Limitation periods – out of time?
Claims for service charges, ground rents and administration charges are subject to statutory limitation periods:
- For service charges recoverable as rent AND ground rent the limitation period for a claim being issued at court is six years from the date the sums are properly due under the terms of the lease.
- Where the service charge is not recoverable as rent AND where the tenancy/lease is granted by a deed the limitation period is 12 years from the date that the payment fell due.
- Where the tenancy is not created by deed then the limitation period is six years irrespective of whether or not the service charges are recoverable as rent.
However, any subsequent arrears can be claimed as long as they themselves do not fall outside the relevant limitation period.
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The exception to this is if the leaseholder has acknowledged the debt within the limitation period. An example of this is where a demand for payment is sent out to which the leaseholder confirms there is an outstanding amount or balance due. The limitation period will then run from the date of the last acknowledgment.
As we have discussed in our previous article there are further limitations under section 20B of the Landlord and Tenant Act 1985 in relation to service charges for residential premises. Within 18 months of incurring a cost that is intended to be recovered through the service charge the landlord must either demand the payment in the prescribed method or the tenant must be informed that these costs have been incurred and reimbursement will be sought at some time in the future. If this is not done then the tenant will not be liable for those charges that have fallen outside of the 18 month period.
For freeholders, managing agents and RMCs limitation periods are an important point to consider. Arrears can easily be left to accumulate (especially if each demand is for a low value) and when it subsequently comes to making a claim it may be found that earlier arrears fall outside the limitation period.
It is, therefore, good practice to keep a proper account of all payments being received as well as those which are outstanding together with correspondence with leaseholders in addition to setting up a system to alert if arrears are approaching near the six (or 12) year deadline. If the deadline is found to have been missed it would be advisable to check previous correspondence with the leaseholder to see if the debt has been acknowledged.