Minimising Your Service Charge Arrears
As a landlord, managing agent or RMC director you will encounter all varieties of tenants; organised, careless, respectful, solitary. The characteristics of all are likely to show their heads at some point during their tenancy. If a non-payer rears their head it could spell trouble not only for your immediate cashflow but making the maintenance and upkeep of buildings problematical and slowing down the ability to pay contractors on time causing problems further down the line if the arrears aren’t recovered quickly.
Initially, it is worth you identifying the cause for a non-payment. In our experience, this could be anything from concerns or delays with works or stipulated percentages in the lease not following the pre-agreed proportions. Completing a lease review when taking on a new site especially but certainly before issuing a demand for service charges can quickly identify the contribution to be paid by the leaseholder and help to iron out any grey areas.
It is always advised that you should keep up to date and detailed breakdowns of any communications with leaseholders. In these circumstances you will be able to quickly identify any requests and present a timeline based on your findings. Any contested matters can quickly be put to bed providing you have adequate reports of works, complaints and proposed deadlines. This will also help to reduce the risk of a leaseholder claiming they haven’t received requests for service charge payments. In some instances the property in question may not be occupied by the paying leaseholder and as such demands may get lost in the post. In such cases the leaseholder should be providing you with an alternative address in writing. It is the leaseholder’s responsibility to keep you in the know of their whereabouts; if you have not been informed of an additional means of contact you are entitled to serve on the last known address; which in this case is the property under your control. Keeping records now could save you a lot of time when you begin to encounter problems further down the line.
In some circumstances it may be that the leaseholder genuinely hasn’t got the means to pay their service charge and fall into arrears through a lack of funds. Whilst being careful regarding the issue of creating a precedent, in these cases a payment plan may be the only port of call to get you what is owed. You will need to identify the total amount in arrears and what amount you can afford to have deferred for the time being to take account of what is needed to manage the site. You can then agree payment terms and timings for each instalment that is suitable for both parties.
Regardless of the reasons the slow or non-payment of service charge demands it is important you act quickly and get to the bottom of the arrears. If you sit back and allow the debtor to continually default on their service charge the incentive to pay will quickly deflate. The ins and outs to a service charge demand is never ending, and we don’t expect you to know it all – that’s what we’re here for. If you have any defended arrears, need help with reading a lease or just want a second opinion, get in touch with one of our team.