The Limitation periods for different types of payments due under a Lease can be confusing so we will try and set out the main issues that arise in this area.
Let’s start with ground rent. This is always subject to a limitation period of six years. This means that a claim for unpaid ground rent must be issued within six years of the date upon which it falls due. There are no exceptions to this.
Service charge recovery is somewhat more complex:
- For service charges which are reserved as rent under the terms of the Lease 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 reserved as rent AND where the tenancy/lease is granted by a deed the limitation period is twelve 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 reserved as rent.
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 to the leaseholder who confirms there is an outstanding amount or balance due, or if a letter before action is sent and the leaseholder admits the sum due as being correct, raising some other reason for non-payment. The limitation period will then run from the date of the acknowledgement by the leaseholder of the sum due.
For freeholders, managing agents and RMCs, limitation periods are an important issue 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 periods.
It is, therefore, good practice to keep a detailed record of all correspondence received or conversations which have been had with leaseholders in arrears as this could become important at a later date. If the deadline is found to have been missed it will then be possible to check previous correspondence with the leaseholder to see if the debt has been acknowledged.
In addition set up a system alert to warn as arrears are approaching the six or twelve year deadline.