“I didn’t receive it” reply to a service charge demand. How often do you receive that reason as a property manager?
As a matter of fact, nearly half of our service charge recovery matters here at LMP Law are owing to the leaseholders saying they never reived the demand and therefore that’s why they haven’t paid.
To begin with making sure the lease agreement is watertight and that each party or parties know exactly what is expected of them will help processes down the line. That said, changes are a constant in leasehold property ownership!
Your residents expect their property to be managed well and you, as a block manager, would expect to be paid in return for this service.
When service charges aren’t paid in time the cashflow problems for the agency then often goes into automatic drive, or disputes and litigation can arise.
Peter Cornell, LMP Law Partner & Director reminds us:
“MANY TIMES, IT IS ASSUMED THAT SERVICE CHARGE IS SIMPLY PAYABLE IN ADVANCE. UNFORTUNATELY, THAT IS NOT ALWAYS THE CASE.”
To read Peter’s specific advice on service charge recovery, you can read it HERE.
Our advice is full transparency, open communication and, well continue reading for more tips on keeping that cash flowing.
CASHFLOW AND SERVICE CHARGE DEMANDS
There are various reasons our managing agent clients come to us to help collect outstanding service charges, and there is often a pattern of reasons why the monies haven’t come in.
The biggest, by far, is that the resident says they didn’t receive the demand.
SCENARIO ONE: I DIDN’T RECEIVE THE SERVICE CHARGE DEMAND
As this reason for non-payment of a service charge is one of the biggest explanations, our role is to then issue the letter before action, which can be the legal letter they often need to pay up fast. Why did it get to that stage though? Reducing your debtor list is essential to better cashflow in a block management company.
Tips on how to make sure your residents receive their service charge demands so they have no excuses!
Being proactive with your residents’ situations will help with receiving service charges on time, and it’s back to communicative skills.
Each managing agent will have their own specific way of working and having a department who looks after specific blocks, or contractors or debt recovery.
Be proactive with your engagement with your residents, which also includes reminding them of their lease agreement, and making sure they confirm any change of circumstance in writing and make sure that letter of email is received. They need to know that you have received it. So, in an email you could ask them to “acknowledge receipt of the email” or send a signed for letter, it’s all about the evidence!
Is your CRM and list of residents up to date? Is your software for data up to date and doing what it should do? Any new recruits at your company will need proper training because lack of understanding is where the gaps open for mistakes.
Some of your residents won’t live in the property with the lease against their name. Some residents have various names. Always keep details of changes updated on their file and on the system. You are busy, but by updating all systems and writing on the file to note their current address could save you a legal bill!
New leaseholder on your block? Send any new resident a Notice under s48 of Landlord & Tenant Act 1987 when they have bought their property to formally notify them of the Landlord and any Managing Agent. Failure to do this may render charges irrecoverable. From a legal perspective, keeping updated with any changes and evidencing them will always help in the long run.
Ultimately, where the service charge is disputed, the question for the court is not whether the leaseholder has received the demand, but whether the landlord can show that on the balance of probabilities the demand was delivered in accordance with the lease. The onus therefore, is on you as the landlord or managing agent to follow procedures to the rule and mitigate non payment through the tips we’ve written above.
SCENARIO TWO – DONE A RUNNER!
Returned to sender by Post Office with no-one at that address, “unknown”, “gone away” we deem as “having done a runner”.
That’s when our clients instruct us to use more of our powers. These powers include using tracing agents. The tracing agents track (where possible) the resident you are chasing for service charge non-payment to find their current whereabouts.
Whenever the leaseholder has decided, for whatever reason, they’re running away, then once all steps have been taken to find that leaseholder, repossession of their leasehold property will have to be processed.
Repossession Claims article HERE.
SCENARIO THREE – NOT HAPPY WITH MANAGEMENT OF SERVICE
The biggest tip we can advise from our experience when leaseholders refuse to pay because they are unhappy with their service, is to engage and communicate with them, not on the defence but be proactive in general.
Having meetings, either online and site visits and check on the block, your contractors and your colleagues.
By having an open dialogue and letting them contact your easily (yet reasonably) will give them the feeling you are listening to them. That’s what any of us really want with any service isn’t it? To be listened to and any problems rectified. So, if they do need to complain or report something, find a solution quicky and monitor it and check in with the leaseholder.
IN SUMMARY – GETTING THE SERVICE CHARGE DEMANDS RIGHT
Service charges are not enforceable or payable unless they have been properly requested from the leaseholder.
As a freeholder, you simply must comply with the Commonhold & Leasehold Reform Act 2002 when serving the demand for service charges. What must be in the demand:
- The demand has to be in writing.
- It must include the landlord’s name and address.
- Aways attach a summary of the rights and obligations with the demand.
- The demand has to be sent to the leaseholder (of the lease it applies to) at the address or any other address supplied by the leaseholder.
- Remember that every leaseholder is also entitled to inspect the landlord’s accounts for information about service charges for the block.
If you have complied with the appropriate request, it’s always good to know, come what may, what the Service Charge 18 Month Rule is! According to this rule under the Section 20b Notice, a leaseholder is liable to pay any service charge if one of the following conditions is met:
- The demand for payment has been sent to the leaseholder by the landlord, within 18 months from the time the cost was incurred.
- The landlord sends a written notification to the leaseholder about the cost incurred and the amount of the costs within a period of 18 months, from the day the cost was incurred. The leaseholder will then be liable to pay the service charge amount at a later date.
Always worth noting those dates against a debtor’s file.
Let us help you get your cashflow back on track by looking after your service charge recovery and your debtors’ list. The legal debt recovery team, headed up by Peter Cornell, will take that stress away leaving you to manage your blocks.
Get in touch with us if you’d like a chat.
Laura.
