Debt collection for service charges

by Readers Question

20:10 PM, 16th March 2015
About 6 years ago

Debt collection for service charges

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Debt collection for service charges

I am a new Company Secretary for a block of 12 flats where each owner has a share of the freehold. Debt collection for service charges

One of the owners has never paid any service charges since moving in despite reminders, emails and a telephone conversation.

He now owes about £2,500.

What is the best option for chasing debt? Small claims court? Involve a legal firm?

Also what costs may be added to bill e.g. admin fees, interest charges etc.

Any help would be gratefully received.

Thanks

Jim


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Comments

Advance Block Management

12:01 PM, 17th March 2015
About 6 years ago

Dear Jim,

It is important to have a paper trail and ensure before starting the legal procedure that all the neccesary steps have been taken.

Has the service charge demand been issued correctly in line with the lease? For instance we have seen many instances where RMCs are not issuing service charge demands out correctly. They would issue yearly demands out instead whats written in the lease (for example monthly demands). Ensure that the tenants rights and obligation notice is sent to leaseholders each time a demand is sent out etc.

If all is sent out correctly and you have got a solid paper trail that you can proceed. If you havent, than be very careful.

Often you may find with arrears the matter does not have to go to court . Usually a letter which would be sent to their mortgage company or even their employer would prompt them to pay in full. There are lots of options to go through.

It is important to check the lease and refer to this for more information.

Depending on what it says on the lease, you may be able to recover the full legal cost and interest from the leaseholder directly too, which wouldn't cost the development. Again it depends on what it says on the lease.

Have you considered appointing an agent to manage the block? You may find that having an agent wouldnt neccesarily increase your service charge, and may be able to reduce other items on the service charge budget.

Kind Regards

Tony White

14:45 PM, 17th March 2015
About 6 years ago

Some years ago I had this problem when I was the secretary of leasehold complex. Our lease term allowed the freeholder to terminate the lease if a tenant failed to comply with its terms. I was advised to check with the land registry to see if the property had a mortgage over it and if it had, to inform the lender and tenant that we would be forced to take action to repossess because of non payment of service charges. The lenders immediate response was inform the tenant that they would be taking repossession action themselves. We got paid three days later...

Tony Lilleystone

16:30 PM, 17th March 2015
About 6 years ago

This looks like another leaseholder who thinks having a share of the freehold means not having to pay service charges. Disabuse them of this error straightaway and point out that they are getting a free ride at the expense of the other flat-owners if they don't pay up.

Plenty of good advice above on recovering arrears, so I won't add to it. But I have to ask whether you anticipated having to deal with this sort of thing when you took on the role of Company Secretary? This job involves a lot of work to do properly and can be a thankless task. It also involves various legal responsibilities.

If you are dealing with all the building management on your own then unless you are being paid for your services you should certainly consider appointing a firm of managing agents to do the donkey work. I know that flat-owners who have a share of the freehold they think this is an unnecessary expense but a block of 12 flats will involve a fair amount of management and why should you have to do it for nothing?

You would have to get your fellow flat-owners to agree (or at least a majority) but as freeholders you would be able to pick and choose who you appointed and make sure they did a fair job. They could then deal with regular building management, collecting service charges and chasing up defaulters, as well as keeping accounts and other secretarial duties.

Shakeel Ahmad

18:32 PM, 17th March 2015
About 6 years ago

The advise above is spot on check your lease first.

Lenders use to quickly pay up under the pretext that they were protecting their security. This practice encouraged the sharks Freeholder/Managing agents to run to them while knowing very well that the amount is disputed, notices not properly served etc. In addition there were few add on's cost.

Every time I had this issue I wrote to my Lenders fore warning them of the dispute and put them on notice that if they paid & debited my account I will not be responsible for the amount or the associated interest charges nor any other cost that the lender added on for admin fee etc.

Where there was information available of the nasty practices on websites etc I would enclose copies of the same to the lenders.

I have seen these Freeholders/Managing Agents in the Courts represented by their solicitors lying through and through. Happy to say that I had been successful in all instances/cases. DO NOT BOTHER WITH THE LVT?.

The Lease document invariably is one sided i.e. siding with the Freeholders.(After all we are living in a fuedel system) I just wish some one challenges the restrictive & unfair clauses in the leases like other contracts.

Advise to have all documents e,g summary of charges etc should be served & this were the Freeholders/Managing Agents get caught out.

Just an example:
I have had managing Agents purposely serving documents to the wrong address whilst knowing my correct address and corresponded with me on it . Needless to say that I could not attend the Court as I did not receive the hearing date/Court documents. This was done intentionally to obtain the Court order. The crooked solicitors are in cahoot with the Managing agents/Leaseholders.

I could not take the crooked solicitors complaint for all its worth as I am not their client.

Adrian Jones

9:31 AM, 18th March 2015
About 6 years ago

Further to my earlier comment, something else we did was name and shame the culprit at our AGM.

Advance Block Management

10:04 AM, 18th March 2015
About 6 years ago

Dear Mr Jones.

I wouldnt advise you do that unless all the residents of the RMC were on the board of Directors. You could potentially be breaching the Data Protection Act.

Adrian Jones

13:10 PM, 18th March 2015
About 6 years ago

Reply to the comment left by "Advance Block Management" at "18/03/2015 - 10:04":

Surely if another owner asks why there is a hole in our accounts they are entitled to be told?

Advance Block Management

13:22 PM, 18th March 2015
About 6 years ago

Reply to the comment left by "Adrian Jones" at "18/03/2015 - 13:10":

Dear Mr Jones,

You can explain to the owner that due to arrears there aren't sufficient funds in the account, but you cannot inform the owner who it is and how much they are in arrears by as that would be breaching the act. Only the Directors of the RMC can be told of this.

There are RMC where the lease requires all residents (shareholders) to be on the board of directors. In this situation for instance it would be ok to mention the arrears in a meeting or AGM.

Shakeel Ahmad

14:58 PM, 18th March 2015
About 6 years ago

"Further to my earlier comment, something else we did was name and shame the culprit at our AGM."

Name & shame is meaning less as people have little or no self respect or dignity to worry about it, as its water over the ducks back.

Gary Nock

0:09 AM, 19th March 2015
About 6 years ago

The advice about serving the service charge demand in the prescribed format is spot on.The demand has to be accompanied by a notice of rights and obligations. And in the correct size font. Not less than 10. Unless it is served with the demand the leaseholder can lawfully withold the service charge monies until it is.

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