One member of RTM not paying critical bill?

by Readers Question

15:42 PM, 29th March 2021
About 2 weeks ago

One member of RTM not paying critical bill?

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One member of RTM not paying critical bill?

I am a member (director) of an RTM in a small block of 7 leasehold flats. 3 of the leaseholders are also Directors and 3 are non Directors leaving one leaseholder yet to join the RTM.

We mostly agree on necessary maintenance works and split the costs between ourselves individually. We also have a management company who originally helped us set up the RTM and take responsibility for the building, but we do not engage with them much, and they mainly collect service fee charges to build a reserve fund and charge their fees which seem a bit steep.

However, my query is recently we have engaged in the expensive process of having the building newly rendered. We all initially paid a deposit of the total costs with future planned equal payments outstanding. We now have a worrying situation where one leaseholder and member of our RTM has pulled out of communication with the rest of us and is not making any further payments.

Scaffolding is up and time is not in our favour, and we see no option other than to cover his share and try to recoup, but how?

We have all been paying the rendering company our separate shares who have been invoicing us as individuals. We now find ourselves in this position and are unsure of the best route to take or even our legal position?

Has anyone had similar or could anyone advise our legal rights or options to recoup?

Bob

Comments

BernieWales

8:59 AM, 30th March 2021
About 2 weeks ago

Doing things in a friendly jolly way is not the answer here. You have stepped into the shoes of the landlord, so far as the management functions of the lease are concerned, and therefore you need to READ THE LEASE as your starting point. Then you need to ensure the managing agents have demanded the service charges legally and in accordance with the methodology/dates stated in the lease.

The works you describe sound like they will cost 'any one leaseholder more than £250 in one service charge period' therefore you presumably ensured the managing agents consulted leaseholders by serving valid section 20 notices.

If you did all the above correctly and legally - the next step would be an application to the First-tier Tribunal (Property Chamber) to request a determination that the service charges are legally due.

If you get the determination, then you could issue a Summons via the County Court and persue the arrears as a money debt. Or you could enlist the help of the landlord/freeholder in pursuing the breach of the terms of the lease; i.e. non-payment of service charges.

Happy to discuss. Bernie Wales

Dylan Morris

10:38 AM, 30th March 2021
About 2 weeks ago

What you can’t do as an RTM is enforce the forfeiture of the lease. This powerful threat is often the only way you can actually obtain service charge payments. A CCJ is all well and good but doesn’t always mean you will receive any monies.
This is often overlooked when arranging an RTM. As Bernie says you could ask for the help of the freeholder. Only they can threaten forfeiture but if the RTM was set up without their favour (most often the case) then your chances of actually recovering monies owed can be slim.
On another issue your RTM needs to comply with GDPR as you will be a data Controller so ensure you’ve registered your company with the ICO and are following all the correct procedures. ie, regular data audit, issuing privacy notice etc. Again this is often forgotten when setting up an RTM.

moneymanager

11:08 AM, 30th March 2021
About 2 weeks ago

Right out of the gate " leaving one leaseholder yet to join the RTM." is a concern, it shouldn't be possible for a purchaser to complete on a transfer without the consent of the RTM or their agent, this is usually done post completion but prior to the filing with Land Registry and without which RTM's (or prior that the freeholder's) consent, Land Registry will be precluded from completing the transfer.

The above usually goes hand in hand with Covenent of Compliance to all the terms of the lease.

DGM

12:42 PM, 30th March 2021
About 2 weeks ago

I am a Director of a Resident Management company and we had an issue with renewing the roof, which was expensive. We did all by the book, issue S20 get 3 quotes. We had a few that refused to pay so our Management company, went to court asked for a second charge on the property and discussed with the mortgage company about adding to the mortgage. All was settled eventually with the ones that refused to pay.

Freda Blogs

19:32 PM, 30th March 2021
About 2 weeks ago

A few years ago I was a Director of a Management Company such as this. The advice from a solicitor regarding non-payers was to write to their mortgage company (details on Land Registry title), who would on occasion pay up on behalf of the leaseholder and/or write to the leaseholder, because they take a dim view of mortgagors not complying with their lease covenants (to comply with the lease and pay service charges). I don't know whether they would do that these days, but it may be worth a try, or even the threat to do so to the non payer may get the result you want.

Also, if you had insufficient funds due to non payment to carry out certain works, particular essential items, that could strengthen your argument - as there could be a diminution in value of the non payer's flat (and of course everyone else's).

DGM

22:22 PM, 30th March 2021
About 2 weeks ago

Reply to the comment left by Freda Blogs at 30/03/2021 - 19:32
Hi Freda
That is exactly what we did as I sold earlier, this was only 18 months ago. As you say, mortgage companies have an issue if people are breaking the terms of the lease. We actually got the roof works done a lot cheaper than anticipated and while the scaffolding was up and used this as a reason to paint the exterior as well, which we had sinking funds for as it was due next year and in agreement with the majority, this has saved us money.


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