Receiving service charge payments on time is vital for effective property management. However, there is often a small group of leaseholders who do not contribute when the rest do and it’s important to manage them appropriately.
With the cost of living crisis at the forefront of everyone’s minds, it is even more important to maintain a flow of funds for key maintenance and improvement. However, serial debtors don’t just impact your cash flow, they create a constant drain on your resources and take up Property Managers’ valuable time.
Although it is a big ask to turn a serial debtor into a prompt payer, a tailored approach can often speed up the arrears recovery process. This Brady Solicitors’ blog provides some advice on a credit control procedure specifically for persistent slow payers.
Shorten their reminder process
Usual service charge procedures involve a series of reminders over the course of many weeks – and this tends to be enough to get most leaseholders to settle their service charge demand. For serial service charge debtors however, we recommend that you only send one reminder, which gives them a maximum of 14 days to settle before taking legal action.
Don’t delay sending out your demands to repeat debtors
With quarterly and half-yearly service charge periods, sometimes concern over waiving the right to forfeit means you can end up with a delay in issuing the service charge demand when a leaseholder is in arrears from the previous period.
Make sure you have a system in place so that as soon as you receive settlement of the arrears, you issue the next service charge demand immediately. We would suggest allowing 21 days to pay – assuming this doesn’t contravene any terms within the lease.
Don’t allow the arrears to build up
With serial debtors, we often see scenarios where managing agents have allowed service charge arrears to hold up over several demand periods before instructing solicitors. In these situations, leaseholders quickly realise that they won’t be chased beyond the reminders they receive, leaving them with very little incentive to pay.
In our experience, the quicker you act, the more likely the leaseholder is to consider making payment in order to avoid the administration and legal costs.
Tell your solicitors it is a ‘repeat arrears’ instruction
When you instruct your solicitors, we would recommend you include a note within your instruction to say this is a repeat arrears instruction. As part of our file opening procedure at Brady Solicitors, we will always check whether this is a repeat instruction, and any new files will be noted accordingly. We have proven that when we have dealt with a leaseholder before, any repeat service charge arrears cases will be resolved even quicker. There is value in breaking this cycle of non-payment and reducing overall service charge debt on the estate.
More often than not serial service charge debtors are uncommunicative and don’t respond to attempts to contact them. By putting in place a different and more ‘robust’ procedure for managing repeat offenders you can speed up service charge arrears recovery to benefit the other leaseholders and reduce the time you spend on credit control rather than block management.