Maintaining predictable and sufficient service charge cash flow can be challenging at any time of year, but the months leading up to Christmas can be particularly testing. As specialists within leasehold property management, we regularly have clients asking us what the best stance is for them to take when a leaseholder is in arrears at this time of year. Although there is not a one size fits all answer to this question, there are a number of considerations that should be made when deciding on the best approach.
- Is the leaseholder in question a serial debtor?
Previously we’ve been known to advise our clients to put a specific credit control procedure in place to manage serial debtors. This procedure includes shortening the reminder process, ensuring there are no delays in sending out demands, not letting the arrears build up and other suggestions. With that in mind, if you’re dealing with a serial debtor in arrears, we’d advise acting swiftly, no matter what time of year it is.
- What details are included within the lease?
As with the majority of our advice, we suggest assessing the relevant details within the lease in question before choosing what stance to take. Before starting legal action to recovery arrears it’s crucial to ensure you’re acting in accordance with the details involved within the lease to avoid the arrears being unrecoverable, whether that be during the Christmas period or any other time of year.
- Over 60% of debtors pay their arrears upon receiving a letter before action
Around Christmas clients have been known to worry about properties being repossessed on Christmas day. Firstly, it is important to state repossession orders are never going to be filed on Christmas day. Secondly, and perhaps even more importantly, the majority of service charge arrears are paid upon receipt of one of our letter before actions (LBAs).
- Do you have any maintenance work planned?
Over winter our regularly plan maintenance projects and it also tends to be the time of year when unexpected emergency works are most likely to crop up. It is therefore even more important than usual to maintain a healthy cash flow and maintenance budget during this period, which is most likely to be the case if you act quickly and effectively to manage any arrears within your blocks.
- Have budgets been set for next year?
This is also the time of year when service charge budgets are reviewed inline with any potential cost increases or new costs to be factored in. In the current climate, there is a strong chance that certain costs may be set to increase going into 2024, which increases the importance of having as few arrears to recover as possible at the start of the year. It is also very satisfying coming back into work after the Christmas and new year period with a healthy looking budget!