Managing agent and RMC director clients often ask us if they should allow leaseholders to pay their service charge by instalments. It can seem like a good idea when a leaseholder is in the “can’t pay” rather than “won’t pay” territory, but it needs careful managing to ensure you don’t end up with a shortfall at the end of the year.
So, should you offer service charge payments by instalments?
The Brady Solicitors service charge solicitors set out the three main considerations in deciding whether to offer an instalment facility for service charge payments:
- Firstly, what does the lease say? We would always advise our clients to make service charge demands in accordance with the lease to avoid potential disputes. If you are not obliged to offer a service charge payment plan you are entitled to withdraw the facility and revert to making demands in accordance with the lease, as long as you act reasonably. In this situation, you should write to your leaseholders informing them that you will be withdrawing the facility and requesting payment of the arrears to bring the account up to date. Clear and open communication with leaseholders will be essential to ensure they understand why the payment regime is changing, and how it will benefit the development.
- Secondly, are payments by instalments suitable for the development? Consider whether smaller, more regular payments will support or hinder your ability to manage the property.
- And, thirdly, can you resource it? At Brady Solicitors we have seen a number of clients come to us because they are struggling to deal with increasing arrears from leaseholders who are making service charge payments by instalments, but the amount is not sufficient to cover costs at the end of the financial year. It’s essential to have the correct systems (and enough people) to manage payments by instalments so that payments are allocated correctly, and any shortfalls or missed payments are picked up and dealt with quickly and efficiently.
How Brady Solicitors can help
The quieter (or slightly less manic!) summer months can be a good time to review the way you make service charge demands and collect payments to ensure your processes meet the needs of the development.
Our property management specialists can review your leases and processes for making service charge demands to ensure they are made both correctly and in a way that works for your developments. Where you wish to withdraw payments by instalments, we can assist you with communications to your leaseholders to ensure your actions are reasonable and you can maintain good leaseholder relationships to the benefit of the block.
Brady Solicitors are experts in service charge arrears recovery and can help you settle outstanding arrears quickly – including those accumulated through insufficient instalments – and get your accounts back on track.