Who can enforce payment of service charge demands when a residents’ association or residents’ management company takes over the service charge functions?

This was a question we tackled recently at Brady Solicitors as Sam Andrews, specialist property management solicitor, explains.

Three years’ of service charge arrears. Plenty of delaying tactics

In this case, one leaseholder had built up over three years’ of service charge arrears. It isn’t a large block so these arrears were causing financial problems for the rest of the leaseholders and residents, and relationships were understandably getting frayed.

The residents association had taken lots of sensible steps to try and secure the outstanding arrears but, ultimately, legal action was required when payment was still not forthcoming.

And this was where the problem (and the delaying tactics) came in.

The lease contained a clause that obliged the leaseholders to pay service charges ‘on demand’ directly to the residents’ association. Importantly, however, the lease was between the freeholder and the leaseholder – the residents’ association was not a party to the lease.

This meant that the promise to pay the service charge was actually being made to the freeholder – even though the monies were to be collected by the residents association.

Because the promise was to the freeholder, only the freeholder could LEGALLY pursue a service charge debtor.

Accordingly, proceedings were issued by the freeholder.

The leaseholder refused to pay. His argument was that the freeholder couldn’t demand the arrears – only the residents’ association.

We successfully argued that whilst the residents association should be the recipient of the service charge monies, the only party that could bring a claim for their payment was the freeholder.

The County Court judge agreed with us, and the leaseholder was ordered to pay the three years’ of outstanding arrears in full, with costs and interest.

Unpicking this lease clause took a forensic approach and some complex arguments but, ultimately, we were able to help our client overcome this leaseholder’s delaying tactics and help the residents’ association to get its cash-flow and block management back on track.

For expert help with property management disputes and recovering service charge arrears, contact the experts at Brady Solicitors.

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