Service charge arrears: getting from complaint to compliment

Picture the scenario. It may not be that big a leap of imagination…

You run a pretty harmonious block and relationships with leaseholders are generally good. But there are a couple of leaseholders who are persistently very late in paying their service charge – to the point that cash-flow and your ability to manage the block are starting to suffer.

Your fellow RMC directors would rather keep the service charge arrears recovery process in house; they don’t want to instruct solicitors for fear of causing problems with the defaulting leaseholders.

So the situation rolls on and the slow payers (or non payers) gradually impact the rest of the block but without facing any consequences.

Don’t be scared to instruct solicitors to help you recover the debts!

Done properly it can – believe it or not – actually enhance your relationship with the leaseholder, as Brady Solicitors’ Annette Frost explains.

“We have evidence of this time and time again, where we have helped seemingly angry and disaffected leaseholders to settle their arrears and remove quite a substantial burden from their day to day life.

Our approach to arrears recovery is rarely heavy handed. Yes we of course need to issue the formal ‘Letter Before Action’ (or LBA), explaining the consequences of not paying the service charge debt – including the risk of forfeiting the lease. But that is just the start of the process; we then engage in dialogue with the leaseholder and find out why they aren’t paying.

“If it’s a ‘won’t pay’ then we aim to unpick and resolve the reasons behind this. If there is no good reason for their service charge arrears then we become a little firmer in our tactics.

“With most leaseholders however it tends to be a case of ‘can’t pay’. And this is where our negotiating abilities come in; we talk to the leaseholder to help them find the best way of bringing their service charge account up to date. Often this can be via the lender, meaning we are in a three way conversation with both leaseholder and lender.

“In these can’t pay situations, it can come as a huge relief to the leaseholder to have the arrears settled and the weight of the debt off their shoulders.

“It would be an exaggeration to say we get notes of thanks from leaseholders every day, but we receive them surprisingly often!”

So, the message is – don’t be scared to ‘go legal’ with persistent debtors. It might just be the solution that both you, and they, need.

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With hundreds of years’ worth of combined experience, our experts have dealt with nearly every leasehold property matter you can imagine. If you’re currently in need of legal support or advice, please get in touch.

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