The service charge specialists at Brady Solicitors explain why a ‘one size fits all’ approach to arrears recovery doesn’t work.
When dealing with leaseholders in arrears with their service charge, our first step at Brady Solicitors is always to understand why they aren’t paying. This helps us establish the best approach to secure a speedy recovery.
The three cases below show the very different approaches we took when working with a leaseholder suffering with dementia; a persistent debtor; and an individual contesting their liability to contribute to major works.
Sensitivity and tact settle arrears out of court
When a managing agent came to Bradys for help with recovering service charge arrears from one of their leaseholders, we knew straight away that the matter required a different approach to perhaps more conventional methods of debt recovery.
Emma Voce explains: “The leaseholder was an elderly gentleman and had failed to pay two year’s worth of service charges on his flat. It quickly transpired that he suffered from dementia and didn’t have the mental capacity to deal with the situation.”
Sensitivity and tact were key to settling the matter. Emma kept the lines of communication open with the family and maintained regular contact with the power of attorney (the leaseholder’s cousin), taking the time to fully explain the situation to ease their stress and worry.
After careful and delicate negotiations with the power of attorney and their solicitor Emma put a stop to the existing court proceedings and agreed to settle out of court via an undertaking for payment upon sale of the property. We felt this was the most amicable option for settling the matter sensitively, whilst still recovering the debt for our client.
The property sold quickly and we successfully collected all arrears, plus interest and costs on behalf of our client. And the other side appreciated the sensitive approach we took towards the leaseholder.
Leaseholder liability for major works secured in FTT success
With a leaseholder denying their liability to contribute towards a recent major works project, the managing agent turned to Brady Solicitors for help. Property litigator Sam Andrews successfully argued their case in the FTT and recovered the contribution in full.
Our client had correctly followed the major works process to create access to gas flue pipes that were situated in the gaps between internal communal walls of certain apartments in a large block following changes in gas regulations. One leaseholder meanwhile refused to pay her contribution to the major works costs, claiming that she was not liable under the terms of the lease.
After assessing the terms of the lease, Sam argued that the terms “service media” and “apparatus ancillary” included the gas pipes and gas flues, the maintenance of which fall under the covenants of the management company, regardless of where they are situated in the block. The works, therefore, were covered in the lease.
Thanks to Sam’s expertise, the FTT agreed that the gas flue pipes were part of “service media” at the property and the repairs were covered by the lease.
This enabled the managing agent to recover payment for the major works project from the leaseholder as part of the service charge demand.
Persistence and tenacity prevail to recover substantial arrears
Non-payment of service charges not only have a negative impact on cash flow, but ultimately affect the smooth management of a block. Brady Solicitors’ Lydia Anderson needed every ounce of tenacity to conclude a long-standing service charge case, recovering substantial arrears and legal costs, to the relief of the managing agent, as she explains:
“The mounting debts due to non-payment of service charges were not only having a negative impact on cash flow, but also affecting the smooth management of the block.
“Our initial instructions were for £10k of service charge arrears; we issued legal proceedings and the claim was defended, but the defence was struck out of court and we received a default judgment for the arrears.
“Following non-payment of the judgment, we began possession proceedings but the leaseholder continued to defend the matter and the arrears continued to mount, as did our costs.”
Lydia’s ongoing collection of detailed evidence against the leaseholder, along with her tenacious approach to the situation and efforts to settle out of court, eventually resulted in a possession order and judgment in April 2015, despite the leaseholder’s lender being added as a second defendant.
The final judgment amounted to £25k, including ALL outstanding service charge arrears to date and legal costs.
The lender, as the second defendant, agreed to pay the full amount to obtain relief from possession and our client can finally put the matter behind them and concentrate on getting the management of the block back on track.
A more sophisticated approach to arrears recovery?
Whilst strong and robust systems are key to securing a swift and effective settlement of service charge arrears for our clients, Brady Solicitors people are empowered to engage in open communications with all parties in order to determine the best outcome and help our clients to maintain good relationships with landlords and leaseholders alike.
If your property management business would benefit from some specialist legal support, please do get in touch.