Service charge recovery : Tackling service charge voids in a Right to Manage company

Brady Solicitors’ Lydia Anderson outlines a solution for RTM companies where the developer has retained the lease on a flat and service charge recovery is suffering.

The recent recession led to some developers being unable to sell all their flats and many decided to cut their losses and rent them out on an assured shorthold tenancy basis, retaining the leases.

Where these flats have subsequently been part of a Right to Manage process, the RTM company can then find that the service charge percentages for the block are not adding up to 100 percent – and that they are facing a growing deficit in collections.

As there is no lease, RTM companies have then felt stumped as to how to recover the service charge arrears.

You can’t threaten forfeiture, so what can you do to secure the service charge payments from flats where the developer has retained the lease?

Fortunately there is redress, through Section 103 of the Commonhold and Leasehold Reform Act, which explains that if there is an RTM company with an ‘excluded unit’, then the person responsible must pay the service charge. If there is no lease, then the person responsible is the freeholder (ie: the developer).

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If you are facing a legal property management situation that has got you stumped, give us a call on 0115 985 3450 or send us an email and we’ll be pleased to get our legal eagles on the case. The Brady Solicitors team relishes a challenge.

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