Persistent slow payers can be a drain on resources and hamper your estates’ cash flow. This Brady Solicitors’ Expert View recommends the value of having a separate credit control process specifically for serial service charge debtors.
Seeing the same leaseholder in arrears after each service charge demand period is frustrating and unfortunately you will no doubt see familiar names on your debtors list time and time again. It is a big ask to to turn serial service charge debtors into prompt payers but a bespoke approach can speed up the arrears recovery process.
Don’t allow the arrears to build up
With serial debtors managing agents have often allowed service charge arrears to build up over a number of demand periods before instructing solicitors. Leaseholders can therefore realise they won’t be chased beyond a reminder, so where’s the incentive to pay?
In our experience, the quicker action is taken and an agreed credit control process is followed, the more the more likely they are to consider making payment in order to avoid the administration and legal costs.
Tighten up the reminder process
Usual service charge procedures involve a set of reminders over the course of many weeks – and this tends to be enough to get most leaseholders to settle their service charge demand. For serial service charge debtors however we recommend that you shorten this to one reminder, giving a maximum of 14 days to settle the arrears before taking legal action.
Don’t delay sending out your demands to repeat debtors
With quarterly and half-yearly service charge periods, sometimes concern over waiving the right to forfeit means you can end up with a delay in issuing the service charge demand when a leaseholder is in arrears from the previous period.
Make sure you have a system in place so that as soon as you receive settlement of the arrears, you issue the next service charge demand immediately. We would suggest allowing 21 days to pay – assuming this doesn’t contravene any terms in the lease.
Tell your solicitors it is a ‘repeat arrears’ instruction
When you instruct solicitors, we would always recommend you include in your instruction a note to say this is a repeat arrears instruction. As part of our file opening procedure at Brady Solicitors, we will always check to see if this is a repeat instruction and any new files will be noted accordingly. We have proven that where we have dealt with a leaseholder before, any repeat service charge arrears cases will be recovered more quickly. There is value in breaking this cycle of non payment and reduce overall service charge debt on the estate
In can be the case that serial service charge debtors can be uncommunicative and don’t respond to attempts at contact. By having a separate, more ‘robust’ procedure for repeat offenders you can speed up service charge arrears recovery to the benefit of the rest of the block and reduce time you spend on credit control rather than block management.