Block Management for Landlords
Service Charge and Ground Rent Recovery
Efficient collection of service charges is key for managing agents or RMC’s (Residential Management Companies) to be able to effectively manage blocks. Without funds, contractors may go unpaid and refuse to work, resulting in further disrepair which can often create a cycle whereby tenants refuse to pay until something is done, but nothing can be done until arrears are paid.
Furthermore. leaseholders are becoming more aware of the rights afforded to them by legislation, in respect of their flats. One of the most contentious areas for leaseholders and landlords alike is Service Charges.
Unpaid arrears is the most common breach of lease and a landlord is entitled to take action to forfeit the defaulting tenant’s lease (although this is subject to statutory protection and the tenant must owe more than £350.00 or be in arrears for 3 years or more). It is very rare for forfeiture action to take place as usually, once solicitors are instructed, payment can be obtained prior to that becoming necessary.
Upon receipt of an instruction to recover ground rent or service charge arrears, we will firstly undertake a legal review and once we are satisfied that the payment is properly due we will take action to recover it on your (or your client’s) behalf. This may involve formal court proceedings, or recovery from any mortgage lender. We assess each matter on its own merits. If we think it is unwise to issue court proceedings, we will tell you and advise in respect of alternatives.
What can you do if there is a dispute over service charge?
There are times when a tenant may have a real reason to have withheld payment and we are experienced in dealing with service charge disputes.
Leaseholders have a right to ask a Tribunal to determine whether a Service Charge is payable, who it is payable by and to, how much is payable, when it is payable and how it is payable.
There are three main reasons that service charge can be challenged in this way; either because the demands are not contractually valid (not allowed for in the lease), they are not legally valid or because the service charge is not reasonable.
- Contractual Validity
A lease is a contract and all parties to it are bound by its terms.
Therefore, if service charges are not demanded within the confines of the lease then there may be scope to challenge them.
- Legal Validity
Under the provisions of Sections 47 and 48 of the Landlord and Tenant Act 1987, the Landlord must include his name and address on all Service Charge demands. It is not enough for the landlord’s agent’s details to be provided. Failure to comply with these provisions has the same effect as had the demands not be served; no payment is due until they are corrected.
Additionally, Section 21B of the Landlord and Tenant Act 1985 requires that all demands for Service Charge are accompanied by a Summary of Rights and obligations. There is no obligation on a leaseholder to make payment if this has not been served with each demand.
There are also various other statutory controls such as the “18 month rule” for demanding service charges and the consultation requirements for major works, which can leave you in trouble if not complied with.
This category of challenge captures those cases where the leaseholders deem the service charges to be excessive or where service charges are being demanded but there is no real evidence of the money being spent on what it has been demanded for. So, if the service charges seem high for inconsequential works or there is dispute over the quality of the works carried out, the Tribunal can be asked to make a decision.
You will be required to demonstrate that a full decision making process, including tendering, was undertaken rather than opting for the first contractor that you happened to come across, in order to show that the service charge is in fact reasonable. The leaseholder will need to demonstrate the opposite.
How can we help?
Successful service charge disputes by Leaseholders can result in heavy discounts to the Service Charge that is recoverable.
We offer fixed fee arrangements for dealing with recovery or any aspect of a service charge dispute – from an initial review of the lease to advice on the service charge provisions, right through to preparing for any necessary Tribunal hearing. We can also deal with supplementary service charge issues such as applications for dispensation from consultation requirements and general advice. We will aim to seek recovery of our costs or advise you well in advance if we expect there may be problems in doing so.
Should you need any assistance in this respect please do not hesitate to contact us today.