Service Charges are close to the hearts of many of us working in the property management industry.
They are the lifeblood of any development. Payments are made by leaseholders to the landlord in exchange for services and it is a reciprocal relationship - many landlords are not-for-profit resident management companies, for whom service charges are their only source of income.
The services landlords are required to provide, such as repairs, cleaning, insurance and management, can only be undertaken when leaseholders pay their charges in a timely and efficient manner. If it has no money, how can a not-for-profit company provide any services?
We all know there are limitations placed on the recovery of service charges by the terms of the lease and various pieces of legislation.
Underpinning any effective arrears recovery is the absolute requirement to ensure service charges are demanded in accordance with these restrictions. If not, then the money could be withheld until you request correctly, or in some cases, may not be payable at all.
It might be tedious, but I would urge you to read and understand the lease relating to your development to ensure service charges are issued in the correct manner.
One of the most common complaints management firms encounter when taking recovery action is that records have not been updated.
Make sure your record keeping is robust. Shoddy practices, for example not maintaining current details for leaseholders, causes avoidable delays and difficulties in the recovery process.
The importance of good communication cannot be emphasised enough. Get this right, and the recovery process becomes much smoother.
Poor communication, however, may well result in protracted negotiations which, ultimately, don’t benefit anyone.
It is important to understand why a leaseholder isn’t paying their service charges. Maybe they can’t pay because they are in financial difficulties.
Is it because they haven’t understood their obligations or what they are paying for? Perhaps they won’t pay because they disagree with some element of the fee.
Start by distinguishing between ‘can’t payers’ and ‘won’t payers’ and explain their responsibilities. Take a firm but fair approach and try to reason with them by outlining the impact of non-payment and its consequences.
Robotic responses and the threat of costly litigation do little to engender good relations. Try to move forward by working towards a solution, rather than focusing on the problem.
Ultimately, if service charges aren’t forthcoming, then matters need to be referred to specialist solicitors.
They become a spokesperson for your company and you should be comfortable with the way you are being represented. Are you happy with the results you are achieving and how they are being delivered?
Make sure your case is funded in a way that is beneficial to the management company, for example a no win, no fee structure. Does your solicitor report back to you in a clear and concise way? If not, why not? Fancy graphics and pictures are all well and good, but what you actually need is information.
Service charge arrears can be recovered effectively and efficiently with the right organisation and support. Managing agents need robust credit control procedures in place and trusted, accessible solicitors backing them up who have the appropriate skills and experience.
Cassandra Zanelli is Head of property management at Taylor&Emmet LLP