Flat-Living.co.uk Legal update
unpAid serviCe ChArge
decision as if a judgement of the County Court. Once granted the usual
options for enforcement of a County Court money judgment are open
An admission by the leaseholder is sufficient. In all cases of unpaid service
to the landlord, for example by a statutory demand (as a precursor to
charge, the RMC should consider whether there is a dispute as to liability,
bankruptcy proceedings), or by obtaining a charge on the leasehold flat.
as opposed to an inability to pay. Further, if there is a genuine dispute as
Broadly, serving a statutory demand is likely to be highly effective if the
to some elements of the service charge (e.g. the costs of major works),
leaseholder is solvent, but unlikely to be effective if the leaseholder has
there may be no dispute as to other unpaid elements (e.g. the insurance
little equity in the flat or other assets (in which case the mortgagee as a
and the porter’s wages may not be in dispute) and the leaseholder may be
secured creditor will rank above the landlord in a distribution).
prepared to admit these undisputed items. The strategy should always be
to identify at an early stage whether there is a genuine dispute and, if so,
CAuTion is required
to limit the scope of any proceedings accordingly.
The next point to seek to obtain an admission/ further admissions For variety of reasons, not least in terms of recovering costs, once a
is once the claim has been issued in the County Court. Experience judgement has been obtained, the best means of enforcement may
shows that many claims commenced in the County Court are either prove to be the section 146 and forfeiture route. However, caution is
admitted or result in a default judgment. The County Court procedure required. It is unusual to get as far as forfeiting a long residential lease
will require the leaseholder to issue a notice of intention to defend (if and doing so may be regarded by the Courts as an extreme step.
not judgement will be entered for the landlord in default). If the claim is Further, depending on the circumstances, there may be of potential
defended, it is likely, though not inevitable, that it will be transferred to complications, including, circumventing an debarring order that may
the Leasehold Valuation Tribunal. have been made under section 20C of the L & T Act 1985. The up-
A determination by the LVT may be enforced as if a judgement of the shot is that specific legal advice should be obtained before bringing
County Court with the permission of the County Court. It is necessary forfeiture proceedings.
therefore to apply to the County Court if it is intended to enforce the LVT
The managing agent says….
For any block where service funds to pay for it.
charges are payable but The agents’ ability to
particularly for RMCs the promptly issue budgets and
management of arrears accounts, issue demands
is at the heart of good (and statements of rights and
administration. Most RMCs obligations) and chase arrears
do not have company assets ensures the cash flow to the
to lend to the service charge RMC to undertake works and
when funds are short, yet the also lays the foundation for any
responsibility remains with the legal action. If the paperwork
RMC to continue to provide is wrong from the outset the
services and undertake works. ability to recover the sums
Remember, an agent or their demanded (and costs) may be
client many be committing seriously prejudiced.
a fraud if they instruct a Andrew McKeer MRICS
contractor to do works FIRPM, Director, Prior
knowing there are insufficient Estates Ltd
The solicitor says…
If you face a problem with done by the solicitor
arrears of service charges such as limited
then seek advice at an early instructions to review
stage. The longer you leave the lease and write to
the problem the more the the defaulting lessee and
arrears build up. They won’t their mortgagee;
reduce by you doing nothing. • Agree any action to
Communicate with the lessee follow and put in place
and address any concerns the legal team;
raised by the lessee. • Work as a team:
Managing Agent –
If the problem persists,
Solicitor – Barrister
• Obtain advice from a
(in some cases).
solicitor;
• Choose a solicitor with
The economic climate has
the right expertise.
caused an increase in service
Telephone initially – few
charge arrears but it has not
solicitors charge for that
made recovering the arrears
first conversation
any more difficult. Arrears can
especially if they think
be recovered cost effectively
there will be a job in it;
and successfully.
• Agree the next step and
Andrew Raby, partner at
the costs of any work
Thackray Williams LLP

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