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“Hesaw her in thelobby;hefelt hisfaceblaze and histhroatgodry;heaverted hiseyes although she stared directly- brazenly, even – into his. He had to get out of there and quickly.”

Is thIs the fIrst fewlInes of the newMills and Boon romance? No - just a descriptionofhowmostRMCdirectors feel when they bumpinto afellowresident who has persistent service charge arrears: an acknowledgment of the awkwardness of writing to neighbours to chaseand thesense of infuriationthat produceswhen those demands, letters and reminders are ignored. How, then,can this situationbe

avoided – and more to the point – howcan thearrears bemanaged and prevented entirely? It allstartswithastrictcredit

controlprocedure.Whether you administer this ‘in-house’ or outsourceit,make sure that it is organised and that your automated systemhas allthe correctinformation aboutthe leaseholders.You will need to know: ndate andfrequency of the payments; nthedateofissueofthe demand and due date; nlatest correspondence addresses -if they do not reside at the property; nthe correct contribution percentage for each flat; and nthelandlord’suptodateaddress for service in England andWales. Nowthatthe economyisatbest

sluggish, it is moreimportant than ever to exercise astrictcreditcontrol system whichwillresultintimelycollection andprompt action on defaulters –azero toleranceapproach,ifyou will.Mills andBoonmay peddlesentimentality butthere is no placefor that in the business ofmanaging your building. So ensure your demandsare correct andcompliant with statute(ie, that they stipulate the landlord’s address for the purposes of s47 of the Landlord and

Flat Living Spring2012


slCsolICItors explains howRMCs can tighten up on service charge arrears collection

Tenant Act 1987 and have attached to themthe latest versionof the summaries of Tenants’ Rights andObligations).Stick to thedeadlines set for reminders and knowwhen to drawthe line. By that,wemeanthatyou should operate a policywhere if initial demands and reminders (no more than two) continue to be ignored then youshould notenter anyfurther dialogue or correspondence with the leaseholderbut should instruct solicitors straightaway.Very

FINANCE Advice oftenyourlease will providethatlegal

fees forrecoveringarrears or taking action in contemplationofforfeiturewill bemet by the leaseholder, so the fear of incurring legal fees ought not to be a bar to instructingsolicitors.

As directorsofthemanagement companyyou cannot afford to allow arrearstobuildup, asRMCs know only toowellthatthe lack of payments has an adverseeffect by reducing or stalling the levelofservices youcan provide. This has the knock-on effectofdecreasingthe building’s valueand ultimately reducing theequityof allleaseholders.You have adutytoall those leaseholderswhodopay theirservice charges on timeto pursue arrears, so ending the downward spiral.

Decidingtopursueenforcement through

courtactioncould beoneofyourbetter decisions:most leaseholdershaveamortgage lenderandthethreat of courtactionresultingin forfeiture oftenmeans that thelenderwillsettle theleaseholder’sarrears (andsimply add thedebt to theleaseholder’sborrowingfortheremainder of themortgage term). Forfeiture is themost useful tool to secure paymentofdebtwhere the arrearsamount tomore than£350 orhave been outstanding fornofewer thanthree years. Even if theleaseholderhas nomortgage

(and, indeed,evenifthere wereamortgage) youcan always pursueamoney judgement against the leaseholder. Before you do so youmay wish to ascertainwhetherthe leaseholdercannotpay orwhetherhe just will notpay.Thiscan be done by obtainingastatusreportfrom aTracing Agencywhichwillrevealbankruptcy, previousCountyCourt Judgements andmatters as variedaswhether the leaseholderisincurrentemployment or howmanycharges he has over the property.Ifyou arehavingtrouble tracking downyour leaseholder then theTracing Agencies can help with that too. Alternatively, youmay consider applying to

result in timely collection...

controlsystem whichwill

astrictcredit ismore important than ever to exercise

courtfor an oral examination of the leaseholderwhich obligeshim to attend to answerquestions about hisfinancialpositiononoath. If theresults of either exercise reveal theleaseholdertobea“won’tpay” andworth pursuing, then it could bemoney well spent. In theevent that he is revealed to be a “can’t

pay” then it will have prevented money beingwastedinfutile

enforcement action. If it is generallyaccepted that the

RMCwillpursueamatterthrough to itsconclusion–including taking enforcement action against debtors - then this couldact as adeterrent to late payerswhich, in turn,willmeanan overallimprovement in collection rates and a better platform for delivery of vitalmanagementservices. There-now doesn’tthatmakeyou feel loved up?●

Janwoodland is the Head of Property at SLC Solicitors


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