Features SERVICE CHARGES
CAN’T PAY, WON’T PAY
Does your block have problems collecting payments from residents? Louisa Benbow offers some advice on the best way to effectively manage your service charges
The need to keep common areas of residential blocks clean and well maintained is a top priority for most leaseholders and tenants, so
it makes perfect sense that leaseholders make their service charge payments in full and on time so that the necessary services can be provided. Unfortunately, this is not always the case and those responsible for collecting the service charge can face a whole catalogue of explanations as to why payments are being withheld. With notable exceptions, in our experience the majority of disputes are unjustified, with the most common reasons given including:
Alleged non-receipt of demands; Invoices seemingly being issued to the property as opposed to the correspondence address; Leaseholders believing that services are not carried out; and Residents claiming they are uninformed as to what their payment is contributing to.
There are a number of ways to address these issues and tackle the problem payers.
How is my service charge spent?
The service charge is an obligatory contribution from all residents to fund the costs in maintaining the communal parts of a property or development. The requirement for this contribution is stipulated in the lease and can encompass a number of expenses such as general maintenance, including repairs, insurance, lighting and cleaning, to name but a few. Service charge demands are calculated as an anticipated expenditure for the upcoming period. The entry detailing service charges in a lease will specify when and to whom they are payable.
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Leaseholders will often claim that they have not received invoices from the managing agent in an attempt to justify their non- payment. Although leaseholders should be aware that their lease outlines the duty to pay their service charge by the specified dates, there is no substitute for regular communication between property managers or managing agents and residents, especially if they are known to be elderly or vulnerable. While flat owners should be liaising with their managing agent in order to make payments on time if the invoices are not received, more often than not, payments are simply forgotten. Missing payments are not necessarily checked on by leaseholders as the invoices themselves serve as a cue that payment is due. We would always recommend that the managing agent or property manager is seen to be on hand at the blocks they manage, either by way of scheduled visits to the site or regular updates posted on a communal noticeboard or IT platform, showing them to be a constant, accessible presence on site.
Another common reason for non-payment of service charges which is all too familiar to those in the property debt collection business, is that demands have either been issued without being addressed to an RMC director or other named resident, or to an address where the owner no longer resides. In this case, flat owners will be advised that invoices should be requested from the managing agent if they are yet to be received, as the onus is on them to pay their service charge on time.
However, issuing demands to the correct, most recent address on file is imperative in ensuring that payment is received in a timely manner. This will go a long way to reduce any potential legal issues that could arise should it transpire that a managing agent has failed to issue invoices to the address they hold for the
owner. As ever, regular communication between leaseholders and their RMC board or property manager encourages regular and consistent dialogue and helps to ensure that all information held is current.
It is noticeable that disputes concerning the services provided by property managers tend to increase once the matter has been passed through to a debt collection agency. Regular interaction with leaseholders can greatly reduce the plethora of maintenance disputes that seem to appear only once a problem has been escalated. By talking to residents on a regular basis and dealing with their concerns at an early stage, disputes can generally be resolved before the parties involved take entrenched positions and start withholding payment.
So good communication really helps when it comes to the effective management of service charge collection. However communication is pointless if it is incomprehensible to a resident. Making all aspects of their service charge obligations accessible to residents by using clear, concise explanations rather than technical jargon and ensuring transparency and integrity in matters concerning accounts is of huge benefit to both parties.
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