Explaining the service charge
Service charges cause a huge number of arguments between leaseholders and landlords but thankfully, these disputes can usually be resolved before the landlord loses out financially due to non-payment by the leaseholder and before the leaseholder finds themselves evicted after forfeiture and possession action by the landlord.
The lease will set out the details of the service charge which is essentially a fee for the services performed on the property. Leaseholders must pay this fee to landlords who may need to recover costs for the following:
• Maintenance and repairs
• Servicing of lifts
• Insurance premiums
• Contributions to reserve funds
• Costs of lighting, heating etc.
• Cleaning charges
Whether it is a fixed or variable charge should be detailed in the lease. Provided that the charge can be deemed reasonable, there are no limits on how much it varies. If a freeholder does not believe the charge to be reasonable, they can take their issue to the Leasehold Valuation Tribunal (LVT).
Reducing the need to recover service charge arrears
If landlords stay on top of credit control, they can keep down the number of times that they need to collect service charge arrears. By keeping credit high, landlords can insulate themselves from facing pressure from creditors.
Serving a demand for service charges
When demanding service charge arrears, the landlord must ensure that the demand is lawful. In order to be lawful it must be delivered to the leaseholder’s property in writing along with the document detailing the leaseholder’s rights and responsibilities and must feature the landlord’s name and address.
If the demand is unlawful the leaseholder will be under no obligation to comply with it. It is therefore important for the landlord to instruct a specialist solicitor to help ensure that the demand is lawful. Your solicitor will also be able to check that leaseholders pay the charges and if they do not they can send a firm reminder. If this reminder is ignored, the solicitor can then issue a warning that legal proceedings may be commenced unless payment is received. Late payment charges will be added to cover the cost of chasing the overdue arrears. Interest can also be charged and this is usually around 4%.
Service Charge Disputes – pay attention to time limits
Under Section 20B of the Landlord and Tenant Act 1985, the landlord must demand payment of the service charge within 18 months of the landlord incurring expense for the service. Failure to demand the charge within this time and tell the leaseholder when the charge is due can cause a big problem which is why it advisable to instruct a solicitor to make sure this does not happen.
Legal action over service charges
If the leaseholder does not respond to the demand for service charge arrears or any subsequent reminders they can be said to be in breach of the lease and the landlord can therefore decide to start forfeiture and possession proceedings. Such action cannot be pursued if the due debt is less than £350, in which case an application to the County Court will need to be made.
Forfeiture and possession proceedings are very complex and require the input of a specialist solicitor. In most cases, the costs associated with Country Court or forfeiture proceedings will be paid by the leaseholder. Click here to read more about forfeiture of leases.
Service Charge Disputes contact us today
As you will see above, it is crucial that you have the help of a specialist solicitor when trying to recover service charge arrears. Whether you are a freeholder or the owner of a leasehold flat, our team have the expertise you need. So for FREE initial phone advice on any aspect of your service charge dispute:
- Call us now on 0800 1404544, or
- Fill out the contact form below to get in touch.
- FREEPHONE 0800 1404544
Comments or questions are welcome.