Collecting Service Charges
It is usually the managing agent who collects the service charges and it is extremely important that they have a robust collection process in place because continual non-payment will have a serious impact on the ability of the freeholder or the agents to carry out all the services which the building requires.
Our managing agent’s process is as follows:
Day 1 – Invoice becomes due.
Day 7 – Telephone call and a reminder letter sent. It is important to note that whilst there is no legal obligation for such a letter to be sent it is considered fair to do so because the non-payment could be an oversight or it could be that the leaseholder has hit financial difficulties.
Day 21 – Telephone call and a stronger chasing letter.
Day 30 – Monthly Statement (sent at the beginning of each month).
Day 35 – Warning letter sent stating that the mortgage company will be contacted and legal proceedings will be instigated. The letter will read something like this:
‘Please be warned that if you miss any service charge payments you will be breaking your lease and possibly your mortgage agreement (if you have one). If you fall into debt we will tell your lender who may decide to pay this on your behalf. If this is the case they will add your service charge debt to the mortgage you still owe them and you will pay interest on the charge’.
Day 42 – Approach Land Registry to get details of mortgagee. If a mortgage is held then a pre-legal letter is sent to the mortgage company and to the debtor informing that the letter has been sent to their lender.
If no mortgage is held, then a pre-legal letter is also sent to the debtor. This means that this is the last chance to pay the debt and the debtor will receive a 7 day legal notice from a debt collector or a solicitor.
Day 56 – If the mortgage company is inclined to make a payment then they usually request between 7-28 days for their borrower to respond. If there is no response from the mortgage company or the debtor or the mortgage company declines to assist with payment (which they sometimes do on the instruction of the debtor) then approval for legal action is requested from the freeholder.
Day 63 – Assuming no payment has been received, legal action will then be commenced through either a debt collector, solicitor or a law firm specialising in arrears recovery.