Falling Into Arrears: Can’t Pay or Won’t Pay?
There are many reasons why leaseholders may fall into arrears and end up breaching their lease as a result. Changes in personal circumstance such as redundancy, being too ill to work (this is where sick certificates, GP letters, copies of any hospital admittance and release forms should be provided) being on a low/fixed income or having no savings to fall back on can happen to anyone and the result is exactly the same as falling behind with credit cards or mortgage payments. Why? Because a long lease is also a contract and just like you would advise your mortgage lender as soon as possible that there is a problem, you should also advise your freehold RMC or the managing agent. Unless they are advised, they will continue to send out demands (which usually contain a threat of legal action) and add their own administration charges, (if the lease allows it) without having the slightest idea what situation is and, as a result, inadvertently worsen the situation.
Other reasons for leaseholders falling into arrears could be that:
- Leaseholders are disputing the service charges on grounds of validity, reasonableness or legality;
- A leaseholder has died and the estate is being handled by family members;
- There are accounting failures such as where the incoming payments may have been posted to the incorrect leaseholder account;
- Demands are incorrectly addressed;
- New leaseholders (or their solicitors) fail to serve the required notices stated by the lease during the conveyancing process.
All these reasons are a far cry from those leaseholders who choose not to pay, or pay when they feel like it. There’s been a lot of this on our block and usually the involvement of our RMC solicitor has been enough to move the situation forward but I am now involved in a very tricky situation. As usual, when the managing agent collection process was exhausted, two leaseholders were referred to our company solicitor who applied for a money judgement at the County Court. The leaseholders challenged it (we had no idea they felt the charges were unreasonable) and the application was referred to the FTT. Despite a hearing and a decision made largely in our favour the service charge account has yet to see a penny! These two leaseholders remain in arrears and so not only do we have to adhere to the Debt Pre-action Protocol for monies that were added to the debt after its introduction on 1st October 2017 but we also have to look at enforcement measures, which will again cost us yet more money!!
There is so much in the press about the problems leaseholders suffer at the hands of unscrupulous developers/freeholders but we are being held to ransom by two unscrupulous leaseholders who refuse to pay whilst our costs keep mounting!