It is usually the managing agent who demands and collects the service charges and the statutory codes relating to service charge recovery are s21b of the Landlord and Tenant Act 1985 (notice to accompany demands for service charges) (amended by s153 of the Commonhold and Leasehold Reform Act), s47 of the Landlord and Tenant Act 1987 (landlords name and address to be contained in demands for rent) and s48 of the Landlord and Tenant Act 1987 (notification by landlord of address for services of notice).
The following example is the service charge demands/collections process enacted by our own managing agent:
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 ask for 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 help with payment (which they sometimes do on the instruction of the debtor) then legal action would be requested from the freeholder.
Day 63 – Assuming no payment has been received, the next step is now that of adhering to the Debt Pre-Action Protocol which came into effect on 1st October 2017. It has not been specifically written for leaseholders in arrears, rather they have been included within it.
This is exactly the same as the first stage if there has been no response from the mortgage company or if they have declined to assist with payment. If they have agreed to assist then they usually request between 7 –28 days for their borrower to respond.
At this stage the cycle of chasing is slowed to accommodate this request.
A second letter is sent to the mortgage company – if the agent or the mortgagor don’t hear from the borrower the agent contacts the mortgage provider again in writing to which they usually return a cheque;
Payment received (if no payment is received at this stage then legal action will commence).
Note: Some of these steps may now have been omitted due to the requirements of the Debt Pre-Action Protocol which came into effect on 1st October 2017.