If you are struggling to get service charges and ground rent invoices settled, we have some advice that might help you recover the sums outstanding.
Be clear about what you are recovering and what the invoice is for, and the impact of non-payment.
A service charge will usually relate to the maintenance of communal areas within a building such as security, heating, cleaning and lighting, repairs and servicing and any gardening. In some cases, it may also cover insurance, property management costs and a reserve fund – which will be for any incidental costs not budgeted for. Non-payment of this charge is a breach of the lease and continued non-payment can impact cashflow which will then have a knock-on effect to maintenance of the building and is unfair to other leaseholders that have already settled their outstanding service charges.
Ground rents are an altogether different matter and associated with owned properties (that are on a leasehold), and which are paid to the freeholder, by the leaseholder. Ground rent is typically around £500 per year but can be up to £1000 per year for higher value properties and covers the cost of renting out the land from the freeholder. Again, leaseholders not paying their ground rent is a breach of contract. (Since the introduction of The Leasehold Reform (Ground Rent) Act 2022, any new leases are not subject to ground rent. Read more here https://www.sinclairtaylor.co.uk/news/the-leasehold-reform-ground-rent-act-2022)
Make sure the demand contains the correct information.
Legally, service charge and ground rent demands must be made in writing and include the name and address of the landlord. (If the Landlord resides outside of the UK, then an additional address within England or Wales is required. It will need to be sent to the leaseholder at the leased property (or another address that has been supplied to you, in writing, by the leaseholder).
The demand will also need to include a ‘Summary of Rights and Obligations’ which briefly sets out the rights and obligations of both parties in relation to service charges. Without this, a leaseholder can withhold settlement.
Consult leaseholders on high value or long-term work.
Freeholders (or their management agents) must ensure that leaseholders are consulted before work commences on any planned work where the charges are over £250, or for work or services that are in excess of £100 but lasting more than 12 months.
Service Charges must be made within 18 months of the incurred expense, and within that period the leaseholder must either be issued with a service charge demand or be advised that payment will be required at a subsequent date.
What happens if the above guidelines have been met, but payment is still outstanding?
The non-payment of ground rent and service charges on leasehold properties can cause disruption and impacts the maintenance of common parts at any development. If your internal credit control has not been successful in recovering the sums, Sinclair Taylor can help. We have been recovering property debt in all its forms for over 30 years and have a great deal of experience in working with management agents and freeholders, helping them recover unpaid sums, reduce the time wasted trying to recover these sums, and protect their brand reputation through careful mediation via our trained collectors and advisors.
We work on a no collection, no fee basis and will recover the outstanding amounts ethically and professionally through our pre-legal collections. We are happy to review any agreements to make sure that there are no areas that could leave you vulnerable. We can offer additional services such a as tracing – to help when your leaseholder has moved on without a forwarding address, or litigation services to secure a judgment.
We work with property management agents, commercial agents, and the UK’s leading estate agents to recover property debt in all its forms – efficiently, ethically and sensitively.
