Recovery of Residential Service Charges via the Debt Recovery Small Claims Process in England– Part 1

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Are you a landlord with investments in residential property? Have your lessees failed to pay amounts of Service Charges and you would like to bring a claim to the County Court for recovery?

This is Part 1 of a series of articles that we will be producing on this topic. We will focus, in this part, on the checklist of technicalities to be observed when demanding service charges.

The Lease
The first and foremost point to keep in mind, is whether the charges are in fact properly recoverable under the terms of the lease, and whether you have demanded them in accordance with the lease terms.

Residential leases will usually provide detailed provisions regarding items that the landlord can charge for, as well as to the timing of demands and payment etc. This is obviously something that needs to be looked at on a lease by lease basis, and needless to say, you must take care to ensure that they have complied with the terms of the lease (as well as any regulatory requirements).

Have you properly consulted before carrying out “qualifying works” or before entering into a “qualifying long term agreement for the provision of services”?

If you intend to carry out “qualifying works” which would result in any tenant being required to contribute more than £250, then you must have consulted with the lessees before carrying out those works. You may well ask what would amount to “qualifying works”. This can vary from major improvement works, repairs, as well as planned maintenance. You must also pay careful attention as to what works are to be banded together when considering the £250 threshold.

If you intend to enter into a “qualifying long term agreement”, then you must have consulted with the lessees before doing so. A “qualifying long term agreement” means an agreement entered into for a term of more than 12 months. If such an agreement is intended, which would mean that any lessee would be required to pay more than £100 in any accounting period, then you must have undertaken the consultation. Careful consideration will also need to be given to this if you intend to enter into a rolling contract.

You must ensure that you have demanded the service charges in time, as your lessees will not be liable to pay for service charges that were incurred more than 18 months before your demand is served. The exception to this is if you notified the lessees in writing during those 18 months, that those costs were incurred and that they would be required to pay towards them via the service charges subsequently. It would however be preferable for the demand to have been sent out within that 18 month period, to avoid arguments as to whether or not they were properly notified.

Your Demand
There are several points to consider here:

• Has your demand been addressed to the correct person and sent to the correct address? You will need to be sure that your records are kept up to date as to who the lessee(s) are and the correct address to which demands ought to be sent. There may well be provisions in the lease as to the address to be used, which will need to be checked.

• Whether your demand contains your name and address, as well as an address in England and Wales at which notices (including notices in proceedings) may be served on you. If it does not, then the service charges are not due from the lessee(s) until you comply with this.

• Whether your demand includes the prescribed Summary of Tenants’ Rights and Obligations. Again, failure to include this will mean that the service charges are not due from the lessee(s).

• Whether you have complied with all company and VAT formalities.

Assuming that this is all done correctly, then we can move on to the next step of the process, which will be covered by Part 2 in this series.

If you need help with the recovery of service charges, please contact Penny Daisley, debt recovery manager or Panayioya Ioannou, senior lawyer for advice:

Telephone: 0333 2200244