For the vast majority of managing agents February and March are the busiest months of the year with regards to service charge arrears. Helen Carey, Head of Debt Recovery at Brady Solicitors, shares five tips for a smooth demand period and speedy settlement.
A focused approach to this service charge period can pay dividends for busy property managers, and now is the perfect time to get organised.
1. Clear the debtor list before issuing new demands
Always aim to recover existing arrears before the next billing period so that you don’t allow service charge debts to build up. So, if one of your leaseholders is in arrears from the June service charge demand, make sure that you (or your legal team) collect this debt before you start to issue the next demands. If you have repeat debtors, consider a bespoke process – read more about dealing with repeat debtors here.
Don’t wait for debts to mount before you instruct solicitors: a half-hearted approach to credit control can encourage leaseholders to be complacent as they know they won’t be pursued for their slow payment.
2. Get your service charge budgets prepared and approved
In an ideal world, you will already have been busy preparing the service charge budget, planning for next year’s costs and any major works projects. If you need to increase the service charge, make sure you have checked the lease to understand how to implement any increase.
3. Follow the terms of the lease
It sounds obvious, but it’s imperative that you make your demands in accordance with the terms of the lease. For example, should you be issuing service charge demands in advance or in arrears? Are there any interesting clauses that you need to consider?
4. Set clear timings for service charge demands and communications
Set out key dates and milestones for issuing and chasing service charge demands. We recommend that you:
Issue the demand 21 days before it is due.
Chase any late payers 14 days after the due date, clearly stating the next step if payment isn’t received.
5. Allow for the Royal Mail strikes– and back up by email
If you hand-deliver your service charge demands, make sure you keep a record of when delivery was made and, if you are posting, remember to allow extra time for any delays caused by the Royal Mail strikes. Any delay in issuing service charge demands will make it harder to chase slow payers – all of which can affect your cashflow. We recommend that you also send the demand by email, to remind the leaseholder to fish out the demand from amongst their other post.
Whether you post or hand-deliver, make sure you comply with Sections 47 and 48 of the Landlord and Tenant Act 1987 and include the address – in England and Wales – of the landlord.
Now is the time to make sure you have cleared any arrears from the previous period. Your estate bank balance and prompt-paying leaseholders will thank you for it!
For help with shifting any stubborn service charge arrears or managing the big service charge demand period, please get in touch with the service charge experts at Brady Solicitors.
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