Covid-19 has undoubtedly affected the property management industry. Liz Rowen, Legal Director and Head of the Residential Property Management team at UK-top 200 Yorkshire law firm Keebles LLP, explains how the pandemic has impacted the payment and recovery of service charges.
The ongoing health crisis has certainly had an impact on service charges, whether that be the recovery or payment of them by leaseholders. The government put measures in place in the early stages of the pandemic to not only protect the public from the spread of the virus but to also to protect tenants, including leaseholders. This led to landlords being been put at a disadvantage.
Typically, where there are unpaid service charges and where recovery action is contemplated, the landlord may look to forfeit the lease. Whilst several hurdles will be met before forfeiture proceedings are issued, it is possible that once a determination of the arrears has been obtained via the County Court or the Tribunal, forfeiture proceedings will be issued.
For solicitors, the costs of proceedings are always an important factor, whether that be the possible cost to the leaseholder or the recoverability of costs for the landlord.
There has been a host of cases over the years supporting the landlord’s position to recover costs from a defaulting leaseholder under the terms of their lease. This can be the case where the lease provides for the recovery of costs which are incidental to the preparation and service of a ‘Notice pursuant to Section 146 of the Law Property Act 1925’.
Case Notes
The case of ‘Freeholders of 69 Marina, St. Leonards on Sea v Oram [2011] EWCA Civ1258’ is often cited by landlords to persuade the courts that they are entitled to recover their costs of proceedings against a leaseholder for the recovery of service charges.
In November 2020, the Upper Tribunal confirmed costs recovery in taking proceedings against a leaseholder in the case of ‘Kensquare Limited v Boakye [2020] UKUT 359 (LC)’ and therefore a landlord’s cost recovery position was strengthened. This will have an ongoing impact on leaseholders but was welcomed by landlords who are required to undertake a number of steps on the route to forfeiture where service charge arrears have been an issue.
Further Impacts of Covid
Even where all steps have been taken and the landlord is able to issue forfeiture action, Covid-19 has thrown a spanner in the works. The Civil Procedure Rules were amended to add a new practice direction 51Z which suspended possession proceedings. This ruling remained in place until 20 September 2020. Claims proceedings that had been issued prior to 3 August 2020 needed to be resumed using a reactivation notice before they could proceed.
With the third lockdown underway attention has turned back to evictions and on 8 January 2021 the government set out an extension to the halt on evictions under the Public Health (Coronavirus) (Protection from Eviction) (England) Regulations 2021. This means that evictions will be placed on hold until 21 February 2021.
2020 has certainly seen barriers to the payment and recovery of service charges and early signs suggest that the impact of this will be seen by landlords well into 2021. It is unlikely that matters will be back to normal until after the worst of the pandemic is over.
If you would like to discuss any of the issues above or have any other questions around how Keebles can help you, contact the firm’s Residential Property Management team today by calling Liz on 01302 308675 or e-mailing on [email protected].
