Service Charge arrears - Flat now up for auction

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    Service Charge arrears - Flat now up for auction


    I bought a freehold this year for a small block of flats. Due to there being no SC pool and some urgent works being required I authorised the work and paid for it.

    2 flats had been repossessed by the bank and they have not paid any service charges for the last 12 months (I am owed about £750). they are now advertising 1 of the flats for auction.

    Their solicitor asked me to complete an LPE1 which I stated I would if the arrears were paid. They haven't chased me for this form.

    How am I best to recoup these arrears?



    By completing the LPE1 giving details of the arrears!. Actually you should have contacted the lenders with details of the arrears before they started repossession.

    As it is not a service to provided under the terms of the lease, you can also make a reasonable charge for completing the LPE1, but that mght affect any dormant company status, as it is freeholder money, not service charge money.


      If it were me, I would refuse to complete the LPE 1 form, as I assume you have not given the mortgage company permission to assign the lease to anyone without your authorisation.
      Make sure the auction site are aware that the freeholder is owed unpaid service charges, which apply to the flat.
      Do NOT fill in that LPE1 form until you know the new actual owner of the lease, if the mortgage company rail-road through a sale of your lease without authorisation.

      You are entitled to ensure that anyone buying a lease is financially able to pay, per year, anticipated service charges. ( ours can be £ 9000 per year for a few years as the leaseholder directors previously refused to spend money on the building over the last 10 years )
      I would state to both the Mortgage Co's that as they think they own the lease ( which you have not given permission to sell ) you will be instigating court proceedings for recovery of owing service charges if not paid within 14 days ( including any that you have issued recently that should be paid shortly ).

      Irrespective of whether replies come in that you can't do above, you say it anyway.
      I've had selling leaseholders threaten to sue me for me requesting that they observe the lease. I said, "Bring it on" I'll be making a lot of money when you lose, for my time", and they will be paying for it.

      If you are brave enough, state you don't entertain developers either.

      Once you know who the new owner of the lease is, don't forget thy have to sign a deed that says they will abide by the lease, and you need all their info, - last address, where they work and contact number in case of emergency, and you as freeholder charge for implementing the LPE1 and associated paperwork.

      Have been through what you are going through, and you CAN be rail-roaded and ignored by solicitors and mortgage companies, so get it in writing, the above points, so when you see the new owner, who may be oblivious to all that went on, you say, here's the proof, not my problem if you were lied to.


        I would also contact the auctioneer and inform him that you are issuing proceedings in relation to the property and ask him to add the information to the legal pack.


          From the point of view of a leaseholder (i.e. potential purchaser), I would think that completing the LPE1 form and informing the auctioneers would be the most sensible options, that way the purchase is made with full knowledge of how much debt is attached to the property and that, as freeholder, you fully intend to pursue this debt.

          It wouldn't hurt to also contact the bank and inform them that you want the debt paid out of the sale proceeds, but I suspect they'll be expecting the purchaser to cover this.


            give notice of the arrears in LPE1 and the vendor will pay you at or by completion as no buyer will bid optimally on the basis that he or she is taking on old arrears


              You can send a letter by registered post to the auction company requesting them to inform all prospective bidders that £750 service charges are owing and not yet paid by the bank (seller ).


                The horse has already bolted, but if you had chased the bank earlier, they would almost certainly have paid up the service charges, to avoid the risk of forfeiture.

                These days, mortgagees typically send a notification of charge to the freeholder, and that, typically, says: please tell us of any underpayment or other breach of the lease.


                  I think service charges needs to be owing for 3 years before forfeiture proceedings can be started.

                  When you send the letter to Auction Company, send a copy to both mortgage bank and bank's solicitor.


                    Originally posted by Gordon999 View Post
                    I think service charges needs to be owing for 3 years before forfeiture proceedings can be started.
                    That is not correct. There was a mis-drafting of the SI giving the statutory notice, but that has been corrected by an errata, and the actual legislation has always provided for £750 of arrears to be pursued immediately.

                    The legislation sets two thresholds: £350, above which forfeiture can be started immediately, and 3 years of continuous debt, after which forfeiture can be started, regardless of the amount. £750 is more than twice the first figure.


                      In that case , OP can make the threat of starting forfeiture proceedings and block the auction sale ?


                        In layman's terms.

                        A) You can't seek forfeiture for none payment of service charges if the amount is no more than £ 350.
                        ( for 3 years )

                        But you can't have unpaid service charges as the Directors will have to finance that shortfall ( from their own personal bank accounts, as I have had to do, and it was thousands £ for each director ! ) as it is set in law that maintenance has to be done "within a reasonable amount of time"

                        If you have say 40 flats and each one of them owes £350, then that's £ 14000 , which could bring the property to a standstill, or even bankruptcy.

                        B) Therefore if the amount owing is £ 350 or less, you may after 3 years of that debt, seek forfeiture of the flat. ( Forfeiture is often the only way to get the debt paid in many leasehold agreements. )

                        Contrary to my initial suggestion not to submit an LPE1, I concur with others that you fill in the form.


                          Send an email to the bank's solicitor asking for undertaking to pay (1) the sc arrears from the sale's proceeds (2) your fee of £75 for completing LPE1.

                          Send letter to auction company.

                          Start a claim in the small claims court ( at the County Court ) against the bank for payment of sc.arrears


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