Leaseholder not paid s.20 charges

[Emilycarter]

Hi, I am a co-freeholder and one of the Leaseholders
has not paid their charges for two sets of s.20 works. There is no dispute, managing agent has simply not received replies to emails and letters. We suspect the service charge recently issued will also remain unpaid.

Reading some threads here it seems there may be two routes for payment - small claims and/or raise forfeiture issue as breach of lease. Which would be the best course to follow?

[vmart]

Unless the leaseholder has admitted the service charges you will need to apply to the FTT first for a determination before you can issue a small claim.

You cannot implement s.146 until a court has agreed there is a breach and need to be mindful of waiving your right to forfeiture in the meantime.

Litigation should be a last resort. Does the MA or you hold a phone number for the leaseholder? You might perhaps try phoning and/or you write to the leaseholder to attempt to establish if there are any issues.

Read around these topics on the LEASE website. Your managing agent should also be able to advise. You will probably want to take professional advice before deciding the best course.

[leaseholder64]

As a technical point, there is no such thing as a section 20 charge. When it comes to billing, they are just part of the normal service charge.

[Emilycarter]

Thank you both.

What does 'admitting' actually mean? They have to agree (written or verbally?) that they are liable for the service charge?

And if no contact can be made first port of call.os FTT? Can interest (as per the Lease) stil be added in the meantime?

[Macromia]

What does 'admitting' actually mean? They have to agree (written or verbally?) that they are liable for the service charge?

To pursue forfeiture as a result of service charge debt you would need to have evidence that the leaseholder had admitted that they owed the sum that you were demanding (or, at least, that they owed enough for forfeiture to be a theoretical possibility - at least £350).
This means that you preferably need an admission that they owe the sum in some written form (letter, email, text, etc.).
An admission that they are liable to pay service charges will not be sufficient unless they agree that the sums being demanded are payable as a service charge under the terms of the lease.

And if no contact can be made first port of call.os FTT? Can interest (as per the Lease) stil be added in the meantime?

If there is no admission that the debt is owed then the FTT will need to agree the amount that is due before you can pursue forfeiture (but the costs involved with this may be recoverable from the leaseholder (although this depends on precisely what the lease says regarding forfeiture).

If the lease allows for interest to be charged on late payments you can add this, but you may need to later recalculate the amount of interest owed if the FTT don't allow some of the service charge amounts that you have demanded (you can't charge interest on sums that are determined not to have been due).

[Jericho]

Just checking vmart's assertion in #2 ...
"Unless the leaseholder has admitted the service charges you will need to apply to the FTT first for a determination before you can issue a small claim"

I agree that if there was there was doubt about the leaseholder challenging the SC debt then a FTT application would be advisable. My understanding was that providing you were confident on being on safe ground regarding the serving of the demand (so S20 process followed in this case and usual summary of rights etc) the usual escalation route was:
Usual reminder letters
Letter Before Claim - following pre-action protocol (there are letter templates and quite a lot of guidance out there on doing this)
Money Claim Online - followed by CCJ award if not contested and not paid. If the claim was disputed at this point it would get sent to the FTT.

If CCJ didn't do the trick then yes the next lever is S146 which is definitely an area for professional legal input. After the moneyclaim (or perhaps the LBC) you surely would know if the debt was admitted or disputed even if the leaseholder had been playing hardball?

[Emilycarter]

Thank you all once again. The s.20's were served correctly, other Leaseholders have paid and works completed. I do hope that Jericho's view is correct. They have not disputed or commented on the s.20 at all (as far as the Managing Agent tells us). If the recent service charge also remains unpaid they will owe around £4k. The property is a btl and tenanted.

[leaseholder64]

As I understand it, you can start with the small claims court without FTT clearance. However, their rules say that, if the defence is based on unreasonableness, or non payability, of the charges, the court should redirect to the FTT for a decision, and only proceed if the FTT validates the claim.

The specific legal requirement to get an FTT ruling only applies if you intend to threaten forfeiture.

The reason the forfeiture routes is often used is a perception that it is more likely to allow the costs of enforcement to be recovered. They are often not recoverable from the service charge.

[Jericho]

Thanks LH64. Just another clarification ... if the leaseholder accepted the full debt was due at the small claims stage and a CCJ was awarded (but the debt was still not paid), wouldn't this be sufficient to prove breach of the lease and mean a FTT ruling was not required?

This is the stage I'm at with a leaseholder but I've decided to issue this year's upcoming SC demand and almost certainly add that to the debt before going through the process again ending with getting legal advice on S146 action (avoiding waiving the forfeiture by issuing this year's SC demand).

As an aside I've written to the leaseholder's mortgage lender mentioning the prospect of S146 action but even though they have written to the leaseholder they are insisting on notice actually being served before doing anything further (hopefully paying the debt and adding it to the mortgage).

[Anna1985]

Resurrecting an old thread, did the leaseholder pay?

[NaomiB]

I thought that if the managing agent issued an S20 notice and the work was eventually carried out, then the leaseholder would have to pay straight away not in with his service charges. That is what I've been telling my managing agent.

As well as that, just recently, I received a bill for £4550 for my share of the outside decoration of the building where I own a flat. The service charges were issued quite separately.

[Section20z]

Yes normally S20 works will result in an additional invoice but costs could just as easily be met from a reserve fund.

[eagle2]

I thought that if the managing agent issued an S20 notice and the work was eventually carried out, then the leaseholder would have to pay straight away not in with his service charges. That is what I've been telling my managing agent.

As well as that, just recently, I received a bill for £4550 for my share of the outside decoration of the building where I own a flat. The service charges were issued quite separately.

It is advisable to charge leaseholders in accordance with the lease, In your case, the amount should be deducted from the reserve fund which is held by the freeholder.

[NaomiB]

We do not have a reserve fund. And there isn't one for the block of flats where the decoration has been done either.

[Macromia]

I thought that if the managing agent issued an S20 notice and the work was eventually carried out, then the leaseholder would have to pay straight away not in with his service charges. That is what I've been telling my managing agent.

Anything that requires section 20 consultation will still be part of the service charges.
The costs need to be included in the service charge accounts for the relevant year, and any amount that needs to be demanded only becomes payable if it is demanded in line with the terms of the lease and is accompanied by all information that is legally required for service charge charges.

Pretty much the only time that freeholders don't have to follow the terms of the lease, and leasehold legislation, when asking for payment if they want to make improvements that are not covered by the lease. In this situation leaseholders will not have any obligation to pay anything at all - but if all leaseholders want the proposed work done, and agree to pay a share, the freeholder can ask for it to be paid whenever they want (which will usually be before the work is carried out!).