RTM and inherited off-lease concession

[MrSoffit]

Hi,

Our RTM company inherited a long-standing informal concession to allow service charges to be paid monthly on 1st April, 1st May etc even though they were still demanded per the lease in two equal half-year portions payable in advance.

Problem is, the RTM company finds flats reinterpret the monthly concession to pay up to the end of the month, making for stressful cashflow management.

The simple answer would be to invoke the lease as worded, but some directors would like to maintain the concession to keep the peace. I worry we aren't acting prudently if we end up facing bills we can't pay on time because we're waiting for, or chasing, unreliable monthly instalments.

My other concern is whether allowing off-lease concessions causes legal problems for debt recovery?

If a landlord informally permits monthly payments with nothing in writing, is the due date on the half-year demand invoice no longer valid? If not, and the monthly concession isn't backed up by invoice demands with six monthly due dates, are monthly payments enforceable anyway?

Please can you advise?

[Gordon999]

Increase the annual service charge by 20% to build up a reserve fund to cover the 5 years periodic external painting and internal decorating. That should avoid any the cash flow problems if one or two flats are late paying.

[leaseholdanswers]

Increase the annual service charge by 20% to build up a reserve fund to cover the 5 years periodic external painting and internal decorating. That should avoid any the cash flow problems if one or two flats are late paying.

That would need the lease to allow
a reserve funds
b allow the RF to be used as loan facility

Even long standing arrangements are hard to argue that you have estopped yourself ( by earlier actions) from collecting in monthly installments. You would simply give notice that the arrangement is terminated and sue for all amounts due.


I would suggest that the Board resolve as follows and inform leaseholders accordingly- but it means getting your act together.

" In the past flat owners have been permitted, without prejudice to the terms of the lease, to pay the bi annual service charge by monthly installments.

The payment of these amounts late and at the end of each month means that the Company is constantly unable to pay bills leading to considerable stress in dealing with collectors contacting X and Y who deal with our payments.

it is important to remember that we flat owners alone are responsible for our finances and it is unfair to expose X and Y who are flat owners themselves to this undue stress.

The Board have therefore resolved that from the 30th September ( I am assuming your year end is 31-3) the half year payment will be due in full on 1-10. Any amounts not paid by the 15-10 will result in debt recovery action for the full amount, regardless of any pror arrangement.

We are however decided, without prejudice to the terms of the lease to accept installments on the 1- 10 1-11 etc on the condition that any payments made late or altered by you will automatically terminate the arrangement and the balance due will be recovered in full, as above.

In order to do so we enclose the attached Standing Order form to be completed and returned to us by the 30 June.

For those of you who have paid toward the end of the month that will mean two payments close together.

As a transitional measure we are prepared to accept, as above, an amended monthly amount whereby the payment due in September will be divided by 6 and added to monthly amounts due on 1-10 ( you will have to detail what that means for the particular flat) You must therefore contact your bank to ensure that the old standing orders are cancelled to avoid a payment in September and duplicate payments after October.

For those of you already paying monthly on the 1st of each month you need not take action."

For next year it means getting your budget approved and out by end of Feb with new SOs effective 1-4 and back to you my mid March. Make sure that the new SO's have clear termination dates so old payments are not allowed to be rolled over.

The above will lead to a bit of a riot and some cash flow issues, but it is the only way to effect a transition without real and corrosive arguments.

[MrSoffit]

Hi,

Absolutely fantastic responses. As always. Thank you.