Fee for late payment of service charge - what should an RTM charge?

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    Fee for late payment of service charge - what should an RTM charge?

    Since becoming RTM we've decided to be a little lenient with leaseholders in financial hardship and charge a small fee for any late payment of service charge (£35) and with haven't included interests.
    In hindsight, this doesn't incentivise leaseholders to pay on time and wonder if the fee should be more. Our previous MA used to charge £65.
    For a leaseholder who takes 3 to 4 months to pay any amount of service charge, this means we are short of cash and the leaseholder is getting a free loan.

    In terms of work involved, we (I mean, I) have to constantly chase the outstanding amounts, threaten court action (which we would prefer to avoid) and often the leaseholder won't even contact us to explain their situation.

    Obviously we want this to be a fair and reasonable fee.

    Just wondering what other RTM/RTC charge and should we increase our fee?

    RAM - I already know what you are going to say, it would be good to know how much you charge for your block.

    #2
    well as u know you cant charge a thing unless the lease says so. even if it does, it is about costs not penalising. if you allow monthly then if they are a month in arrears then cancel the arrangement and go for the whole half year. bill , reminder, lba then sue.
    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

    Comment


      #3
      Originally posted by leaseholdanswers View Post
      well as u know you cant charge a thing unless the lease says so. even if it does, it is about costs not penalising. if you allow monthly then if they are a month in arrears then cancel the arrangement and go for the whole half year. bill , reminder, lba then sue.
      You beat me to it. I'm having a look at our lease. Will report back.

      Comment


        #4
        If it's not in the lease, look up
        Schedule 11 of the Commonhold and Leasehold Reform Act 2002

        Comment


          #5
          Originally posted by Carine View Post
          Since becoming RTM we've decided to be a little lenient with leaseholders in financial hardship and charge a small fee for any late payment of service charge (£35) and with haven't included interests.
          In hindsight, this doesn't incentivise leaseholders to pay on time and wonder if the fee should be more. Our previous MA used to charge £65.
          For a leaseholder who takes 3 to 4 months to pay any amount of service charge, this means we are short of cash and the leaseholder is getting a free loan.

          In terms of work involved, we (I mean, I) have to constantly chase the outstanding amounts, threaten court action (which we would prefer to avoid) and often the leaseholder won't even contact us to explain their situation.

          Obviously we want this to be a fair and reasonable fee.

          Just wondering what other RTM/RTC charge and should we increase our fee?

          RAM - I already know what you are going to say, it would be good to know how much you charge for your block.
          I run the RTM for a large block.

          Our payments are due quarterly, after 21 days of non payment we can start charging interest at 8% in accordance with the lease. This is how I do it:

          1. One month after no payment, 1st reminder gets sent
          2. Two months after no payment I send them a letter - this letter is a final reminder, it also outlines that their building is insured, their water rates, their window cleaning are currently being paid for by their neighbours until they pay up and that they are being very unfair, and costing other people money and in effect living for free. It's important to make people realise, this isn't like a normal bill to a large company they can ignore, I make it clear they are effectively scrounging off the rest of us (in nicer terms). This makes any challenge or future late payments very awkward for the leaseholder involved, especially if they are an owner/occupier.

          Number 2 normally works, on the odd occasion it doesn't, after 3 months of no payment I hand the account to Br*dy Solicitors and a couple of months later we get a cheque from the leaseholder or the lender in some cases.

          Never fails.

          On a side note it is essential you let those paying the service charges know where their money is going, it goes a long way to achieving good receovery of service charges. I setup a wordpress blog for our building with what's happening from month to month (painting, lift repairs etc etc).

          Comment


            #6
            Nothing in the lease apart from the usual

            - SC to be paid in advance and in case of default the same shall be recoverable from the tenant as rent in arrears (how helpful is this???)
            - costs reasonably and properly incurred in carrying out the obligations of the Lessors

            Comment


              #7
              Originally posted by Milhouse View Post
              I run the RTM for a large block.

              Our payments are due quarterly, after 21 days of non payment we can start charging interest at 8% in accordance with the lease. This is how I do it:

              1. One month after no payment, 1st reminder gets sent
              2. Two months after no payment I send them a letter - this letter is a final reminder, it also outlines that their building is insured, their water rates, their window cleaning are currently being paid for by their neighbours until they pay up and that they are being very unfair, and costing other people money and in effect living for free. It's important to make people realise, this isn't like a normal bill to a large company they can ignore, I make it clear they are effectively scrounging off the rest of us (in nicer terms). This makes any challenge or future late payments very awkward for the leaseholder involved, especially if they are an owner/occupier.

              Number 2 normally works, on the odd occasion it doesn't, after 3 months of no payment I hand the account to Br*dy Solicitors and a couple of months later we get a cheque from the leaseholder or the lender in some cases.

              Never fails.

              On a side note it is essential you let those paying the service charges know where their money is going, it goes a long way to achieving good receovery of service charges. I setup a wordpress blog for our building with what's happening from month to month (painting, lift repairs etc etc).
              Thanks Millhouse, looks like our lease doesn't allow for late payment fee or interests to be charged unfortunately.
              We have explained many times that we are not a bank or a big organisation (as you pointed out) and that without payment, we simply can't go ahead with some of the much needed works or pay our bills. And as you pointed it is unfair to those who pay and pay on time.
              This has had little influence and we keep having to chase SC.

              On a side note, I'm quite interested in that blog you've set up. Can you tell me more?

              Comment


                #8
                Originally posted by Carine View Post
                Thanks Millhouse, looks like our lease doesn't allow for late payment fee or interests to be charged unfortunately.
                We have explained many times that we are not a bank or a big organisation (as you pointed out) and that without payment, we simply can't go ahead with some of the much needed works or pay our bills. And as you pointed it is unfair to those who pay and pay on time.
                This has had little influence and we keep having to chase SC.

                On a side note, I'm quite interested in that blog you've set up. Can you tell me more?
                Do you have the option of a reserve fund? Do you charge annually in advance for the whole year?
                Do you have a provision for admin charges?

                Comment


                  #9
                  Originally posted by bbva View Post
                  Do you have the option of a reserve fund? Do you charge annually in advance for the whole year?
                  Do you have a provision for admin charges?
                  We do have option for a reserve fund and we do charge in advance twice a year for the whole year (25th dec and 24th june)
                  There is no provision for admin charges in our lease

                  Comment


                    #10
                    Admin' charges when not in the lease

                    The following is from official leasehold solicitors advice web pages.
                    _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

                    The leaseholder is required by the terms of their lease to pay the service charges and ground rent as determined by their lease in advance of the anticipated year’s expenditure. Any non payment will result in a breach of the lease.

                    The landlord or resident management company will be required to collect the service charges and therefore should initially try proactively to seek to get them paid, for example, finding easy ways for payments to be made, i.e. direct debit or making a concession as long as a precedent is not set.

                    Many leases allow late payment fees to be charged by the landlord where leaseholders breach their lease by late payment.

                    Since the Commonhold and Leasehold Reform Act 2002 came into force it has become possible to levy variable administration charges for breaches of a lease, such as late payment, even if the lease does not specify this.
                    ( Post number 4 )

                    When advising a leaseholder of an administration charge it is necessary to ensure that the leaseholder also receives a notice of the Tenant’s Rights and Obligations (Administration Charges). As the charge is variable this simply means that whatever administration fee is levied it must be reasonable.

                    Interest charges – Leases often allow interest to be charged on unpaid service charges which often encourages payments to be made in a timely manner – A typical lease will specify a late payment interest rate of around 4% above base rate.

                    If your lease does not contain this option then you may be able to apply to the Leasehold Valuation Tribunal (LVT) for a variation of lease under Section 35 of the Landlord and Tenant Act 1987 – they will need to be seen as fair and reasonable. Equally the LVT can prevent landlords requesting interest charges if they are seen to be unreasonably high.

                    Often the payment of service charges can be delayed for a variety of reasons, for example when someone has died, a property has been sold or a leaseholder is made redundant, an investment landlord cannot attract a tenant, and therefore it is important that the landlord, Managing Agent or Residents Management Company (RMC) investigates proactively.

                    Where debt recovery is necessary it is best to follow a clear and strong procedure ideally with a zero tolerance to late payment explaining to all leaseholders in very clear terms why payment of service charges is so crucial to the running of their development, its maintenance and with that the maintenance of the apartments market value. We would recommend the following procedure:-

                    * Reminder letter – 14 days after the due date, explaining the procedure that will follow if payment is not made.
                    * Second reminder – 21 days after the due date advising when legal action will be initiated 7 days after date of this letter.
                    * Legal action initiated – after 28 days.

                    At each stage of the request for monies due it is best to offer the leaseholder the opportunity to discuss the outstanding monies to see whether a suitable concession can be made

                    Prior to legal action the letters provided to the defaulting leaseholder must be clear and concise, refer the leaseholder to the availability of legal advice, provide a reasonable time for the leaseholder to respond and state what will happen if the date passes and the debt remains unpaid.
                    If further information is requested from the leaseholder you must allow them sufficient time to provide the information to you.
                    If the Civil Procedure Rules (CPR) are not followed then the court could possibly strike out the claim.
                    However, a strike out would be rare as your solicitor will have ensured before issue of any court claim that all relevant notices and invoices had been served and at that time there is unlikely to be any scope for a dispute upon commencement of court proceedings.

                    When considering instructing a solicitor to act on behalf of the RMC, you or you managing agent should consider instructing a firm that specialises in the recovery of service charges.
                    A specialist law firm understands the need to turn around the arrears situation as fast as possible for the benefit of all the leaseholders and the continued good management of the estate.
                    Some law firms will work on a no recovery no fee basis and will not charge any upfront fees to the RMC as they will be able to recover their professional legal fees from the late paying leaseholder so long as the lease allows this – the vast majority of leases do.

                    Where flats and apartments are subject to mortgages, the leaseholder will not only be breaching the terms of their lease but also the mortgage companies requirements. Mortgage companies can be made aware of the debt, as they will be keen to protect their investment to avoid any possible forfeiture of the lease and the loss of their security. They may even offer to add the debt to their clients’ mortgage with or without a leaseholder’s consent.

                    Legal action is usually sought by seeking a judgment by the court (CCJ) which may award the monies owed plus fixed costs (for claims under £5,000) and late payment interest to be paid by the defaulting leaseholder. Once a CCJ is granted by the court your solicitor has a variety of options to enforce the court’s order.

                    In most cases if there is a mortgage on the property it is likely that the mortgage provider will be given a further opportunity by your solicitor to protect the mortgagee’s interest and pay on behalf of the leaseholder the full amount owing including the solicitor’s costs, interest, administration charges and, of course, all the arrears of service charges and ground rent.

                    If payment still remains outstanding following the court’s determination a number of the following enforcement measures are available:-

                    * “Warrant of Execution” by the courts bailiff to seize goods to the value of the debt;
                    * Attachment of Earnings Order – where monies are deducted regularly from the debtors salary;
                    * Charging Order – where the debt is secured against land or shres in which the debtor has an interest;
                    * Third Party Debt Order, requesting the monies to be paid by a third party who owes money to the debtor (often banks or building societies)

                    Most claims under £5000 are dealt with as small claims in the County Court.


                    - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

                    Admin charges here are as per decided upon via the LVT at £ 25.
                    Is £ 25 too much for a simple letter for an RMC or RTM company?
                    Yes it is,
                    But a managing agent will charge £ 50 to £ 65 ( irrespective of any LVT ruling )
                    So £ 25 from RMC or RTM, or £ 50 from a Managing agent, they take their pick, to have in house management or external management, but fee still charged no matter how much they scream and shout.

                    Comment


                      #11
                      Good advice from RAM.. You can claim up to £10000 now in the small claims court.

                      Comment


                        #12
                        Originally posted by Carine View Post

                        On a side note, I'm quite interested in that blog you've set up. Can you tell me more?
                        I've sent you a PM

                        Comment


                          #13
                          I dont know which solicitors page that came from but they need to pay attention to recent UT decisions....

                          If the lease does not reserve charges then you cant levy them the 2002 Act makes no such provision.

                          The best approach is as suggested earlier stop monthly payments and go for the lot. its best to bill a month before hand reminder 7 days before due date final reminder on the due date, bearing in mind some leases give grace of 14/21 days and then fire a letter to the mortgagee ( saying that all remedies including forfeiture will be explored).

                          Bung on £65 and interest knowing that they don't have to pay it and leave it there until they sell or let them go to the FTT_PC
                          Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                          Comment


                            #14
                            Yes, that 'solicitor' clearly doesn't know the law. I also don't see an FTT allowing the lease to be changed to allow interest charges (although having said that, the LVT in my case made all sorts of bizarre and contradictory comments regarding admin/interest fees)

                            In any event admin fees can always be challenged for reasonableness, they may well decide on a max of £25 for a simple letter.

                            You are finding out one of the drawbacks of an RTM especially if the lease doesn't allow recouping of fees/charges, etc
                            Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

                            I do not accept any liability to you in relation to the advice given.

                            It is always recommended you seek further advice from a solicitor or legal expert.

                            Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

                            Comment


                              #15
                              Thanks everyone for the advice.
                              We can bill earlier than we have and issue strong formal reminders as suggested. it's difficult not to accept monthly payments as some money is better than none and if we were to go to court, the tribunal would probably force onto the leaseholder whatever they can pay at the time...

                              Comment

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