Introduction

Managing a block of flats comes with various challenges, especially when residents default on service charge payments. A recent query from a self-managed block raised concerns about legal action and its potential costs.

Leaseholder Obligations

Service charge payments are typically a legal obligation outlined in the lease agreement. When purchasing a leasehold property, the buyer agrees to abide by the leaseholder’s covenants, which include timely payment of service charges.

Considering Legal Action

Legal action should always be a last resort due to the financial and emotional burden it can place on both parties. It involves using service charge funds, and in self-managed properties, it can create tension among residents.

Alternative Approaches

Before pursuing legal action, it may be effective to send arrears letters or a formal letter before action (LBA). Some law firms charge around £40-£50 + VAT for drafting these letters. In many cases, a well-crafted LBA can encourage payment or at least initiate a response.

Legal Costs and Small Claims Court

If legal action becomes necessary, the County Court small claims track is an option for disputes up to £5,000. Each party is responsible for their own legal costs, and the lease may determine whether administrative costs can be recovered under Section 146 Action.

Conclusion

Addressing service charge arrears can be complex, but legal action isn’t always the first or best step. Understanding leaseholder obligations, exploring alternative approaches, and considering legal costs carefully can help self-managed blocks make informed decisions.