Can I refuse to pay service charge ?
Normally no as the payment of service charge is a firm and legal obligation duty laid out within the lease you would have signed when buying your property. Often people would say 'why should I pay my service charge as the service I am paying for is not satisfactory' - the argument here is actually the majority of the money you pay in service charge goes towards the up keep of the building eg lifts, concierge, buildings insurance etc etc. The portion allocated to the agents fee to carry out this task is relatively small. So what you would need to do is assess resident sentiment towards perceived service and then start the process of looking for another agent whether this is by approaching the freeholder initially or if you have a right to manage then give the agent it's normal 3 month's notice.
The Top 10 reasons for non-payment of service charge :
Service charge arrears can build up and before you know it, cash flow starts to become a problem and the maintenance of the block severely suffers. To help minimise service charge arrears, it can be useful to understand why leaseholders are not paying and the actiona that can be taken.
Unhappy with quality of service generally
Commonly a leaseholder failing to pay their service charge is as a result of a dispute relating to the quality of workmanship carried out by their freeholder of the development. Many leaseholders think that the landlord is not fulfilling their obligations according to their lease, and as such use this as a reason for not paying.
Concerns with level of work carried out
By contrast, a frequent issue for withholding payment can be leaseholders querying works undertaken to the development that are deemed unnecessary. We often hear concerns about improvement works being carried out by the freeholder for which the leaseholders think they should not be charged for nor held liable as they are not necessary.
Delays to works undertaken
Any delay in repair or major works being carried out to a development can make the situation worse as to the disrepair of the property, which can then ultimately require leaseholders to contribute even more towards the repair and maintenance of the block. An example would be roof repair works, and landlords leaving the repair and maintenance to the last minute.
Service charge demand not served correctly
A leaseholder who is not served with a legally worded service charge demand in accordance with section 47 and 48 of the Landlord and Tenant Act 1987 can withhold payment of his service charge until such time as he has received a compliant demand. The demand must be accompanied with the summaries of the tenants’ rights and obligations. This is one of the most common reasons for leaseholders withholding payment of their service charge.
Service charge apportionment is not in accordance with what is in the lease
Some leases state a leaseholder’s % contribution to their service charge an if the leaseholder is charged more than the percentage stated, they have a valid reason to dispute the service charge arrears payable and withhold payment.
Service charge not demanded in accordance with the lease
Another very common reason for withholding payment is where the demands are not made in accordance with the lease.
Demand not even received
The reason for non-payment could be as simple as the service charge demand not being received by the leaseholder.
Often the leaseholder who owns the flat may not be living in it, instead letting the flat to tenants. In which it is the responsibility of the leaseholder to provide an alternative address for correspondence if they do not wish to receive post at the property address. If an alternative address has not been provided, a leaseholder cannot argue that he has not been served with a demand. However, it is found that an alternative address has been given, but the demand has still been sent to the property address. This can be avoided with proper record keeping.
Can’t afford to pay
The leaseholder may genuinely be unable to pay the service charges due to lack of funds, job loss etc. This may come about following an unexpected major works project or to changes in a leaseholders’ financial circumstances. In such cases, a payment plan may well be offered.
How to reduce non-payment of service charges
These issues often arise due to a lack of transparency, accountability and communication between the Freeholder and the leaseholder when it comes to the repair and management of the block.
A few pointers for avoiding these non-payment situations:
Ensure the lease is fully understood to make sure you correctly issue service charge demands in accordance with the terms of the lease.
Keep open communication channels with leaseholders to avoid unforeseen expenditure and keep accurate records of how contractors are alloctaed, expenditure levels etc
Ensure your service charge demands are compliant
Ringley can assist with this aspect of arrears collection, fill out the form on this page within two hours and you will be contacted within two working hours.
K Emerseon, SW3