It’s that time of year where leaseholders find a service charge demand landing on their doormat, obliging them to pay their share of the costs of providing services to their block. Payment of those services charges is crucial.
But what are they for? And what do leaseholders get for their money?
Flats are owned on long leases. Generally speaking, everything within those four walls of the flat belongs to the leaseholder. Everything else (including the main structure of the building, the land it sits in and the common parts) is owned by the landlord.
The lease will set out what services need to be provided for the block by the landlord. Sometimes, this obligation passes to a Residents Management Company.
It can be a range of services that are provided, but these include insuring the building, cleaning and lighting the common areas and grounds, maintenance of equipment such as lifts, professional charges and many more. These are essential services and without them, a block of flats just wouldn’t function.
The only way that those services can be funded is through the payment of service charge. That’s why it’s so important that service charges are paid in full and on time. Without them, the whole block suffers.
Why is payment needed in advance?
The answer is simple. Service charges are payments so that services can be provided.
Cash flow is king. It’s fundamental to any block. If there are delayed payments (or worse still no payments) then this has a massive impact on the services that can be provided. It’s necessary to pay in advance for this very reason.
Leaseholders want to live in blocks that are well-maintained and well-managed. This can only happen if there is co-operation. A leaseholder keeps their end of the bargain by paying their service charges in full and on time.
What happens if service charges aren’t paid?
If there’s no money from the service charges, then services can’t be provided. This impacts on the block, and also on the individual leaseholder who hasn’t paid.
Legal action can be taken against the leaseholder for the arrears. They can be ordered to pay interest on the arrears together with legal fees. County Court action can be taken (which could result in a CCJ) and ultimately a landlord can forfeit the lease and regain possession of the flat. These are serious consequences for the leaseholder concerned.
In my opinion, it’s in the interests of everyone involved in the block that service charges are paid promptly. These funds are the lifeblood of any block, and they are essential to a well-managed and well-maintained building. And after all, that’s what everyone wants.
BY Cassandra Zanelli, a partner specialising in property management at Lexcel accredited solicitors, Taylor&Emmet LLP.
Cassandra has a wealth of litigation experience and regularly presents seminars and courses for industry professionals. She is a member of the Institute of Residential Property Management and the Property Litigation Association. Email: Cassandra.firstname.lastname@example.org
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