Service Charge Arrears

In short

To recover unpaid service charges, first check the demand was valid: the landlord's name and address and the summary of rights must be on it, and costs over 18 months old usually cannot be charged. Then send reminders, a letter before claim giving 30 days, and if needed a county court claim. A mortgage lender will often pay to protect its security. Forfeiture is a last resort, needs the sum agreed or decided first, and is barred for arrears of £350 or less unless over three years old.

01Why it matters

Every unpaid share is paid in effect by everyone else: the building's bills do not shrink because one flat is behind. A board has a duty to the other members to recover arrears, and the earlier it starts, the easier it is.

02First, is the demand valid?

Before chasing, check the demand itself. It must give the landlord's name and an address in England and Wales for notices, and come with the prescribed summary of rights and obligations. Without them the money is not yet legally due. Costs incurred more than 18 months before they were demanded usually cannot be recovered unless the owner was told about them in writing within that time. Many disputes about arrears are really about a defective demand.

03The steps, in order

A reminder soon after the due date, polite, with a copy of the demand.
A second reminder and a call or a letter asking whether there is a problem. Many arrears are a missed change of address, a sale in progress or a hard month.
A letter before claim under the Pre-Action Protocol for Debt Claims when the owner is an individual: the amount, how it is made up, and 30 days to reply, with the information sheet and reply form.
A county court claim, usually online and on the small claims track for smaller sums. Interest and costs are recoverable only as far as the lease allows.

04Mortgage lenders

A mortgage lender will usually pay arrears to protect its security once it is told about them. After a court judgment, or where the lease allows, writing to the lender is often the quickest route to the money.

05Forfeiture is a last resort

The lease may allow the landlord to forfeit, but the law hedges it in. For service charges, forfeiture is not possible unless the amount has been agreed or decided by a court or the First-tier Tribunal, and not at all for small sums: the arrears must be over £350 or more than three years old. A notice in the prescribed form comes first. Boards should take legal advice before going near it.

06If someone is struggling

Some arrears come from illness, bereavement or money worries. We stop chasing and speak to the owner when that is the reason, agree a plan where we can, and tell the board. If anyone says they are at risk of harming themselves, that comes before everything else.

07What we do

We send reminders on a set timetable, make the calls, send the letter before claim and prepare the court claim for the board's decision. An arrears notice is £75 plus VAT, one of the few charges we publish; there is no other charge for chasing.

08Questions

Can a management company take you to court for service charges?

Yes. If reminders and a letter before claim do not work, the company can bring a county court claim for the arrears, usually online. Interest and legal costs can be added only if the lease allows them.

How long can service charge arrears be chased?

Usually six years from when each payment fell due, and sometimes longer depending on how the lease is worded, so take advice on very old debts. Separately, costs incurred more than 18 months before they were first demanded usually cannot be charged at all unless the owner was told about them in writing within that time.

Can I lose my flat for not paying service charges?

Only in limited cases, and as a last resort. Forfeiture for unpaid service charges needs the amount to have been agreed or decided by a court or tribunal, cannot be used for arrears of £350 or less unless they are over three years old, and the court can give relief if the arrears are paid.

Will my mortgage lender pay service charge arrears?

Often, yes. Lenders usually pay arrears to protect their security once they are told about them, and then add the amount to the mortgage. It is far better to talk to the managing agent before that happens.

What if the service charge demand was wrong?

Then the money may not yet be due. A demand must give the landlord's name and an address in England and Wales and come with the summary of rights; if it does not, it can be reissued correctly, and the owner can also ask the First-tier Tribunal whether a charge is payable and reasonable.