AON Knowledge Library

Service Charges

Service Charge Collection

If you’re a director (or even an owner) in a management company, service charge collection will be one of your priorities. However distasteful it may seem, without those service charges, nothing happens. The bins will start piling up, the lift won’t work and it’ll be very dark at night on the stairs.

Unfortunately not everyone will see it that way. Some people didn’t realise when they moved in that service charges are part and parcel of apartment living. Others will think they’re not getting value for money. Some people will prioritise other things above service charges. There are some things you can do to help keep the cash flowing.

* Communicate well

If people understand what they’re paying for, where their money is going and that it’s not being pocketed by you, the managing agent or anyone else (lots of people do believe those even if they’re rarely true), they’ll be happier paying. If they can see the effects of their service charge (painted walls, clean carpets, etc), they’ll be even more likely to pay. Prioritise visible things once the essentials are paid for.

* Get people involved

Get people to help you look for new companies. Not only will they help you conduct more thorough tenders but they’ll be happier paying if they know they’re getting good value for money.

* Send bills out early

Give people time to digest the bill, to talk to you, ask questions and clear up any confusion. Give them time to gather the money.

* Be flexible in accepting payments

If you can, accept payment every month or even any quarter instead of just once a year. It will make it easier for people to afford. Be careful because cash flow can become a problem, especially if people stop paying in the middle of the year.

If you’ve done all that and you’re still having problems, you’re not alone. Here are some more forceful measures people have been forced to take.

* Charge interest to the owner.

This can only be done if your Lease Agreement specifies it. It can rack up very quickly so it’s in owners interests to pay you as soon as possible.

* Send warning letters through

These letters will go out on Stubbs Gazette (a newsletter of all people who’ve had High Court payment judgements against them) headed paper and usually get a prompt response.

* Deny interest letters

If the owner wants to change their mortgage provider, the bank will ask the management company for an interest letter. You can refuse to issue these letters until the service charge has been paid.

* Deny parking permits

If your block or estate operates a parking permit scheme, you could refuse to issue or renew parking permits for owners who are in debt.

* Hire a debt collection solicitor.

These are firms who specialise in collecting payments. They’re not the ‘show up at your job’ or ‘send the boys to your door late at night’ type of people you’re probably thinking of. The truth is rather more mundane. They send the dreaded solicitors letters. If that fails, they’ll take the owner to court where you should get a payment order or instalment order. Depending on your lease agreement, you should be able to charge the solicitors and court costs back to the owner.

* Insurance Policy

Every service charge includes a contribution towards the block insurance policy. If a person is a persistent non-payer, you might be able to instruct your insurance company to remove them from the list of policy beneficiaries. This means that if there are any problems in their unit, they won’t be able to claim from the block policy. The insurance company should also notify the owners mortgage bank (if any) to let them know the unit is uninsured. This should void their mortgage forcing them to pay or sell. This is a risky option because their lease agreement states that you must provide cover but it has been done for people who have never paid at all. However, for unknown reasons, none of the banks involved took any action.

Hopefully by the time you’ve done all that, you’re finances will be a better state. You do need to keep an eye on it then to make sure that actions are being carried through and that new offenders don’t slip in unnoticed. Also make sure not to rely on managing agents – collecting fees isn’t always top of their priorities.