When you have a leaseholder who doesn’t pay the obvious thing to do would be to send them a legal letter (letter before action) with the demand and request payment. However, it is important that you make sure you have complied with the requirements of the Lease in relation to service charge accountability and your statutory obligations as this could be a bar to you being able to issue proceedings for recovery of the debt.
Summary of Leaseholder's Rights and Obligations
Section 153 of the Commonhold and Leasehold Reform Act 2002 ("CLRA") require that "a demand for the payment of service charge must be accompanied by a summary of the rights and obligations to tenants of dwellings in relation to service charges, the font of which must be at least 10 point. A tenant can withhold payment until it has been provided. The wording can be obtained from the Act itself.
Details of the Landlord
Under Section 47 Landlord and Tenant Act 1987 any written demand for rent or other sums payable to the Landlord pursuant to the Lease must contain the Landlord's name and not that of the Landlord's agent. Further, pursuant to Section 48, it must also provide an address where notices can be served in England and Wales. In some circumstances therefore this will require two different addresses on the demands.
You must comply with your obligations pursuant to the Lease in respect of accounting for service charges. There are often a number of conditions set out in the Lease in respect of service charge accounting, for example the timing of when a demand can be made, providing a signed certificate containing a summary of the costs and expenses incurred.
Timing of the Demand
A demand for payment of service charges must be served within 18 months of those costs being incurred. If the relevant costs were incurred more than 18 months before a demand for payment of the service charge is served on the tenant, the tenant will not be liable for those costs unless, within the period of 18 months following the costs being incurred, the tenant was notified that they had been incurred and that he would subsequently be required to contribute to them pursuant to Section 20B(1) and (2) of the Landlord and Tenant Act 1985
Request for Information
Pursuant to Section 21 Landlord & Tenant Act 1985 a tenant has the right to demand certain accounting information from the Landlord. The landlord should comply with such request within one month of the request, or within six months of the end of the accounting period , whichever is later. The tenant may withhold payment of a service charge if the landlord does not provide the information or a report but the tenant may not withhold payment once the correct information or report has been supplied, even if supplied late.
Rebecca Smith, Chartered Legal Executive at Blake Morgan LLP