Service Charge Demands – Get Them Right

Guidelines on issuing correct Service Charge demands to avoid non-payments, delays and fines

What is a resident management company and how the leaseholders are liable to pay the service charges?

Resident management companies provide services to the leaseholders or the tenants by managing and maintaining common parts of the property that is under the lease. The residents living in such buildings share common parts like the roof, boundaries, gardens, etc. Therefore, the tenant or the leaseholder is liable to pay service charges as these charges ensure the maintenance of the property that they have leased.

If you are one of the resident management company owners, you already know the value of the service charge demands your firm issues. In this latest article by clear house accountants, we aim to inform you on how to get your service charge demands done properly and correctly. If in doubt about how this works or about your service charge accounting, it is advisable to speak to a competent service charge accountant or an experienced property management company.

Why is it important to issue the correct service charge demands?

The timely payment of service charges is vital for the health of Resident management companies (RMC), their functioning is impossible without their tenants paying for the service charge demands. Therefore, it is necessary for all of the RMCs to correctly issue the service charge demands as incorrect demands may be used as a justification for non-payment by the tenants and instead make the RMCs vulnerable to legal penalties or trials. Our in-house service charge accountants have taken upon themselves, the duty to enlighten you on the ways through which you can rightfully issue these service charge demands accurately.

Why is important to abide by the lease conditions?

It’s very important that you abide by the lease conditions, for instance, the demands are to be issued by premium post or recorded delivery along with specifying how these demands are to be met.

If your firm strictly abides by the conditions of the lease, then your demands can’t be challenged and your tenant becomes liable to pay the service charge under the contract. As long as the demand was served in line with the lease, the leaseholder’s claim of not receiving the demand becomes null or insignificant.

What does the law suggest, about how the demand is to be issued?

Usually, the lease does not disclose any information about how the demand is to be issued, it may make statutory reference, for instance, if the lease refers to section 196 from the Property Act (1925) then your service charge demands must abide by the following rules:

  • Ensure that you address all of the service charge demands to the leaseholders and tenants
  • The service charge demands that your issue should be in writing.
  • The demand notification if sent by recorded delivery to the last known residence or business in the UK will be considered as served.

If the lease mentions section 23 of the Landlord & Tenant Act (1927) then:

  • The service charge demands that your issue should be in writing.
  • The demand notification will be considered as served if delivered personally, by registered post or left at the last known place of residence.

However, you may rely on section 7 of the Interpretation Act (1978) if the lease does not refer to any of the above legislation. Your service charge demand will be considered as correct if posted through an approved postal service on the correct address, therefore leaving the responsibility on the tenant or leaseholder to prove if none of these was done. Again if in doubt hire a qualified service charge accounting firm or an expert property management company.

What happens if there are errors in your service charge demands?

If there are mistakes or errors in the service charge demand issued, the court will not give any decision in favour of the tenant or the leaseholder as long as the demand has been received by the leaseholder. The demand will be considered as effective if the mistakes in the notice do not mislead or prejudice the leaseholder or tenant. You may seek assistance on how to issue correct service charge demands by getting in touch with our team of in-house Service Charge Accountants.

You can strengthen your relationship with the leaseholders by issuing correct service charge demands and recovering them efficiently. Contact our Service Charge Accountants to help you recover your rightful service charges as our firm is an expert in handling issues related to Service Charge Accounting. Once the demands are issues based on an effective budget, there is a requirement to prepare end of year accounts and issue a final surplus/deficit billing note. Your service charge accountants should be able to assist you with providing a set of certified service charge accounts.

Clear House Accountants are expert service charge Accountants in London. Our personal accountants have an extensive understanding of and experience with service charges within the residential and commercial sector to handle all issues pertaining to service charge accounting in line with the landlord and tenants act, ARMA, RICS and TECH03/FACTSHEET 172 regulations.

You might also want to read:

VAT Domestic Reverse Charge – Building And Construction Sector

Block Management Service Charges Explained

Service Charge Dispute Resolution (Infographics)