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Q Our service charge is collected monthly through standing order but we have a lessee, who persistently does not pay this and is 18 months in arrears. He does not live in the property but rents it out to his son and tells me it is his son’s responsibility. I have written to the son but he has not paid any money either and ignores me. It is further complicated by the fact that the lessee’s company went into liquidation last year and although we have found an address it turns out that the house is owned by his son. We sued him through the small claims court in 2006, only to find when bailiffs went to the address the property had been demolished! Please advise how we should now proceed. Name withheld
A It sounds as if forfeiture proceedings are the way forward, based upon the arrears of ground rent. The outstanding service charges can be claimed in the same proceedings but there are a number of problems with claiming service charges. Service charges can no longer be relied on in forfeiture proceedings as a ground for forfeiture unless they are agreed or they have been determined by an Arbitral tribunal (the LVT). Service charges claimed as a debt, as opposed to giving rise to forfeiture, are subject to the usual costs rules – if they are less than £5,000 costs will not be recoverable. This rule does not affect forfeiture proceedings, where the value of the ground rent outstanding can be low without being treated as a small claim matter (one is in truth claiming the value of the property) Given that one cannot rely on service charges anymore as a ground for forfeiture, there is no longer any reasons for mortgage companies to pay outstanding service charges, although some still do. The clause you refer to is not the relevant clause in the lease. The clause should say something like “The parties agree that all notices relating to this lease, including all notices in proceedings are validly served if addressed to the Lessee at the premises...” Maurice Evans, Wilson Barca LLP
Q With the increasing work load involved in issuing Section 20 Notices, is there a fair and reasonable administration fee we can charge lessees for the additional work. Company name withheld
A The first port of call is always the lease – are such fees recoverable as service charges? If they are, you should then refer to your management agreement with your client – because Section 20 work is now more onerous, many managing agents contract a separate fee for this rather than include it in their day-to-day management fee. If your agreement is silent on this matter you will have to negotiate with your client if you want to charge a fee. In terms of the amount you charge for this work (and I am ignoring here the professional fees for preparing specifications, managing the tendering process and supervising the works) some managing agents charge a very small percentage of the value of the contract while others have a schedule of fees based on time and costs. Your fees must be reasonable both in terms of the cost to lessees and your remuneration as a property professional. David Hewett, ARMA
Q Is there any way we can find out (as reported in News on the Block, issue 38) what exactly the new service charge demand must say (all of it)? Name withheld
A The information to be set out on a service charge demand is contained in section 3 of The Service Charges (Summary of Rights and Obligations, and Transitional Provision) (England) Regulations 2007. This is SI 2007 No 1257. There is no prescribed form but the demand must have the heading referred to in 3(a). The wording of 3(b) should be reproduced accurately and in full. There is a separate statutory instrument dealing with the required wording for demands in relation to administration charges. This is SI 2007 No 1258 – the same principles apply. Kerry Glanville, Pemberton Greenish
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