Service Charge passed on to a debt collection agency

baksonlee

I've reviewed various posts here but couldn't find a similar situation, so I'm seeking advice.

I own a leasehold flat managed by a management company. Due to being away for work for several months, I forgot to pay my service charge on time. Upon returning, I discovered several letters and found that the debt had been passed to a collection agency, inflating my service charge from about £1,400 to over £3,200 with additional fees of over £1,800.

I have since paid the £1,400 directly to the management company (not the debt agency), but I've now received a letter from the county court initiated by the debt collection agency.

I have sent a complaint letter to the management company addressing these points:

1. Incorrect Service Charge Demand: The original service charge demand was incorrect as it did not comply with statutory requirements. It failed to include the landlord's name and address, listing only an agent's name and address.
2. Lack of Summary of Rights and Obligations: The service charge demand letters did not include a summary of leaseholders' rights and obligations, nor did they inform leaseholders of their right to apply to a tribunal.
3. Property Leasehold Terms: According to the property lease, the service charge payment deadline is the 30th of June each year. There is no provision stating that the payment is due at the beginning of the year.
4. Unreasonable Use of Debt Collection Agency: It was unreasonable for the management company to instruct a debt collection agency, and there is no clause in the lease authorizing this action.

I am deeply concerned and would appreciate advice on the next steps to resolve this situation.

The management company has had the payment for over a week without any response. Should I appeal to the county court using the points above?

I need advise if the points, particularly those regarding the lease, are valid? I have attached a link for the extract of the lease and a copy of the letter demanding the service charge. Legal language can be confusing for me.

Thanks in advance

https://imgur.com/a/I3RJkiZ

https://imgur.com/a/dusfGyc

eddddy

There's a whole bunch of legislation that relates to this - but it would take pages to explain it all.

So, the bottom line is that, in your position, I would send a letter/email to the management company saying something like:

I assume that your collection agent's demand for a fee of £1,800 is an administration charge, as defined in the  Commonhold and Leasehold reform act 2002 schedule 11.

On that basis, I will pay the £1,800 Administration Charge immediately but under protest, and challenge it at a Tribunal in due course.

(and maybe pay it to the management company rather than the debt collector)


Based on what you say, your case at the tribunal could be:

• The Service Charge demand was not valid (lack of landlord's address, lack of Lack of Summary of Rights and Obligations), therefore the amount demanded was not payable

• So no Service Charge was payable... therefore, it is not reasonable for the landlord to charge debt collection fees for a charge that is not payable

But TBH, it sounds like you've been lucky that there were "technical errors" in the Service Charge demand. If that wasn't the case, you might have had to pay some or all of the £1,800.

silvercar

Have they accepted the money? Arguably the debt has been paid and the debt collection is out of the picture. Theoretically (your complaints aside) they should not have accepted the money and told you that the debt collectors are now dealing with it and you should pay them. 

Hoenir

Did the overdue letters not detail the additional charges levied? Late payment of service charges is a considerable drain on management time and resources. As it's the cash required to pay the bills. 

eddddy

silvercar said:

 Theoretically (your complaints aside) they should not have accepted the money and told you that the debt collectors are now dealing with it and you should pay them. 

That might be an argument if the bill/demand from the debt collectors was a valid service charge demand.

i.e. It should have included the landlords name and address, and a summary of tenant's Summary of Rights and Obligations. (I suspect it didn't.)



And Debt Collectors sometimes put dodgy terms and charges on their bills - e.g. Something like "You are agreeing to pay us a fee of £1,800 for our services."

So then the OP is entering into a contract with the Debt Collector and agreeing to pay them £1800.

So that's not a Leasehold Administration Charge, and therefore it cannot be challenged at Tribunal.


So I think you either need to study the fine-print on the Debt Collector's bill in great detail, or keep it simple and pay the Management Company instead.

baksonlee

silvercar said:

Have they accepted the money? Arguably the debt has been paid and the debt collection is out of the picture. Theoretically (your complaints aside) they should not have accepted the money and told you that the debt collectors are now dealing with it and you should pay them. 

I transferred the money to their bank account as I have consistently done for the past six years. It has now been almost two weeks, and they still haven't returned the money. I have printed out the confirmation for my records.

eddddy

Just to add - if you don't pay the debt collection fees, and let this continues to court... the debt collectors will probably  instruct solicitors and incur legal fees...

• If you win the case - that's great - you won't have to pay any of those fees

• If you lose the case - then you'll have to pay those fees. It could be another thousand or two on your service charge bill.

That's the key reason that people almost always advise paying whatever amount a management company demand. It stops more fees being added (in case you lose).

Then you can take your time and prepare your challenge - without the time-pressure of more fees being piled on.

And if you eventually win your challenge, you'll get some or all of the fees you've paid refunded.

baksonlee

eddddy said:

Just to add - if you don't pay the debt collection fees, and let this continues to court... the debt collectors will probably  instruct solicitors and incur legal fees...

• If you win the case - that's great - you won't have to pay any of those fees

• If you lose the case - then you'll have to pay those fees. It could be another thousand or two on your service charge bill.

That's the key reason that people almost always advise paying whatever amount a management company demand. It stops more fees being added (in case you lose).

Then you can take your time and prepare your challenge - without the time-pressure of more fees being piled on.

And if you eventually win your challenge, you'll get some or all of the fees you've paid refunded.

I believe the advice above is no longer possible for me as I have already received the claims from the court which I have to respond to.

I have to choose one of two options:

1. Admit and pay the fee of £1800
2. Challenge and let the county court decide.

I do not think I can pay the fee at this stage and then take them to a tribunal afterwards.

Could someone please help me with the highlighted part of the lease in the link below. Does it mean that the service charge is due at the June every year?

https://imgur.com/a/I3RJkiZ

saajan_12

baksonlee said:

...
Could someone please help me with the highlighted part of the lease in the link below. Does it mean that the service charge is due at the June every year?

https://imgur.com/a/I3RJkiZ

Does look like that, though hard to be sure without context of the whole lease.

What date was stated on the bill you received, and what period did it say it covered?

baksonlee

saajan_12 said:

baksonlee said:

...
Could someone please help me with the highlighted part of the lease in the link below. Does it mean that the service charge is due at the June every year?

https://imgur.com/a/I3RJkiZ

Does look like that, though hard to be sure without context of the whole lease.

What date was stated on the bill you received, and what period did it say it covered?

This was the final reminder I received. It does specifically say the period, but it is from January to December.

https://imgur.com/a/dusfGyc

saajan_12

baksonlee said:

saajan_12 said:

baksonlee said:

...
Could someone please help me with the highlighted part of the lease in the link below. Does it mean that the service charge is due at the June every year?

https://imgur.com/a/I3RJkiZ

Does look like that, though hard to be sure without context of the whole lease.

What date was stated on the bill you received, and what period did it say it covered?

This was the final reminder I received. It does specifically say the period, but it is from January to December.

https://imgur.com/a/dusfGyc

I'm really asking for the first service charge invoice this year which should say. eg is it Jan-Dec of which year, and an estimate or balancing payment etc. 

Also the next page of your lease, as that last clause is cut off.