Service charge late payment passed to debt collector

gdyulfai

Hello everyone,

I'm here to seek advice about a late service charge payment.

In May 2023, I bought a flat which I haven't lived in to date. I didn't receive any service charge bills so I reminded the management company a few times, most recently in April (I think) when they said they were waiting for a reply to an email sent to my solicitor in February.

Sod's law - in September, while I was abroad for a month, they sent me a bill for about £2.6k covering Q3-Q4 2023 and all of 2024. I saw the bill a day before the due date. I went into my bank account and could have sworn I paid it that same day (only it now turns out I didn't).

After I thought I'd paid, I forgot about it until last Friday, when I went back to pick up post and found first and final reminders to pay with a warning that they'd contact debt collectors if I didn't pay by last Monday (4 Nov). I felt sure I'd paid and was about to email them to say so, but found to my horror that there was no sign of the transfer on my bank statement. I must have misremembered what I'd done. I paid the service charge to the management company that same evening (Fri 8 Nov) and emailed them proof of the bank transfer.

I phoned them yesterday to confirm what I'd said in my email. They said I'd have to contact a debt collection agency (I'll call them DCA) as they'd already instructed the DCA a few days prior, and gave me their number. I phoned the DCA, who said my service charge payment - which they wanted to see proof of (I emailed this afterwards as requested) - leaves an outstanding total balance of about £1,000. I was expecting some sort of penalty, but a grand?! As of Friday when I picked up my post and paid the service charge, I hadn't even received anything in the post from the DCA.

Doesn't this seem a bit exorbitant? I believe £420 is an instruction fee charged by the management company for the fact that they involved a DCA, which would mean the other £600 or so is going to the DCA, although I have yet to see written confirmation of this (I'll go back to the flat this afternoon). Given that I paid the service charge before receiving any communications from the DCA, who will now be collecting at most the £420 DCA instruction fee on the management company's behalf, doesn't £600-odd seem a bit much? I don't know if there are limits on what a DCA can charge. I don't imagine they'll voluntarily reduce their charges to reflect the reduced debt, but the fact remains that I paid the service charge to the freeholder before the DCA asked me to, so the DCA won't be collecting it from me.

Thanks for any advice. I asked this question in another forum and someone said they can see no legal basis for the charges, which is not the reply I was expecting! But then I'm not a lawyer.

Mark_d

Considering that the management company charged £420 simply for instructing DCA, and that DCA would be charging interest on your overdue £2.6k...perhaps it's not so surprising that DCA are charging £600 in total for the calculations and admin that they've had to do.

You said that there was some correspondence between your solicitor and the management company.  What was the outcome of this?

theartfullodger

Pay the full amount immediately "under protest" (in writing) to stop further action then sort the mess out later, slowly, carefully.  Read the lease cautiously, carefully, then again.  Check charges are permitted.

gdyulfai

Mark_d said:

Considering that the management company charged £420 simply for instructing DCA, and that DCA would be charging interest on your overdue £2.6k...perhaps it's not so surprising that DCA are charging £600 in total for the calculations and admin that they've had to do.

You said that there was some correspondence between your solicitor and the management company.  What was the outcome of this?

Thanks for your reply. They said they'd asked my solicitor to confirm at what point the previous flat owner had ceased to be responsible for paying the service charge, and when it became payable by me. It "only" took them a further five months to send me the first service charge bill, and it was for Q3-4 2023 and all of 2024.

gdyulfai

theartfullodger said:

Pay the full amount immediately "under protest" (in writing) to stop further action then sort the mess out later, slowly, carefully.  Read the lease cautiously, carefully, then again.  Check charges are permitted.

Yes, I've seen similar advice in other discussions ("pay first, argue later"). I suppose the basis for my protest would be that I paid the service charge before I heard anything from them or even knew their name, so the DCA didn't collect it, but whether that argument holds any water, I don't know! I'll see what description they give to their charges when I hear from them.

As for the lease, I don't think I ever received it AFAIK, but I emailed my solicitor today to ask if they have it on file. If they don't, I'll request it from the Land Registry. I'll be surprised if it doesn't allow the management company to charge me something in this situation. The main issue for me here is what the DCA can reasonably charge me, if anything, and I doubt the lease will cover what third parties can or can't charge me.

eddddy

There's a huge pile of legislation that relates to this. Typically, the situation will be as follows:

• You seem to agree that the management company sent you a valid service charge bill. (But if the service charge bill had 'technical errors' that made the bill invalid, you might be able to avoid the extra fees.)

• Because you didn't pay the bill - the law says that the management company can take reasonable enforcement action, and charge you reasonable fees for this. (Unless the lease says otherwise.)
• 
  
• The fees are called Administration Fees, and they get added to your service charge.

Reasonable enforcement action might include:

• Sending you a reminder letter - and charging you a £50 Administration Fee for the work involved in sending the letter
• Sending you a second reminder letter - and charging you a £50 Administration Fee for the work involved in sending the letter
• Instructing a solicitor to send you a letter - and charging you the solicitor's fee as an Administration Fee
• Instructing a debt collector - and charging you the debt collector's fee as an Administration fee

The Administration Fees above are only payable when you receive a valid Service Charge bill which includes those fees. 

The Management Company might issue you with a Service Charge bill showing the fees, or they could give the Debt Collectors authority to issue a Service Charge bill to you (but it must be in a valid format).


You can also decide whether you believe the bill is reasonable... for example...

• Was it reasonable to instruct debt collectors at that stage?

• Was the debt collector's fee of £600 reasonable - or do most other debt collectors charge less?

• Was the management company's fee of £400 reasonable - that suggests they did 4 or 5 hours work? Ask for a breakdown of what they needed all that time for.

Assuming that you receive a valid service charge bill that includes the £1000 administration fees, it's usually best to pay it under protest - and then challenge it at a tribunal. (If you don't pay, further fees can be added.)

Maybe tell the management company that you plan to challenge the service charge bill at tribunal, to give them the opportunity to reconsider. 

(And if the tribunal agree that the £600 is unreasonable, it will be the Management Company who have to partially refund you - so they'll then have to argue with the debt collectors.)

eddddy

gdyulfai said:

As for the lease, I don't think I ever received it AFAIK, but I emailed my solicitor today to ask if they have it on file. If they don't, I'll request it from the Land Registry. I'll be surprised if it doesn't allow the management company to charge me something in this situation. The main issue for me here is what the DCA can reasonably charge me, if anything, and I doubt the lease will cover what third parties can or can't charge me.

Administration fees aren't usually mentioned in the lease.

If they're not mentioned in the lease, it's the Commonhold and Leasehold Reform Act 2002 that applies.
https://www.legislation.gov.uk/ukpga/2002/15/schedule/11

gdyulfai

Thanks very much for your replies, edddy.

You're right, I'm not disputing the validity of the service charge demand. I found the DCA's letter in my mailbox yesterday, they're giving me 30 days to pay as of 7 Nov. Their fee is referred to in the covering letter as "administration fees", and later in a separate breakdown as "[name of company] instruction fee" (£576) and a Land Registry fee of £24 for getting hold of "office copy entries". No basis for the calculation of the £576 instruction fee was given, I don't know how they arrived at that and don't know what most DCAs would charge, so I can't compare.

I still don't have the lease and won't bother waiting to receive it as it could take ages. I'll give the vultures their pound of flesh now, minus what I already paid to the management company last week (needless to say, the DCA hasn't bothered to acknowledge receipt of the proof of payment I emailed to them). If any case I try to make against the amount of the charges would come down to a Tribunal judge's interpretation of "reasonable" versus mine, I won't take the risk of contesting it because knowing my luck, I'd probably get the most horrid judge in the land and lose a shedload of more money in legal costs. Best to draw a line under it and move on, I hope this will be the end of it.

Anyway, many thanks indeed to you all for your replies, it's helpful to get other people's points of view. Even the jurist in another forum who initially advised me to tell the DCA to "get knotted" now concedes I'm bound by the terms of the lease, which I expect will be heavily stacked in the management company's favour. Thanks again.