For many landlords, directors of resident management companies (RMCs), and professional managing agents, the need to engage lawyers to enforce the recovery of service charges is a common occurrence. However, the process leading to the recovery of payment may appear mysterious to some. This article aims to provide an overview of this process, shedding light on the steps involved in recovering unpaid service charges.
When a leaseholder fails to pay the service charges as specified in the lease agreement, the landlord or management company (referred to as “the Claimant”) can initiate legal proceedings either in the County Court or the First-Tier Tribunal. The objective of these proceedings is to obtain a determination that the debt is owed to the Claimant. In the Tribunal, the process results in a determination of the amount owed, while in the County Court, it also leads to a money judgment (County Court Judgment or CCJ) against the defaulting leaseholder (referred to as “the Defendant”), compelling them to repay the debt to the Claimant.
If the Defendant fails to pay the determined sum following the Court or Tribunal decision, the Claimant can take further action to enforce the judgment debt.
In cases where the debt is related to a lease or a rent charge (where a CCJ is not necessary for pursuing a rent charge), the enforcement steps commonly involve seeking possession of the property through lease forfeiture or possession under a rent charge. However, if forfeiture is not a viable enforcement option available to the Claimant, there are alternative avenues for enforcing a money judgment. It is important to note that if the determination has been made by the Tribunal rather than the Court and forfeiture is not an option, the Claimant will need to file an additional claim to obtain a CCJ that can be enforced to recover the outstanding sums. This is because a Tribunal determination does not possess the same enforceability as a Court order.
Understanding the process of recovering unpaid service charges is essential for landlords, RMC directors, and managing agents. By following the appropriate legal procedures, such as seeking a determination from the Court or Tribunal, obtaining a money judgment, and enforcing the judgment debt, landlords can effectively recover the outstanding sums owed. It is advisable to seek legal guidance to navigate this process successfully and ensure compliance with the relevant laws and regulations.