I have just joined the owners’ management company as a director and am shocked to find that there are some people who haven’t paid service charges for two years. When I checked there had only been one invoice issued but no reminder letters etc.
What is the best way of resolving this and what happens if they still won’t pay?
The lease agreement binding the owners’ management company (OMC) and its members will, in almost every case, express that the service charges are due in full on the first day of the financial year.
In the current economic environment, logic must prevail and allow for a reasonable compromise — one such compromise is to allow members to pay by instalments. You must set out clear and reasonable rules in advance of the financial year that are fair to the members and practical to the OMC in its ability to recover its due monies.
Ensure that a payment plan does not contradict the lease. A payment plan must be specific in identifying how much money will be paid, when it will be paid and the method of payment. If you do not get results I recommend that you liaise with a reputable law firm to engage debt-collection services. Usually, a solicitor’s letter advising that the OMC has instructed them to recover the debt will result in some bad debtors paying.
The next round of correspondence will be a final reminder and after that it goes to court. It can be expensive to use debt-collection services and not all monies are recoverable. A licensed property service provider will assist an OMC in dealing with the bad debtors and the processes.
Take advantage of the honeymoon period you are currently in and speak to the bad debtors first. In the case for good practice, I would recommend negotiating with your property service provider so that they provide for a set number of payment reminders during their appointment.
An effective way to remind members of their existing balance is to issue statements along with memos concerning other matters, for example, window cleaning or the annual fire inspection schedule.
Any demand for monies by the OMC must conform to sections 18 and Section 21 of the Multi-Unit Developments Act 2011 . I highly recommend you also familiarise yourself with the Property Services (Regulation) Act 2011 and the ODCE website.
Paul Huberman is a member of the Property & Facilities Management Professional Group of the SCSI