What Is a Resident Management Company, and How Are the Leaseholders Liable To Pay the Service Charge Demands?
Resident management companies provide services to leaseholders or tenants by managing and maintaining the common areas of the property that are under the lease. Residents living in such buildings share common areas, such as the roof, boundaries, and gardens. Therefore, the tenant or leaseholder is liable to pay service charges, typically raised through formal service charge demands, as these charges ensure the maintenance of the property they have leased.
If you are a resident management company owner, you are already aware of the value of the service charge that your firm issues. If you are unsure about how this works or your service charge accounting, it is advisable to consult with a competent service charge accountant or an experienced property management company.
Why Is It Important To Issue the Correct Demands?
The timely payment of service charges is vital for the health of Resident Management Companies (RMC); their functioning is impossible without their tenants paying for the service charge demands. Therefore, it is necessary for all RMCs to correctly issue service charge demands, as incorrect demands may be used as a justification for non-payment by tenants and thereby make the RMCs vulnerable to legal penalties or trials. Our in-house service charge accountants have taken it upon themselves to enlighten you on the ways through which you can rightfully issue these service charge demands accurately.
Why Is It Important To Abide by the Lease Conditions?
You must abide by the lease conditions. For instance, the demands are to be issued by premium post or recorded delivery, along with specifying how these demands are to be met.
If your firm strictly abides by the conditions of the lease, then your demands can’t be challenged, and your tenant becomes liable to pay the service charge under the contract. As long as the demand was served in line with the lease, the leaseholder’s claim of not receiving the demand becomes null or insignificant.
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How Is the Demand To Be Issued?
Usually, the lease does not disclose any information about how the demand is to be issued; it may make a statutory reference. For instance, if the lease refers to section 196 of the Property Act (1925), then your service charge demands must abide by the following rules:
- Ensure that you address all of the service charge demands to the leaseholders and tenants
- The service charge demands that your issue be in writing.
- The demand notification, if sent by recorded delivery to the last known residence or business in the UK, will be considered as served.
If the lease mentions section 23 of the Landlord & Tenant Act (1927), then:
- The service charge demands that your issue be in writing.
- The demand notification will be considered as served if delivered personally, by registered post or left at the last known place of residence.
However, you may rely on section 7 of the Interpretation Act (1978) if the lease does not refer to any of the above legislation. Your service charge demand will be considered correct if posted through an approved postal service to the correct address, thereby leaving the responsibility on the tenant or leaseholder to prove that none of these conditions was met.
What Happens if There Are Errors in Your Service Charge Demands?
If there are mistakes or errors in the service charge demand issued, the court will not decide in favour of the tenant or the leaseholder, provided the leaseholder has received the demand. The demand will be considered effective if the mistakes in the notice do not mislead or prejudice the leaseholder or tenant. You may seek assistance on how to issue correct service charge demands by getting in touch with our in-house team.
You can strengthen your relationship with the leaseholders by issuing accurate service charge demands and recovering them efficiently through our firm, which handles issues related to Service Charge Accounting. Once the demands are issued based on an effective budget, there is a requirement to prepare end-of-year accounts and issue a final surplus/deficit billing note. Your service charge accountants should be able to assist you with providing a set of certified service charge accounts.
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