What Happens if a Freeholder Doesn’t Pay the Service Charge?

Freeholder Not Paying the Service Charge: What You Need to Know

Service charges are critical in maintaining and managing communal areas and facilities in a property. These charges, typically paid by leaseholders, may sometimes also be required from a freeholder, particularly if they own or benefit from parts of the property. But what happens if a freeholder refuses to pay their share? This situation can cause tension and financial strain for leaseholders.

Here’s a comprehensive guide to understanding the issue and how to address it.

Who is Responsible for Service Charges?

Service charges are typically outlined in the lease or property agreement and can apply to:

1. Leaseholders: Generally responsible for contributing to the upkeep of shared areas and facilities.
2. Freeholders: May also be obligated to pay service charges if their agreement specifies this or if they benefit from shared services (e.g., a freeholder residing in a property with shared amenities).

Implications of a Freeholder Not Paying

If a freeholder does not pay their service charge:

1. Financial Burden on Leaseholders: The unpaid amount may need to be covered by other leaseholders, increasing their financial obligations.
2. Maintenance Delays: Essential services like repairs, cleaning, or insurance may be delayed, affecting property value and living standards.
3. Legal Disputes: The issue may escalate to formal disputes, adding stress and legal costs for all parties involved.

Legal Options for Leaseholders

1. Check the Lease Agreement: Ensure the freeholder is contractually obligated to pay service charges and review the terms for non-payment.
2. Serve a Notice of Breach: If the freeholder’s non-payment breaches the lease agreement, a formal notice can be issued.
3. Mediation or Arbitration: These methods can help resolve the dispute without costly legal proceedings.
4. Tribunal Proceedings: In the UK, leaseholders can apply to the First-tier Tribunal (Property Chamber) to resolve service charge disputes. They will assess whether the charges and obligations are reasonable and enforceable.
5. Legal Action: If the tribunal finds in favour of leaseholders, a court order may enforce payment from the freeholder.

Preventing Future Issues

1. Regular Audits: Ensure transparency in the service charge accounts to avoid disputes.
2. Clear Agreements: Draft robust leases with clear terms about payment obligations and consequences for non-payment.
3. Engage Professional Property Managers: Companies like Fraser Bond can manage service charge collections and address disputes effectively.

How Fraser Bond Can Assist

Fraser Bond has extensive expertise in handling property management and resolving service charge disputes. Our services include:

• Lease Review: Ensuring obligations are clearly defined and enforceable.
• Dispute Resolution: Offering mediation and tribunal representation.
• Property Management: Handling service charge collection and maintenance efficiently.

Conclusion

When a freeholder fails to pay the service charge, it can disrupt property management and cause financial strain for leaseholders. However, with clear legal agreements and professional support, disputes can be resolved efficiently.

Fraser Bond is here to provide expert guidance and solutions for all your property-related challenges. Contact us today for tailored advice.