James Wren, head of service charge recovery at Brady Solicitors, explains how to tackle service charge arrears from an absent leaseholder.
Collecting service charge debts can be more challenging, where a defaulting leaseholder does not reside at the property address, cannot be located or lives outside of the UK.
However, with the right tactics and procedures these service charge arrears can still be collected successfully.
Carry out a trace
It is always good practice to carry out a trace which will in most cases ascertain whether the address you have for the leaseholder (whether that be the property or other address) is the correct one or whether there is another address for the leaseholder that might not have been known to the property agent or RMC/landlord. Most trace agents off a “no trace no fee” service which means that if the Lh’s address cannot be confirmed there will be no charge.
Serve a claim on the last known address
If a trace proves unsuccessful the debt can still be pursued as a claim can be served on the “last known address”. It is good practice to write to the leaseholder’s lender prior to, or at the stage of issuing any claim, as the lender might have a more recent and/or accurate address for the leaseholder and will notify the leaseholder of the claim.
Avoiding risk of future defences
The risk in proceeding against a leaseholder that cannot be contacted is that they could argue after the proceedings have been settled (even if the debt has been paid by their lender) that the proceedings were not served on them, and their lender should not have made payment as they were not aware of the claim.
This can be problematic particularly if there is a valid defence to the claim. Payments by lenders are not generally considered as payments on behalf of the leaseholder but rather payments by the lender which means that a court could still be willing to consider the leaseholder defence even after a payment by the their lender.
The right wording in letters to the leaseholder and their lender can help avoid the risk of defendants raising disputes after lender payments.
Out of jurisdiction claims
There is a slightly different procedure for bringing claims against a leaseholder who is resident outside the UK.
The main differences are the need to obtain court leave at the claim and judgment stage, and the need to serve the claim in accordance with the legislative requirements of service of the country of domicile. The leaseholder will usually have a longer time to serve their defence and that timescale will vary depending on where they reside in the world.
Most specialist advisers will be used to these different rules and should have their own standard procedures for dealing with these types of claims.