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COVID-19 and service charge holidays

COVID-19 and service charge holidays
29th May 2020 Editor

We have seen various articles debating whether or not leaseholders should be allowed to have a ‘service charge holiday’ during the C-19 pandemic. Here we give the managing agent’s viewpoint, from both a legal and practical standpoint.

For many individuals, the pandemic has had an immediate and negative effect on household income, with salaries being cut and, sadly, jobs being lost.

The government has reacted with various schemes with which you will be familiar, and we have all been encouraged to take advantage of payment ‘holidays’ on things like our mortgages, car finance schemes, loan payments and so forth.

These payment holiday schemes have encouraged many to ask why the same logic can’t be applied to service charge payments?

As a managing agent, it is our duty to maintain each development in accordance with the lease. It is also our duty to collect service charge monies to enable each development to be managed correctly, from arranging the right insurance, through to maintaining communal areas and gardens. Leaseholders also have their obligations under the lease, not least of which is to pay the service charge on receipt of a correctly issued demand.

The service charge is effectively a collective responsibility; as leaseholders we all ‘chip in’ to keeping our developments managed and maintained as we wish.

In cold, legal terms the COVID-19 pandemic changes none of this – both we at Clear Building Management and our leaseholder customers remain bound by the terms of the lease.

Practically speaking, payment holidays would also be a challenge for many of our RMC customers. They run a lean financial operation, not holding onto leaseholders’ monies for the sake of it, which then means there is little slack if a number of leaseholders choose not to pay their service charge.

However, putting legalities and practicalities aside, we are acutely aware of the challenges of managing household expenditure at a time when incomes are really suffering, and that the service charge can be a core component of this expenditure.

If a leaseholder is genuinely struggling to pay, we would always try to help manage the situation, whether during a pandemic or not!  We frequently put in place payment plans that have some mutual compromise, such as moving to smaller monthly amounts or a commitment to paying more in three or perhaps six months’ time. As a housing cost, service charges are regarded as a protected expense and so there may be support available. An important to note though is that service charge funds must be collected in the building’s financial year, so payment plans do need to take this into account.

If you are struggling to pay your service charge, we would encourage you to talk to your managing agent about the situation. Explain how your income has been affected and how you can make up any future deficit.

If they are half as reasonable as we are at Clear, then we are sure you will be able to come to a sensible arrangement without needing to breach the lease through a service charge holiday!






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