Service charge arrears
Sometimes, homeowners fall behind with their service-charge payments on their annual service-charge account or invoices for rechargeable work under section 20, or both. This section explains what happens in this case.
There are many reasons why you might fall behind with your service-charge payments. We will be sympathetic to genuine cases of financial difficulty as long as you have done everything you can to clear the arrears in a reasonable way.
If you are having difficulty paying your annual service charge
There may be times when, for one reason or another, you will not be able to meet your monthly payments of your service charge. However, under the conditions of your lease agreement, you must pay your service charge every month for the following month by the first day of each month. If you fail to do this, you will be breaking the conditions of the lease. You must contact your local housing office immediately. We will be able to help you and will go through the options that are available to you.
If you are having difficulty paying your section 20 rechargeable work service charge
We recognise that charges arising from this work can cause financial difficulties. You have several options if you cannot pay the full amount that is due.
- If you have a mortgage from a building society or bank, you could ask them to extend your mortgage to cover the cost of the work.
- In certain circumstances, you can get a loan from us
under the Statutory Service Charge Loan scheme. However, the legislation sets the following restrictions:
- The lease must have been granted within the last 10 years.
- If the total service charge demanded during the year is more than £1500, you must meet the first £1500 of the bill.
- The loan must be for over £500 and cannot be more than £20,000.
The terms of repayment are:
- Three years for loans of less than £1500;
- Five years for loans of £1500 to £4499; and
- 10 years for loans of £5000 or more.
- Interest will be charged on the loan.
- We will charge you a £100 administration fee for arranging the loan.
If you are eligible to apply for a statutory loan, we will send you details when these service charges are due to be paid.
- If you cannot afford to pay the bill in full or extend your mortgage, we may allow you to pay the charge over a period of 12 months in equal instalments provided you:
- live at the Leasehold property address
- have no other outstanding section 20 rechargeable works invoices and annual service charge debt.
You will not have to pay interest as long as you pay the balance within the given period.
- If none of the options above are open to you or you do not want to take out a statutory loan, in exceptional cases you may apply for our Discretionary Loan Scheme. Eligibility for this scheme depends on your financial status and the size of the bill. Once you receive the bill, you should phone Home Ownership Services to arrange an appointment to discuss your circumstances.
- You may be able to get help to pay for your service charge by contacting the Benefits Agency.
N.B. All options for repayment of service charge debt over an extended period are only available to resident leaseholders.
Payments if you are not working
If you are receiving Income Support, you may be able to get help with some of your service charges. Please contact the Benefits Agency to get more information.
What can I do if you are going to take legal action against me for not paying my service charge?
You must not ignore any letters that you have received from us about taking legal action against you to recover the service-charge arrears. You should get independent professional advice from a Citizens’ Advice Bureau, a law centre or a solicitor.
What if I am taken to court?
We must protect our interest in the property and even though we will only take legal action as a last resort, sometimes it does happen. If the court rules against you, you will have to pay your service charge plus our costs and interest. Legal action could result in problems getting credit, a charging order, an order for sale, bankruptcy, or forfeiture of the lease. We will avoid legal action if at all possible.
What happens in cases of forfeiture?
Forfeiture is very serious and should be avoided at all costs. If your lease is forfeited, you will lose your home. Not only that, but you will still have to pay any arrears that you have against the property, such as a mortgage or service charges. You should not confused this with an order for sale where we can ask the court to order the sale of your home and you may get something from the proceeds of the sale of the property. In forfeiture cases you get nothing.