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Corona Virus – Service Charges

The existing government guidance on COVID-19 does not cover service charge or ground rent arrears that arise during the Corona Virus crisis. Broadly speaking, the courts remain open and any actions to recover ground rent or service charge arrears can continue as normal.

Where there are ground rent and/or service charge arrears the process would normally be to bring a claim for the arrears and obtain judgment. If the lessee does not pay the sums due at that point you’re your remedy is to serve a notice of forfeiture and seek to forfeit the lease. Possession hearings are currently being adjourned so if you needed to bring possession proceedings to forfeit the lease, you would be unable to get a possession order or gain vacant possession of the property while the current ban on evictions continues.

Ultimately freeholders should consider being flexible in terms of seeking to recover unpaid ground rent and service charges while the Covid-19 situation continues and it may be more practical to arrange payment plans with any lessees who are in difficulty where possible. It seems that the housing element of universal credit has been increased and can, in theory, cover service charges.

Where services covered by service charges are not being provided due to the current restrictions there is no particular government guidance with regards to freezing or refunding service charges so you would need to look at the terms of the lease in each case to see what is provided for. Most leases contain provisions whereby interim service charges are payable and accounts detailing the actual expenditure are drawn up at the end of the service charge year. Once the actual expenditure is established, the surplus paid would be refunded to the lessee or they would be required to pay a balancing charge. Therefore any overpayment for services could be accounted for in this way, depending on the terms of the lease.

Posted by:

Alex Cook

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