Why withholding service charge payments is a bad idea
As we approach the new year, many people are being asked to pay their service charge for 2024. If you’re unhappy with the way your building is being managed, should you refuse to pay or what can you do instead?
In our consultancy practice, we deal with lots of clients who have not been paying their service charge bill because they are trying to draw their managing agent’s attention to various issues, and withholding payment until the problems are solved. But, legally, this is not a good idea.
People often refuse to pay because they are unhappy with their managing agent, but withholding payment does not have the effect they intend. Service charge payments aren’t actually made to the managing agent – the agent simply collects the funds on behalf of the freeholder. Even if you stop paying your service charge, the agent will still collect their fees in full.
Rather than refusing to pay, we always recommend that our clients make payment under protest.
Instead, you are reducing the budget available to maintain the building – meaning there is no money to pay for maintenance, cleaning and any other services, potentially making problems worse and more expensive to deal with in the long run.
Most importantly, you are legally required to make service charge payments according to the terms of your lease. If you stop paying, you are breaking the legal agreement between you and the freeholder of your building and may find yourself being summoned to court. Even worse, if you want to take legal action against your freeholder or managing agent, the fact that you are in breach yourself will weaken your case significantly.
So what can you do instead?
Rather than refusing to pay, we always recommend that our clients make payment under protest, by paying the bill but sending a letter or email with wording like this: “This payment is made under protest, and does not indicate acceptance of these charges, which I reserve the right to challenge in court or tribunal setting or via formal complaint”.
By paying under protest, you’ll be in a much stronger position to tackle the problems you’re facing, either via formal complaint or by legal action. You can find an example of one approach you can take in our recent blog post about the cost of fire safety works.