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Cost of living crisis and the impact on service charge recoveries

In February 2023, the Bank of England’s Monetary Policy Committee (MPC) voted that the bank interest rate would make its tenth increase over the past year by 0.5ppts to 4%, being the highest level in 15 years.

With inflation also rising a real strain is being put on Real Household Disposable Incomes (RHDI) which, according to a projection from the Office for Budget Responsibility are set to fall by 7.1% reducing it to it its lowest since 2013-2014.

Against this backdrop, it will be more important than ever to ensure that you have effective debt recovery processes in place, particularly when it comes to recovering service charges.

Why are recovering service charges important to the Social Housing Sector?

Service charges have unique characteristics compared to other types of debt. The collection of service charges is essential to fund the upkeep of common areas for the benefit of all residents. It is also a governance requirement for Social Housing providers to maximise the surplus available, which can be used for reinvestment. Avoiding shortfalls in the service charge accounts assist in achieving this.

With there being such a squeeze on household incomes, the collection of service charges cannot be ignored.

The need to act

The longer service charges are left unpaid, the more difficult they are to recover.

Allowing the debt to grow is a detriment to the registered provider as it will impact their governance requirements and create shortfalls in their ability to provide the services for the benefit of other residents.

Doing nothing and allowing arrears to increase is also a detriment to the leaseholder. Allowing the debt to increase could leave them with a very large and overwhelming debt that they simply won’t know how to pay.

Taking responsible and ethical recovery action at the earliest possible stage will however bring about the best results for all concerned.

The way forward

Over the coming months there will undoubtedly be a much greater focus on affordability of arrears and making sure ongoing liabilities can be met.

Taking that first step to pursue the debt and encourage dialogue with the leaseholder will maximise the prospects of recovery. Where internal collections procedures have not been successful, this will normally be achieved by a Solicitors sending a Pre-Action Protocol compliant letter before action.

In our experience at Clarke Willmott, the majority of cases are settled in response to the Letter Before Action. Our team are trained in negotiating settlements as well as identifying vulnerability and this expertise brings about the best results. It is particularly important with service charge settlements that the leaseholder can also pay future liabilities as well as current arrears.

There will be occasions where settlement cannot be achieved and litigation is required. With costs almost always being recoverable under the terms of the lease issuing proceedings is an effective and often necessary step for Social Housing providers. It presents a further opportunity for the leaseholder to make payment or for you to obtain an enforceable Judgment. Where we obtain an enforceable judgment for residential service charge arrears, it is very rare for us not to go on to obtain payment.


Act now to prevent service charge arrears growing and becoming unmanageable.

Here at Clarke Willmott we have a dedicated team of experts and a proven track record in recovering service charges for Social Housing providers. Whether you are currently using in house procedures or if you have any service charge arrears that need action, please contact us for a free consultation to see how we can help.


Your key contacts

Philip Roberts

Partner and Head of Debt Recovery

Birmingham, Bristol, Cardiff, London, Manchester, Southampton and Taunton
Phil is a Chartered Legal Executive and Partner in Clarke Willmott’s Debt Recovery team specialising in defended debt recovery litigation and insolvency actions.
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