Arrears Recovery Process v1.1

1. PURPOSE

The purpose of this procedure is to have a companywide process for collecting arrears. This procedure must comply with section 4.6 of ARMA guidance note D06 and The Commonhold and Leasehold Reform Act 2002 (for administration charges).

2. INTRODUCTION

‘Arrears’ can be defined as – money that is owed and should have been paid earlier.

Arrears occur when owners do not pay their demands or additional demands.

Sites we manage being in arrears are likely to provide Modbury (Modbury Estates Ltd) with cashflow difficulties or the inability to preform our management duties for our clients.

3. SCOPE

This SOP (Standard Operating Procedure) covers service charge, estate charge and additional charge arrears.

It does not cover arrears for invoices from Modbury Estates for our company invoices – for both management fees and additional charges.

4. DEFINITIONS

Demands – a demand for service charge or estate charge money payable.

Additional Demands – demands for additional costs, such as Section 20 payments, utility payments, balancing charges etc.

Owners – leaseholders, freeholders, tenants, commercial leaseholders, commercial tenants.

Administration Charge – a charge for additional administration.

5. RESPONSIBILITIES

Accounts Team – Monitor arrears and perform the procedure.

Director – Sign off on the instruction of debt collection agent. Version: 1.0 Page 3 of 4

6. SPECIFIC PROCEDURE

Demands (Accounts Team):

Are sent out by email (by post if no email address is held) 30 days before the due date of the demand.

If the demand is paid on time, no further action is required. If the demand is not paid on or before the due date proceed with the below steps. At any point if payment is made (including payment of any administration charges) then the case can be closed, and no further action will be required.

Step 1 (Accounts Team):

1 day after the due date of the demand a ‘statement’ and friendly reminder notice is sent to the owner. A friendly phone call should also be made.

This notice is accompanied by a statement of account, and a copy of the original demand that was sent, and it asks for the leaseholder/property owner to submit payment. The notice states that should payment not be received within 7 days, a late payment fee of £40.00 plus VAT will be applied to their account.

Step 2 (Accounts Team):

7 days after the first notice is sent all non-payers are issued with a second reminder notice, a £40.00 plus VAT late payment fee will be applied to their account.

This notice is accompanied by a statement of account, and a copy of the original demand that was sent, and it asks for the leaseholder/property owner to submit payment. The notice states that should payment not be received within 7 days, an additional late payment fee of £70.00 plus VAT will be applied to their account. Version: 1.0 Page 4 of 4

Step 3 (Accounts Team):

7 days after the second notice is sent all non-payers are issued with a third reminder notice, a £70.00 plus VAT late payment fee will be applied to their account.

The third reminder notice allows a further 7 days for payment. This third notice will state that should payment not be made after the issuance of this notice; the account will be passed to an external debt collection agent and a referral fee of £96.00 plus VAT will be charged by Modbury Estates Ltd, the external debt collection agent will charge their own additional fees to the unit. This fee covers our administrative time which is spent liaising with the debt collection company throughout this process and is not inclusive of our costs should any case progress to Court.

Step 4 (Accounts Team and Director):

Should the recipients of the notice sent in step 3 not make payment or contact Modbury within 7 days from the date of the notice sent in step 3, the account will be passed to a debt collection agent. A £96.00 plus VAT late payment fee will be applied to their account.

Director approval is required before a debt collection agent is instructed.

This agent will commence collection of these monies. At this time, Debt referral fees will be applied to the account.

The external debt collection company will use various methods to try and contact the owner and should they not receive a response, contact will be made with the mortgage lender. In some instances, a mortgage lender will settle the balance in full prior to any legal action, however more often than not a County Court Judgement and Section 146 Notice (leaseholder) or Section 121 (freehold) will be required before payment is made.

Notes:

If the demands are issued after the due date, then each steps time periods will change to be in line with X period from the issue date of the demand as opposed to due date.

All costs of arrears recovery are initially payable by the Client and should these not be recovered from the debtor directly; the Client is required to indemnify Modbury for the costs of any action taken.

When an administration charge is applied, we will also send a summary of ‘rights and obligations’.

7. INTERNAL AND EXTERNAL REFERENCES

7.1 Internal References

Server location for templates: Modbury Estates > 5.0 Templates > Accounts > Arrears