It is always a very sad event when a leaseholder passes away. We obviously encourage the landlord/RMC/RTM company and their managing agent to always assist the beneficiaries and those affected by the death insofar as is reasonably possible.  However, how should you act where accruing service charge is not being addressed following the leaseholder's death. That money is required to enable the landlord/RMC/RTM to fulfil its obligations in relation to the ongoing maintenance and management of the whole block and so can and should you take action and if so what?

There are a number of different scenarios that might follow the death of a leaseholder who is, or may subsequent to their death, fall into arrears with the required payments of service charge and/or ground rent.  We have set out below some of the common scenarios that we see landlords/RMC/RTM companies encounter and provide some guidance as to how they should proceed.

What happens to the debt owed by a person who has passed away?

When a person dies their Estate has the liability for any debts which were not settled prior to their death. The same applies to debts accruing subsequent to death.   

The deceased’s Estate must be administered which, in addition to realising any assets so as to pass those onto any beneficiaries, includes clearing any debts too. The latter must occur prior to the distribution of the assets to the beneficiaries. 

Representatives of the deceased leaseholder's Estate

If the deceased left a will then the person appointed to administer the Estate will be the executor(s) named in the will and they will need to apply for Grant of Probate. The Grant of Probate will enable the executor to administer (deal and dispose of the assets in) the Estate.

If the deceased did not make a will (died intestate) then the beneficiaries will need to apply for Letters of Administration. Once granted the administrator will also then have authority to administer (deal and dispose of the assets in) the Estate.

Following notice of the death of a leaseholder you should, as a current or potential future creditor of the Estate, apply to the Probate Registry once you are aware that a leaseholder has died. This is done on line at Search probate records for documents and wills (England and Wales) - GOV.UK (www.gov.uk) and is relatively simple save that some information about the deceased, including region and rough date of death is required.   Generally, we would suggest waiting three months before seeking the above, in order to have enabled the representatives of the deceased to have had time to make an application for the appointment of an executor/administrator, but you can apply at any time.

Once someone has already been appointed to administer the deceased leaseholder’s Estate

Where an executor has been nominated under the will, or administrator has made application to be appointed to administer the Estate, you will likely be asked to address all demands and correspondence in relation to the property to that person “ [ name ] as personal representative of the Estate of [ name of deceased leaseholder ] deceased”.   If no such request is made then demands and correspondence addressed to “[ name of the leaseholder ] (deceased)” at the last notified address for service will suffice - see here and here.  

If payment of the debt is not immediately forthcoming we suggest that landlords/RMC’s/RTM’s provide an initial grace period of say 3 - 6 months following the date of death to enable the representatives of the Estate to get themselves organised and, hopefully, make payment.  That is a reasonable period for the executor or administrator to get things moving.  It is not unreasonable to ask how things are progressing during this period.

However, be wary of being too lenient. It is easy to feel awkward about chasing an Estate's representative to pay overdue service charges and all too often it is easy to be dismissed by them with comments such as that there are no funds to pay from until the property is sold etc. However, unless there is good reason for delaying more than the suggested 6 months, and the fact that the property has not sold and you are being told that there is no money until it has been sold is often not a good reason, then you should not be fobbed off.

Often the representatives/beneficiaries are reluctant to pay the debt straightaway. Equally often the executor/administrator will just assume (entirely incorrectly) that they can discharge any unpaid service charges as and when it best suits them, often upon completion of any sale of the property, with no regard as to what you/your client is to do absent the funds in the interim.  Some will take offence when you might politely highlight to them that that is not acceptable and, given the advice in our Legal Update - When leaseholders are in breach - some Do’s and Don’ts – KDL Law - won’t work anyway as, whilst there are arrears, you should be reluctant to provide answers to LPE1 pre-sale enquiries required for the sale to proceed as to do prejudices you/your client.

Another response we often hear from an executor/administrator to a request for payment of the charges accruing on the deceased’s property is an assertion that the beneficiaries cannot pay the debt until the property has been sold.  In most cases this is likely to be simply incorrect and it is entirely reasonable not to accept that position.  It is always surprising how many cases where the most vehement denial of an ability to pay is soon reversed when consequences of non payment are explained or action is commenced!

Is it reasonable to pursue a deceased leaseholder’s representatives for unpaid service charges?

Absolutely yes although, as we say above, the approach to the issue should always be one that is respectful and we suggest that an initial, but brief, grace period is provided before the usual debt recovery process is started.  Often the issue is one of educating the representatives of the estate as to their misunderstanding as to when and how the debts of the Estate must be addressed and once that is achieved previously "unavailable" funds materialise to satisfy the debt.

In most cases that we assist with the issue not contentious once the representative understands the points made above.

What about where none comes forward to administer the Estate?

In most cases the beneficiaries of the deceased leaseholder’s Estate will want to see the Estate managed and the assets dispersed as swiftly as possible.  Accordingly, in most cases, someone will be appointed, or at least be in touch with you, well within the 3 - 6 month suggested grace period referred to above.  However, there will be occasions when no one comes forward to administer the Estate and no one appears to claim to benefit from the Estate.  What should you do in those circumstances?

The answer is that the debt can still be pursued, notwithstanding the death of the tenant and the current lack of representative for the Estate. There are however options in that regard and consideration will need to be had as to the specific circumstances of the case and the most appropriate of those options.  Accordingly, and following expiry of the suggested grace period referred to above, the client should appoint lawyers and obtain advice on the most appropriate way forward.   

Conclusion

When a leaseholder passes away landlords/RMC’s/RTM’s and their managing agents should, of course, be respectful of the situation by allowing the beneficiaries/representatives time to organise themselves.  They have, after all, suffered a bereavement. 

However, after providing a suitable period of time for the steps to be taken to progress the management of the Estate, including the payment of debts, normal service should resume and, where necessary, reluctant payers should be educated as to their obligations and the consequences of not paying what is due. 

Legal action can, and in some cases may need to, be taken to facilitate recovery. You/your client’s are bound to allow the beneficiaries of a deceased leaseholder’s Estate pay at their convenience to the cost of all other leaseholders.  As the enforcement process can be less than straight forward though, we strongly recommend that landlord’s/RMC’/RTM’s seek advice about their options from the outset to avoid any issues further down the line.

Disclaimer

This Legal Update describes the position in law as at the date of this article and care should be taken to note any subsequent amendments to the position as set out above.  The Legal Update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole. 

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