Property Management Companies Credit Control and Debt Recovery Strategy
A common frustration faced by many property management companies is the payment of service charges from property owners or, at times, lack there of to be more specific. A less common, but very productive way, of reducing your unpaid service charges is for a property management company to have a clear credit control policy on how to deal with chasing unpaid service charges. Once the debt recovery process has been agreed, an often-unexplored area of credit control is for the property management company to step outside the box and focus on a softer approach to credit control. You would be surprised how effective communication, community management as well as reputation management combined can help to reduce the number of service charges that a property management company needs to chase.
Credit Control Policy for Property Management Companies – Ensure Strong Foundation First
An Annual General Meeting (AGM) is a great forum to agree a credit control policy. Once a policy is agreed at AGM, the property management company will then have a course of action available which can be relied upon in the event of any debt issue arising. Any such policy should consider the timeline of the outstanding debt so that the timeline triggers an action. An agreed policy is an action plan which means that a property management company will avoid having to wait for the next AGM to agree on any actions in relation to chasing debt. Adopting a clear policy for how debts are collected saves time and money in the long run. Consider how debt collection charges are going to be legally applied for members – know the terms of your lease and what can be agreed at AGM
Such a debt collection policy should be communicated to all property owners who must pay service charge fees, whether through a lease agreement or as part of your ongoing communication to your members; this will send a strong message to all property owners that service charges should be paid within the agreed credit period.
Never write off bad debts – there is always a debt collection solution.
It is important that property management companies do not write off any unpaid service charges. Utilising the services of a debt recovery solicitor will ensure that a judgment is obtained and enforced against any debtor which greatly increase your chances of getting paid.
When a service charge is outstanding for a specified time (e.g. 60 days) a legal letter ought to be sent out to the debtor demanding payment and warning that legal proceedings will issue against the debtor in the event that the debt is not paid in full. Any interest accrued should be included.
If the service charge remains outstanding after a further specified time (e.g. 120 days) legal proceedings ought to issue to recover the debt. Once judgment is obtained against the debtor it will be enforced in due course if the debtor continues to fail to pay the amount due.
The Softer Side to Credit Control
Once a debt collection procedure and timeline have been established, property management companies should stop and examine what activities are they doing, or can they do, to encourage their members to pay their charges in full and on time. A lesser used technique can be called the softer side of credit control and uses strategies such as communication strategies and reputational management and online activities. Here are some tips to help create a sense of community, improve the property management company’s reputation and communication which should help to decrease the number of unpaid charges:
Communication with members
There are many ways in which a property management company can improve/increase the level of communication they have with their members. Remember there is a fine line between effective communication and annoying members with too much correspondence. Some ways in which a property management company can improve their relationship with the members are:
1. Induction process for new property owners
This can include, informing the new owner of how and when to contact the property management company, important dates in the calendar and information on the building’s processes and procedures (from waste management to general building upkeep). Communicate clearly the activities of the property management company, this will ensure that the lines of communication and clear and open from the beginning. For some people who live in an apartment block, for example, do not see what their fees are put towards, they may see regular cleanings of the common areas, but is that enough to win over the people of the building?
2. Regular Meetings with Property Owners
Whether it be monthly, bi-monthly or quarterly meetings, keeping the property owners involved in the running’s, upkeep and management of the property is key. Listen to the voice of the community in the building, hear what they have to say, listen to their suggestions and follow through with actions that meet their expectations. At the end of the day, these are the people that live in the building and the people you need to keep onside.
3. Mail campaigns
Get the community involved by utilising mail to promote the management company services, organise and invite people who live in the building to an event organised by the property management company (BBQs, family days etc.). Ensure to outline out benefits of involvement, promote the upkeep of common areas, parking facilities, refuse collection, post and always have a policy by which a member can contact the management company if issues of antisocial behaviour arise. This helps to create a sense of community within the buildings and can help the people of the building feel like they are getting more for service charges they pay.
4. Create an online forum
Creating an online forum where members of the building can come together, raise and discuss important issues relating to the building can help instil a sense of community in the building. Just make sure that there is somebody from the property management company monitoring the discussions and responding accordingly.
5. Message boards in common areas
Message boards organised and maintained by management company can help encourage people in the building to get more involved.
All of the above activities, if correctly executed, managed and maintained by the property management company can help the property owners and people living in the building see the value of paying annual service charges without hesitation. When they see the value of the service, the property management company should be able to reduce the number of unpaid fees in the building.
Protecting the reputation of the property management company is key. Having a good reputation can help to attract people who are willing to pay service charges without hesitation. In the digital world we live in today, everything is online and it is often said that ignoring your online presence is the same as ignoring your business – ways in which you can help to improve/protect your reputation are:
1, Social Media
Set up a Facebook page, invite all members to join the page, create a compelling content plan and engage with the people.
2. Online Reviews
Increase your efforts in gathering online reviews, google reviews are often a go to source for people who want to know more about a company. Ensure your references shine.
3. Search Engine Optimisation and Website
Maintain a strong online presence will help to strengthen your company’s reputation. Invest the time into your online image and watch your business grow.
Creating quarterly newsletters with input from property owners where possible can be a great way of increasing trust and effective communication with members.
For a property company to manage their credit control well, decrease the number of members who are late/will not pay service charges and improve their debt collection efforts for those who have not paid, it is important to combine a strong policy with the softer side of credit control.
5 Aspects of an Effective, Well Rounded Property Management Credit Control Policy
1. An induction process for new owners
A comprehensive induction process will ensure that any new property owners feel comfortable with the property management services and respect and honour the annual service charges.
2. Keep updated information on your members on file at all times
It is important to have updated information on your members at all times as this will help you get paid faster if you need to recover any unpaid debts. The information you should keep on file are:
- Address (this is especially important for those who do not live in the building but are renting their property out to tenants)
- Contact information – mobile phone number and email address (work and personal)
- Date of birth
- Occupation and place of business
- Copy of lease
3. Open communication with all members
Communicate via newsletters, regular meetings, mail campaigns, message boards in common areas and events. Management of online forums and discussion boards for members.
4. Online marketing and reputational management
Social media campaigns and management, maintain positive online reviews on social media as well as google reviews and maintain effective SEO for the company website.
5. Referral of outstanding debtors to debt collection solicitor
Specific Timeframes for referral to solicitor in cases where a property owner fails to pay within agreed credit period (usually 30 days)
- Issue reminder letter to pay services charges, within this letter, give a predetermined amount of days to pay the debt owed. In cases of larger debts, it may be possible to organise a payment plan to recover the debt.
- If no engagement following credit period and reminder letters sent, then refer the case to a solicitor to start the legal debt recovery process.
The Property Management Debt Recovery Process
In some instances, the softer side of an effective credit control policy will not speak to every member and you still may be faced with a situation whereby a person will not respond to your reminder letters. In this case, your best course of action to recover these debts is to start the legal debt recovery process by contacting a debt recovery solicitor. The steps to debt recovery for property management companies are as follows:
Step 1: Inform your Solicitor
Gather as much important information as you can about the person that owes you money so that your solicitor will have all the information needed to pursue and recover your debt. The information that you should provide to your solicitor will be:
- Date of birth
- Occupation and place of business
- Amount of money owed to you
- Updated statement of account
- Proof of ownership
If you are having issues gathers each of the above pieces of information, gather as much as you possibly can and speak with your solicitor.
Step 2: 7 Day demand letter
Once your solicitor has all the relevant information from you, they will proceed and issue a 7-day demand letter to the property owner, demanding that the debt be paid within 7 days or legal proceedings will follow. In some cases sending having a solicitor send a demand letter can be enough to persuade the debtor to pay the debt, or at least engage with you. In cases where a debtor ignores a demand letter then you would move forward and issue legal processing’s to recover the debt.
Step 3: Obtaining Judgment to get paid
Judgment and resolution of the debt can be obtained in two ways;
- If the debtor does not respond to legal proceedings then you move straight to judgment
- If the debtor does respond and would like to defend the case then a hearing in court will be the next step.
In either case, your debt recovery solicitor will be on hand every step of the way to make sure that you understand each step of the process.
Carlisle Solicitors dedicated debt recovery team have years of experience in helping property management companies get paid faster and are on hand to help you move through the debt recovery process with ease. For a confidential discussion contact Sarah Walsh, Debt Recovery Solicitor, on 01 653 33670 or via email at firstname.lastname@example.org and tell her about your case.