Recoverability And Provisions Against Long Term Debtors The recoverability of service charge debtors is an issue for many OMC’s, with members struggling or in many cases refusing to pay their debt. Where this is the situation, directors when preparing the annual financial statements must consider the requirement for a provision against these long term debtors. The argument that there is no need for a provision as the member cannot sell their property until all service charges are fully paid does not hold much weight where: • The owner has no plans to sell the property, what value is the debt to the company if it is not realised for 15 – 20 years; • Owner may be in the process of being liquidated (company) or bankrupt (personal) and funds may not be available to settle the outstanding debt. Directors should look to put a policy in place for the provision against long term debtors. This policy should be explained to members, included in the annual financial statements and applied consistently across debtors and periods.

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