The legal requirements around holding Client Money and particularly services charges is complex - we have expert advice on hand.
The Law & Property Accounts
The Law & Property Accounts
"The legal requirements around holding Client Money and particularly services charges is complex - we have expert advice on hand."
Expert Service charge accounting demands 100% transparency, an understanding of the lease and legal requirements as well as being able to understand what value for money means. Collecting service charge arrears will be frustrated and can fail at Tribunal if the Service Charge Accounts are not right - and - a £2,500 fine applies if they are not produced.
Service Charge accounts
Service charge accounts are 'not for profit' and required by virtue of Landlord and Tenant legislation not company law. Service charge accounts should not be confused with accounts for filing at Companies House.
For blocks of flats the Company Accounts that are required for filing at Companies House may be 'dormant', 'abbreviated' or 'trading' company accounts depending on whether ground rent is collected, lease extensions have been sold or whether owners have clubbed together and bought the freehold.
Otherwise, the service charges you demand may not be due, and if you need to go to Court to seek recovery your service charge accounts, Freehold Company or Right to Manage Company accounts will need to hold up to scrutiny.
Here are some tips, you'll need:
| To hold service charges in trust` | *Section 42A Landlord and Tenant Act 1987 |
| To split balancing charges | *Section 21-28 Landlord and Tenant Act 1987 |
| To prepare service charge accounts if there are 5 or more service charge payers | *Section 21-28 Landlord and Tenant Act 1987 |
Not to collect reserves unless the lease allows |
|
| Charges may be unreasonable if they are a surprise or unusually high | *Garside v RFYC Ltd |
| Charges may not be due if consultation notices are not properly served | *Phillips and Goddard v Francis |
| Unless you seek retrospective dispensation from consultation requirements | *Daejan Investments Ltd v Benson and others" |
| All parts of Section 20 consultation must have lapsed before demands become valid | |
| Service charges will not be due until the prescribed summary of leaseholder rights & obligations is served | *Section 21B Landlord and Tenant Act 1985 |
| Demands may not be compliant if an address in England and Wales whereon to serve notices is not provided | *Section 48 Landlord and Tenant Act 1987 |
CIMA, ACCA and Financial Reporting of Service Charge Accounts
Service charge accounts of schemes managed by ARMA members are normally subject to either an Audit or a Report of Factual Findings, depending upon the lease and the size and nature of the property/scheme. LAN 08 states that “all annual statements of account should be subject to an examination by an independent accountant before issuing to lessees”.
Accountants undertaking Audit for service charge accounts must be qualified to do so and must be members of the recognised supervisory bodies for company auditors (as listed in Appendix J of the ICAEW Technical Release Tech 03/11) who are entitled under the rules of the body to which they belong to engage in public practice.
The focus of accountancy qualifications from other accountancy bodies not listed in Tech 03/11 is not usually that of audit. The competencies to complete the second type of financial report that appears in the technical guidance - a report on factual findings - require an accountancy skill-set (albeit that there is no requirement to be a statutory auditor under the Companies Act). It is essential that ARMA members who are in a position to appoint a reporting accountant (or to recommend the appointment of a reporting accountant) satisfy themselves that members of other accountancy bodies maintain the requisite skill-set. Members of other accountancy bodies would seek and provide guidance from their own professional bodies as to their suitability to perform such engagements.
Property Service Charge Accountants
We are more than accountants, we are property accountants. All we do is property accounts which means service charge accounts, company accounts for Resident and Freehold Management Companies and RTM Companies.
Service charge accounting has to relate to what is permitted service charge expenditure under the lease and also for new build properties has to apportion expenses in the early days between the leaseholders and the developer. So, if you want to talk anything service charge accounts, get in touch today..
Sarah Steel
Head of Finance
Find out more right now
Without a schedule, how would you negotiate repairs due or alleged? Don’t take on a lease without one.
Call us
020 7267 2900Email us
md@ringley.co.uk
Expert Service charge accounting demands 100% transparency, an understanding of the lease and legal requirements as well as being able to understand what value for money means. Collecting service charge arrears will be frustrated and can fail at Tribunal if the Service Charge Accounts are not right - and - a £2,500 fine applies if they are not produced.
Service Charge accounts
Service charge accounts are 'not for profit' and required by virtue of Landlord and Tenant legislation not company law. Service charge accounts should not be confused with accounts for filing at Companies House.
For blocks of flats the Company Accounts that are required for filing at Companies House may be 'dormant', 'abbreviated' or 'trading' company accounts depending on whether ground rent is collected, lease extensions have been sold or whether owners have clubbed together and bought the freehold.
Otherwise, the service charges you demand may not be due, and if you need to go to Court to seek recovery your service charge accounts, Freehold Company or Right to Manage Company accounts will need to hold up to scrutiny.
Here are some tips, you'll need:
| To hold service charges in trust` | *Section 42A Landlord and Tenant Act 1987 |
| To split balancing charges | *Section 21-28 Landlord and Tenant Act 1987 |
| To prepare service charge accounts if there are 5 or more service charge payers | *Section 21-28 Landlord and Tenant Act 1987 |
| Not to collect reserves unless the lease allows | |
| Charges may be unreasonable if they are a surprise or unusually high | *Garside v RFYC Ltd |
| Charges may not be due if consultation notices are not properly served | *Phillips and Goddard v Francis |
| Unless you seek retrospective dispensation from consultation requirements | *Daejan Investments Ltd v Benson and others" |
| All parts of Section 20 consultation must have lapsed before demands become valid | |
| Service charges will not be due until the prescribed summary of leaseholder rights & obligations is served | *Section 21B Landlord and Tenant Act 1985 |
| Demands may not be compliant if an address in England and Wales whereon to serve notices is not provided | *Section 48 Landlord and Tenant Act 1987 |
CIMA, ACCA and Financial Reporting of Service Charge Accounts
Service charge accounts of schemes managed by ARMA members are normally subject to either an Audit or a Report of Factual Findings, depending upon the lease and the size and nature of the property/scheme. LAN 08 states that “all annual statements of account should be subject to an examination by an independent accountant before issuing to lessees”.
Accountants undertaking Audit for service charge accounts must be qualified to do so and must be members of the recognised supervisory bodies for company auditors (as listed in Appendix J of the ICAEW Technical Release Tech 03/11) who are entitled under the rules of the body to which they belong to engage in public practice.
The focus of accountancy qualifications from other accountancy bodies not listed in Tech 03/11 is not usually that of audit. The competencies to complete the second type of financial report that appears in the technical guidance - a report on factual findings - require an accountancy skill-set (albeit that there is no requirement to be a statutory auditor under the Companies Act). It is essential that ARMA members who are in a position to appoint a reporting accountant (or to recommend the appointment of a reporting accountant) satisfy themselves that members of other accountancy bodies maintain the requisite skill-set. Members of other accountancy bodies would seek and provide guidance from their own professional bodies as to their suitability to perform such engagements.
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Sarah Steel
Head of Finance
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London
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Sarah coaches talented team of finance professionals and promotes a results-driven atmosphere that supports powerful opportunity pipelines.
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