Thackray Williams

Three remaining parts of the Commonhold and Leasehold Reform Act 2002 are soon to be enacted.  These sections will impact upon how parties both hold and account for lessees’ monies.   It is therefore important that Landlords, Managing agents, accountants and ‘Right to Manage’ review their service charge accounting processes as soon as possible. Failure to implement these new measures could provide a tenant with another technical “shield” to hide behind, if they are looking for ways to avoid payment.

Regular statements of account
Landlords will be required to provide annual accounting statements.  These detailed statements will have to be certified by a qualified accountant unless exempted by regulations.  Landlords will also have to provide leaseholders with a summary of their rights and obligations in relation to service charges.
Significantly, tenants will be able to withhold payments should landlords have failed to provide documents which substantially meet the statement of account requirement.  The ability to withhold service charges would however cease once satisfactory documents are provided, (even if these are provided after the relevant deadline).

Inspection of documents
Tenants will be entitling to inspect documentation relevant to their accounting statements within 21 days of their request.  They will be able to take copies of that information or have copies provided to them on payment of a reasonable fee.  This right to inspect the documents does however end six months after they are provided with the corresponding statements of account.

Service charge contributions must be held in a designated account
Service charge funds must be held in separate designated accounts.  This will form a trust account and cannot be used as the landlords’ management account.  The service charges must be kept separate from other payments such as ground rents and admin charges, etc.  Therefore, it will no longer be possible to hold funds in one client bank account for any number of schemes.

For more information about these measures or if you need assistance in recovering outstanding service charge and ground rent payments contact Graeme Weir on 20 8290 0440 or email Graeme.weir@thackraywilliams.com