Accounting for service charges and service charge audit is a complex area that requires technical specialists and an understanding of the property sector.
Our specialist team delivers value-added service charge certifications and audits to a wide range of residential, commercial and mixed developments. These range from five to ten unit properties to mixed developments containing hundreds of units. We work closely with managing agents and leaseholders alike, delivering an efficient, timely and cost-effective service.
Our services include:
- Preparation of service charge accounts
- Service charge certification and audit
- Completing handover reviews on change of managing agents
- AGM attendance and meetings with landlords and agents
- Preparation of statutory accounts for Residential Management Companies (RMC’s) Right to Manage Companies (RTM’s)
- Corporation tax advice and returns
- Tax planning for non-service charge income
- Annual compliance reports for RICs, ARMA and ARLA
- Advice and assistance during the acquisition of freehold properties
Our specialist team ensures our accounts are prepared in accordance with the terms of each individual lease or transfer document (TP1), using best practice guidance provided by ICAEW Technical Release Tech 03/11, ARMA-Q and the RICS code.
Technical Background
The need for a Residents’ Management Company (RMC) arises when properties share common amenities which need to be maintained on a collaborative basis. Funds need to be collected and expended on behalf of property owners. A limited company is the most practical vehicle to operate as a sole legal entity that can act on behalf of all parties.
This is normally organised by the freeholder, generally via a managing agent. However, the Right To Manage (RTM) lets some leasehold property owners take over management of the building -even without the agreement of the freeholder. To use this right, leaseholders must set up an RTM company and follow certain procedures.
Leasehold Properties
In the case of properties where the governing document is a lease, the relevant parties will be the resident leaseholder, the freeholder and the RMC.
The lease will set out all the various obligations regarding the property. In particular, it will specify that Service Charges will be due and payable for the upkeep of the common amenities, the dates when payable, and the types of expenditure that may be incurred.
The lease may not specify the nature of accounts to be produced, but residents are entitled under S21 of the Landlord and Tenant act of 1985 to request a summary of expenditure or statement of costs from the landlord for the year.
The lease may require such a statement to be reported on by an independent accountant, and in some cases formally audited. In each case, when an RMC has been formed, all legal requirements must be addressed.
Freehold Properties
There are many instances where a group of freehold properties are built around common land by a developer who either retains such land or transfers it to the residents through a limited company. No leases will exist. Instead, a TP1 will be the governing document, which will stipulate that Amenity charges will be payable towards the upkeep of the common land, and the nature of that expenditure.
Mixed Developments
In some instances a development will be a mixture of leasehold and freehold properties, in which case both Service charges and Amenity charges may be levied. When the RMC also owns freehold land, the presentation of the accounts take on increased importance, as the reader will require the transactional information by sector, in addition to the sectored ownership of the assets or liabilities arising.
Require more information?
If you would like more information or would like to speak to us direct then call us on 01628 665000. Or if you would prefer, ask us a question online.