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UKSolicitorJA, Solicitor
Category: Law
Satisfied Customers: 4312
Experience:  English solicitor with over 12 years experience
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Legal requirements for providing accounting of reserve funds:

Customer Question

Legal requirements for providing accounting of reserve funds: I own a leasehold flat in a building of 5 flats. New managing agents began making [substantial] charges for a reserve fund 2-3 years ago. They now say that cannot and will not provide an accounting of the monies paid to them. They earn no interest, but are allegedly held in a trust account. They claim that not distinguishing among the amounts paid by various leaseholders [which differ according to their percentage fiscal responsibilities for the whole building] "is common place in black management".

My understanding is that an accounting is required, in particular in the event that the leasehold is sold.

Would be grateful for your advice.

Sharon Cather
Submitted: 3 years ago.
Category: Law
Expert:  Nicola-mod replied 3 years ago.

I've been working hard to find a Professional to assist you with your question, but sometimes finding the right Professional can take a little longer than expected.

I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.

Thank you!
Customer: replied 3 years ago.

This is really wasting my time. I am delaying answering the management company. I PAID for an urgent reply to what, I assume, is not a rocket science question.


You say there will be a further delay but give NO IDEA how long.


Do you know how much longer than 48 hours it will take for an URGENT answer?


Sharon Cather

Expert:  Nicola-mod replied 3 years ago.
Hello Sharon,

I'm afraid JustAnswer cannot guarantee a time, however most questions are answered in a timely manner.

I have marked this high priority to alert Experts that you need an answer quickly.

We will continue to look for a Professional to assist you.

Thank you for your patience,
Expert:  UKSolicitorJA replied 3 years ago.
Hello Sharon,

I have just been notified of your question and will revert shortly with an answer. In the next 5 minutes.
Expert:  UKSolicitorJA replied 3 years ago.
Thank you for your patience.

S. 42 of the Landlord and Tenant Act 1987 provides that

(2)Any sums paid to the payee by the contributing tenants by way of relevant service charges, and any investments representing those sums, shall (together with any income accruing thereon) be held by the payee either as a single fund or, if he thinks fit, in two or more separate funds.
(3)The payee shall hold any trust fund—
(a)on trust to defray costs incurred in connection with the matters for which the relevant service charges were payable (whether incurred by himself or by any other person), and
(b)subject to that, on trust for the persons who are the contributing tenants for the time being.
(4)Subject to subsections (6) to (8), the contributing tenants shall be treated as entitled by virtue of subsection (3)(b) to such shares in the residue of any such fund as are proportionate to their respective liabilities to pay relevant service charges.

The above legislation means that the management company is obliged to hold any monies paid by tenants as service charge or sinking funds or reserve funds in trust for the tenants.

You have a statutory right to ask for a summary of the service charge account or the reserve funds account from the landlord or the management company acting on behalf of the landlord under section 21 of the Landlord and Tenant Act 1985. The request must be in writing and can be sent direct to the landlord or to the managing agent. It can require a summary of the 'relevant costs in relation to the service charges payable' in respect of the last accounting year, or where accounts are not kept by accounting years, the past 12 months preceding the request.

Where a landlord has received such a demand he must provide the summary within one month (or within six months of the end of the 12-month accounting period, whichever is the later).

The summary should show:

how the costs relate to the service charge demand, or if they will be included in a later demand;
any items for which the landlord did not receive a demand for payment during the accounting period;
any items for which a demand was received and for which no payment was made during the accounting period;
any items for which a demand was received and for which payment was made during the accounting period; and
whether any of the costs relate to works for which an improvement grant has been or is to be paid.
Where the service charge is payable by the leaseholders of more than four dwellings, the summary must be certified by a qualified accountant as a fair summary and sufficiently supported by accounts, receipts and other documents produced to the accountant. Where the landlord is a public sector body, one of their officers who is a qualified accountant may certify the summary, but otherwise the accountant must be independent of your landlord.

Rights to further information (inspecting accounts and receipts)

As well as receiving the summary, the leaseholder has the right under section 22 of the Landlord and Tenant Act 1985 to inspect documents relating to his service charge as a follow-up to provide more detail on the summary. Within a period of six months from receipt of the summary, the service charge payer (or the secretary of a recognised tenants' association) may write to the landlord requiring him to allow access to and inspection of the accounts, receipts and any other documents relevant to the service charge information in the summary and to provide facilities for them to be copied.

Facilities for inspection must be provided within one month of the request, and must be available for a period of two months.

There are further rights of investigation of service charges and management provided by the right to a management audit under the Leasehold Reform Act 1993 and the right to appoint a surveyor under the Housing Act 1996.

Failure to provide a summary or allow access to further information

Where a landlord fails without reasonable excuse to comply with either a request for a summary or to inspect supporting documents they commit a summary offence on conviction and are liable for a fine of up to £2,500 (level 4 on the standard scale). The council has the power to bring proceedings, or they can be brought by you.
The above advice appears here

You may therefore take legal action against the management company by complaining to the local authority and or by appointing a solicitor to act for you.

May I help further?