Compliance Aspects
What owners and property managers need to know
MJP was formed in April 2014 in response to client requests to provide an independent accountant service that was focused on the residential property sector and understood the sector’s specific requirements.
We work closely with property owners and their managing agents to make sure the financial aspects of property management are compliant with the necessary rules and regulations. Below is a quick overview of the technical aspects that need to be addressed in any property based business:
Client monies
Service charge monies paid by lessees are trust monies and should be held in ring fenced designated bank accounts (s42, Landlord and Tenant Act 1987). A landlord or managing agent need not have a separate bank account for each property/scheme unless the lease requires one. But the funds for each property or scheme must be separately identifiable as it is a breach of trust to use service charge monies from one property/scheme to pay the bills of another or of the landlord.
Statements of account
Annual statements of account should be prepared for property structures where common services are provided to freeholders and/or leaseholders and the cost of those services need to be correctly accounted for in the service charge accounts and apportioned amongst the stakeholders who are required to fund those services. All annual statements of account should be subject to an examination by an independent accountant before issue to the stakeholders.
Independent accountant examination
An independent accountant examination can take the form of an “Audit” or an “Engagement to deliver a report of factual findings”, the latter also being referred to as “Certification”. Individual leases will state whether the accountant needs to audit or certify the annual statement. Leases drafted prior to 1980 used the term “audit” loosely so there is room for interpretation but post 1980 leases are more specific. An audit is a rigorous investigative process and the accountant needs to follow procedures governed by International Standards on Auditing. By comparison a statement of factual findings is based on relatively limited procedures and does not require the same level of investigation so is less time consuming and less expensive than an audit but should still provide reasonable comfort to the stakeholders that the annual statement of account has been correctly prepared and is in accordance with the books and records. Whilst MJP can carry out an independent accountant examination of your financial statements, please note we are not statutory auditors.
Certification of annual statements
We specialise in the “certification” of annual statements or service charge accounts. In respect of residential leasehold properties on which variable service charges are paid by the leaseholders, we follow the latest guidelines provided by the ICAEW through its Technical Release “Tech 03/11”. Tech 03/11 provides guidance prepared by a joint working group comprising representatives of the Association of Chartered Certified Accountants, ICAEW, the Institute of Chartered Accountants of Scotland, the Association of Residential Managing Agents (“ARMA”) and the Royal Institution of Chartered Surveyors (“RICS”).
Property trading structures
We deal with some of the most complex structures and the different types of companies that can be used. For example, a company can own the freehold or it could hold a headlease instead. Under the Commonhold and Leasehold Reform Act 2002, introduced on 27 September 2004, property may be held as commonhold, where common parts are owned and managed by “commonhold association”, which is a company.
A breakdown of the services we can help you with can be found on the ‘Our Services’ page.
Free Consulation
As specialists in the property sector, we have vast experience of working with individual owners, small and large property companies and developers and their managing agents.
If you would like to have a free, no obligation, discussion about your property accounting requirements, we’d be delighted to hear from you. Simply complete the booking form opposite or call us on 01803 321286, or email John Dwyer, Managing Partner.