Proposed Changes and Implications

The accounting rules for Service Charges are still governed by s21 Landlord and Tenant Act 1985 but there have been proposals to lay down new rules for some time now. The Commonhold and Leasehold Reform Act 2002 has been implemented in stages over a number of years but unfortunately the proposed changes for service charge accounting have been delayed on many occasions.

The Housing and Regeneration Act 2008 contains provisions under Schedule 12 for Services Charges and the legislators are hoping to set down rules prescribing the formats for Service Charge accounts. Unfortunately there have been delays in the legislative process and it had been hoped that the new rules would have become law on 1st April 2010. However we now understand that the Housing Minister has now announced that he will not be introducing the long awaited new accountancy requirements that would have protected lessee service charge funds.

We understand that ARMA, the Institute of Chartered Accountants for England and Wales and RICS are to issue joint guidance later this year setting out their thoughts for best practice for annual statements of account for residential service charges. We will provide an update when this guidance becomes available.

There is likely to be a requirement for Landlords or their agents to maintain separate bank accounts for each individual property rather than operating 'global' accounts and therefore it is best practice to implement this now. 

The Association of Residential Managing Agents (ARMA) have issued guidance note 72 covering these proposed changes.

Plummer Parsons

Plummer Parsons