3 flats: 2 Joint Freeholders, 1 Long-Leaseholder, Request to inspect the Accounts

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    Originally posted by eagle2 View Post
    When you send out demands for the service charges, they should contain the names and addresses of the freeholders to whom notices should be served.
    Thank you for giving this information. We, the Freeholders, have amended our template to include this information, so it will now be on every Service Charge Demand.

    The Leaseholder has requested to see all the bank statements.
    I don't have a problem with this, but is it a legal requirement for Leaseholders to see the bank accounts?


      The general trend, with legislation, seems to be that leaseholders should have the right to inspect all accounting documents that aren't confidential. With RTM's that is what is required to be available immediately. For other leaseholders, they can be forced to wait until about seven months after the accounting year. As I previously commented, some managing agents now provide real time access to payments details to all leaseholders.

      Normally bank statements would need to be redacted, as they contain personal information about the bank accounts of leaseholders, and when they actually paid, so how far in arrears they are. If there really is only one leaseholder (share of freehold freeholders are also leaseholders), they have the right to see that information under the terms of the GDPR (subject access requests).


        It is much simpler to call a meeting and show your shoe box with all the bills and bank statement for the year and give her a copy of the simple annual accounts which should be certified by a director.

        Ask her to bring her mobile to take any photos of bills because you cannot bring a copying machine to McDonalds Cafe.

        You need to keep records for at least 6 years and copy of annual service charge accounts for 3 years because when any flat is put up for sale , the next buyer has to get a mortgage. The mortgage lender wants to see service charge accounts for last 3 years before they are willing to make an offer of loan. .


          The problem I have is that one Leaseholder (joint Freeholder) pays their service charge monthly, not every six months as per the terms of the lease. This is a special arrangement and was agreed by a former joint freeholder, because of personal circumstances.
          I don’t want to get into the situation where the 3rd Leaseholder thinks she can pay monthly.
          Surely, this arrangement should be kept confidential.


            The arrangement must be kept confidential, otherwise it would be a serious breach of data protection law. Revealing that a "customer" is a credit risk is a definite no-no.

            Generally, when people operate an open policy, it is only the outgoings (supplier invoices) that are published to the leaseholders.

            I would only allow people to see the end of year account totals, from the bank, although you could take a .csv transaction list, and edit out the balances and leaseholder transactions.

            If the voluntary arrangement with the debtor clears the debt at the end of the financial year, it won't show up on the summary accounts, but, if overruns, you can't really hide the fact that there are arrears. Also, if the arrears prevent necessary expenditure, you may have to reveal that they exist, and it may be possible for people to then deduce who the debtor is. Standard conveyancing questions ask for information about this, so it could be an issue at any time of year.


              As you have been advised, allow those who wish to see the accounts, see them, as it's THEIR money you are spending. Don't need forms, they just ask, especially as they live in the same building.

              I used to have everything available on a table at A.G.M's but no one bothered to look ( I assume, and know they trusted me ).

              The monthly service charge payments are a concession, and ONLY for one flat.
              If any other flats have problems with their own payment issues, then that leaseholder puts in a request, and it is looked at if there is actual financial problems or not. If not, the request is denied.

              What you can't do is have everyone paying monthly, because you prepare a service charge for the forthcoming year and if you don't get all the money in, up front, then you have to wait a full year before you can start the last job, which will be in month 13 when the last payments come in at month 12..
              Repairs / Maintenance MUST be done within a reasonable time, not 13 months after.


                If one of the freeholders is not complying with the lease, the leaseholder should be informed and given the same facility to pay monthly. It is best policy to disclose everything, the more you disclose the less will be requested going forward.


                  Whilst it is generally best not to hold any secrets, I believe you do have a duty to protect the fact that the joint freeholder has made an arrangement with his creditors.

                  Incidentally, if this were a limited company, rather than a tenants in common arrangement, I have a feeling that a director in that position would have to resign.


                    Its best with only 3 flats in building to allow everyone to pay by 10 monthly standing orders. This way you have no secrets to guard and no need to prepare invoice for half year service charge demand .
                    For my block , of 30 flats , all leaseholders are allowed to pay by one payment or by 10 monthly bank standing orders.

                    So let her see the bank statements and be willing to discuss if she wants to pay by monthly standing order.


                      You should make available for inspection the bank statements otherwise you cannot prove payment of bills so the leaseholder will see the arrangement. Billing should remain in accordance with the lease in case the leaseholder fails to make payment and you need to recover arrears. If a leaseholder offers to pay, it is best to accept the proposal but it does not alter the dates when charges are due.


                        Thank you for all the (sometimes conflicting) advice.
                        I have asked my solicitor about the bank account statements.
                        My solicitor has said the Leaseholder has no right whatsoever to see the bank account.
                        I have receipts from the companies who have been paid, so I have proof that they have been paid.


                          I strongly disagree with your solicitor. A leaseholder has the right to see what happens to his payments and check that they are paid in promptly and how they are used. He also has the right to know how much is held at the bank and has not been siphoned off. It is unusual for a freeholder to obtain receipts for all payments however receipts can be forged and they do not confirm that money left the bank account. A payment can be cancelled or a credit note could be issued subsequently. Refunds can be seen on a bank statement. I would advise any leaseholder to be suspicious of a freeholder who refuses to disclose all accounting records.


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