Section 22 LTA 1985 – What can we really inspect?

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    Section 22 LTA 1985 – What can we really inspect?

    Hi All,

    Can you please help with the questions below?

    Section 22 Par. 2 states that:

    “The tenant, or the secretary with the consent of the tenant, may within six months of obtaining the summary require the landlord in writing to afford him reasonable facilities:
    (a) for inspecting the accounts, receipts and other documents supporting the summary, and
    (b) for taking copies or extracts from them.”


    1) being an accountant, I would expect that “inspecting the accounts” means having access to the full accounting ledger, considering that soon after the law goes on to say that we can also inspect receipts, which I interpret as the actual invoices etc. Is it correct assumption that we must be granted access to the accounting ledger? 2) What would the “other documents” under (a) comprise of? Can we request access to contracts in order to confirm if a service has effectively been contracted exclusively for our building?
    3) The service charge summary includes the Balance Sheet and there is a section for the accruals. Can we request a full breakdown of the accruals even though they are not 100% related to the accruals accounted for in the current period (i.e. accrued costs include balances from previous years) as this would qualify as details to support the summary?

    Thank you for clarifying!

    A good manager would volunteer as much information as they could, in advance, to try and avoid a formal request.

    Although I know of at least one person that would disagree, I think that the full journal cold not be used, as it would reveal personal information about defaulting leaseholders.

    Most people, wanting to inspect, would want to see the invoices, rather than the ledgers, as that is all they would really understand and trust. I would imagine they would want to see contracts, but I'm not sure that the letter of the law requires that. Most people would only have a hazy concept of accruals, and wouldn't understand the term itself.

    I'd suggest that the model articles for RTM companies give a good idea of what the legislators think should be disclosed, even if S22A doesn't explicitly require all of that (and RTM members can request current year information).


      You can request the opportunity to inspect whatever documentation you want to (and can do so without an official s22 request), and I would say that there is nothing to lose from doing so.

      I can't really help with what you are legally entitled to see (accounts for my block are simple, so it's not really necessary to do more than check invoices), but the legislation only allows for the inspection of documentation that supports the summary of accounts, so may not allow you to inspect everything that you might want to.

      Someone may know whether there is any case law regarding this.


        It is absolutely essential that you see the ledgers otherwise you have no way of knowing whether or not an invoice has been paid or is included in the service charge accounts and whether or not there are any missing invoices.


          This is from an FTT decision which is not a precedent but gives an indication of a Tribunal’s thinking. MAN/ooCB/LSC/2014/0060 Para 43

          It is essential that the information kept by the Respondent (or those acting on the Respondent's behalf) should be clear and transparent disclosing an audit trail which would show the basis upon which the services were considered necessary; the process of commissioning, including a tendering process or a clear explanation as to why tenders had not been obtained; the basis of any estimated cost; the computation of the final cost; and a statement reflecting quality control and satisfactory completion.


            That reference provides no Google hits! The opening words also produce no relevant hits.

            However, it seems to me that this is talking about record keeping and what needs to be available to the tribunal, rather than what has to be disclosed outside of judicial proceedings.

            On the other hand, for transactions with no personal data, I would expect complete openness, at all times, except where there in an active tendering process that might be compromised by release of competitor information.


              The first paragraph clarifies

              "In this respect, the Tribunal would observe that Section 22 of the Landlord and Tenant Act 1985 makes provision for the inspection by the tenant of specified documentation. It appears that the Applicants were offered facilities for inspection but, having regard to the information contained in the documentation placed before the Tribunal, it is unlikely that it would have fulfilled the purpose for which inspection might reasonably be considered to be necessary."


                In practice, in the situations were people try to exercise that right, is likely that the requestor will only really understand original invoices and that the company has incomplete accounting records. From what i've seen, accountants don't supply reconstructed ledgers to self managers with incomplete accounting records. (If they do create ledgers, they are likely to be using proprietary accounting software, and not usable unless you also have that software.)

                None of this is to suggest that one should not provide almost everything that is available, on the expenditure side.


                  Are you a leaseholder and shareholder? You have the right to see the insurance invoice and policy, you have right to see all invoices and receipts and ensure they are original? Ask to see bank account profit and loss and balance sheet? Ask to see contracts and anything else you think you need to see which has been spent via the service charges? Managing agent fees invoice? Accountants invoice?


                    Try this link re #5 and #7


                      It will reflect badly on the landlord if he does not permit inspection of the full accounting records.


                        You would inspect the doubtful receipts etc and bank statement for last year's service charge, if the receipts and the accruals shown in the accounts do not tally , then you would ask to see the bookkeeping records


                          Receipts don''t show accruals. Accruals are where work has been done, or goods supplied, but no invoice has yet been generated, You can't have a receipt until you have an invoice, although the receipt can double as the invoice, as is typical for shop purchases.

                          In the case of something like electricity, they may be estimates because the exact consumption at the end of the accounting period is not known. (In that case, the expenditure is added to the expenditure account and a debt added to the supplier account, just before the end of the year. Immediately at the start of the next year, the same figures are applied in the opposite direction, after resetting the expenditure for the new year. The result is that, when the invoice does arrive, the expenditure is less by the amount already in the previous end of year accounts.)

                          I suspect the legislators were thinking in terms of cash basis. Although the ICAEW guidelines say accruals basis, that is a difficult concept for leaseholders and typical RTM/RMC directors.


                            Lets not confuse the issue.

                            The lease will usually define service charge expenditure as sums spent or to be spent, so accruals are usually permitted. It is a matter of fact whether or not accruals are included within the service charge expenditure, if they are included, a leaseholder is entitled to request the details.

                            The receipts plus the accruals will not equal the service charge expenditure for various reasons, there is no need to complicate matters by explaining further. The full accounting records should be produced to the leaseholder.


                              The accounts show accruals and if the receipts do not tally up, this will be your reason for asking to see the bookkeeping records.


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