RTM Service Charge Certificate

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    RTM Service Charge Certificate

    Hello,

    I live in a block of two flats. We have an RTM company in place, self managing the building. Both leaseholders are directors of the RTM company. We are approaching the close of our service charge year and the lease requires that the service charge accounts be certified. Specifically it says:

    ”The amount of the service charge shall be ascertained and certified by a Certificate signed by the Landlord’s Accountants or Auditors or Managing Agents (at the discretion of the Landlord) acting as experts and not as arbitrators as soon after the end of the Landlord’s Accounting Period as may be practicable and shall relate to such year in the matter as hereinafter mentioned”

    It then goes on to explain what the certificate should contain, which is details of the Landlord’s expenses and outgoings etc. When we had managing agents they charged us to certify the accounts which was done by an external firm of accountants.

    My question is are we (the RTM company) able to self-certify the accounts? The lease seems to suggest that the Landlord can decide who certifies it and as we are now responsible for the Landlord’s functions, therefore so can we. As one of the options is the Managing Agents, as we self-manage can we argue that therefore we can do it? We do have money in the service charge budget for certifying the accounts through an accountant but I would rather not waste money if it’s not necessary.

    #2
    I'm a little surprised that the managing agent was allowed to do so. I would say that you are most likely to have the expertise and are unlikely to be able to handle the conflict of interest.

    Comment


      #3
      The accounts are straightforward - it’s a house split into two flats. I would argue there is an inherent conflict of interest in everything an RTM company does given that it is responsible for maintaining the property on behalf of the freeholder whilst also normally being run by leaseholders, who will want to keep service charges low.

      Anyway, my question was whether we can self certify according to the provisions of the lease - can we?

      Comment


        #4
        I’m sorry to ask again but does anyone else have a view on this please?

        Comment


          #5
          Hi. If I understand things, you have an RTMC managing two flats in one block and both flats are directors of the RTMC? There is no other schedule of servcie charges for being part of a bigger freehold?

          If be the case, you have the lease and the ICAEW Tech 03/11 to review. Taking Tech 03/11 first... This expects an independent accountant, but is binding only on accountants, RICS and ARMA members via their rules. So strike that out. The 'parent' RICS code is something else. Tech 03/11 makes clear failure to comply with the RICS Code is not a offence nor does it create any civil liability. Failure can be used in evidence. Which of you both wishes to adduce it?

          You are both making all the decisions? You know the bookkeeping because you are keeping them and writing the cheques? The RTMC in respect of service charges is the landlord. The freeholder pays no service charges. Obviously wants proof the insurance is paid for his investment, mind.

          Acting as landlord the lease gives you discretion over who certifies the Certificate, be it your accountant or your agent. Neither do you have. The external agents charged you, no doubt handsomely, for external accountants but now they are toast. They could charge because they were accounting to you for your contributions and where the money went, hopefully. You are certifying to yourselves for your contributions, what you are spending anyway.


          I'm not a lawyer but I'm lost for seeing any impediment?

          Print a nice Certificate, nothing naff. Quote the lease for more formality. Use free GIMP or better still free Inkscape for vector graphics. Print on nice parchment paper.

          Use the money saved on fixing the roof?
          Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.

          Comment


            #6
            Originally posted by chris1544 View Post
            ”The amount of the service charge shall be ascertained and certified by a Certificate signed by the Landlord’s Accountants or Auditors or Managing Agents (at the discretion of the Landlord) acting as experts and not as arbitrators as soon after the end of the Landlord’s Accounting Period as may be practicable and shall relate to such year in the matter as hereinafter mentioned”

            It then goes on to explain what the certificate should contain, which is details of the Landlord’s expenses and outgoings etc. When we had managing agents they charged us to certify the accounts which was done by an external firm of accountants.
            If the accounts are not certified in the way described (which means that they would need to be signed off by an accountant, auditor, or managing agent - and the RTM company is none of these things), it would give any leaseholder who disagreed with the sums involved a reason to dispute paying them.

            Ordinarily RTM companies should do everything in full accordance with the lease because otherwise they may end up with money that can't be recovered if one or more leaseholders challenges costs and wins at a tribunal or court hearing.

            However, if there are only two leaseholders, and both are actively involved with the management of the property, I don't see any harm in signing the accounts off yourselves in your situation.
            I would agree to produce a statement of account each year and have both leaseholders sign a statement at the bottom that reads something like:
            "I, the leaseholder of [leasehold property address], certify that the preceding statement of account accurately details the expenditure and receipts for [freehold property address] and I agree that all expenditure detailed is payable as the service charge for the year and no independent certification is required"

            Both leaseholders should then keep a copy of the statement signed by both of you.
            If, for any reason, a disagreement of some type later develops between you, you will each have evidence that all charges were agreed, and this will mean that they can't be challenged at tribunal - even though the lease terms weren't strictly adhered to.






            Originally posted by MrSoffit View Post
            ...you have the lease and the ICAEW Tech 03/11 to review.
            ICAEW Tech 03/11 is a waste of time for all small blocks, regardless of how they are managed.
            It provides no guarantee that the sums demanded are reasonable, or that they are actually payable under the terms of the lease. In fact, the only people who benefit from it are the accountants who get to charge unreasonably high sums for basically doing nothing.

            Comment


              #7
              Brilliant advice, thank you both, I really appreciate it. Yes to answer your question MrSoffit we are both actively involved in running the property and make decisions jointly. In fact, the service charge account is set up so that bank transfers can only be made if we both authorise them.

              I'll draw up a simple certificate with a statement as described and we can both sign. Will definitely save us a few pounds!

              Yes we were charged around £350 I think it was by the managing agents for the accounts and certification. The accounts we got were so confusing that I think only another accountant would be able to understand them.

              Comment


                #8
                I think one of the problems with accountants is that their role of protecting the investors and customers has been replaced by one of finding ways to legally avoid providing any information to them. That may match the wants of many for profit businesses, but absolute openness should be the aim of RTMs. I think that is one of the reasons the accounts weren't useful to you.;

                Comment

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