New flat purchasing advice needed please. RMC run by managing agent as director

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    #16
    Hi All,
    I have now requested and reviewed the account from 2017, 18, 19 for the RMC. Accounts for 2020 were not provided. The accounts have been signed off by the Managing Agent on behalf of the directors of the RMC. I also note that the account have been audited by a company related (husband/wife) to an employee who works for the Managing Agent.

    My observations are as follows,
    • I'm not seeing any evidence of the RMC or its members being actively engaged in managing the accounts
    • The managing agent is well aware of the legalities (Landlord & Tenants Act) and are operating in a manner that it would be hard to catch them out unless you are willing to go into details, ask for receipts and so on. eg. Individual large cost maintenance items are close to but under £250 per member, so no special approvals are needed
    • All accounts are prepared by the managing agent with wording that responsibility lies with the RMC directors to approve
    • No major building works have been undertaken, mostly large costs are related to gate maintenance £3000, grounds maintenance £3000 and general maintenance £3000+, managing agents fee £3000+, buildings insurance £3000
    • The reserve funds are simply the retained earnings of the company and if the company overspends on the above items it makes up the shortfall from reserve funds
    • The budgets seems to keep missing out recurring charges from previous year and then at end of year report them as overspend and this is then taken from the reserve fund
    • For a relatively new building (2006 building) standing for 20 years the reserve funds were completed depleted by "redecoration" in 2017. Then the annual charges were then upped and the reserve funds restored by not carrying out some of the budgeted work (underspend)
    • Consequently, In the last 4 years the annual maintenance has gone up by £10,000 with no major works carried out

    Am I being paranoid or is this business as usual for leasehold blocks?

    Comment


      #17
      7.13 of the RICS code requires the annual accounts to be examined by an independent accountant. Tech 03/11 3.2.4 requires the accountant to be a member of one of the professional accountancy bodies and hold a practising certificate. It also states “independent” means that the accountant should not be an employee or director or associate of the landlord, managing agent or any associated company of the landlord or agent.
      The wording of the lease will determine whether or not a reserve fund may be held and the purpose of that fund. 7.16 of the RICS code states that “unless the lease states otherwise, you should not use any reserve fund as a float for the credit of surpluses and the debit of any deficits”.
      The RMC is allowed 6 months after the financial year end to complete the accounts and it is not unusual for an agent to prepare and sign the accounts on behalf of the directors, who remain responsible for the content.

      Comment


        #18
        Thanks, the reserve funds as stipulated in the lease is,

        image_3412.png

        Comment

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