Inspecting receipts on a Section 20B notice

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    Inspecting receipts on a Section 20B notice

    Hi all,

    Our managing agent sent a summary of ‘relevant costs’ made of best estimates of incurred costs based on work done, invoices received and services provided.

    They included a section 20B notice, but have said they expect to finalise accounts within 18 months of the first incurred payment. (We are at 13 months).

    I requested to see the invoices and maintenance services as I believe one or more of the charges should be covered under our defect warranty, not the service charge. However the MA said that Section 22 and 21 only apply to finalised accounts and that I only have the right to see receipts in 5 months when they expect the accounts to be finalised.

    I’ve read over (what I hope is) the latest version of section 21 and see no mention of the relevant costs having to be finalised or excluding section 20B notices. I sent a request to the MA to clarify this but they have said they will not be engaging in any further discussion about service charges.

    Could anybody confirm whether I have a right to see receipts used for a section 20B notice or if I have to wait for the certified accounts. (And please may you reference where to find this in the legislation)?

    Thanks to all who’ve read this far!

    #2
    A "Section 21" request under the Landlord & Tenant Act 1985 requires the freeholder to produce a summary of the service charge accounts, containing specific information, within 1 month of the end of the request or 6 months of the end of the accounting period - whichever is the later.
    "Section 22" only comes into play after a section 21 request has been received by leaseholders.

    So, although the legislation doesn't specify that it is referring to finalised accounts, that is effectively what it means.
    It sounds like your managing agent still has 5 months to produce accounts within 6 months of the end of the accounting period, and they would only have a legal obligation to provide access to invoices within a month of this being demanded after you have received a 'Section 21 account summary'.



    There is no good justification for a managing agent to refuse allowing you to see any invoices that they have for service charges for your property though, even if accounts haven't been finalised (unless, perhaps, they are disputing an invoice with the supplier/contractor -although even then they could let you see it but make it clear that the amount is under dispute).
    Best practice for managing agents says that anything to do with service charges should be open and transparent, and they should not expect to only provide sight of invoices if legally obligated too.

    Comment


      #3
      Thank you, good to have a proper answer. Please may you point me in the direction of where to find the ‘6 month of end of accounting period’ deadline.

      I’ve been referring to section 22:


      ‘22Request to inspect supporting accounts &c.

      (1)This section applies where a tenant, or the secretary of a recognised tenants’ association, has obtained such a summary as is referred to in section 21(1) (summary of relevant costs), whether in pursuance of that section or otherwise.

      (2)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,’


      The management agent has sent me a summary of what they’ve called ‘Relevant Costs’.

      If anything is not that the MA simply shot themselves in the foot by sending out an early section 20B notice which is typically issued on the 18th month?

      Maybe I am looking at an old version of the legislation or missing an amendment?

      Comment


        #4
        Okay I’ve found the reference in the 1996 version Section 21 (4) where if a leaseholder requests the summary of relevant costs the must provide it up to 6 months after the year end.

        I guess my point is, while I did not request it, the summary was provided so why must I wait a further 5 months. I move on to section 22 which allows one month after the summary had been provided and nothing more.

        I have, however, spotted reference to the accounts having to be certified in Section 21 (6) which would require the wait. However I note this is only for buildings with more than four dwellings. (We are a building of four dwellings).

        Please correct me if I’m referencing terms that aren’t in force, I’m finding the legislation structure hard to navigate.

        Comment


          #5
          Originally posted by NicolaNaa View Post
          Please correct me if I’m referencing terms that aren’t in force, I’m finding the legislation structure hard to navigate.
          Hi,

          From recent posts you are not alone, have a read through the following, I haven't as yet, it may be helpful;

          https://www.servicechargedisputeguid...e-information/

          Comment


            #6
            Originally posted by fos333 View Post

            Hi,

            From recent posts you are not alone, have a read through the following, I haven't as yet, it may be helpful;

            https://www.servicechargedisputeguid...e-information/
            Thanks! I had come across the link before, but the first paragraph made me immediately close it.

            I’ve now read it and it makes sense. Looks like the 1996 version is the best bet for in force terms.

            Comment


              #7
              Section 7.12 in the RICS Residential \Management Code . 3rd Ed. may apply to your situation .

              https://www.rics.org/globalassets/ri...ition-rics.pdf

              Comment


                #8
                Thank you all, very helpful

                So my understanding is:
                - The Section 20B notice is by definition a written summary of relevant costs, but it is not the written summary of relevant of costs (which contains specific additional items and must be certified for properties with more than four dwellings)

                - Tenants have to right to inspect receipts when they receive the summary of incurred costs or the Service Charge accounts

                - The Section 20B notice is an interim substitute for the Service Charge Account, but not for the summary of incurred costs.

                - While it is an interim substitute for the Service Charge Account, its purpose is simply to notify tenants of what is incurred and to ensure costs are still payable if the demand is late; it does not allow tenants the right to see receipts as the Service Charge account would.

                - So if, following my request, I was provided with the Summary of incurred costs, but it had left off, say, the amount already paid to the Landlord. I would not have the right to see receipts until the corrected version was sent to me (but this would need to be sent within 6 months from the end of the financial year).

                Comment


                  #9
                  The RICS code is a good point of reference and the following paragraph is also relevant
                  13.1 where reasonable information and/or copies of documents are requested, the agent should provide them within reasonable timescales
                  It also confirms what Macromia has stated in #2
                  2.2 one of the core principles is that the agent should be transparent
                  4.1 the agent should manage on an open and transparent basis

                  Comment


                    #10
                    Originally posted by NicolaNaa View Post
                    I guess my point is, while I did not request it, the summary was provided so why must I wait a further 5 months. I move on to section 22 which allows one month after the summary had been provided and nothing more.
                    L&TA 1985, section 22(1) specifically says that section 22 applies when a tenant has "..obtained such a summary as is referred to in section 21(1)..."

                    This means that the freeholder/managing agent is technically only obliged to provide sight of receipts within a month if the "tenant" (leaseholder) has received the type of summary that is described by regulation.

                    Unfortunately, the type of summary described by current regulations is of very little use to leaseholders, as described in the article below:
                    http://www.flat-living.co.uk/advice/...runtled-lessee

                    It is unlikely that the summary that you have been provided with is a summary that is in accordance with section 21, which would mean that section 22 does not apply.
                    It might be different if the managing agents have said that the summary they have sent meets the requirements of section 21 (I currently receive an annual summary that does not meet the requirements, but which is stated to be in accordance with the requirements of section 21 - so I'd like to see what argument my freeholder/managing agents would try if they wanted to refuse a request to see invoices!).

                    Your best bet is likely to point out that they have no reasonable justification not to let you at least see any invoices that have been paid, or that haven't been paid but aren't going to be challenged on the grounds that this may help to reduce any disagreement once the finalised accounts are ready.

                    Comment


                      #11
                      Thank you all! Yes that’s correct, unfortunately the summary I received doesn’t adhere to Section 21.

                      I will remind the MA of the principle of transparency, hopefully that will convince them to at least reveal to me what the service was.

                      Comment

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