Personal or group bank account for property management funds

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    Personal or group bank account for property management funds

    I am a director of a Residential Management Company (RMC) set up to own the freehold of a property consisting of 5 leasehold flats, the other owners also being directors of the RMC with equal shares in the freehold. Currently, the management of the funds necessary to administer, maintain and insure the property are deposited equally by each member of the company into a dedicated separate personal bank account set up by the secretary of the company. The role of secretary is rotated on a yearly basis between the 5 directors on a round robin basis and at the end of the year, the funds are transferred from the old secretary's personal account to the new secretary's personal account.

    This arrangement has so far worked reasonably well, however there are complications such as transferring DDs between accounts and concerns regarding the safety/accessibility of funds particularly when large sums are needed for expensive repairs. I would like to simplify this arrangement by starting a single group bank account which would be accessible to all the directors and therefore could be used on a permanent on-going basis removing the need to transfer funds between personal accounts each year. A possible candidate for this is Santander's Treasurer's Current Account:-
    https://www.santander.co.uk/business...urrent-account

    However, the other directors are not keen to change the status-quo and have raised concerns that this group bank account might alter the company's current status as a dormant company.

    I have read many threads in this forum about whether or not an RMC company can be a dormant company and there are many conflicting views, but my question here is whether there are more compelling reasons for us to change to using a group bank account as opposed to continuing with the use of personal bank accounts, such as:-
    1. Does the group account have more validity or legality in terms of holding the maintenance fund in trust?
    2. The leases require the RMC to maintain and insure the property and maintain an "Maintenance Fund". Does either bank account method satisfy this requirement better than the other?
    3. The policyholder for the buildings insurance on the property is in the name of the RMC. Does this have any bearing on the way the maintenance fund account should be organised?
    4. Is using a group account more likely to have an adverse affect on the company's dormant status?

    #2
    The monies should be held in trust and you should open a separate client bank account. It protects the monies in case one of the directors is in debt and prevents the bank from offsetting the funds against another account in the name of the same director which is overdrawn. The major banks are familiar with the type of account if you explain it to them.

    1 It is a legal requirement
    2 A personal account does not not satisfy the terms of the lease or the legislation. Currently, there appears to be a loan from the RMC to a director, which is not permitted.
    3 No
    4 A client account in the name of the RMC would assist it to claim dormancy because it allows the RMC to ringfence service charge contributions and expenditure. At present, the RMC does not appear to be dormant because there are monies owing by a director to the RMC.

    Comment


      #3
      Exactly as Eagle2 says.

      Comment


        #4
        The RMC is a dormant company if it does not demand annual ground rent payment from leaseholders. ( because the service charge money collected from leaseholders for maintenance of building is not income due to RMC.

        The RMC should open a separate bank account named "RMC Service charges" to hold service charge money collected from leaseholders.

        Comment


          #5
          Thanks all for your quick responses and clear answers, though I do have a query as to what constitutes "held in trust". Is this associated with a special type of bank account or is a legal document required or can just having a client account suffice, such as the Santanders Treasurer's Current Account which stipulates the following eligibility conditions:-
          - not-for-profit organisation operating in the UK
          - Your organisation has an annual turnover of up to £250,000
          - All directors, owners (shareholders) or partners are aged 18 or over and UK resident
          - You intend to use this account for business purposes only

          Comment


            #6
            We found it impossible to get a new bank account for our management co. So weuse other accounts that directors had already. The alternative was chaos!
            i think there was no profitfor the banks.

            Comment


              #7
              Originally posted by Codger View Post
              We found it impossible to get a new bank account for our management co. So weuse other accounts that directors had already. The alternative was chaos!
              i think there was no profitfor the banks.
              The major banks operate client accounts but I agree that they expect you to have your own personal account with them.

              Comment


                #8
                Originally posted by kennyj52 View Post
                Thanks all for your quick responses and clear answers, though I do have a query as to what constitutes "held in trust". Is this associated with a special type of bank account or is a legal document required or can just having a client account suffice, such as the Santanders Treasurer's Current Account which stipulates the following eligibility conditions:-
                - not-for-profit organisation operating in the UK
                - Your organisation has an annual turnover of up to £250,000
                - All directors, owners (shareholders) or partners are aged 18 or over and UK resident
                - You intend to use this account for business purposes only
                A client bank account is sufficient, it makes it clear to the bank that the monies are held on behalf of others. The bank account which you describe may be alright as long as the bank agrees to include client account in the title.

                Comment


                  #9
                  One other question which has cropped up.

                  In the scenario where there is no bank account involved and no service charges are levied by the company and the Secretary pays for all the maintenance expenses etc. out of their own pocket and are subsequently reimbursed equally directly by all the other shareholders. I am aware of one very small company (3 flats) that does operate this way reasonably happily.

                  I recognise in our case that this method of operation does not satisfy the lease covenants, but does it satisfy the company dormant status from a Companies House viewpoint?

                  Comment


                    #10
                    If the company does not receive ground rent, it has no trading transactions ( except payment of annual company listing fee ) to report . Companies House accepts this situation as a "dormant company".

                    Regarding your small block operating without bank account, it may cause problems in future sales. Mortgage lenders require to see last 3 years service charge accounts and this will be a problem for a future buyer requiring a mortgage.

                    Comment


                      #11
                      kennyj52,

                      If the RMC never holds any funds, it follows that it has no need to open a client bank account. If the Company Secretary pays expenditure, it could be argued that he is lending monies to the RMC and then recovering the monies on behalf of the RMC, so it could affect the dormant status of the RMC.

                      It is best not to depart from the terms of the lease because that will cause problems if a leaseholder wishes to challenge the charges or the amicable agreement ends and arrears need to be collected.

                      Comment


                        #12
                        I notice the Santander website shows the Treasury's current account is only available to existing customers.

                        You can try HSBC which offers similar current account to clubs and non-profit companies for holding service charge money. .

                        Comment

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