Industry comment, updates and news from the Websters team.

Accounting for Service Charges

Tuesday, November 23rd, 2010 in Landlord, Managing Agent, News, Residential, Service Charge

A technical release has been developed by the Institute of Chartered Accountants to provide guidance on accounting for residential variable service charges and covers the treatment of service charges in the accounts of the ‘landlord’ or other entity that levies service charges for the maintenance of the common parts of the property. The guidance also covers independent accountants’ reports on service charge accounts, based on agreed-upon procedures, where the terms of the relevant lease or leases do not require an audit to be carried out. The guidance focuses on accounting for service charges by residents’ management companies and similar, ie, companies where the members are also leaseholders paying variable service charges, because experience shows there to be widespread confusion about the interaction of the statutory accounting provisions of the Companies Act 2006, the information requirements of the property lease or leases, and the statutory trust provisions of the Landlord and Tenant Act 1987. Commercial landlords are equally subject to the provisions of the Landlord and Tenant Acts (LTAs) 1985 and 1987, but the issues are more clear-cut because there is generally no overlap between landlord/members of the landlord company, and leaseholders/tenants paying variable service charges. The guidance does not, therefore, deal with the statutory accounts of such entities, although the material on the trust status of service charge monies, and on the preparation of service charge accounts themselves, does apply. Obtain a copy of the Technical Release here

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