Tuesday, September 21st, 2010 in Landlord, Managing Agent, News, Residential, Service Charge
Websters has been around for a long time! H. Thomas Salmon started his general practice firm in 1896. It operated in the City of London under the title of H.T. Salmon & Co until, in 1964, it merged with the West End firm, Derek Webster & Co., later to be re-named Websters in 1998. Since its formation, there have been four generations of Salmons as partners and Thomas’s great grandson, Andrew, is continuing the tradition today as one of the senior partners in the firm.
The firm grew up as a general practice firm offering accounting and taxation services to companies, partnerships, individuals and trusts. In 1960 the firm received its first instructions to audit the maintenance funds of a portfolio of residential properties. With larger commercial (particularly shopping centres) and residential instructions following, the firm recognised that the industry was often poorly served and our clients began to realise the benefits in appointing a specialist firm rather than using their own company’s auditor. As a result the firm’s focus on service charge auditing continued to increase alongside the general practice work.
In 2008 Websters ceased other general practice work altogether in order to concentrate on property management accounting services exclusively. This specialism is therefore supported by the firm’s established expertise in accountancy matters and the firm continues to be fully regulated by the ICAEW as Registered Auditors. Many of the old general practice skills are still essential when dealing with audits of, for example, residential management companies, and related tax advice and compliance.
It can safely be said that Websters is now one of the leaders in this niche market. We see the firm as a close ‘family’ and the partners and staff have always been very proud of Websters and what the firm has achieved. This is demonstrated by the current average length of service being over 15 years!!
This year we are celebrating our golden anniversary with 50 years of property management accounting services under our belts!! Here’s to many more!!
Tuesday, September 21st, 2010 in Landlord, Managing Agent, News, Residential, Service Charge
We have already reported that many residential management companies (RMCs) are not preparing their accounts correctly, as, in addition to valid company matters such as ground rents, they often include service charge payments, that are items made solely on behalf of the tenants. Service charge monies are held in trust by the company and should be excluded from the statutory accounts and reported to tenants separately. This article looks in more depth at the current position.
Following problems with the sections in the 2002 Commonhold and Leasehold Reform Act, dealing with the separate treatment of service charge funds and the provision of regular statements of account, revised proposals were included in the Housing and Regeneration Act 2008. These new sections were originally anticipated to be in place for accounting periods beginning on or after 1 April 2009 but this did not happen. However, in anticipation of the new legislation, ARMA (Association of Residential Managing Agents) had already issued, in 2008, a Lessee Advisory Note (LAN08) in which they advised that the Service Charge monies were held in trust by the management company and should not be accounted for as company assets. In June 2010 ARMA said again that their advice remained unchanged on this matter, whatever the arguments under current law. In a final complication, we understand that ARMA were advised in July 2010 by Grant Shapps, the housing minister, that the Communities and Local Government Department were not going to progress the regulations.
Therefore, although legislation will not require service charge statements to be issued to lessees, the Institute of Chartered Accountants guidance to its members accords with the ARMA guidance, in that the basic accounting principal still applies so that the accounts of service charge companies should only include those transactions where the company is acting as principal and separate accounts should be prepared for lessees of service charge transactions. Hopefully the legal position will be confirmed shortly.
Tuesday, September 21st, 2010 in Landlord, Managing Agent, News, Service Charge
Car parks can be big business but are sometimes the Cinderella of service charge reporting; often being excluded from the same close scrutiny as the shopping centres that they service. A small car park can involve huge expenditure and generate more income than the rents from the centre itself.
Shopping centre car parks can be split into two categories; those that charge for parking and those that don’t but both should be treated to the same level of scrutiny as the main centre. It is therefore vital to ensure that the costs being charged to the car park are relevant and fair. However, things can become far more complicated when parking is paid for by the visitors to the centre, for not only are there the costs to be considered but large sums of cash in machines and in remote ticket offices can obviously be particularly troublesome. There are also administrative matters to be considered, where, for example, a managing agent is involved, it can sometimes be difficult to reconcile their records and with those from the other agencies responsible for the collecting and banking car park monies.
Therefore, full and regular system reviews, backed up by an annual audit should be carried out to isolate and rectify potential weaknesses.
Tuesday, September 21st, 2010 in Landlord, Managing Agent, News, Residential, Service Charge
With the increase in the VAT rate from 17.5% to 20% from 4 January 2011, everyone will be keen to ensure that rent and service charge demands are raised at the appropriate time so that the 17.5% rate applies for as long as possible.
The VAT rate to be applied to rent and service charge demands is determined by the tax point for the supply.
It would normally be the case that rent or service charge demands for the quarter commencing 25 December would be issued in mid-December, and should therefore bear VAT at 17.5%. If, however, due to the holiday period, the demands are not issued until after 3 January 2011, the VAT rate will depend upon whether the tenant had paid the amount due before 4 January 2011 (in which case VAT would be at 17.5%) or after (in which case it would be 20%). This is because the VAT date is the earlier of the date of the invoice and the date of payment. Therefore, to avoid the confusion of some tenants being chargeable to VAT at one rate and some at another, managing agents should ensure that March quarter invoices are issued before 4th January.
For those tenants who are able to reclaim any VAT paid on rent or service charges in full as input tax, this will only be a cash flow concern. However, tenants who are not registered for VAT, or who are partially exempt, should ensure that they make payment of their rent and service charge liabilities in respect of the quarter ending 24 March 2011 by 3 January, if they have not received a demand by that date.
So far as managing agents are concerned, who are managing residential properties, or commercial properties, where the “option to tax” has not been exercised, they should ensure that they settle liabilities before 4 January 2011 for service contracts commencing before that date for which they have not been invoiced.
By way of example; if a contractor normally bills a contracted sum of £10,000 monthly in arrears, when an invoice is raised for January 2011 (in early February), VAT of £2,000 would be have to be added by the contractor, making a total charge of £12,000. However, if the payment has been made by the managing agent prior to 4 January 2011, the total due would be only £11,750 – a saving of slightly more than 2%.
Wednesday, August 25th, 2010 in Landlord, Managing Agent, News, Residential, Service Charge
Swat Uk has reported that many residential management companies (RMCs) are not preparing their accounts correctly, as, in addition to valid company matters such as ground rent, they often include service charge payments, that are items made solely on behalf of the tenants. Service charge monies are held in trust by the company and should be excluded from the statutory accounts. The only way that service charge expenditure can be reported is if it is requested by the tenants or is required by the lease. Despite the advice from the Association of Residential Managing Agents (ARMA) to its members, there is currently no legislation to force the publication of a property’s service charge affairs.
Read the full article here.
Wednesday, June 23rd, 2010 in Commercial, Landlord, Managing Agent, News, Residential, Service Charge
David Goddard notes that a further imposition has been put on Landlords and Tenants with the Governments CRC Efficiency Scheme, as this article by by Reynolds Porter Chaimberlain explains.
The CRC Energy Efficiency scheme is a mandatory scheme affecting the whole of the UK, which requires participants to annually buy and surrender allowances priced in pounds per tonne to cover the amount of CO2 a participant emits each year. It is part of the 2008 Climate Change Act, which was introduced to try to meet the Government’s target of reducing greenhouse gases by 80% by 2050. The scheme’s main purpose is to drive down energy consumption.
Read the full article here
Friday, May 28th, 2010 in Managing Agent, News, Service Charge
Michael Wear of Bond Pearce writes that the RICS intends to tighten up on the proceedures relating to service charges, when there is a change of agent. Often the final reconciliation of the service charge accounts at the date of hand over is not fully completed because the property is no longer the responsibility of the transferring agent and there may be fears about receiving payment for this work.
Ian Stubbs
Read the full article here
Tuesday, April 13th, 2010 in Landlord, Managing Agent, News, Residential
Another legal decision has been published in an article by Shoosmiths about the ‘fair’ apportionment of service charges between tenants in a new build development of residential flats.
The article concludes:
It is important that landlords and managing agents consult before setting service charge levels because in this case, the service charges amounted to more than 100% of the landlords costs. This encouraged the tenants to seek a legal decision to vary their leases in order to adjust the apportionment between the leaseholders to a more “fair” share.
This decision should not be seen as a get out of jail card for landlords in getting the service charge percentages wrong, provided they all add up to 100%. Rather, it highlights the difficulties in calculating fair service charge proportions especially when dealing with premises of different sizes and in larger estates where different parts get the benefit of different services.
It is in no one’s interests that tenants should feel aggrieved by what they perceive as an unfair service charge, and in new developments in particular it should be possible to avoid this. An essential element of doing so is a robust analysis of the service charge as early as possible in the scheme.
Read the full article here.
Tags: Landlord
Wednesday, April 7th, 2010 in Landlord, News, Residential
An article by John Levy of Lewis Silkin solicitors
The Landlord and Tenant Act 1985 (as amended) imposes stringent procedural requirements on landlords who wish to carry out repairs to residential premises and recover the costs from the tenants. The Leasehold Valuation Tribunal (“LVT”) has power to dispense with those requirements if it is reasonable to do so.
In the case of Daejan Investments v. Benson and others, Daejan sought to recover approximately £270,000 from five leaseholders. The leaseholders complained that Daejan had not complied with a number of provisions of the Act. The LVT upheld that complaint.
The Lands Tribunal of the Upper Chamber examined each of the breaches and found, with one exception, that the breaches had not prejudiced the tenants to any significant extent. However, it agreed that the curtailment of the period within which the tenants could examine the estimates was capable of being a serious breach. The final words of the judgment are interesting: “we are unable to say that LVT has erred in principle, or that its decision was clearly wrong. The financial consequence may be thought disproportionately damaging to the landlord, and disproportionately advantageous to the lessees, but, as we have said, that is the effect of the legislation.”
It could be inferred that the Upper Chamber felt that the decision was wrong, but not ‘clearly wrong’, and on that technicality Daejan was only able to recover £250 from the five leaseholders, rather than £270,000.
So, a rather expensive mistake. And a salutary lesson that, if there is a clear set of rules, stick to ‘em!
Field Fisher Waterhouse also wrote about the same case
Tags: Leasehold Valuation Tribunal
Thursday, March 25th, 2010 in Landlord, Managing Agent, News, Residential
Steven Wood of Coffin Mew solicitors has written an article about a recent court case regarding Landlord, Managing Agent and Tenant rights surrounding the Deposit Protection Services (DPS) and access to monies deposited with it.
He concludes,
Most landlords are now aware of the legal requirement to protect deposits taken in connection with shorthold tenancies. To date there has been little reported litigation under the provisions of Chapter 4 of the 2004 Act and this case is a useful benchmark of the courts’ attitude and interpretation of the Act. Crucially, it serves as a reminder that until such time as a deposit is properly protected the landlord is precluded from utilising the accelerated possession procedure set out in s.21 of the Housing Act 1988 and which is one of the main reasons why landlords choose to use shorthold tenancies. Perhaps less obvious though is the hidden cost for the landlord if it gets it wrong – the deposit in this case was relatively high at £2,700 but, even so, the cost of the legal proceedings will have far outstripped the amount of money at stake. The moral of this case is simple: ignore the deposit protection provisions at your peril.
Read the full article.
Tags: Leasehold estate, Property Law and Real Estate
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