Question 1

Struggle with Accounts

Accepted Answer

Q: Following our query last year regarding our accounts, we have now updated the Limited Company accounts to ensure that they are in the correct format, and made various changes to the contents, but not yet the format, of the Residents' Association accounts. Since then, I have been informally advised by a Managing Agent, that the Residents' Association accounts should be being independently certificated by a Chartered Accountant, to comply with Section 21 of the Landlord and Tenant Act. Having googled various websites, including your own, I am struggling to find a reference to this, and wondered if you could confirm if this is the case? FPRA replies: A section 21 report is a special type of Accountant’s report that is attached to annual service charge accounts. The report has to state that,

The service charge accounts comply with the requirements of section 21 of LTA 1985
The costs in the accounts are sufficiently supported by accounts, receipts and other documents produced to the accountant.

To comply fully with section 21 the accounts must follow a pre-defined format and this can be quite clumsy to follow and difficult for the lessee to understand. Furthermore, the reporting Accountant must be registered auditor as defined under the Companies Act. However, the important point to note about a section 21 report is that it is only required if a lessee formally requests such a report. The request must be made in writing and must be delivered to the Landlord or his agent. I have reviewed the lease provided for your property and there is nothing in it that prescribes the format of the service charge accounts or the nature of the report to be attached to the service charge accounts. As the lease is silent on the nature of the service charge accounts it is advisable to follow best practice on service charge accounting and this is laid down in TECH03/11. I have attached a copy of TECH03/11 for your information. My advice would be to go back to the Managing Agent and determine if he has received a written request for a Section 21 report (which seems unlikely) or if he has a particular reason for wanting a section 21 report prepared as an Accountant’s report prepared in accordance with TECH03/11 is a better reporting option for the lessee.

Question 2

Struggle with Accounts

Accepted Answer

Q: Following our query last year regarding our accounts, we have now updated the Limited Company accounts to ensure that they are in the correct format, and made various changes to the contents, but not yet the format, of the Residents' Association accounts. Since then, I have been informally advised by a Managing Agent, that the Residents' Association accounts should be being independently certificated by a Chartered Accountant, to comply with Section 21 of the Landlord and Tenant Act. Having googled various websites, including your own, I am struggling to find a reference to this, and wondered if you could confirm if this is the case? FPRA replies: A section 21 report is a special type of Accountant’s report that is attached to annual service charge accounts. The report has to state that,

The service charge accounts comply with the requirements of section 21 of LTA 1985
The costs in the accounts are sufficiently supported by accounts, receipts and other documents produced to the accountant.

To comply fully with section 21 the accounts must follow a pre-defined format and this can be quite clumsy to follow and difficult for the lessee to understand. Furthermore, the reporting Accountant must be registered auditor as defined under the Companies Act. However, the important point to note about a section 21 report is that it is only required if a lessee formally requests such a report. The request must be made in writing and must be delivered to the Landlord or his agent. I have reviewed the lease provided for your property and there is nothing in it that prescribes the format of the service charge accounts or the nature of the report to be attached to the service charge accounts. As the lease is silent on the nature of the service charge accounts it is advisable to follow best practice on service charge accounting and this is laid down in TECH03/11. I have attached a copy of TECH03/11 for your information. My advice would be to go back to the Managing Agent and determine if he has received a written request for a Section 21 report (which seems unlikely) or if he has a particular reason for wanting a section 21 report prepared as an Accountant’s report prepared in accordance with TECH03/11 is a better reporting option for the lessee.

Struggle with Accounts

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