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Conference What’s happening in the leasehold sector Guidance
ARMAPRoMotesBest PRActicefoRseRvice chARgeAccounts
Newbest practice guidance on accounting forservice charges waspublished in November, aimed atmanaging agents, Residents’Management Companies(RMCs), Rightto Manage companies(RTMCos) and accountants. The guidance has been jointlyproducedby theAssociation of Residential Managing Agents (ARMA), theInstitute of Chartered Accountants for England and Wales(ICAEW),the Association of Chartered Accountants (ACCA) andthe Royal Institutionof Chartered Surveyors (RICS) in response to theGovernment’s decision in summer 2010 not to regulate accounting for flat owners’service chargemonies. Thenew documentknownas Tech 11/03, aims to clearupthe inconsistenciesinapproach to service charge accounts, increase transparencyinservice charge accounting procedures andfill the void created by the lack of accounting Regulations, giving flat owners greater confidence in the way theirmoney is handled. ARMAhas also issuedguidance
for flat owners based on Tech 11/03 in the form of a newLessee Advisory Note (see pages 46-47 of this issue). This will help them
enerGy
ARMAhas reached amajor agreementwiththe bigsix energy companies to protect leaseholders frompower disconnections to thecommunal areas of their property. The groundbreaking initiative
ARMAsecuResMAjoRdisconnectionsPRotocol Part of the problemis
has been driven by ARMA in response to several recent concerns raised bymembersafter thepower to communal areasof blocks of flats theymanage was cut off. No power in communal
areasmeans no fire alarms, no Flat Living Winter 2011
emergencylighting, no lifts, no watersuppliesand no sewage pumping. On one occasion, a localauthority hadtostepinand payalandlord’selectricity bill to prevent flat owners beingmade homeless because of the threat of disconnection. Thenew protocolhas been
agreed with the Energy Retail Association(ERA)which represents the big six energy companies. “Thisisareallysignificant agreement” commented
ARMA’s chairmanPeter Dening. “Communal areas are thelifeblood to ablock of flats providinglifts,lighting, water and fire alarms. Although rare,power disconnections to these areas can have as serious an impact as they would for individual flats andhouses. This newprotocol should make energy suppliers think about the adverse affects on leaseholders before resorting to disconnections andmake it absolutely a last resort.”
that thecommunalareas of blocks of flats aredefinedby OFGEM, theregulator of energy companies, as commercial premisesand arenot protected by the samesafety net that protectsthe residentsof individual flatswhoare defined as domestic customers. Energy companiescan disconnect the power to the communal areas withouthavingtoconsider theeffect it mighthaveon residents.
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Giving flat owners more confidence in theway theirmoney is handled
enerGy
fPRA cAMPAigns foRchAnge toeneRgy suPPlies
TheFederationofPrivate Residents Associations (FPRA) is campaigning forchanges to the way inwhich utility companiescategoriseblocksof flats forenergysupply. TheFPRA argues that all supplies of gas and electricity to common parts of blocks of flats should bemade as residential supplies and not commercial as at present (see story below). The FPRA estimates that for
understandwhatisbest practice forlandlordsormanaging agentswhen it comes to how their service chargemoney is spent. The LANalong with the full36-pageTechdocumentcan be downloaded fromthe ARMA website
atwww.arma.org.uk Commenting on the
publication of the newbest practice guidance,ARMA’s chairmanPeter Dening said “Whenyou thinkthatlandlords andmanagingagentsare collectively handling over £1bn
worthofservice chargemonies every year yet there are no statutoryrequirementsfor the accountingmethods, this could be someof themost significant guidance leaseholders have had for quite sometime.We wanted to ensure that it was as accessible as possiblewhich is whywedecided to condense the most importantelementsofthe detailed guidance into afourpage Lessee Advisory Notewhich is free to download along with the full 36-page Tech document.”
about60% of blocks of flats in EnglandandWalesthe effective landlord for supplies to common partsisaresidentmanagement company (RMC). In recent yearsutility companieshave run credit checks onRMCs and somehave refused to supply themaltogether.Otherswill only supply if large deposits are made;thisisnot practicalfor mostRMCs as they do not hold anyreserves(or theleasemaynot allowit). Others demand direct debit payments;atrustee or its managing agent cannot do this as it is against the RICS Service Chargecodeofpracticeapproved by Government to set up adirect debit on a client or trust account. The FPRA is lobbying
government via the Department of Energy and Climate Change on this issue.
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