Management Company – where are the leaseholders’ funds?

Management Company – where are the leaseholders’ funds?

13:38 PM, 2nd August 2021, About 2 months ago 7

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The block of apartments where I have a flat is managed by a ‘right to manage’ (RTM) company. This company retains a ‘management company’ (MC) whose function appears to be to manage the building/common areas/gardens etc. There are 200+ Apartments in the building, each paying £2,000 per year to the MC.

The annual accounts for the RTM show ‘NIL’ and have done since they took over from the previous RTM, two years ago. The MC, however, has no current accounts filed with Companies House. Their last accounts were dated October 2019 and showed a balance of £1,069,294 attributable to “Shareholders Funds”.

There is only one shareholder – an individual. There appears to be no Escrow Account or other ‘sinking fund’ account. I’m concerned that this individual might take the £1million+ and disappear.

Is this a legitimate concern, or is this how the RTM system works?

Many thanks

Dave



Comments

by Seething Landlord

9:50 AM, 3rd August 2021, About 2 months ago

I am not an accountant and what I say is therefore not authoritative.
It is my understanding that the statutory accounts to which you are probably referring only show the net position. The detailed management accounts should show where the money is and how it is accounted for. Some accountants seem to class the maintenance reserve as shareholders' funds which then appear in the statutory accounts but others regard it as an outstanding liability payable within 12 months and therefore shown in the detailed accounts as a creditor, reducing the net assets to nil, apart from the nominal value of any shares.

by David Price

10:03 AM, 3rd August 2021, About 2 months ago

You say there is only one shareholder but I suspect you meant to say there is only one director for all the leaseholders have the right to be shareholders (without subscription as a Right To Manage company is a company limited by guarantee). All service charge funds are the property of the leaseholders and should be held in such a manner that they are protected from fraudulent extraction.
I run a RTM company where all the funds are held in the name of the RTM company, why do you not do the same? The whole point of a RTM company is that the leaseholders are in control; seize that control.

by BernieWales

11:54 AM, 3rd August 2021, About 2 months ago

Your list of facts appears to contain significant errors - or - something is clearly amiss.

The Right to Manage Company would have had to have 50% of the qualifying leaseholders (or more) to be members of the RTMCo prior to the RTM claim being submitted. Had that not been the case, then the landlord/freeholder would surely have objected and rejected the claim.

Unlike Resident Management Companies and/or Resident Freehold Companies ... all the funds handled by the RTMCo relate to service charges. Therefore, the accounts should not be £zero and/or dormant. In any event, there should be a set of Service Charge Accounts produced at the end of each service charge year ... and those should be issued to all leaseholders each year, often with a balancing Excess Service Charge or Credit.

Probably not wise to name names on here, so please direct message me and I will investigate the nitty gritty for you.

by David Judd

8:54 AM, 4th August 2021, About 2 months ago

Further digging around required. Raise your concerns with the RTM company, surely there are resident members, and ideally a chairman. You need to also answer how the accounts are classed as above some items could be listed under a different category. If you don't understand - ask, always ask until you do understand. If its not clear to you, it may not be clear to others. Always ask

by David McCormick

18:42 PM, 4th August 2021, About 2 months ago

Reply to the comment left by David Judd at 04/08/2021 - 08:54
Can you give me a link to your contact details, please?

by BernieWales

10:28 AM, 5th August 2021, About 2 months ago

Reply to the comment left by David McCormick at 04/08/2021 - 18:42
BernieWales.co.uk

by BernieWales

8:23 AM, 3rd September 2021, About 4 weeks ago

For those of you who live in flats or invest in flats, which clearly is those following this string, this will be of interest.

The management of a block of flats is often controlled by leaseholders, via a Residents Management Company, a Residents Freehold Company, or a Right to Manage Company. This involves both company law and Landlord & Tenant law ... both of which are complex and ever-changing. Whether you're on the controlling side as a Resident Director - or the receiving side as a leaseholder/shareholder - you probably don't know all you should/could know in order to fully understand how the management of the building should be run.

To help leaseholders, shareholders and Resident Directors update their knowledge and understanding, ARMA ... the Association of Residential Managing Agents ... is running a training event at the end of September > https://arma.org.uk/training-events/training-courses/tc101-resident-directors-training Split over three days, there are three 2-hour sessions, which cover the following topics and more:

> The Lease - demystified
> The Company - what type is yours?
> Three Hats - directors' various roles
> Managing Agents - professional advice, needing support
> Memorandum & Articles of Association - demystified too
> The Law - the important bits to know
> G D P R - don't get caught out
> Meetings - when, who, what and why
> The Neighbour From Hell - avoid the battle but win the war
> First-tier Tribunal or Court - a layman's guide to the law in practice
> Accounts - what money goes where and why
> Section 20 - notices and practicalities
> Right to Buy - what to do ... fast
> Right to Enfranchise - when and how to succeed
> Directors and Officers Insurance - "CYA"
... together with interactive questions and answers throughout. And all for a stupidly low price of £30 per person.

I urge anyone who owns a flat, whether as an investment or as their home, to attend this live webinar course. You are guaranteed to learn something useful and I have no doubt that knowledge will save you more than the course fee.

And for those who cannot attend at the end of September, there's my own online course ... at a higher price ... here > https://bernie-wales-school.thinkific.com

Whichever route you choose - enjoy learning leasehold 🙂


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