Requests for a Summary of Accounts and Supporting Invoices
8th September 2022
8th September 2022
In this update we re-visit the requirements for a reply to a formal request made by a leaseholder pursuant to Section 21(1) of the Landlord and Tenant Act 1985 (LTA 1985) and for inspection of documents under Section 22 of the LTA 1985.
Request for a Summary of Relevant Costs - Section 21 LTA 1985
The original purpose of the s.21 request was to help protect lessees from rogue landlords. Section 21(1) LTA 1985 provides for greater transparency by allowing a leaseholder (or a recognised Residents Association on behalf of the leaseholder) to request a summary of information from their landlord about the service charges they have been asked to pay. As a guide, the s.21 summary should show:
Any items which the landlord paid for during the relevant accounting period but for which an invoice was not received within the same period (i.e. a cost which accrued before, or is to accrue, as an on account payment, after the relevant period to which the summary relates).
Any items for which an invoice was received and for which no payment was made during the relevant accounting period (this requires the landlord to outline bills which remain unpaid at the end of the accounting period).
Any items for which an invoice was received and paid during the accounting period.
Whether any of the costs relate to works for which an improvement grant has been or is to be paid; and
Specify the aggregate of the amounts received by the landlord down to the end of the accounting period and still stand to the credit of the leaseholders (for example interim service charges paid by the leaseholders to the landlord by the end of the accounting period in respect of the service charge costs for that year).
The landlord must provide the summary either within one month of the date of the request, or within six months of the financial year end, whichever is later.
An often overlooked part of the summary is that where the service charges are payable by leaseholders of more than four homes, the summary must be certified by a qualified accountant as a fair summary. The guidance for who can certify and what information should be included within such certification of the summary, or generally service charge accounts, is set out in ‘Tech 03/11’ (the formal guidance on accounting and reporting in relation to service charge accounts for residential properties) and which is, we are informed, currently under review and so maybe subject to change soon.
What if you/your client is not the superior landlord?
It may be the case that you/your client is not the superior landlord and that part of the information required to respond to a s.21 request is required from a superior landlord(s). In those circumstances you are required by s.23 of the LTA 1985 to make a written request to the superior landlord for the said information. The superior landlord is required to respond to that request within “a reasonable time” - a term unhelpfully not defined in the Act (s.23(1)(b)).
You/your client is, however, still required to respond to the s.21 request, or that part of it which relates to the costs incurred by or on behalf of the superior landlord, within either the one month of the request or six months of the end of the last complete financial period as set out above, or within such further time, if any, as is reasonable in the circumstances. The guidance here is to keep the requesting party fully informed in respect of the need for, and timing of, the request made to the superior landlord, your chasing of the same if information is not forthcoming and then, when information has arrived from the superior landlord, the proposed date by which you will serve the response, if that date is going to be later than the statutory deadlines set out above.
Failure to provide the information within the deadlines is a criminal offence and can be punishable with a fine. So it is vital that you/your client immediately action any s.21 request as soon as it is received.
Request to Inspect Supporting Accounts - Section 22 LTA 1985
By s.22 LTA 1985, any leaseholder (or the Secretary of any recognised Tenants Association) has a right to inspect all of the relevant documents relating to the service charge (whether they have received a summary in response to a s.21 request as above or not). The right will be to view all receipts and dockets and such other information as would have been required by the accountant to certify the accounts summary. This will include documents relevant to the tenant’s property but also such other documents relating to other properties of the landlord, insofar as they are relevant to the costs demanded of the leaseholder.
The landlord must make facilities available to the tenant for a period of two months, beginning one month after the request is made. The facilities for inspection of the documents must be made available free of charge. That said, whilst the landlord must provide facilities for the inspection of the documents free of charge, s.22(6) LTA1985 enables the landlord to treat as part of its costs of management any costs incurred in connection with making those facilities available.
The lessee has the right to request copies of any documents during the inspection and should expect to pay a “reasonable charge” for those copies.
Dealing with misinterpretations of the rights under s.21 and s.22
We see quite often a misunderstanding of the above provisions, particularly in relation to the right to inspect under s.22, resulting in a demand by a leaseholder/Residents Association for the landlord or its agent, to post or scan and email copies of all receipts and dockets. The request is often said by the leaseholder to be made in compliance with s.22 but is of course wholly incorrect. The obligation is for the landlord/its agent to make available the documents for inspection. Normally, this would require the leaseholder to attend at the offices of the landlord/agent and then, if they wished to take away copies of any document, to pay for that to be copied.
The advice in relation to this point is to consider your approach by reference to the requesting individual and the issues relating to the block. There is nothing to say that you cannot provide a complete set of documents by email and, on occasion, it might be wholly appropriate for you to do just that. However, it may equally be appropriate to insist on personal attendance at your offices, particularly where it will enable you to answer questions that will assist the requesting leaseholder understand relevant matters and thereby avoid further work based upon misunderstanding of information provided. Either approach is correct and neither is wrong, so you will need to decide what suits the specific individual and circumstances of the request/development and act accordingly.
Please feel free to contact a member of the team on 01435 897297 or email@example.com should you have any queries whatsoever.
This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole.
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