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Are you risking non-payment of service charge through wrongly certified accounts?

It is always good practise to ensure the service charge accounts are prepared by a professional, however have you considered that the lease might have a specific clause that stipulates that someone of certain professional status is needed to certify the accounts?

Brady Solicitors’ Annette Frost explains how failure to have accounts certified in accordance with terms of the lease could lead to service charge arrears and gives an example of when this happened in a past case.

The lease lays it all out

Have you checked the lease to see if the service charge accounts have to be certified by an individual with specific qualifications, such as a chartered accountant or a chartered surveyor?

It seems a small detail to overlook, but failing to observe who needs to certify the accounts could render the accounts and any service charge demands void. Leaseholders can lawfully withhold payment which could lead to reduced income for managing the block.

Case shows importance of correctly certified accounts

In the case Akorita v Marina Heights (St. Leonards) Limited [2011] UKUT 255 (LC) the managing agent had the accounts prepared and sent to the leaseholders. The lease required that for the final service charge to be paid, a certificate from a chartered surveyor was required.

In this instance the accounts had not been certified by a chartered surveyor but by an accountant.   The consequences of incorrectly certified accounts meant the service charge was void. The judge in the case concluded that nothing was payable as the requirement of the lease had not been fulfilled.

The LVT concluded that the accounts needed to certified by a chartered surveyor in order to comply with the terms of the lease and therefore for leaseholders to pay service charge.

A clear reminder: do check the lease

The message to freeholders, managing agents & RMCs is to check the lease when getting the service charge accounts in order. The lease will stipulate who needs to prepare and certify the accounts which crucially ensures the leaseholder is liable to pay.

As in the case above, failure to do so could lead to mounting unpaid service charge which could impact on management of the block.

Expert lease advice

A lease review conducted by experienced solicitors will be able to clear up any doubt if the accounts need to be certified. Your solicitor will be able to advise who needs to certify the accounts and clear up any other questions on service charge.

If you have any queries about leases or need help with recovering service charge arrears, our dedicated legal team are on hand. Please get in touch on 0115 985 3450 or drop us an email.

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With hundreds of years’ worth of combined experience, our experts have dealt with nearly every leasehold property matter you can imagine. If you’re currently in need of legal support or advice, please get in touch.

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