I prepare the accounts for a property management company, where homeowners on a private estate are all shareholders, and pay a service charge to cover estate maintenance costs. One of the shareholders is in dispute with the directors and has demanded access to inspect accounting records, receipts etc.( - the accounts are still in draft form and not yet finalised or signed off by directors.) My first reaction was, no, under company law there is no such right, though there are formal steps which can be taken to request an audit.
However, under the Landlord and Tenant Act it seems that a tenant can indeed request and inspect the information.
Is there a hierarchy as to which legislation takes precedence over the other?
My view is that my engagement is with the directors so I should do nothing without their specific instruction. The shareholder approached me directly, via a not too pleasant phone call yesterday.
Has anyone else had any similar experience?
Replies (4)
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Company and Service charge accounts
Are you confusing the company's accounting records and the service charge account records?
The service charge account operates under a statutory trust and is separate from the company's accounts. The tenants have the right to see the records for the service account. The shareholders do not have the right to see the company records.
I expect your engagement would be with the company. The company has the obligation to disclose the information, so I would tell the directors that the request has been made then await instructions, you do not want to be drawn into the dispute.
Agree
That's my take on it too.
Although the tenant isn't likely to be particularly interested in the company stuff anyway. It'll be the management transactions he'll be after.
S22 L&T 1985
Yep, S22 L&T 1985. The management company is undertaking the role of the landlord and is obliged to provide the accounting records within one month of request. The landlord can can make a reasonable charge for this. They can however only request the accounting records after the service charge accounts (or summary of service charge expenditure under S20 L&T 1985) have been published. This should be within 6 months of the year end, or the lessee can withhold service charges.
further to the above
If you act for RMCs, RTMCs, service charge landlords, freehold companies etc, give sections 20-22 L&T 1985 a read - they are the entirety of the legislation that governs accounts for this portion of the market and will only take about 5 minutes.