It seems to be common practice that when residents management companies appoint managing agents to do the job for them, the agents hold the company's money in a client bank account. It is bank practice (quite possibly a requirement imposed by some legislation) to confirm to the agent that they are holding the money in a separate client account to which the agent is not beneficially entitled, but the agent has control of the client account and is the only authorised signatory. No-one from the residents management company has access to the account.
When preparing the accounts of the residents management company, should we show the balance on the bank account as a current debtor due from the agent or as the company's own bank account?
Euan MacLennan
Replies (6)
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Dormant company...?
I understand that the Companies Registry accept a dormant company b/s as these sorts of companies are not trading as such. Any monies received from residents and unspent will be returned to the residents so no profit or loss occurs. Only entries will be share capital, etc. I think there is info on the Companies Registry website for your area.
Try this...
http://www.detini.gov.uk/cgi-bin/downutildoc?id=1160
Have a look at the above. I would put the bank balance in the usual place in assets. Yes it is held by a third party, but is that not what a bank is anyway? Any outstanding service charges from residents would need to be shown as debtors and any amounts due to suppliers shown as creditors (this info would be available from the mgt co.). Should an adjustment be made to the income figures to reflect the credit that is due to the residents at the end of the service charge year (assuming to much has been invoiced out to them?).
Original question
To answer the original question...
Euan, I'm not sure why you would think that this balance should be shown as a bank balance. It is money held by the managing agent and is thus a debtor. It doesn't matter if the balance is in a nominated bank account (or not), the debt is due by the agent, not the bank.
The money does not belong to the company
Are the residents leaseholders?
Money collected from leaseholders must be kept in a bank account separate from the landlord's, even if the management company is also the landlord. The bank account must have the word 'trust' in its name and the bank must be informed that the funds are leaseholders contributions. No actual legal trust is established but if the landlord goes bankrupt these funds cannot be touched by the liquidator. This was clarified by the Commonhold and Leasehold Reform Act 2002 You ought to check the other requirements of this legislation