Residents management companies

Residents management companies

Didn't find your answer?

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)

Please login or register to join the discussion.

avatar
By nathanhamill
27th Jul 2007 10:23

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.

Thanks (0)
Euan's picture
By Euan MacLennan
30th Jul 2007 14:05

Yes, but ...
... rightly or wrongly, we have not prepared dormant accounts and I am looking for advice on where to show the bank balance held by the managing agents.

Actually, I do not agree that these companies are dormant. The company is a separate legal entity from its shareholders and trades with them - it may be mutual trading, but it is still trading. The only reference I have found at Companies House is GBA9. The worked example of statutory accounts is a normal trading set of accounts. The only reference to dormant accounts is where the company owns the freehold, but leaves the management to an unincorporated residents association.

Thanks (0)
avatar
By nathanhamill
30th Jul 2007 14:46

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?).

Thanks (0)
avatar
By neileg
01st Aug 2007 13:32

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.

Thanks (0)
avatar
By KEYNSERV
01st Aug 2007 11:53

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

Thanks (0)
Euan's picture
By Euan MacLennan
01st Aug 2007 15:04

Thank you all
I am sorry if my question was not entirely clear. I am talking about residents management companies of which the shareholders or guarantee members are the leaseholders of the flats or sometimes, freeholders of houses within the development. The companies are not owned by the original property developer or landlord, even if they were originally set up by them; sometimes, the management company is also the freeholder of the block of flats.

I asked the question because we have always shown bank accounts held by managing agents as debtors due from the agents, for the reasons given by Neil, but one of the managing agents for whom we prepare accounts commented that other accountants showed the bank account as a bank balance in the residents management company's accounts.

Thanks (0)