Handover of funds, contracts and data
What the outgoing landlord or agent has to give you on the acquisition date, and how to scrutinise the accruals before you sign anything off.
Law stated as at England and Wales
Acquisition is the easy part. Handover is where RTM companies lose money, usually by accepting whatever figure the outgoing party offers for accrued service charges and by inheriting contracts nobody has read.
What has to be handed over
Accrued uncommitted service charges. The landlord must pay over any service charge money held that has not been committed to expenditure. Either side can ask the First-tier Tribunal to determine the amount if you cannot agree it, so an unsatisfactory offer is not the end of the conversation.
Contract information. On request, the landlord must supply the information the company needs about contracts relating to the management of the building.
Uncommitted is the word that does the work. Expect the outgoing party to treat a large part of the balance as committed. Ask, in writing, for the basis of that: what was ordered, when, by whom, under what contract, and whether the order predates the claim notice.
Scrutinising the accruals
Before agreeing any figure, ask for:
- The service charge accounts for the last three years, plus the current year to date.
- Bank statements for the service charge account and any reserve fund account.
- A schedule of arrears by flat, with ages.
- The reserve fund balance and what the lease says it can be spent on.
- A list of every open purchase order and every commitment said to be uncommitted-no-longer.
- Copies of all invoices above a threshold you set £500 is a reasonable starting point.
Look specifically for management fees charged beyond the acquisition date, insurance commissions retained by the agent, works ordered in the window between the claim notice and acquisition, and any inter-company balances.
If the numbers do not reconcile, get an accountant to look before you sign a settlement. A one-off fee is small against a reserve fund shortfall you inherit permanently.
Contracts and contractors
You take over the building with its existing arrangements. Go through each one and record: what it covers, what it costs, the notice period, whether it was entered into after the claim notice, and whether it was consulted on under section 20 where required.
Long-term agreements of more than twelve months are the ones to watch cleaning, lifts, door entry, communal heating. If you intend to replace them, check the notice periods before the acquisition date rather than after.
Data you must ask for
You will need, at minimum: the full leaseholder contact list, the health and safety file and fire risk assessment, asbestos register where applicable, lift and other statutory inspection records, insurance policy and claims history, utility account details and meter readings, plans and drawings, warranties and guarantees, and any correspondence about known defects or disputes.
Once you hold leaseholder data you are a data controller under UK GDPR. Set up the basics — a privacy notice, a retention policy, and access limited to those who need it at handover rather than a year later.
Doing it yourself
None of this needs a solicitor. The work is administrative, and a determined treasurer with a spreadsheet will do it better than an agent who is billing by the hour. Where it becomes worth getting help is a contested accruals figure, a large reserve fund, or a building with fire safety remediation in progress.
Sources
- Right to Manage Leasehold Advisory ServiceOpen Government Licence v3.0
- Commonhold and Leasehold Reform Act 2002, sections 92 to 94legislation.gov.uk Open Government Licence v3.0
- Service Charge Residential Management Code, 4th edition (RICS) approved code of practice cited, not reproduced
This page contains public sector information licensed under the Open Government Licence v3.0. It has been summarised and re-written by Better Leasehold; any errors are ours. Reproduction here does not imply endorsement by the Leasehold Advisory Service or by any government department.