The importance of correct service charge accounting

June 14, 2022

The importance of correct service charge accounting


The importance of correct service charge accounting

Owners and occupiers will be familiar with service charge accounting and reporting. The importance of these being up to date and accurate cannot be overstated, as service charges are one of the main areas for dispute between leaseholders and landlords. This problem was highlighted in a recent case we were instructed to resolve.

Case study on service charge accounting

We were introduced by a landlord to a managing agent.  The landlord had for several years self-managed their property portfolio and fallen behind in reporting numerous years of final service charge accounts.

This had led to serious under recovery of costs and the landlord, and recently appointed managing agent, had major issues in being able to fund the proper maintenance and service the property in a way that was required and expected by the occupiers.  The occupiers, without the final accounts, were not comfortable continuing to pay the on-account service charges, without knowing how the funds were being spent.  The landlord was having to inject funds to keep the estate maintained.

The landlord realised he needed external help and appointed a property managing agent.

Working with the agent, we set out to bring all the outstanding accounts up to date, overcoming technical issues such as cost allocations.

As part of the process, it was identified that the managing agent also had several property managers, each working in their own way.  We advised on the implementation of standardised processes for year-end reporting. This created efficiencies in terms of costs and turnaround for the managing agent, not just for this portfolio, but across the entire property management book.  Barnes Roffe has provided training sessions for the property managers on property reporting to ensure that future reporting is standardised across all properties.

Feedback from the landlord and property managers has been:

  • Recovery of arrears, bringing in much needed funds to maintain the property and bring up to standard.
  • Fewer queries and better recovery of charges.
  • Faster recovery of shortfalls through speedier year end reporting.
  • Our team is friendly, available, knowledgeable and easy to work with.

In line with industry best practice, we issue reports within 4 months on the commercial property and 6 months for the residential element, although often much sooner than this.

If you are an owner or manager that would like to discuss the service charges of your portfolio, please contact Barnes Roffe.

We believe we are more than just your average accountancy firm. Our goal at Barnes Roffe is to engage our clients through a proactive relationship, which provides you with the resources and tools you need to enable you to take charge of your finances with confidence.

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PLEASE NOTE: By the very nature of this type of information the details of tax law might have changed since they were published, so contact your Barnes Roffe partner before acting on any matter contained in these documents.