The Managing Agent employed will need to be fully aware of the requirements of the Landlord and Tenant Act 1985 (as amended by the Commonhold and Leasehold Reform Act 2002) upon the manager relating to information to be provided to flat-owners, reasonableness of costs and formal consultation procedures and be able to put them into practice.

Even where there appears to be a general consensus of support by the flat-owners to the company’s proposals, say in a vote at a meeting, this will not remove the obligation for compliance with the statutory procedures.

• Provision of information to the lessees – under the Landlord and Tenant Acts 1985 and 1987 (as amended) the landlord must, on the lessee’s request, provide summaries of service charge costs and details of the insurance arrangements, and make available for the lessees’
  inspection all relevant invoices, documents etc, including the insurance policy.

Departure from these duties of information can render the landlord liable to litigation and even to criminal prosecution. Under further amendments made by the Commonhold and Leasehold Reform Act 2002, but not commenced at the date of this publication, the RMC will be required to issue summaries of service charges to all leaseholders on a yearly basis, whether requested or not. In case of failure to provide the summary, the leaseholder has a statutory right to withhold payment of the service charge. If the RMC is unable to comply with this requirement, it will thereby endanger the future service charge income.

As from 1st October 2007, all demands for service charges must be accompanied by a
prescribed summary of leaseholders’ rights.The demand will not be valid without the statement and, again, the leaseholder will legally be able to withhold the payment.

(This provision also applies to administration charges).

• Consultation on proposed service charge expenditure – the landlord or management company must formally consult the lessees where the landlord, or the company, proposes to carry out works resulting in a charge to any flat of more than £250, or to let a contract for a term of more than 12 months which will cost any flat-owner more than £100 a year. The consultation is a formal process, set in legislation, and the landlord must generally invite comment and observations on the proposals from the lessees and give reasons for the final decision made. Failure to comply with the process can result in the landlord being unable to collect any more than the statutory amounts, whatever the actual cost of the works or the contract.

• Service charge monies to be held on trust – all money collected from the leaseholders in respect of any service charge are required by law to be held as a trust; provisions of the 2002 Act will require these funds to be held in designated accounts to which the leaseholders have full rights of information and inspection. It is most important that service charge funds are kept separate from money belonging to or chargeable to the RMC as a company; the costs arising from running the company may not be deducted from service charge monies unless expressly provided for in the lease.

• Demands for rent – whatever the terms of the lease, the ground rent is not recoverable unless properly demanded, in the prescribed manner. The RMC will have to make satisfactory arrangements for the issue of these demands if the rental income stream is not to be affected.

• Reasonableness of service charges – any service charges levied by the landlord must be reasonable, in terms of both cost and standards. Collection of the charges is not legally enforceable in the event of either being found not to be reasonable by a court or tribunal. Inability to collect service charges in respect of works done or services provided under contract can have disastrous consequences for resident management and Right to Manage companies operating without substantial cash reserves.

• Health and Safety – the landlord has responsibilities in complying with a very wide range of Health and Safety requirements, with serious consequences if they are neglected. The common parts of the building become a place of work for purposes of H&S regulation when there is a workman on the premises and this introduces compliance requirements well beyond the landlord’s contractual responsibilities under the lease. There will be a need to maintain an asbestos register, to carry out inspections and testing of electrical equipment and other machinery in the building and to provide H & S information to contractors. This is an area requiring specialist input.

Statutory requirements go beyond the issues highlighted above and are likely to include the environment, Disability Discrimination and many more.

The information contained in this article has been taken from the publication Appointing a Managing Agent produced as a joint publication by ARMA, the Association of Residential Managing Agents, ARHM, the Association of Retirement Housing Manager and LEASE, the Leasehold Advisory Service. The full guide is available at

The ARMA document Appointing a Managing Agent Guide is available as a PDF file.(531 Kb)