Protecting Service Charge monies – FPRA
The Federation of Private Residents’ Associations which is the national non-profit making organisation that represents the interests of leaseholders in England and Wales, has been campaigning for many years for the protection of lessees money from misappropriation and loss as a result of inept, or indeed dishonest managing agents or freeholders.
Since the start of the “credit crunch” and the failing of a number of financial institutions we have been made aware that many Residents’ Management Companies (RMC’s) are concerned about the safety of service charge monies and reserve funds if their bank or building society goes into administration.
Newsletter 87 from the Federation of Private Residents’ Associations (FPRA) advised that the Financial Services Authority (FSA) have confirmed:
“small businesses, (and most RMC’s would qualify) have the same protection as individuals”
The definition of a small business is any business that meets any two of the following criteria:
- Turnover of not more than £6,500,000
- Balance sheet total of not more than £3,260,000
- Total employees numbering not more than 50
In addition the FPRA have been told by the FSA, that where monies are held in trust, but held by a larger organisation (which does not qualify as a small business above) such as a freeholder or managing agent, then PROVIDED that for each account held, the holder of the account writes to the bank advising that monies are held on behalf of individuals and the bank acknowledges this, then each of those individuals is protected up to a maximum of £50,000.”
In 2009 accountancy regulations are being reviewed to line up with Section 42 of the Commonhold and Leasehold Reform Act 2002. It is expected that the outcome will be that all service charge monies will be required to be held in new accounts holding service charge monies alone. Indeed, as this magazine goes to press the Department of Communities and Local Government is in the process of publishing the new regulations.
It is recommended that you obtain confirmation in writing from your bank, building society, managing agent or freeholder that The Financial Services Compensation Scheme (FSCS) applies to all monies deposited with them.
Robert Levene – Chief Executive of
The Federation of Private Residents Associations Ltd.
FPRA, T: 0871 200 3324 www.fpra.org.uk
Membership of the FPRA is available from £65.00 per annum