News Flat Living
Energy code Lease campaign Conference
9 10 11
w h at ’S h a p p e nin g in l e a S e h o l d S ec t o r
code of Practice
leaseholders let down by new energy code Thousands of residential leaseholders could face hefty backdated energy bills despite a new Code of Practice that is supposed to protect them, ARMA has warned. The new Code, issued by the Energy Retail Association (ERA), is supposed to protect small businesses – including leaseholder run Residents Management Companies (RMCs) - from crippling backdated energy bills but completely fails to do so, according to the Association of Residential Managing Agents (ARMA). ARMA believes that RMCs will be left particularly vulnerable, saying, “These micro-businesses are run by volunteer leaseholders purely to manage the communal areas of their homes and do not make a profit. Unexpected bills, often the result of energy companies misreading meters, can run into tens of thousands of pounds and are especially damaging to the leaseholders who must then foot the bill through their service charge payments”. Under the Code, energy companies commit to limit backdated bills to three years for electricity and five years for gas. ARMA says the limit should be
Mary-anne Bowring: critical of code one year, the same as for domestic customers and that the Code should be compulsory - so far it is voluntary and not all energy suppliers have signed up. ARMA chairman Peter Dening, who is a partner at Pennycuick Collins in Birmingham, said: “We are very disappointed that the ERA has not gone further to protect leaseholders from the disastrous effects of backbilling. ARMA has campaigned for this Code of Practice so that
energy companies will treat the communal areas to blocks of flats like the domestic premises they are. At a time when many families are struggling with fuel poverty, it is simply not fair that flat owners could still be billed for charges going back five years.’’ Mary-Anne Bowring, Chair of membership at the Institute of Residential Property Managers (IRPM) said: “Leaseholders should not be punished for the mistakes of energy suppliers. In these tough economic times it is simply not acceptable that residents can receive unexpected bills for thousands because their supplier has misread a meter. This is why we are backing ARMA’s call for a Code of Practice to protect leaseholders from the crippling effects of such mistakes and avoid unnecessary debt”. ARMA estimates that for around 60% of the blocks of flats in England and Wales, the effective landlord for supplies to communal areas is an RMC. The organisation recently agreed a protocol with ERA to protect leaseholders from power disconnections to the communal areas of their property which can be downloaded from the ARMA website at www.arma.org.uk.
the prestigious Walpole Mayfair building
Price record
Mayfairstill hasMonopoly onprices Despite the continuing slump in UK house prices, the sale of a penthouse apartment on Arlington Street in London’s exclusive Mayfair recently set a new price record, according to Property Week magazine. The 3,100 sq ft apartment, which also boasts a substantial roof terrace, was sold to a British buyer for just over £14 million. At £4,542/sq ft, the apartment easily beat the £3,800/sq ft record previously set for this part of London. The Grade II listed building, formerly the home of eighteenth century Prime Minister Sir Robert Walpole, has been redeveloped by Oliver Burns. Located opposite the Ritz the building comprises five luxury apartments. In contrast to the national trend, Property Week reports that prices in London’s Mayfair and neighbouring St James’ rose by 11% in the 12 months to February 2012.
consultation
proposed changes to service charge accounting The Government’s Urgent Issues Task force has consulted on proposed changes to the accounting procedures for Residents Management Companies when they deal with transactions for flat owners. In May, a ‘draft abstract’ was issued in response to a request from the Institute of Chartered Accountants in England and Wales to look at the way service charges are dealt with in the financial statements of RMCs. This abstract dealt with: n Helping RMCs recognise which transactions need to be included in financial statements
Flat Living
Summer 2012
by identifying whether the RMC is acting as principal (landlord) or agent. Guidance on this is provided in FRS5 and in most cases the RMC is likely to be acting as an ‘undisclosed agent’ on behalf of flat owners. n Helping other people entering into a financial agreement with an RMC – including flat owners and creditors – understand the RMC’s position; n Confirming that money collected as service charges needs to be held in a statutory trust on behalf of residents; and n Protecting flat owners and anyone else using RMC
all change for rMc accounting financial statements by disclosing where information can be found that details the transactions made. The consultation closed in June and the intention is that
any changes made to the rules on service charge accounting will be applied to accounting periods ending after 31 December 2012, although early adoption will be permitted.
9
