When your accountant isn’t a service charge accountant
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Southfield Park, Oxford is a development of 58 flats which had operated under a hybrid-management arrangement with the resident’s management company running the day to day and the financial management outsourced to a mid-sized accountancy firm.
The problem
A number of tricky management issues lead to the resident’s management company opting to outsource the management of the estate and Common Ground were selected based on legal expertise, the transparent approach to management and because the incumbent accountants already ran the finances of the estate on Xero, the system also used by Common Ground that enables directors access to the financial information about the site 24/7.
Upon accessing the Xero license set up by the incumbent accountant, Common Ground’s in-house service charge accountants established that the system had not been set up correctly.
The solution
Many accountancy firms, large and small, are not familiar with the unique accounting requirements relating to leasehold management, specifically the following acts
- Landlord and Tenants Act 1985
- Leasehold Reform, Housing and Urban Development Act 1993
- Commonhold and Leasehold Reform Act 2002
Upon transfer of the Xero license to Common Ground, the errors were quickly rectified and around £15,000 in aged debt was quickly recovered. This only became possible after Common Ground had re-issued previously incorrect invoices (which would have rendered the bad debt irrecoverable).
For further about service charge accounting, please see the section in Common Ground’s leasehold library, Leasehold Financial Management
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