Accounting fees for small blocks of flats that self-manage: how much should you pay?

The cost of accounting fees for small blocks of flats that self-manage varies depending on several factors, such as the complexity of the financial transactions, the level of reporting required, and the experience and expertise of the accounting professional or firm. Additionally, the flats’ region may also influence the pricing structure.
Accounting fees are typically billed based on hourly rates or a flat fee structure. The actual cost may vary depending on the complexity of the lease, how many schedules there are in the lease, how many flats there are in the block, the level of expenditure, how much reconciliation has occurred, how good the accounting narrative is for each receipt and expense, and whether the opening balances agree to the prior year’s accounts.

Under the 1985 Landlord and Tenant Act in the United Kingdom, there are provisions related to the independent certification of service charge accounts. These provisions are aimed at creating transparency and fairness in the management of service charges by landlords or property managers. The concept and rules of independent certification for service charge accounts are below:

Service charges payments

Service charges are payments made by tenants to cover the costs associated with the maintenance, repair, and management of shared areas and items in a building or development. The Landlord and Tenant Act 1985 sets out rules and regulations to protect tenants' rights and ensure that service charges are reasonable and properly accounted for.

requirement for service charge accounts

Independent certification refers to the requirement for service charge accounts to be examined and certified by a qualified accountant who is independent of the landlord or property manager. This assures that the accounts have been prepared correctly and fairly.

The accountant responsible for the independent certification

The accountant responsible for the independent certification must have relevant professional qualifications, such as being a member of a recognised accounting body, like the Association of Chartered Certified Accountants (ACCA) or the Institute of Chartered Accountants in England and Wales (ICAEW). Service charge accounts should be certified within a specific timeframe, usually within six months from the end of the accounting period to which they relate. This means that tenants receive the certified accounts on time.

Certified accounts should include a detailed breakdown of income

Certified accounts should include a detailed breakdown of income and expenditure related to the service charge, along with supporting documentation such as invoices, receipts, and bank statements. A clear explanation of how the service charge was calculated and any variances from the previous year should be included.

Tenants’ inspection is also granted by the Act. This gives tenant the right to inspect the certified accounts, supporting documents, and other relevant records related to the service charge. This allows tenants to verify that the charges are reasonable and under the terms of their leases.

Dispute resolution is provided for by the Act if tenants have concerns or disputes regarding the service charge accounts. Tenants can refer the matter to the First-tier Tribunal (Property Chamber) or the Leasehold Valuation Tribunal (LVT) for an independent assessment and determination of the reasonableness of the charges.

Key Considerations for Accounting Fees in Self-Managing Blocks

When managing a small block of flats, it's crucial to factor in the costs of accounting services to ensure compliance with the Landlord and Tenant Act 1985. Independent certification of service charge accounts is a legal requirement, and the fees for these services should reflect the complexity of the financials and the required reporting. Landlords should carefully assess the scope of services provided by accountants and ensure that the accounts are transparent, accurate, and certified within the designated time frame to avoid disputes and maintain trust with tenants.