Your money. Properly held. Fully visible. Correctly managed. Every block has its own designated client account, RICS-standard budgets, and real-time director access from day one.
Service charge money belongs to the leaseholders of the building, held in trust for the maintenance and management of their block. It is not the managing agent's money. It is not the freeholder's money. It cannot legally be pooled with funds from other buildings or used for purposes other than those covered by the service charge provisions in the lease.
Those are basic legal requirements. They are also, in our experience, among the most commonly violated in residential block management. We have taken over blocks where service charge funds from multiple buildings were held in a single shared account, with no ability to identify what belonged to which block or evidence how it had been spent. Directors asking for their balance received different figures each time. There was no designated account, no proper ledger, and no audit trail.
Client Money Protection is a requirement for all managing agents in England under the Client Money Protection Schemes for Property Agents Regulations 2019. It means that if a managing agent misappropriates client funds, there is a compensation scheme that can reimburse the loss. But CMP is only part of the picture. The more fundamental protection is the requirement to hold client money in a designated client account — separate from the agent's own funds and from the funds of any other client.
When an agent holds service charge funds from multiple blocks in a single account, three things happen — and none of them are good for your building.
If another block managed by the same agent has a deficit, unpaid invoices, or legal costs, those obligations exist in the same pot as your money. There is no ringfence. Your service charge is covering someone else's problem.
If funds are commingled, any figure given for your building's balance is an estimate at best. This is exactly why directors at a 32-flat East London block we took over received different figures each time they asked — because no clean figure existed. The agent could not evidence anything properly because there was nothing to evidence against.
The fundamental assurance that service charge funds are held correctly — that your money is there, it is yours, and it has only been spent on your building — cannot be given when funds are pooled.
No pooling. No shared accounts. Your building's money is separated from every other building and from Neon's own operating funds. Directors have real-time online access to their service charge accounts through our portal — you can see the balance and every transaction at any time.
These are not marketing credentials — they are the professional standards your managing agent should be meeting as a minimum.
Service charge management is the financial backbone of block management. Done correctly, it gives directors confidence in the numbers, gives leaseholders assurance that their contributions are being spent properly, and gives the building a financial platform for planned maintenance and major works.
Prepared in advance of the service charge year. Itemised against the building's maintenance requirements and compliance obligations. Presented to directors for approval before demands are issued.
Issued correctly under the lease. Correct form, correct notice period, correct split between leaseholders as specified in the lease. Demands that do not comply with lease requirements are not recoverable — we do not cut corners on demand procedure.
A separate bank account for each block. No pooling with other buildings. Funds held in trust for the leaseholders of that building only. Balance accessible to directors through the online portal at any time.
All income and expenditure recorded in the accounting system. Every payment authorised and matched to an invoice. Every invoice filed and accessible through the portal. No unexplained transactions.
Reserve fund contributions calculated against the building's planned maintenance schedule. Held separately from the current service charge account. Balance and planned expenditure visible to directors through the portal.
Service charge accounts prepared annually to the RICS Service Charge Code standard. Submitted for certification. Issued to leaseholders within the timeframe required by the lease.
Service charge arrears tracked from the demand date. Formal demands issued at the correct intervals. Legal recovery referred to specialist solicitors where required. Directors kept informed of the arrears position throughout.
Directors have real-time access to all accounts, all transactions, all invoices, and all supporting documentation through the online portal. No waiting for monthly reports. No chasing for information that should be available on demand.
The service charge budget is the financial plan for the building's year. It sets out what is expected to be spent on maintenance, utilities, insurance, compliance, and management. It determines what each leaseholder pays.
Getting it right matters — too low and the building runs into deficit; too high and leaseholders are overcollected and due a credit. We do not use generic categories that cannot be interrogated. Every line is explained, every budget approved by directors before a demand is issued.
We review the building's maintenance requirements, upcoming compliance renewals, planned works, and insurance costs. The reserve fund position informs the contribution level for the year.
We prepare an itemised draft budget. Every line is explained. Directors can see exactly what each budget line covers and why.
The draft is presented to directors before demands are issued. Directors review, ask questions, and approve. We do not issue demands without director sign-off.
Service charge demands are issued to leaseholders in the correct form, with the approved budget summary as required. Issued in advance of the service charge year start.
Expenditure is monitored against budget throughout the year. Where significant variances arise, directors are informed. Supplementary demands are not issued without director approval and proper notice.
At year end, the accounts are prepared, reconciled, and submitted for certification. Surplus or deficit is carried forward or credited in line with the lease. Accounts are issued to leaseholders within the required timeframe.
The reserve fund — sometimes called the sinking fund — is the money set aside for major future expenditure: roof replacement, lift overhaul, external decoration, major structural repairs. Properly managed, it means that when significant work is needed, the money is available without an emergency special levy on leaseholders. Poorly managed, it is either absent, inadequate, or has been spent on current-year expenditure it was never intended for.
An underfunded reserve fund does not stay invisible.
When the roof needs replacing or the lift needs a major overhaul, the money either exists or it does not. If it does not, leaseholders face a special levy — potentially thousands of pounds each, at short notice, for expenditure that a well-managed building would have been planning for years. We establish the reserve fund position on takeover, prepare a forward maintenance schedule, and set contribution levels that give the building a realistic financial foundation for future works.
These are the failures we encounter most often when taking over block management from another agent.
| Failure | Consequence |
|---|---|
| Funds pooled across multiple blocks with no separate account per building | No auditable balance. Funds exposed to other buildings' liabilities. CMP potentially ineffective. |
| Service charge demands not issued in correct form or without required notice | Demands unenforceable. Agent cannot recover arrears. Building in deficit. |
| Expenditure not matched to invoices or authorised by directors | Accounts not certifiable. Leaseholders entitled to challenge all expenditure. Potential fraud exposure. |
| Reserve fund contributions collected but spent on operational costs | Reserve fund inadequate for future major works. Emergency levies required. Leaseholder disputes. |
| Annual accounts not prepared or not issued within lease timeframe | Leaseholders not obliged to pay. Service charge becomes irrecoverable after 18 months without certification. |
| No planned maintenance schedule — reserve fund contributions arbitrary | Reserve fund under or over funded. No basis for Section 20 major works planning. |
| Service charge surplus not credited to leaseholders or carried forward correctly | Leaseholders entitled to challenge. Potential overpayment liability. |
The RICS Professional Statement on Service Charges sets out how service charges should be managed in residential and mixed-use blocks. It covers transparency, communication, demand procedure, accounts preparation, and certification.
We prepare service charge accounts to the RICS Service Charge Code standard on every block we manage. Budgets prepared on a transparent basis, expenditure documented and justified, accounts certified by a suitably qualified accountant, surplus and deficit dealt with correctly. Not a legal requirement — a professional standard we adopt because it is the right way to manage service charge accounts.
Whether you are considering switching managing agent, have just taken over an RTM, or want to understand the current state of your building's accounts — start with a conversation. We will be direct about what we find and what it means.
This website uses cookies. By continuing to use this site, you accept our use of cookies. Learn more
