Part 4 - Regulation of leasehold Section 56: Accounts and Annual reports
Section 56 inserts new Sections 21D and 21E into the 1985 Act. These provisions create a new requirement for a written Statement of Account to be provided by landlords within 6 months of the end of the 12-month accounting period for which service charges apply, as well as an obligation on landlords to provide an annual report to leaseholders.
	Under existing provisions individual service charge demands on leaseholders who pay variable service charges must be in writing and be accompanied by details of the landlord’s name and address, as well as a summary of rights and obligations.  If a landlord’s address is outside England or Wales, the demand must contain an address in England or Wales which can be used to send notices to the landlord. Leaseholders may ask for a summary of the service charge account for the last accounting year or, if accounts are not kept by accounting years, the past 12 months. Leaseholders also have the right to inspect documents relating to the service charge to provide more detail on the summary.
	Section 56(1) makes clear that this Section makes further amendments to the 1985 Act. Subsection (2) inserts a new Section 21D on service charge accounts and a new Section 21E on annual reports. Section 21D (1) sets out that the Section applies to leases of a dwelling if (a) a variable service charge is or may be payable under the lease, and (b) any of the relevant costs which may be taken into account in determining that variable service charges are taken into account in determining the amount of variable service charge payable by the tenants of three or more other dwellings. These are known as "connected tenants".
	Section 21D(2)(a) implies into leases that landlord must, on or before the account date for each accounting period, provide the tenant with a written statement of accounts in relation to variable service charges arising in the period. The statement must be in a specified form and manner and set out (i) the variable service charge arising in the period which are payable by each tenant and any connected tenants, (ii) the relevant costs relating to the service charge, and (iii) any other specified matters set out in legislation by the appropriate authority. Section 21D (2)(b) sets out the process for ensuring the written statement of accounts is prepared to an appropriate standard. Subsection (2)(b)(i) implies into leases that the landlord must provide a report to leaseholders which is prepared by a qualified accountant in line with specified standards, while subsection (2)(b)(ii) requires that the report also needs to include a statement from the accountant detailing that it is a faithful representation of what it purports to represent. Subsection (2)(c) requires landlords to provide relevant information on request to the qualified accountant to help prepare that report. Subsection (2)(d) requires leaseholders to pay a fair and reasonable contribution to any costs incurred by the landlord in obtaining the report. For the purposes of this subsection "specified" is defined as "specified in regulations made by the appropriate authority".
	Section 21D(3) defines an accounting period as a period of 12 months as specified in the lease or, if the lease does not specify a period, 12 months starting from 1 April. Section 21D (4) sets the "account date" for an accounting period as being the final day of a period of six months from the final day of the accounting period.
	Section 21D(5) makes it clear that any contribution by the leaseholder towards the cost of the preparation of the written report under subsection (2)(d) is to be regarded as a variable service charge, and payable irrespective of the terms of the lease, contract or other arrangement.
	Section 21D(6) allows the appropriate authority, through regulations, to provide for circumstances in which a term in subsection (2) is not implied into a lease or is to be implied into a lease in a modified form.
	Section 21D(7) details that regulations under this Section are (a) to be made by statutory instrument; (b) may make provision generally or for specific cases; (c) may make different provision for different purposes; (d) may include supplementary, incidental, transitional or saving provision. Section 21D (8) sets out that the statutory instrument is be subject to the negative procedure.
	Section 21E(1) places the obligation on landlords to provide an annual report in respect of service charges arising in that period. Section 21E (2) allows the appropriate authority through regulations to set out (a) the information that must be contained in the report; (b)the form of the report and (c) the manner for providing the report. Section 21E (3) gives the ability of the appropriate authority to make provision requiring information to be contained in the report in respect of other matters which the appropriate authority considers are likely to be of interest to the tenant, whether or not they directly relate to service charges or service charges arising in the period.
	Section 21E(4) defines an accounting period as a period of 12 months as specified in the lease or, if the lease does not specify a period, 12 months starting from 1 April. Section 21E (5) defines the "report date" for an accounting period as being the final day of the period of one month beginning with the day after the final day of the accounting period. Section 21E (6), allows the appropriate authority to set the exceptions to this duty through (a) descriptions of the landlord, (b) descriptions of the service charge, or (c) any other matter.
	Section 21E(7) details that regulations under this Section are (a) to be made by statutory instrument; (b) may make provision generally or for specific cases; (c) may make different provision for different purposes; (d) may include supplementary, incidental, transitional or saving provision.
	Section 21E(8) sets out that the statutory instrument is be subject to the negative procedure.
	Section 56(3) makes a consequential amendment to Section 28 of the 1985 Act on the definition of qualified accountant. It enables the appropriate authority to make regulations to expand the meaning of a "the necessary qualification" in Section 28(2) of the Landlord and tenant Act 1985, to allow for a wider range of individuals to prepare the written report required under subsection (2)(b). Regulations under this Section are subject to the affirmative procedure.
	Section 56(4) makes a consequential amendment to Section 39 of the 1985 Act (index of defined expressions), substituting Section 21D(2)(b) in place of existing Section 21(6).