Schedule 12- Service charges: provision of information and designated accounts
994.Schedule 12 makes changes to the requirements in the Landlord and Tenant Act 1985 (“the 1985 Act”) and the Landlord and Tenant Act 1987 (“the 1987 Act”) regarding the information that landlords must supply to service charge payers and how service charge monies are to be held. The main amendments are to section 21 of the 1985 Act (as substituted by the Commonhold and Leasehold Reform Act 2002) and section 42A of the 1987 Act (as inserted by the 2002 Act). Section 21 of the 1985 Act and section 42A of the 1987 Act, as amended or introduced by the 2002 Act, have not been brought into force.
995.Paragraph 2 broadly replicates the effect of section 21 of the 1985 Act. Subsection (1) provides the appropriate national authority (the Secretary of State in England, and the Welsh Ministers in Wales) with power to make regulations about the provision by landlords of dwellings of service charge information. Subsection (2) sets out the types of information that should be dealt with in those regulations. In particular, the regulations must, subject to exceptions, require a landlord to provide information about the service charges of the tenant and any “associated charges” (defined in subsection (10)); and the relevant costs relating to the service charges. Subsection (3) provides that the regulations must (subject to exceptions) require that a report by a qualified person be supplied with the information provided. Subsection (4) sets out the additional matters about which provision may be made in the regulations. In particular the regulations may make provision about the information and reports that need to be provided, the periods in relation to which information or reports are to be provided, the times at or by which they need to be provided, and the form and manner in which they may be provided. The regulations may also describe the persons who are “qualified persons” for the purposes of preparing the report that must accompany the information supplied by the landlord. Subsection (5) provides that the power under subsection (1) to make regulations is not limited in any way by the provisions of subsections (2) to (4).
996.Subsection (6) allows regulations made under section 21 to make different provision for different cases, descriptions of case or different purposes and to make supplementary, incidental, consequential, transitional or saving provision that is considered to be appropriate. Subsection (7) provides that, subject to subsections (8) and (9), the regulations will be subject to the negative procedure. Subsections (8) and (9) provides that the first use of the regulation making powers by the appropriate national authority will be subject to the affirmative resolution procedure. Subsection (10) contains definitions.
997.Paragraphs 3 to 8 of the Schedule make amendments to sections 21A, 22, 23, 26 and 27 of the 1985 Act, which are consequential on the new terminology used in section 21. These sections enable tenants to withhold service charges if the provisions in section 21 are not complied with, provide rights of inspection of supporting documentation, deal with the situation where information is held by a superior landlord or there is a change of landlord and provide for exceptions. These amendments ensure that these provisions reflect where necessary the new terminology used in section 21.
998.Paragraph 9 repeals section 28 of the 1985 Act, which defines the meaning of ‘qualified accountant’ for the purposes of providing a certificate supporting information supplied under the existing section 21. This is being replaced with the power to specify in regulations made under the new section 21(4) the persons who are qualified to provide a report on such information. Paragraph 10 removes the reference to “qualified accountant” in the index of defined expressions in the 1985 Act.
999.Paragraphs 11, 12 and 13 amend section 42A of the 1987 Act. These amendments will allow one or more trust funds containing service charge monies held on behalf of different groups of service charge payers to be held by the landlord in one designated client account. Provision is made for regulations to be made to ensure that funds cannot be moved between designated client accounts unless conditions specified in the regulations are met.
1000.The regulations to be made under section 42A may make different provision for different cases or different areas. The regulations are subject to the negative procedure.
1001.Paragraph 14 amends section 78 of the Leasehold Reform, Housing and Urban Development Act 1993 which defines the persons able to carry out a management audit of premises under rights provided to long leaseholders by the Act. Instead of referring to section 28 of the 1985 Act (which is being repealed under paragraph 9 of this Schedule), it inserts a new class of auditor, being a person who is a member of a body which is a recognised supervisory body for the purposes of Part 42 of the Companies Act 2006, and disqualifies certain persons.