Are our service charges safe?
Are you worried about the safety of your service charge monies?
Since the start of the credit crunch and the failing of a number of financial institutions we have been made aware that many Residents Management Companies (RMC’s) are concerned about the safety of service charges and reserve funds if their bank or building society goes in to administration.
Newsletter 87 from the Federation of Private Residents’ Associations (FPRA) has advised that the Financial Services Authority (FSA) have confirmed
“small businesses, (and most RMC’s would qualify), have the same protection as individuals.
The definition of small business is any business that meets any two out of the following criteria:
* Turnover not more than £6,500,000
* Balance sheet total of not more than £3,260,000
* Total employees not more than 50
In addition the FPRA have been told by the FSA, although this has not been confirmed, that where monies are held in trust, but held by a larger organisation (which does not qualify as a small business above) such as a freeholder or managing agent, PROVIDED that each account held, the holder of the account writes to the bank advising them that monies are held on behalf of individuals and the bank acknowledges this, then each of these individuals is protected up to a maximum of £50,000.”
In 2009 accountancy regulations are being reviewed to line up with Section 42 of the Commonhold and Leasehold Reform Act 2002. It is expected that the outcome will be that all service charge monies will be required to be held in new accounts holding service charge monies alone.
It is recommended that you should obtain confirmation in writing from your bank, building society, managing agent or freeholder that The Financial Services Compensation Scheme (FSCS) applies to all monies deposited with them.
Robert Levene
Chief Executive of The Federation of Private Residents Associations Ltd.
www.fpra.org.uk
0871 200 3324
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