Housing: Leaseholders' Charges

House of Lords written question – answered on 10th April 2013.

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Photo of Baroness Gardner of Parkes Baroness Gardner of Parkes Conservative

To ask Her Majesty's Government whether monies paid towards a service charge on a residential leasehold property fall within the meaning of clients' money in Section 12 of the Estate Agents Act 1979; and what impact they forecast the Enterprise and Regulatory Reform Bill, if enacted, will have on protection of funds held by managers of residential leasehold properties.

Photo of Baroness Hanham Baroness Hanham The Parliamentary Under-Secretary of State for Communities and Local Government

Section 12 of the Estate Agents Act 1979 sets out the meaning of "client money" for the purposes of estate agency work, including in respect of client money protection requirements at Section 13 of that Act.

Service charges paid by leaseholders in respect of residential leasehold properties do not fall within the meaning of Section 12 of that Act. It is also not entirely clear what impact Clause 71 (Letting Agents etc) of the Enterprise and Regulatory Reform Bill as amended on Report in the Lords, would have on the protection of service charges in the residential leasehold sector, if enacted.

However, service charge monies are already protected under Section 42 of the Landlord and Tenant Act 1987. This requires that service charges must be held in one or more accounts and at a financial institution specified by regulations. Service charges are also deemed to be held in a statutory trust and can only be used for the purposes for which they have been collected.

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