Appointment of a surveyor and management audits
Management audit
Qualification
To qualify for the right a tenant must have a long lease (an original lease of more than 21 years) which includes an obligation to pay service charges. The dwelling can be a flat or a house but the lease must not be a business lease:
- where there is only one tenant in the building paying service charges, that tenant can exercise the right
- where there are only two dwellings in the building either or both of the tenants can exercise the right
- where there are three or more dwellings then it requires not less than two thirds of the tenants to collectively exercise the right
Management audits were introduced as part of legislation for leasehold reform and are applicable only to premises occupied by “qualifying tenants”, that is long leaseholders.
It is clear from the legislation that, whilst a management audit may be commissioned in respect of a building occupied by both long leaseholders and other tenants paying a variable service charge (so long as the long leaseholders have a two-thirds majority), the audit is only applicable to the flats of the qualifying tenants.
Whether this would, in application, cause a problem is not so clear. However, a management audit may be commenced by either or both leaseholders of a building in only two flats where it is unlikely that a tenants’ association exists. It is also available to individual leaseholders of houses or properties which contain only one flat.
Appointment
The auditor must satisfy certain statutory requirements.
They must be “suitably qualified”, either:
- a qualified accountant; which means a member of:
- the Institute of Chartered Accountants or
- the Association of Certified Accountants or
- any other body of accountants recognised by the Secretary of State
- a qualified surveyor, which means a fellow or associate of:
- the Royal Institution of Chartered Surveyors
- the Incorporated Society of Valuers & Auctioneers
- the Architects and Surveyors Institute or
- as prescribed in regulations made by the Secretary of State
They must not be:
- a tenant of the premises, or
- an officer, partner, agent or employee of the landlord
The auditor may appoint others to assist them in the audit (who also exercise the rights of the auditor). An accountant may employ a surveyor for the purpose of the property inspection, a surveyor may employ an accountant for examination of the accounts. There is no specific advantage in the audit being carried out by either profession but tenants should check the auditor’s relevant experience in property management.
You can find out more information on finding, evaluating and hiring a surveyor on the LEASE Learn website – our e-learning platform.
Rights of access and information
For purposes of an audit, the auditor has a statutory right (S79 1993 Act) to require the landlord:
- to supply them with the summary of relevant costs referred to in Section 21 of the 1985 Landlord and Tenant Act on which the service charge is based.
- to afford them reasonable facilities for inspecting and copying accounts, receipts and other documents supporting the summary, or any other document “sight of which is reasonably required by him for the purpose of carrying out the audit”
- to allow an inspection of any common parts comprised in the relevant premises or appurtenant property
Notice to the landlord
These rights arise from the provision of a notice to the landlord, under S80 of the 1993 Act, stating:
- the full names of all the qualifying tenants on whose behalf it is served, and the addresses of the flats of which they are qualifying tenants
- the name and address of the auditor
- any documents which the landlord is required to supply to the auditor or to afford him access to inspect and copy
- date on which the auditor proposes to carry out an inspection (not less than one month or more than two months from the date of the notice)
The notice must be signed by all the tenants.
The landlord must comply with the notice within one month, or serve a counter-notice setting out his objections, or proposing an alternative date for the inspection. Where the landlord fails to comply or provides objections, the auditor may apply to the court for an order.
The application to the court must be made no sooner than two months nor later than four months after the service of the S80 notice.
- Last updated:
- 27 August 2021
- Next review:
- 12 December 2026
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