Rejected RTM Claims and Unspent Service Charge Monies
If the landlord has collected service charges in advance, with the unspent sums being held in an investment trust account, under s94 of RTM legislation he is under an obligation to hand over these monies as well as any interest paid to the company after he has deducted proper expenses he has accrued up to the acquisition date. Unspent sums will also include any reserve account or sinking fund. The RTM doesn’t have to serve a notice for these monies because legislation requires the landlord to act and to make to payment to the RTM company on the acquisition date ‘or as soon after that date as is reasonably practical. It is important that these unspent funds are obtained as soon as possible because the RTM company is not required to have any capital.
Whilst some landlords are happy to rely on the FTT to fix the sum, others only pay what they consider appropriate which is often disputed and taken to the Lands Tribunal for them to resolve. This is where an independent audit could prove valuable both in the pursuit of fairness as well as being time saving.
Note: Monies due to the landlord before acquisition date but not yet paid, remain payable to and collectible by the landlord, not the RTM company.
There are however a number of reasons why an RTM claim may be rejected by the landlord because they are deemed not to have met the legal requirements which are:
- Less than two thirds of the flats are held by qualifying tenants;
- Less than 50% of leasehold owners are members of the RTM Company;
- The member register has not been correctly updated at the correct location;
- There is insufficient documentation that prove members are qualifying tenants;
- The RTM Company formation is incorrect because the company has not been set up as limited by guarantee;
- The Memorandum and Articles of Association are incorrect;
- There is no certificate of incorporation;
- If there is more than 25% of commercial space in the building, anything close to this number is likely to be disputed and require detailed measurements from a surveyor);
- The date for a Counter Notice being insufficiently long;
- Non-participants not being served the correctly worded invitation to join in the RTM process (Notice of Participation);
- Non-participants not being given enough time to respond;
- No proof of RTM members receiving copies of the RTM Claim.