Filing Accounts for a Flat Management Company

SELondonLady

I am one of the directors of a flat management company that owns the freehold for three share of freehold flats (one of which is mine). We have a sink fund in which each flat pays a set amount each month which we use for our buildings inusurance payments and anything else that needs doing in terms of repair to common areas. In the past this was used to pay for roof repairs and fixing the front door. 

Until last year, this sink fund was held in a personal bank account by one of the directors. When he sold his flat, he withheld 1/3 and then transferred the rest to me as I agreed to take on the secretary role. I have since set up a business bank account in the company's name and we are using that to manage the fund.

Now I need to file the company accounts which have historically been filed as a micro-entity with 3 assets and no income generated. Because we have now moved to a company business bank account (which doesn't get any interest btw), do I need to file it any differently? Is the money in the bank account considered the company's or is the company just holding money on behaf of trustees in this case?

eddddy

SELondonLady said:

Until last year, this sink fund was held in a personal bank account by one of the directors. When he sold his flat, he withheld 1/3 and then transferred the rest to me as I agreed to take on the secretary role.

I know this isn't your main question... but the above defeats the key reasons for having a sink fund.

A sink fund's main purpose is to spread the cost of major maintenance jobs across multiple owners of each flat.

As an example

• There are 3 flats

• Every 10 years you expect the roof to need re-felting at a cost of £15k - or £5k per flat

• The next re-felting is due in 2 years in 2025

• So each flat owner should have been contributing £500 per year towards the £5k for the last 8 years, and for the next 2 years

• Instead of expecting the one person who happens to own a flat in 2025 to pay the full £5k 

Also, you now have a sinking fund which only contains money contributed by 2 of the 3 flat owners. 



Although from your description, maybe it is more of a Service Charge Fund than a Sink Fund.

But even then, it was wrong for your neighbour to keep 1/3rd of the fund. The leases might make it difficult for you to get any money to replace it from the new flat owner.

flashg67

I did the accounts for a while for a management company and operated a business account. The money in the bank account was shown as 'current assets'. I'm not an accountant but never had any queries, and filed it like this for a number of years