Service Charge Banking: Your Options at East Valley

Banking is an important consideration when appointing a managing agent. This page explains who holds the account under each option, how the building's money is kept separate from business funds, who administers payments, whether directors can see balances and transactions directly, and what happens if you change managing agent. Neither option is automatically right for every development.

Who Owns the Money?

Service-charge and reserve funds are held on trust to meet the building's costs in accordance with the leases. They are not East Valley's business money or funds your company can use for unrelated purposes. The funds pay for items such as insurance, cleaning, compliance and reserves for future works, and the year-end reconciliation can produce a service charge balancing charge or credit. Demands must also be issued on time, since a demand issued late can affect what is recoverable. Our wider approach is set out on our service charge management page.

Option 1 - An Account Held by Your Company

Your RTM, RMC or freehold company opens and holds the account, with East Valley authorised to administer payments and manage the day-to-day banking.

Benefits:

• Your company holds the banking relationship directly.
• Directors retain oversight.
• Keeping the same account may make a future change of managing agent easier, subject to the bank's requirements.

Practical considerations:

Finding a suitable account can be difficult, particularly for smaller companies. Banks have different eligibility requirements, checks and charges. Before using this arrangement, we need to check that the account provides appropriate safeguards for service-charge money. An ordinary business account should not be assumed to provide the same protections as a designated client account.

Option 2 - A Dedicated East Valley Client Account with Metro Bank

We arrange designated client accounts through East Valley Block Management Ltd, with each account identifying the company or development it serves. Separate accounts can be opened for service charges and reserve funds.

East Valley Block Management Ltd is the bank's account holder under this arrangement. The account is designated for your company or development, and the development's funds are held on trust as client money, separately from East Valley Block Management Ltd's business funds.

Metro can provide written confirmation that the money is held as client money and cannot be used by the bank to offset debts on East Valley's other accounts. Any interest paid is credited to the relevant client account.

East Valley administers the accounts and payments under the agreed management arrangements. When our appointment ends, the remaining funds and financial records are handed over to the authorised recipient in accordance with those arrangements.

Which Option Should You Choose?

We generally propose the dedicated Metro client-account arrangement because it combines separate client banking with direct visibility for directors. We can also work with a suitable account held by your company.

Before you appoint us, we explain the proposed account structure, access permissions, charges and applicable protections so your directors can make an informed decision.

Side-by-Side Comparison

Questions Every Director Should Ask

Whichever managing agent you are considering, these questions are worth raising before signing a management agreement.

• Who will be the bank's account holder?
• Are the funds kept separate from the agent's business money?
• Can directors view balances and transactions directly?
• Who authorises payments, and what approval thresholds apply?
• How are reserve funds held and accounted for separately?
• What happens to the account if we change managing agent?
• What written confirmation does the bank give about client money?
• What financial reporting will we receive, and how often?