Worthing RTM company wins £61,444 service charge balance it never received at handover

What happened

On 3 November 2026 gov.uk published a First-tier Tribunal (Property Chamber) decision, dated 1 October 2026, about Stoke Abbott Court in Worthing, a block of 48 flats. Its leaseholders’ company, StokeAbbottWorthing RTM Company Limited, acquired the right to manage on 24 February 2025. The decision records that it was common ground that no money was transferred to the company on acquisition.

The company applied under section 94(3) of the Commonhold and Leasehold Reform Act 2002 for the tribunal to decide how much the head lessee, Olivertom Limited, had to pay it. The head lessee argued that nothing was due, because the service charge money was matched by a loan it said it had made to the service charge account over several years, which it said was needed because some leases collected in advance and others in arrears.

The tribunal found that £61,444 was the accrued uncommitted service charge held at the acquisition date. That was the bank balance shown in the 2024 to 2025 service charge accounts, about a month after the handover, and the head lessee produced no evidence of a different balance. On the loan, it found no loan agreement, statement or repayment schedule had been produced, and that “a historic accounting entry described as a ‘loan’ does not, without more” establish a cost incurred before the acquisition date. It said the same of accruals and trade creditors in the accounts, while making clear it was not finding that those were not genuine liabilities.

The RTM company had argued for a higher figure of £72,187, based on evidence that two sums were moved in March 2025. The tribunal refused it, because £44,187 of that was described as ground rent money, and section 94 covers only service charges. It said section 94 “does not permit the Tribunal to right an earlier wrong”.

The tribunal also accepted largely unchallenged evidence from many leaseholders that substantial sums had been collected towards major works that were not carried out, and recorded that the head lessee had not complied with several directions to produce documents.

What it means for your building

Section 94 is the rule that makes the outgoing landlord or manager hand over unspent service charge money when an RTM company takes over. This case shows two things directors should plan for.

• The duty is to pay what is actually held. The tribunal relied on earlier Upper Tribunal decisions saying the payment is limited to what the landlord or manager “has actually got” on the acquisition date. Money moved out earlier is not recovered through section 94, though other routes may exist.
• Deductions need evidence. The outgoing side can deduct costs incurred before the acquisition date, but the tribunal wanted documents showing those costs had fallen due. Unsupported entries were not enough.

As a worked example, £61,444 across 48 flats is about £1,280 a flat. For a new RTM company with no float, that can be the difference between paying the first insurance premium on time and asking every leaseholder for money in its first month.

What to do now

• Before the acquisition date, write to the landlord and any managing agent asking for the service charge bank statements, the latest accounts, a list of unpaid invoices and any loans they say the service charge account owes. Section 94 does not set a list, so ask early and in writing.
• Have the RTM company’s own bank account open and ready to receive the money on the acquisition date.
• Keep service charge money separate from ground rent and the company’s own money from day one. Under section 42 of the Landlord and Tenant Act 1987 service charge contributions are held on trust in England and Wales.
• If the handover payment does not arrive, or the figure is disputed, either side can ask the tribunal to decide the amount under section 94(3).

This is general information about one tribunal decision, not legal advice. Read the full decision and take advice on your own leases and handover.

How Freeholdpilot helps

Freeholdpilot keeps the service charge, reserve and company bank accounts separate in the books, holds each building’s leases, accounts and handover documents in one document store, and records board decisions, so a new RTM board can see what it has received and what is still owed.