Who Should Sign Service Charge Accounts? A Guide for Managing Agents
Qube Talk: Service Charge Accounting Insights
Welcome to another episode of Qube Talk, where we discuss all things service charge accounting.
I'm Ray Armand, and I'm joined by my sister and business partner, CJ Ralfe.
Today, we're tackling a deceptively simple question:
Who should be signing what?
More specifically:
Who should sign the accountant's engagement letter?
Who should approve and sign off the service charge accounts?
Who should sign statutory company accounts?
Who within a managing agent actually has authority to approve documents?
What happens when RMC or RTM directors want to approve the accounts themselves?
This is one of those areas where there isn't always one single prescribed answer.
That's why managing agents need a clear, consistent and well-documented sign-off policy.
Why Sign-Off Authority Matters in Service Charge Accounting
CJ Ralfe:
The question isn't only relevant to service charge accounts.
It can apply to other contracts as well.
For example, if you're signing a significant annual contract with a cleaning company, gardening contractor or another supplier, you need to understand who has authority to enter into that agreement.
When we look specifically at service charge accounting, our starting points are usually:
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The lease or transfer document
Wider sector guidance
What we generally find is that the guidance doesn't strictly prescribe one person who must sign every service charge accounting document.
However, the lease or transfer document may occasionally be very specific.
If it clearly states who should approve or sign something, that wording needs to be taken seriously.
There Is Not Always One Correct Sign-Off Structure
Ray Armand:
This is a grey area, but it's an important one.
We're not going to tell you that there is only one correct approach for every managing agent.
There are different options.
What matters is that you:
Decide what makes sense for your managing agency.
Document the process.
Make sure everybody understands it.
Apply it consistently.
Have a clear process where an exception is required.
Consistency reduces confusion and mistakes.
Why Managing Agents Need a Consistent Policy
CJ:
Consistency makes the process much more efficient.
You may decide that, as a general rule, the managing agent signs the engagement letter and approves the service charge accounts.
However, you may occasionally have an RMC or developer that insists the directors must approve the accounts themselves.
That's where some flexibility may be required.
The key is that exceptions shouldn't just happen informally.
If you're deviating from your normal process, there should be a clear approval trail showing why.
The Two Most Common Sign-Off Setups
In practice, we generally see two main structures.
Option 1: The RMC, RTM or Freeholder Engages the Accountant
Where there is a Residents' Management Company (RMC) or Right to Manage company (RTM), the company itself could engage the independent accountant.
For a freeholder-managed development, the freeholder could engage the accountant directly.
Under this structure, the relationship is between:
The independent accountant and the RMC, RTM or freeholder.
Option 2: The Managing Agent Engages the Accountant
The other common option is for the managing agent to engage the independent accountant directly.
The accountant then works with the managing agent to prepare or review the service charge accounts.
Both approaches can exist in practice.
The important thing is knowing which structure you're using.
Qube Accountants' Preferred Structure
At Qube Accountants, we generally prefer to engage directly with the managing agent.
That doesn't mean an RMC or RTM engaging directly with the accountant is automatically wrong.
Our preference is driven largely by practicality, consistency and the way the relationship works in practice.
The managing agent is usually the party we communicate with most frequently.
They are also generally responsible for the bookkeeping and accounting records from which the service charge accounts are prepared.
Why the Managing Agent Relationship Can Work Well
CJ:
Even where we're preparing the service charge accounts rather than simply reviewing them, we're working from the financial records maintained by the managing agent.
That means the managing agent has responsibility for the underlying records.
So it can make sense for the service charge accounts to effectively be presented by the managing agent and independently reported on by the accountant.
That creates a relatively clear line of responsibility.
RMC and RTM Directors Can Still Review the Accounts
It's important not to misunderstand this.
If the managing agent signs off the accounts from the accountant's perspective, that does not mean the RMC or RTM directors should be excluded from the process.
If an RMC is in place, its directors may absolutely want to review the accounts before they are finalised.
And in many cases, they should.
A practical process might be:
Draft accounts are prepared.
The managing agent sends them to the RMC directors.
The directors review them.
Their approval is recorded by email, written approval or another suitable method.
The managing agent then provides the formal sign-off required by the accountant.
That can work very well.
The Sign-Off Process Should Match the Engagement
One of the most important principles is consistency between the engagement and the accounts approval.
If the accountant's engagement is with the managing agent, the managing agent should generally be the party providing the formal approval to the accountant.
If the engagement is directly with the RMC or RTM, the approval process should reflect that.
You don't want one party signing the engagement letter and another unrelated party suddenly signing off the service charge accounts without a clearly documented process.
Who Within the Managing Agent Can Actually Sign?
This is where things become even more important.
Many managing agents have thought about the high-level question:
“Does the managing agent sign, or does the RMC sign?”
But fewer have thought about the next question:
“Who inside the managing agent is actually authorised to sign?”
Can the receptionist sign?
Can the property manager sign?
Can the service charge accountant sign?
Does it have to be a finance director?
Does it have to be a company director?
That's where a lot of managing agents don't have a clearly documented answer.
Create an Approved Signatory List
Ray:
One of the biggest gaps we see in practice is the absence of a formal list of approved signatories.
If your managing agency is entering into contracts or approving service charge accounts on behalf of clients, not everyone in the business should automatically have authority to approve everything.
You should create an approved signatory list.
That list could identify:
Who can sign engagement letters
Who can approve service charge accounts
Who can authorise major contracts
Who can approve supplier agreements
Who can approve statutory submissions
Whether different authority levels apply to different staff members
This should be documented internally.
Why an Audit Trail Matters
Imagine service charge accounts are approved.
Several months later, a director says:
“We never approved these accounts.”
If your process is based on verbal conversations or informal messages, it can quickly become a finger-pointing exercise.
A strong process should leave an audit trail.
For example:
Approved by: [Name]
Role: [Position]
Date: [Date]
Approval evidence: [Email / portal approval / internal workflow]
That makes it much easier to show what happened.
Internal Approval Can Work With External Portals
CJ:
There can also be a practical issue.
Imagine the person with ultimate authority at the managing agent is extremely senior and responsible for hundreds of developments.
They may not want to log into the accountant's portal every time a set of service charge accounts needs approving.
That's understandable.
You can solve this through internal controls.
For example:
The authorised senior person reviews and approves the accounts internally.
A service charge accountant or another nominated member of staff records that approval.
That member of staff then completes the approval on the external accountant's portal.
The managing agent retains the internal evidence showing the appropriate person approved the accounts.
The important thing is having that process documented.
Don't Rely Only on Verbal Approval
A process shouldn't simply be:
“Joe said it was fine.”
There should be evidence.
That might be:
Email approval
Digital workflow approval
Internal sign-off form
Portal approval
Signed draft
Board resolution
Whatever method you choose, it should leave a traceable record.
What About Statutory Company Accounts?
Statutory company accounts are different.
If an RMC, RTM or other company is registered at Companies House and statutory accounts need to be filed, the rules around approval are more specific.
CJ:
In that situation, the statutory accounts need to be approved by a director of the company.
The managing agent cannot simply replace the director for that approval requirement.
Statutory Accounts Need Director Approval
Ray:
This is one area where there isn't the same flexibility.
Where statutory company accounts are being prepared for a limited company, the appropriate director approval needs to be obtained.
Practically, however, the managing agent can still help facilitate the process.
For example:
The managing agent receives the draft statutory accounts.
The managing agent sends them to the relevant company director.
The director reviews and approves them.
Evidence of approval is retained.
The accountant proceeds with the formal filing process.
This can reduce confusion because the managing agent already has an established relationship with the director.
Why Direct Accountant Requests Can Confuse Directors
We've seen cases where the external accountant contacts an RMC or RTM director directly.
The director then receives a portal invitation and thinks:
“Who is this?”
“Why am I being asked to sign something?”
“What am I approving?”
The managing agent is often better placed to communicate first.
A simple email such as:
“Our external accountant will shortly send you the statutory accounts for approval. Please expect a signing request.”
can make the process much smoother.
The Anti-Money Laundering Angle
There is also an anti-money laundering (AML) consideration.
This mainly affects the accountant rather than the managing agent, but it's useful context.
At Qube Accountants, we view the managing agent as central to the relationship because they typically manage the funds and maintain the accounting records.
From an AML perspective, this means our client and risk assessment work is focused primarily on understanding the managing agent and its ownership and control structure.
That practical reality is another reason we generally find it cleaner to have the engagement between:
Qube Accountants and the managing agent.
The service charge account approval process can then follow that relationship.
Always Check the Lease First
This is one of the most important messages in the episode.
Before building your sign-off structure, check the lease or transfer document.
If the lease specifically says who must approve something, don't ignore it.
CJ:
The lease is one of the most important documents for the development.
If you're taking on a new site and the lease isn't easily available, that's a concern.
The lease should be one of the first documents you review.
Create a One-Page Lease Summary
Ray:
One of the strongest recommendations we can give managing agents is to create a one-page lease summary for every site.
Lease documents can be long and difficult to work through.
You don't want staff rereading a 100-page lease every time a question arises.
When you first take on the development, review the lease and extract the important financial and management terms.
Your summary might include:
Who has authority to approve accounts
Whether an audit is required
Service charge year end
Billing dates
Budget requirements
Reserve fund provisions
Permitted expenditure
Apportionment rules
Relevant financial deadlines
Other key management requirements
Then retain both the full lease and the summary.
AI Can Help With Lease Reviews
AI document tools can make this process quicker.
For example, you could ask an AI tool:
“Does this lease say who must approve the service charge accounts?”
“Does this lease require an audit?”
“What is the service charge year end?”
“Does the lease contain reserve fund provisions?”
“Which expenses are recoverable?”
AI can help locate relevant clauses quickly.
But the original wording should still be checked by a person.
Use AI to assist the review, not replace professional judgement.
Why Lease Summaries Help With Staff Changes
A good lease summary becomes especially valuable when:
A property manager leaves
A new property manager takes over
The development moves between departments
The accountant changes
Questions arise years later
Instead of relying on one person's memory, your business has a documented summary of the key requirements.
That creates much stronger continuity.
A Practical Sign-Off Policy for Managing Agents
A good internal policy could include the following:
1. Identify the contracting party
Is the external accountant engaged by:
The managing agent?
The RMC?
The RTM?
The freeholder?
Make this clear.
2. Define who can sign engagement letters
Create an approved list of people with authority.
3. Define who can approve service charge accounts
Be specific about roles and authority.
4. Decide how RMC or RTM director approval will be obtained
If directors need to review the accounts, determine how their approval is recorded.
5. Define who can complete portal approvals
Where one person approves internally and another completes the external portal process, document that control.
6. Retain evidence
Keep emails, signed drafts, portal approvals or internal workflow records.
7. Treat statutory accounts separately
Make sure appropriate company director approval is obtained.
8. Check the lease
The lease or transfer document may override your normal internal process.
9. Document exceptions
If you deviate from your normal policy, record why.
10. Review the policy regularly
As your managing agency grows, your authority structure may need to evolve.
Consistency Reduces Risk
The biggest benefit of a clear policy is consistency.
When everybody knows:
Who can approve
What they can approve
How approval should be recorded
What evidence needs to be retained
there is less room for error.
It's also easier to train new team members.
Don't Let Approval Become an Informal Process
As managing agencies grow, informal approval processes become increasingly risky.
When you're managing five sites, everybody may know what's going on.
When you're managing 500 sites, relying on memory or verbal sign-off is much more dangerous.
Processes need to become stronger as the business scales.
The Key Difference: Service Charge Accounts vs Statutory Accounts
It's worth making the distinction very clear.
Service Charge Accounts
There may be different acceptable approaches depending on:
The engagement structure
The managing agent's policy
The RMC or RTM arrangement
The lease
The accountant's procedures
Consistency and documentation are critical.
Statutory Company Accounts
Where statutory accounts are being filed for a limited company, the appropriate company director approval needs to be obtained.
This should be treated separately from the service charge account approval process.
Questions Every Managing Agent Should Ask
If you're reviewing your current sign-off process, ask yourself:
Who signs our accountant's engagement letters?
Who signs off our service charge accounts?
Who has authority to approve contracts?
Do we have an approved signatory list?
Do we retain evidence of approvals?
Are RMC or RTM directors involved where appropriate?
Who signs statutory company accounts?
Does our portal workflow match our internal authority structure?
What happens if someone wants to deviate from our normal process?
Does the lease say anything specific about approval or sign-off?
If you can't answer those questions clearly, your process probably needs documenting.
The Key Message for Managing Agents
There isn't always one single mandatory industry approach to signing engagement letters and service charge accounts.
That's why your managing agency needs a clear, consistent and well-documented policy.
Know:
Who should sign.
Who has authority.
How approval is evidenced.
How exceptions are handled.
When directors need to be involved.
When statutory rules require director approval.
And always check the lease.
A seemingly small process like signing off accounts can become a major problem if authority isn't clear.
Getting it right now can prevent confusion, disputes and unnecessary questions later.
LISTEN HERE
Want to hear Ray and CJ discuss who should sign service charge accounts, engagement letters and statutory accounts in more detail?
Follow Qube Talk for more discussions covering service charge accounting for managing agents, RMC accounting, RTM accounting, year-end accounts, leases, financial controls and residential block management.
Why Not Get in Touch With the Team at Qube Accountants?
Are you a managing agent unsure about service charge account sign-off, engagement letters, RMC approvals or year-end accounting procedures?
Perhaps you're reviewing your internal authority processes or want to make sure your service charge accounting workflow is clear and consistent.
Why not get in touch with the team at Qube Accountants?
We specialise in service charge accounting for managing agents and work with managing agents of different sizes and structures.
Whether you need support with:
Service charge account preparation
Independent reviews
Year-end processes
RMC or RTM accounting
Engagement structures
Financial handovers
Improving your service charge accounting systems and processes
our team would be happy to discuss how we can support you.
This article is based on a Qube Talk podcast discussion and is intended as general information rather than legal advice. Lease terms, company structures, accounting engagements and individual circumstances vary, so appropriate professional or legal advice should be obtained where required.
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