RTM Company Bank Accounts: The Law, the Rules and the Banks That Say Yes

Somewhere between serving the Claim Notice and the acquisition date, every RTM company hits the same practical wall: the company needs a bank account, and no bank seems to have heard of an RTM company. The money is coming - on the acquisition date the outgoing landlord or manager must hand over the uncommitted service charge funds, and your first demands to leaseholders follow shortly after - but the "community" accounts are fenced off for clubs and charities, the app banks reject your company structure at the second screen, and one high street bank excludes residents' management companies from its community product by name.

This guide covers the whole question: what accounts an RTM company actually needs, the statutory trust that governs service charge money, the "designated account" law that has sat dormant on the statute book for over twenty years, who needs client money protection (and who does not), and - because nobody publishes this - which banks will actually open an account for a company limited by guarantee.

Everything below applies to England. The Right to Manage exists in Wales too, but commencement dates and some secondary legislation differ, and Welsh reforms are on their own track. Nothing here is financial advice: bank products, fees and eligibility rules change, so treat the survey as a map of the market checked in August 2026 and confirm the detail with the bank before applying.

And a note for RMC directors: nearly all of this applies equally to a residents' management company that collects variable service charges. The section 42 trust, the RICS code (which names RMCs and RTM companies in the same breath), the client money protection position and the bank survey do not distinguish between the two. The genuinely RTM-specific parts are the section 94 handover of funds on the acquisition date and the company structure: an RTM company must by statute be limited by guarantee, while an RMC may be limited by shares - and if yours is, some doors the survey marks shut will open.

The three pots: what accounts an RTM company needs

An RTM company handles up to three kinds of money, and the cleanest way to think about banking is one pot per kind:

• Service charge money - the on-account contributions leaseholders pay towards running the building. This is trust money the moment it is paid (more on section 42 below). It is not the company's money, and it is the pot that does nearly all the work in a typical RTM company.
• Reserve or sinking fund money - if the leases provide for one. Also trust money. Best practice is to hold it in a separate account from the day-to-day service charge account, usually one that pays interest, so long-term savings are visibly ring-fenced from this year's spending.
• The company's own money - which in most RTM companies rounds to zero. The company usually has no share capital, no trading income and no money of its own beyond, perhaps, member contributions towards company filing costs. Many RTM companies run everything through the service charge fund (management costs are typically recoverable as service charge expenditure under the lease) and the company itself has almost no transactions in its own right.

The legal minimum and best practice diverge here, and it is worth being precise. Section 42 of the Landlord and Tenant Act 1987 imposes a trust over service charge money, but it does not, in terms, require a separate bank account for it - the provision that would have done that was never brought into force (see below). What the law demands is that the money is held on trust and used only for its purpose. What best practice demands - and what the government-approved RICS code says you should do - is a separately named, interest-bearing service charge account, reconciled monthly, whose details leaseholders are told about.

In practice the gap barely matters, because mixing trust money with company money is how RTM companies get into serious trouble. Professional accounting guidance (TECH 03/11, prepared jointly by the accountancy bodies with RICS and the managing agents' association) spells out the risk: service charge money sitting in the company's own account may be claimed as a company asset if the company is ever wound up, and directors who let trust money be misapplied can be personally liable for breach of trust. A separate account costs nothing and removes the ambiguity. For a single-building RTM company the working setup is therefore two accounts - a service charge current account and, where the leases allow a reserve fund, a reserve account - with the company's own rare transactions either run through a third account or kept off the bank entirely.

Section 42: the trust that governs the money

Section 42 of the Landlord and Tenant Act 1987 is the foundation. Where tenants of two or more dwellings pay variable service charges towards the same costs, the contributions are held on a statutory trust by "the payee" - the landlord or other person to whom the charges are payable. Once an RTM company acquires the right to manage, the management functions that include collecting service charges transfer to it under sections 96 and 97 of the Commonhold and Leasehold Reform Act 2002, so the RTM company becomes the person the charges are payable to. Paragraph 11 of Schedule 7 to the 2002 Act puts the point beyond argument: in relation to an RTM company, references in section 42 to "the payee" are to the RTM company - so it holds the contributions on the section 42 trust. The government's leasehold guidance puts it plainly: service charge money must be held in trust.

What the trust means in practice:

• The money is the leaseholders' fund, not the company's. The statutory terms are that the fund is held to defray the costs it was collected for and otherwise on trust for the contributing leaseholders for the time being. Directors administer it; they do not own it.
• Interest follows the fund. Any income earned on the contributions becomes part of the trust fund. Interest on the service charge account belongs to the leaseholders' fund, not to the company - which is also why the RICS code expects the account to be interest-bearing.
• The fund can only be spent on its purpose. Using service charge money for anything other than the costs it was collected for is a breach of trust. In a portfolio context that includes lending one building's fund to another; in a single-building RTM company the everyday version is borrowing from the reserve fund to cover a shortfall and never putting it back.
• Tax is quieter than you might fear, but take advice. HMRC's long-published view, recorded in TECH 03/11, is that service charge contributions received subject to the section 42 trust do not create a tax liability in the payee's hands where the statutory trust applies unmodified and its terms are observed. Interest earned by the fund is trust income with its own treatment, so have an accountant familiar with service charge trusts confirm the position rather than assuming the company can ignore it.

One side effect worth knowing: because the trust money is not the company's asset, professional guidance treats it as sitting outside the company's statutory accounts, and many RTM companies whose only activity is administering the trust file dormant accounts at Companies House. Companies House confirms that flat management companies must file annual accounts like any other company - dormant or not - so the filings still happen; they are just very short. Whether your company qualifies as dormant depends on what actually runs through its own books, so confirm the treatment with your accountant rather than assuming it.

Section 42A: the designated account rule that never arrived

Search for "RTM designated bank account" and you will find confident statements that the law requires service charge money to be held in a designated account at a relevant financial institution. That is a description of section 42A of the Landlord and Tenant Act 1987 - and section 42A has never been brought into force.

The section was inserted by the Commonhold and Leasehold Reform Act 2002, alongside a companion offence provision (section 42B) that would have made non-compliance a criminal offence with a fine. But the commencement order only ever switched on the power to make the supporting regulations, the regulations defining "designated account" were never made, and more than two decades later the duty remains prospective. The same is true of the wider service charge transparency package in the Leasehold and Freehold Reform Act 2024 - the new regime for demands, annual reports and accounts is on the statute book but, as of August 2026, not yet in force and awaiting secondary legislation.

So the accurate statement of the law is narrower than the folklore: the trust is mandatory today; the designated account is not - yet. Run your banking as if section 42A were in force anyway. A separately designated account is what the RICS code already expects, it is what leaseholders will expect when they exercise their statutory rights to see the accounts, and if the dormant provisions or their 2024 replacements are ever commenced you will have nothing to change.

What the RICS code expects

The RICS Service Charge Residential Management Code (4th edition), effective from 7 April 2026 and approved by the Secretary of State under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993, applies to self-managed blocks and lay boards - it names RMCs and RTM companies expressly - not just to professional agents. Tribunals take it into account, and an RTM company that ignores it hands ammunition to any leaseholder in dispute with it. The code is careful with its verbs: "must" marks a legal obligation, "should" marks best practice you ought to be able to justify departing from.

On bank accounts, the code says a manager:

• must hold service charge money, and any interest, on the section 42 statutory trust, keep it separate from the manager's own money, and use it only for the purpose it was collected for
• should hold it either in a ring-fenced service charge bank account per building, or in a universal account where each building's money is separately accounted for - and for a single-building RTM company that distinction collapses into "one account for the building"
• should tell all leaseholders where their money is held - the institution's name and address, the account name and sort code, that the account is interest-bearing, and any notice periods or withdrawal restrictions - and should provide the account details with service charge demands and/or the annual service charge accounts
• should reconcile the service charge account against the cashbook at least monthly, and should not let it go into deficit
• should hold reserve funds in a separate account from day-to-day service charge money, and should not use reserves to prop up routine spending beyond very short-term cash flow cover

None of the "should" items is onerous, and together they make a decent operating manual for a lay board: one named account per pot, interest-bearing, reconciled monthly, details disclosed to the people whose money it is.

Client money protection: agents yes, self-managing companies no

A common worry for new RTM directors is whether they need to join a client money protection scheme or somehow become regulated to hold leaseholders' money. The regulation in this area - the Client Money Protection Schemes for Property Agents Regulations 2019 - is aimed at property agents: businesses doing property management work on instructions from a client. Since 1 April 2019, an agent holding client money must belong to an approved client money protection scheme, with penalties of up to £30,000 for holding client money without one.

An RTM company managing its own building is on the other side of that line. The statutory definition of property management work looks for things done "in the course of a business" on instructions received from a client - and a company of leaseholders running its own block for its own members has no client and is not acting as a business in that sense. That is how the definitions read rather than an express carve-out written for RTM companies, so if your company's situation is unusual - managing for payment, or managing premises beyond its own - take advice. For the standard case, no scheme membership is required.

The rule flips the moment you appoint a managing agent. An agent who collects your service charges holds client money, must belong to an approved client money protection scheme, and - if RICS-regulated - must hold the money in a designated client money account under RICS's client money handling rules. When you interview agents, ask which scheme they belong to and ask for the certificate; they are required to display and provide it. And whether you self-manage or appoint an agent, the section 42 trust applies to the money regardless.

FSCS protection: the £120,000 question

Deposits with a UK-authorised bank are protected by the Financial Services Compensation Scheme up to £120,000 per depositor per authorised institution - the limit rose from £85,000 on 1 December 2025, so older guidance quoting £85,000 is out of date. Two wrinkles matter for RTM companies:

• Trust accounts can be looked through - sometimes. The company itself is an eligible depositor: the FSCS's published deposit protection Q&As say most businesses are protected, with no size test. Where money is held on trust, the same Q&As draw the line by trust type: for a bare trust the scheme may look through the named account holder and treat each eligible beneficiary as having a separate claim of up to £120,000, while for a trust that is not bare a single £120,000 applies however many beneficiaries there are. The section 42 trust holds the fund first to meet the building's costs and only then for the contributing leaseholders, and neither the FSCS nor the banks publish a ruling on how it is classified - so plan on one £120,000 per bank, treat per-leaseholder look-through as an upside rather than a promise, and ask the bank how it reports the account.
• Big reserve funds deserve structural caution. If your block has built a six-figure reserve, consider spreading it across more than one authorised bank rather than relying on look-through. Watch for brands that share a single banking licence - deposits under one licence share one £120,000 limit.

Opening the account: what banks ask for, and when to start

An RTM company is a private company limited by guarantee whose articles are prescribed by regulations (the RTM Companies (Model Articles) (England) Regulations 2009). That structure is exactly what trips the automated onboarding at many banks, which are built for companies limited by shares. Expect to supply:

• the company's registered number and certificate of incorporation
• the articles of association (the prescribed RTM model articles)
• identity and address checks for directors and, at some banks, for anyone with significant control
• a description of what the company does and its expected turnover - "collects service charges of roughly £X a year for the building it manages, held on statutory trust" answers both
• a board decision authorising the account and naming the signatories

Start well before the acquisition date. Company-limited-by-guarantee applications frequently drop out of the automated path into manual review, which turns days into weeks. On the acquisition date the outgoing landlord or manager must pay over the accrued uncommitted service charges - the unspent fund they hold for your building - on that date or as soon after as reasonably practicable (section 94 of the 2002 Act), and your first service charge demands will need account details on them. An RTM company that reaches its acquisition date with no account has nowhere to put either.

Name the account so the trust is visible on the face of it: the accounting guidance's example is the pattern "Hazel Court RMCo Limited Trust Account", and including the building name plus "trust" or "client" in the account title does the job. Set the mandate up with dual authorisation for payments from the start - it is far easier than retrofitting controls after a dispute - and avoid personal or joint director accounts entirely, even as a stopgap. Money in a director's personal account is exactly the mixing the trust exists to prevent.

Which banks will take an RTM company

This is the part nobody publishes. No UK bank markets an account to "RTM companies" or "flat management companies"; the phrase does not appear on any bank product page we could find. What the market actually offers, as at August 2026, sorts into five groups. Product names, fees and eligibility rules drift constantly - verify against the bank's current pages before applying.

Banks whose published criteria fit an RTM company. Metro Bank's business account eligibility expressly includes companies limited by guarantee, which is consistent with its long-standing popularity among self-managed blocks; there is no monthly fee if the balance stays at £6,000 or above, otherwise £8 a month. HSBC's Small Business Banking Account has no monthly account fee at all and is published as open to all legal entity types (HSBC's Kinetic account closed to new applicants in 2026). Cater Allen's Reserve Account has no monthly fee and accepts companies, associations and clubs, though new customers must apply through an intermediary registered with Cater Allen, such as an accountant. Zempler Bank accepts companies limited by guarantee subject to extra due diligence and a one-off fee, with a free account tier.

The mainstream business accounts that work but cost money. The big-four standard business accounts will generally bank an RTM company, though limited-by-guarantee acceptance is decided in application rather than promised on the page. NatWest's business account has no monthly fee but charges per transaction; Barclays is free for twelve months then £8.50 a month; Lloyds is free for twelve months then £10 a month. For a company running one building's service charges, a predictable monthly fee is a legitimate service charge cost - just budget for it.

The accounts that look right but are fenced off. The "community", "treasurer's" and "charity" accounts - the free ones that look purpose-built for a volunteer-run organisation - are almost universally restricted to clubs, societies, charities and community interest companies, and an RTM company fails every one of those gates. Lloyds says so explicitly: its Community Account is "not available to co-operatives, property management companies and residents' management companies". If your management company happens to be limited by shares (some older RMCs are), more doors open - but a statutory RTM company cannot be, so check the eligibility page before spending an evening on an application.

The app banks and e-money accounts: three gates, and most fail all of them. Monzo, Starling, Revolut, Wise and their peers come up in every RTM directors' meeting, because the accounts are free or cheap and the apps are excellent. Before spending an evening on an application, check the same three things we checked in August 2026:

• Company structure. Monzo's eligibility pages list companies limited by guarantee among the business types it cannot support; Starling's published criteria require a company limited by shares; Mettle and Countingup exclude companies limited by guarantee by name; Tide's published criteria do not extend to them. Revolut's supported entity list does not address limited-by-guarantee companies either way. Of the app banks we checked, only Zempler names the structure as acceptable.
• Whose money it is. Service charge contributions are other people's money held on a statutory trust, and several providers' terms prohibit exactly that. Monzo does not allow a business account to be used as a client trust account holding money on behalf of someone else. Revolut bans it outright, whatever the business type: "You can't hold, exchange, transfer, or manage client funds in a Revolut Business account". Wise's acceptable use policy restricts transmitting money on behalf of third parties. None of them publishes a position on section 42 trusts specifically, but a trustee running leaseholders' money through an account whose terms forbid holding money for others is building on sand - even if onboarding lets the application through.
• What the provider actually is. Wise and Airwallex are e-money institutions, not banks, and ANNA's account is provided through one. E-money is safeguarded rather than FSCS-protected: the FCA's consumer guidance is blunt that money with a non-bank payment provider is not covered by the FSCS if the provider fails, with safeguarding expected to return most - not all - of the money, and more slowly. Revolut, for completeness, is now a licensed UK bank (its business terms sit with Revolut Bank UK Ltd, FSCS-protected to £120,000, though accounts opened before its 2026 launch may still sit with its e-money entity while migration completes) - but its client funds ban rules it out for service charge money regardless.

The pattern behind all three gates: app banks are built for trading businesses spending their own money, and an RTM company is a trustee spending other people's. That mismatch, not any single eligibility page, is why the shortlist for statutory trust money keeps coming back to licensed banks whose published criteria fit the structure.

Client money accounts - built for agents, not for you. Several banks offer "client deposit" or "clients premium" accounts for holding third-party money. Their eligibility is shaped around regulated intermediaries - letting and managing agents inside client money protection schemes - not around a company holding its own building's statutory trust fund, so a self-managing RTM company is usually knocking on the wrong door there. A plain business account, properly named and run to the RICS code's standards, is the tool for the job.

For the reserve fund, the same eligibility filter applies to savings products: business deposit and notice accounts from the banks above can hold the reserve at interest, with the account title carrying the building name and "reserve" so the ring-fence survives contact with a bank statement. Check notice periods against the kind of works the reserve exists for, and remember the FSCS arithmetic above before concentrating a large fund in one institution.

Running the account properly

A setup that will survive both a tribunal and an awkward AGM question:

• separate accounts for service charges and reserves, named after the building and the trust
• dual authorisation on payments, and a mandate that does not strand the company when a director resigns
• interest-bearing accounts, with interest credited to the fund it belongs to
• monthly reconciliation against your records, and a rule that the account never goes into deficit
• account details disclosed to leaseholders and shown on demands, as the RICS code expects - leaseholders also have statutory rights to a summary of costs and to inspect the supporting documents, so run the account assuming it will be inspected
• on acquisition, a prompt chase for the section 94 handover payment, with a reconciliation of what the outgoing manager held - our handover checklist covers what to ask for

None of this is difficult, but all of it generates records - statements, reconciliations, demands, disclosures - and scattered records are how well-run blocks end up looking badly run. If you are setting up an RTM company's finances from scratch, it is worth deciding on day one where those records live.

References and further reading

• Landlord and Tenant Act 1987, section 42 - the statutory trust of service charge contributions (and section 42A, the designated account duty that remains prospective)
• Commonhold and Leasehold Reform Act 2002, Part 2, Chapter 1 - the Right to Manage, including section 73 (company limited by guarantee), section 94 (handover of accrued uncommitted service charges), sections 96 to 97 (management functions) and Schedule 7, paragraph 11 (references to "the payee" in section 42 of the 1987 Act are to the RTM company)
• RTM Companies (Model Articles) (England) Regulations 2009 - the prescribed articles of association
• Client Money Protection Schemes for Property Agents Regulations 2019 - the scheme membership requirement for agents holding client money
• RICS Service Charge Residential Management Code, 4th edition - section 5.6 covers holding service charge funds in trust
• Government Leasehold Toolkit (England) - includes the plain-English statement that service charge money must be held in trust
• LEASE - Service charges and other issues - free guidance covering the section 42 trust and leaseholders' rights to information
• LEASE - Right to Manage - free guidance on the RTM process, including the handover of uncommitted service charges
• Companies House - life of a company: accounts - confirms flat management companies file annual accounts, including dormant companies
• FSCS - deposit protection Q&As for banks and building societies - the £120,000 limit, which depositors are eligible, and how bare and non-bare trusts are treated

Opening the right account is the first piece of financial infrastructure an RTM company builds; keeping the records straight is the rest of the job. Marklet is block management software built for RTM companies - service charge budgets, demands and spending in one place, so the account you have just opened comes with the paper trail the code, your leaseholders and your future self will ask for.