RICS set to respond to ‘unfair’ property service charges, with new mandatory requirements

The Royal Institution of Chartered Surveyors (RICS) is developing new mandatory requirements to ensure service charges to commercial tenants are transparent, upfront and fair, and that any costs incurred to repair or maintain their building are in accordance with the terms of their lease. Property professionals involved in the managing of service charges now have until 6 December to have their say on the consultation’s recommended requirements.

The leading professional standards body has long called for a fairer and more professional approach to property management to help outlaw “rogue” landlords and managing agents. The launch of the 4th edition of The ‘RICS Code of Practice: Service charges in commercial property’ – due from 1 April 2018 as a professional statement with mandatory requirements – will provide a momentous step in helping to better regulate the activities of landlords and their agents, whilst protecting tenants from having to pay for unscrupulous repair or maintenance costs.

RICS has worked with major property bodies representing owners, occupiers and managing agents – including British Property Federation (BPF), British Retail Consortium (BRC), British Council for Offices (BCO), CoreNET, Institute of Chartered Accountants (ICAW), The Law Society, Property Managers Association (PMA), and REVO – to produce balanced recommendations that reflect the needs and opinions of landlords and tenants and the specific considerations of different sectors.

“Paul Bagust, RICS Global Property Standards Director commented: “In some cases, a commercial property lease may simply state that the tenant will pay a ‘proportion’ of the cost of the services provided by the landlord. Such vague and unclear information makes it very difficult for a tenant to challenge any costs for repairs and services without the full details of what costs have been incurred, and how they have been calculated.

“Our new guidance will offer best practice on ensuring occupiers are given clear and concise information on all of the service charges they can expect to pay. So, it will help to better protect both landlords and tenants by avoiding costly – and often devastating – disputes over what can be a substantial business overhead.”

The ‘RICS Code of Practice: Service charges in commercial property’ will also look to call for any potential or future changes to service costs to be made clear and obvious to tenants at the outset, and that any costs not specifically mentioned in a lease will not be recoverable from the tenants. The professional statement will provide guidance on more technical matters too, including the way in which service charge monies should be held within bank accounts.

Paul commented: “It is our aim with these mandatory requirements to not only help improve standards by ensuring the management of service charges is more professional, fair, and safe for all involved, but also allow tenants to receive an improved service from their landlords, which will significantly increase confidence in the market place.”