New RICS professional statement to tackle unfair service charge practices

Sponsored feature | Richard Tweed, solicitor, BDB Pitmans

On April 1, 2019, the RICS professional statement ‘Service charges in commercial property (1st edition)’ (the statement) came into force.

‎The statement goes further than previous service charge codes by incorporating a set of ‘mandatory obligations’ that RICS members and regulated firms must comply with. RICS members can only deviate from best practices contained in the statement when they have justifiable reasons.

There are nine mandatory obligations contained in the Statement that RICS members must comply with, as well as some core principles.

These cover matter such as stating expenditure to be recovered must be in accordance with the lease terms and owners must seek to recover no more than 100 per cent of the proper and actual costs of the services.

Tenants should be provided with service charge budgets and accounts showing a true and accurate record of the actual expenditure constituting the service charge.

The statement is to be read in conjunction with the terms of a lease in order to help interpret the service charge obligations. As it cannot override the terms of a lease, its impact will be limited where a lease contains poorly drafted or problematic service charge provisions.

New commercial leases that are entered into from now onwards should be drafted to ensure compliance with the statement. By incorporating mandatory obligations into the statement, it will have a greater influence on the practical management of service charge regimes than the previous service charge codes, which merely provided guidelines for the management of service charge, without having any binding requirements.

Contact richardtweed@bdbpitmans.com or visit https://www.bdbpitmans.com/.

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