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RICS publishes new professional statement on service charges in commercial property.

1024 682 Realty Law

Does new RICS’ statement serve up a fairer deal?

The Royal Institution of Chartered Surveyors (RICS) has published a new professional statement on service charges in commercial property.

Effective from April 1st 2019, Service Charges in Commercial Property (1st Edition), sets a marker for the standards of management required in the industry and provides nine mandatory obligations that RICS’ members and regulated firms must comply with.

The new statement signals RICS’ desire to stamp out the bad practices of landlords in exploiting tenants through unfair and unclear service charges. The delay between the statement being published and coming into effect, gives the industry adequate time to become accustomed to the new requirements.

It replaces the third edition of the Service Charge Code and is applicable across the United Kingdom.

Aims and objectives

RICS states that the aims and objectives of the professional statement are to:

• improve general standards and promote best practice, uniformity, fairness and transparency in the management and administration of services charges in commercial property
• ensure timely issue of budgets and year-end certificates
• reduce the causes of disputes and to provide guidance on resolution, and
• provide guidance to solicitors, their clients (whether owners or occupiers) and managers of service charges in the negotiation, drafting, interpretation and operation of leases, in accordance with best practice.

What are service charges?

Frequently referenced in residential and commercial leases, service charges are costs incurred by a landlord for running and maintaining shared parts of the building or estate. As the landlord can pass this cost on to tenants, service charges are understandably unpopular.

Greater transparency

Widely endorsed by bodies representing all sides of the property industry, the statement is acknowledged as a significant step forward in the management and administration of service charges. It is hoped that through the new statement, a fair and reasonable balance can be struck when commercial leases are drafted.

Adherence to the statement

RICS expects that its members will comply with the document in its entirety and has stated that it is not acceptable simply to comply with the nine mandatory obligations listed within it. As such, members should have justifiable reasons if they want to depart from the best practice requirements.

Our view

Realty Law provides a complete bespoke legal service to residential managers across England and Wales.

We welcome the opportunity to assist property managers in readying themselves for the implementation of the new statement. And we endorse the importance of clarity and transparency which are for the good of the industry and the customers it serves.

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