Update: service charges in commercial property
Following an industry wide consultation, the RICS has published a new professional statement, “Service Charges in Commercial Property”. This has been effective since 1 April 2019 and supersedes the three prior service charge codes of practice. Many landlords already adopt the principles of the prior codes of practice, but it is expected that this statement will see a fairer and more professional approach to property management being adopted more widely.
What does this mean?
The statement sets out nine mandatory requirements that RICS members and regulated firms must comply with, as well as best practice.
The publication as a professional statement means that failure to comply with its mandatory requirements may lead to legal/disciplinary steps being taken and best practice should only be deviated from where there is a justifiable reason to do so.
What does it do?
The stated aims and objectives are to:
- Improve general standards and promote best practice, uniformity, fairness and transparency
- Ensure timely issue of budgets and year-end certificates
- Reduce the causes of disputes
- Provide guidance in the interpretation and operation of leases
It should be noted that the professional statement cannot override the terms of the lease, but it is expected that it will assist in the interpretation of existing leases and will influence the terms on the grant of any new or renewal lease.
It is acknowledged that there is an element of proportionality concerning the extent to which parties may comply with recommended best practice processes and procedures and this will depend on a variety of issues including the size, nature and type of the property, and should be consistent with best value principles.
The recent case of Rees v Windsor-Clive has provided useful guidance on how a right of entry reserved to a landlord in a lease should be interpreted.