RICS announces standards to tackle unfair commercial property service charges

New mandatory requirements that will ensure service charges to commercial tenants are transparent, upfront and fair, and that any costs incurred are in accordance with the terms of the occupational leases, have been announced by RICS. The Institute, which has long called for a fairer and more professional approach to property management to help outlaw “rogue” landlords and managing agents says ‘Service charges in commercial property’ will help regulate the activities of landlords and their agents, whilst protecting tenants from having to pay for unscrupulous repair or maintenance costs. It has worked with major property bodies representing owners, occupiers and managing agents – including BPF, BRC, BCO, PMA, CoreNet, REVO, PMA alongside ICAEW and Law Society, the professional bodies for accountants and lawyers – to produce the recommendations that reflect the needs and opinions of landlords and tenants and the specific considerations of different sectors.

“It is hugely encouraging to see all sides of the property industry collaborating and supporting this new document and committing to working to the highest professional standards”, said Paul Bagust, RICS Global Property Standards Director.

“This professional statement offers best practice on ensuring occupiers are given clear and concise information on all of the service charges they can expect to pay up front.

“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 statement also calls 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 also provides guidance on more technical matters too, including the way in which service charge monies should be held within bank accounts.

Added David Tudor-Morgan, Head of Retail Operations, British Land: “These new requirements provide the industry with a clear and robust set of guidelines that equally benefit occupiers, landlords and agents.”

The wider use of mandatory requirements in the new Guidance Note will be of great benefit to responsible Landlords and Tenants alike and will help to remove non-compliant parties and managing agents from the market. The changes come into effect in April 2019 to give adequate time for accounting procedural changes.