Service charges and other issues
A guide to service charges, administration charges, ground rent, recognised tenants associations and forfeiture.
7th April 2022
On 4th April, the Royal Institution of Chartered Surveyors (RICS) announced that it is consulting on proposed changes to its Service charge residential management Code and additional advice to landlords, leaseholders and agents (the Code)
The Code was last updated in June 2016, and is one of two approved codes of management practice that exist to promote desirable practices in relation to the management of residential property. They apply in England only, and are published by the Association of Retirement Housing Managers (“ARHM”) and RICS. The former applies to the management of properties in the private retirement sector and the latter addresses management of property generally in the residential leasehold sector.
RICS proposes, for the first time, that service charges paid by leaseholders of housing associations will fall within the ambit of the new Code. Other proposed changes include:
- Enhanced requirements of agents and landlords to declare all commissions and a justification for receiving them.
- Additional requirement for landlords and agents to set realistic service charge budgets for new developments.
- Industry standard cost classifications to reflect the commercial service charge code and provide consistent standard headings for service charge budgets and expenditure.
The consultation will end on 30 May 2022. Access the consultation.
RICS will consider feedback and the final service charge Code will be published later in 2022.
Antony Parkinson, Senior Specialist for Property Standards at RICS, said:
“Proposed enhancements to the Code will improve consistency within the industry and transparency for leaseholders in relation to service charges, agents fees, long term planned preventative maintenance plans and reserve funds”
“I encourage all leaseholders, landlords, registered providers, managing agents and anyone else affected by the Code to participate in the consultation and share feedback on the proposals.”
Jeff Platt, Technical Author of the new service charge code, said:
“Since the 1st Edition of the Code was published in 1997, Housing Associations and Local Authorities have evolved into large scale providers of leasehold, shared-ownership and rented homes where the costs of services and property management are recovered as variable service charges. Leaseholders and tenants paying those charges should expect to receive similar best practice management standards from all landlords, managers and managing agents. The proposed enhancements bring the Code into line with the Secretary of State’s powers to approve a Code of Practice designed to promote desirable practices in relation to the management of any residential property subject to a variable service charge.
“I encourage all landlords, managing agents, leaseholders and shared-owners to consider how the Code will benefit themselves and their consumers and to participate in the consultation by providing feedback on the proposals.”