Service charge

England: service fee code revised to help first-time housing association tenants

Renters of leasehold apartments and the rental charges they pay are to be included for the first time in a revised residential rental management code.

This and other proposed changes are announced as part of a consultation by the Royal Institution of Chartered Surveyors (RICS).

Originally developed in 1997, previous editions of the Service Charge Code (a Secretary of State-approved standard that sets out best practice in the management of residential blocks and leasehold estates) only applied to to tenants in private developments. It is used by courts and in the “First Tier Court (Properties Chamber)” to settle disputes over service charges, alongside evidence provided by RICS and other professionals.

Given the growing number of residential leasehold blocks owned and managed by social housing providers, the industry is now seeking the agreement of the Upgrade Secretary which will ensure that housing associations and local authority housing providers follow the new code.

With around 4.6 million leasehold properties in England alone the Code impacts every tenant and the service charge they pay, the proposed improvements to the Code will provide greater transparency around the charges service and associated expenses. Proposed changes to the Code include:

  • Increased requirements for agents and owners to report all commissions and a rationale for receiving them
  • Additional requirement for owners and agents to set realistic service charge budgets for new developments
  • Industry standard cost classifications to mirror the commercial service fee code and provide consistent standard headings for service fee budgets and expenses.

With the rising cost of running apartment buildings, including rising insurance premiums, especially where buildings need to be secured, there is a need for a clear code that helps guide owners and management agents on building management, load funds, forward planning and keeping tenants informed.

Antony Parkinson, Senior Property Standards Specialist at RICS, said: “The proposed improvements to the code will improve consistency within the industry and transparency for tenants regarding service charges, agent fees, long-term planned preventive maintenance plans and reserve funds.

“I encourage all tenants, landlords, registered providers, managing agents and anyone else affected by the Code to participate in the consultation and provide feedback on the proposals.”

Jeff Platt, technical author of the new Service Charge Code, said: “Since the publication of the 1st edition of the Code in 1997, housing associations and local authorities have become large-scale providers of leasehold, condominium and of rental accommodation where the costs of services and property management are recovered in the form of variable rental charges. Leaseholders and fee-paying tenants should expect to receive similar best practice management standards from all landlords, managers and managing agents.

“The proposed improvements align the code with the powers of the Secretary of State to approve a code of practice designed to promote desirable practices in the management of any residential property subject to variable service fees.

“I encourage all landlords, managing agents, lessees and co-owners to consider how the Code will benefit them and their consumers and to participate in the consultation by providing feedback on the proposals.”