Service charge

RICS service fee code consultation begins

RICS has launched a consultation on proposed changes to the Residential Service Charge Management Code, to help housing association tenants.

The Service Charge Residential Management Code (the Coded), which sets out best practices for the management of residential leasehold buildings and estates, which previously only applied to tenants in private developments.

The Code is under review and on 4 April 2022 RICS launched a consultation on the draft Code. Subject to final approval by the Upgrade Secretary, local authority housing providers and housing associations will follow the code, with registered private social housing providers falling under the amended code for the first time.

The changes to the Code aim to reduce the causes of disputes and provide guidance on resolving disputes that arise. The Code and evidence from RICS professionals is relied upon in Magistrate Court hearings to resolve disputes over fees for the service.

In addition, amendments to the Code will increase transparency around service charges and expenses for the nearly 4.6 million leasehold properties in England. The draft code aims to “improve general standards and promote best practices, uniformity, reasonableness and transparency in the management and administration of long-term residential properties“, by:

  • Standardize cost classifications and headings for expenses and service fee budgets using industry standard cost classifications (outlined in Appendix A2) to enable better cost comparisons and benchmarking between properties ;
  • Increase requirements for owners and agents to account for and report all commissions;
  • Requiring landlords or managing agents to provide tenants with a copy of a schedule of work and projected costs in a planned preventative maintenance plan so that tenants can plan for expected expenses; and
  • Increase the requirement for agents and owners to provide realistic service fee budgets for new developments.

These draft amendmentsimprove industry consistency and transparency for tenants regarding service charges, agent fees, long-term planned preventative maintenance plans and reserve funds“.

Anyone affected by the Code is encouraged to participate in the consultation. This includes land surveyors who advise on service charges or who are involved in the certification, review or approval of annual statements and/or service charge accounts. The draft code and the consultation are available here and are open until May 16, 2022.