Commercial property agents who are members of the Royal Institute of
Chartered Surveyors (RICS) or who are regulated by RICS will need to comply
with the RICS Professional Statement ‘Service charges in commercial
property (1st edition) (‘the Statement’) which comes into force
on the 01 April 2019.
The Statement replaces the RICS Service Charge Codes which were previously
only guidance around best practice for the operation of service charge in
The Statement imposes the following mandatory requirements:
1. All expenditure to be recovered from tenants must be in accordance with
2. Owners and managers must not seek to recover more than 100% of the
proper and actual costs of the services;
3. Each year owners and managers must be provided with service charge
budgets, including appropriate explanatory commentary;
4. Service charge monies (including reserve and sinking funds) must be held
in one or more discrete (or virtual) bank accounts;
5. Interest earned on these bank accounts must be credited to the service
charge account (after any necessary deductions have been made);
6. Owners and managers must ensure that an approved set of service charge
accounts (which have been certified by an appropriately qualified person)
are provided annually to tenants;
7. Owners and managers must ensure that a service charge apportionment
schedule is provided annually to tenants;
8. In respect of disputes when acting for a tenant, the manager must advise
the tenant that if money is being withheld, it is only the amount in
dispute which is being withheld; and
9. In respect of an accounting error when acting on behalf of the landlord,
managers must inform the landlord that the service charge has been raised
incorrectly and will be adjusted without any undue delay.
These mandatory requirements are supported by core principles. One of the
core principles states that management fees should be on a fixed price
basis and should reflect the actual costs of managing the services.
If an agent who is a RICS member or is regulated by RICS departs from these
best practices, they must do so for justifiable reasons, or they could face
legal and/or disciplinary action if they commit a serious breach.
This Statement has been introduced to make service charge costs
transparent, hold agents to account and ensure that service charge budgets
and end of year demands are issued in a timely manner.
It is good governance to follow the Statement whether or not you are a RICS
member or regulated by RICS.
Updated Service Management Agreements - Commercial Property and
Commercial Property Lettings Agency Terms and Conditions
We have updated the service charge provisions in our template agreements
and terms and conditions to incorporate the requirements relating to the
issue of annual service charge budgets and apportionment schedules and
Updated Leases of Part of an Office, Shopping Centre or Industrial
If a landlord will be engaging a commercial property agent to manage the
service charge and the agent is regulated by RICS then the lease should be
compliant with the Statement.
We have updated the service charge provisions in our template leases of
part of an office block, shopping centre or industrial estate to
incorporate the requirements relating to the issue of annual service charge
budgets and apportionment schedules to the tenant.
Updated Estimate Service Charge Statement and Final Service Charge
We have updated these statements to incorporate the requirements relating
to the addition of explanatory commentary to be submitted with the service
charge budget and certification of the final service charge statement.
New Service Charge Apportionment Schedule template
The new Simply-Docs template Service Charge Apportionment Schedule can be
used by property managers, agents and/or commercial landlords to set how
the service charge costs are allocated between the parties who benefit from
the services. Under the Statement it is a requirement that RICS members
must issue an apportionment schedule annually to the Tenant. It is good
governance to follow this requirement whether or not you are subject to the
The contents of this Newsletter are for reference purposes only and do not constitute
legal advice. Independent legal advice should be sought in relation to any specific