The Royal Institute of Chartered Surveyors (RICS) professional statement relating to service charges in commercial properties (“the Statement”) became effective on 1 April. Compliance by all RICS members and regulated firms is compulsory.
Service charges are notoriously complex and both parties will naturally want to ensure an approach which suits them, however, tenants are often left feeling they have little influence.
The Statement aims to address these issues and has four key aims and objectives:
It also has nine key principles, which the RICS says should be incorporated into leases:
If you are taking a new lease, then ideally when negotiating heads of terms you should agree that the service charge will comply with the Statement. If you have a surveyor involved, they will be able to negotiate the details of this for you. If not, your solicitor, when drafting the lease, should check that the service charge provisions in legal or disciplinary consequences for members” broadly comply with the Statement.
If you have an existing lease, then the Statement cannot override the lease, but its principles should be applied when interpreting the service charge provisions. If you are renewing an existing lease, the service charge provisions should be updated to reflect the Statement.
The Statement must be complied with by all RICS members and regulated firms.The extent to which the recommended best practices are complied with will depend on a variety of issues such as size and nature of the property, total service charge costs and the amounts payable by each of the tenants. Any deviation from the Statement could result in legal or disciplinary consequences for members and importantly the service charge itself could be open to challenge.
Given that the Statement should make negotiating the service charge easier for commercial tenants who want to ensure what they are signing up to is fair, and without unusual or onerous provisions, it’s good news for commercial tenants. For landlords and property managers, the need to adapt practices to ensure compliance with the Statement could mean an extra burden.