The RICS has launched the second edition of Service Charges in Commercial Property, a code of practice intended to remove service charges as an area of conflict between commercial property owners and occupiers.
The updated code includes two model lease clauses to help the legal profession ensure these standards are being met in new and renewal leases.
Paul Bagust, RICS associate director, said: “Research suggests that a significant proportion of occupiers remain dissatisfied with service charge management. This updated code aims to improve relations between commercial property owners and their tenants when it comes to service charges. It builds on the first edition by prompting better communication, timely action and transparency, which will be of great benefit to both parties.”
Key points in the new code include:
• Occupiers should have the right to challenge service charges, and leases should include an alternative dispute resolution clause regarding the charges.
• The cost of improving or equipping a building should not be included in the service charge.
• Service charge operations should not be run to make either a profit or a loss, except for a reasonable commercial management fee.
• Service charges should be demonstrably fair and reasonable.
• Management fees should include a reasonable profit element to ensure the requisite element of professionalism.
samantha.mcclary@estatesgazette.com
