RICS Service Charge Code Consultation Commences

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

The Service Charge Residential Management Code (the Code), which sets out best practice for leasehold residential blocks and estates management, previously only applied to leaseholders of privately-owned developments. The Code is under review, and on 4 April 2022 the RICS launched a consultation on the draft Code. Subject to the ultimate approval from the Levelling Up Secretary, local authority housing providers and housing associations will follow the Code, with private registered providers of social housing falling under the amended Code for the first time.

The amendments to the Code aim to reduce causes of disputes and offers guidance on resolving disputes that do occur. The Code, and RICS professionals' evidence, is relied on in First-tier Tribunal hearings to settle disputes concerning service charges.

Further, the Code amendments will increase transparency around service charges and expenditure for the nearly 4.6 million leasehold properties in England. The draft Code aims to "improve general standards and promote best practice, uniformity, reasonableness and transparency in the management and administration of long leasehold residential property", by: 

• Standardising cost classifications and headings for service charge expenditure and budgets by way of industry standard cost classifications (set out in Appendix A2) to enable better cost comparisons and benchmarking between properties;
• Increasing the requirements for landlords and agents to justify and declare all commissions; 
• Requiring landlords or managing agents to provide leaseholders with a copy of a schedule of anticipated works and costs in a Planned Preventative Maintenance plan so leaseholders can plan for anticipated expenditure; and
• Increasing the requirement for agents and landlords to provide realistic service charge budgets for new developments.

These draft amendments "will improve consistency within the industry and transparency for leaseholders in relation to service charges, agents' fees, long term planned preventative maintenance plans and reserve funds". 

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