"It will help to better protect both landlords and tenants by avoiding costly – and often devastating - disputes over what can be a substantial business overhead."
RICS has launched new mandatory requirements to ensure service charges to commercial tenants are "transparent, upfront and fair" and that any costs incurred are in accordance with the terms of the occupational leases.
RICS says the launch of its professional statement ‘Service charges in commercial property’ is a "momentous step" in better regulating the activities of landlords and their agents, whilst protecting tenants from having to pay for "unscrupulous repair or maintenance costs".
The statement calls for any potential or future changes to service costs to be made clear and obvious to tenants at the outset, and that any costs not specifically mentioned in a lease will not be recoverable from the tenants. The professional statement also provides guidance on more technical matters, including the way in which service charge monies should be held within bank accounts.
The institute worked with property bodies representing owners, occupiers and managing agents – including BPF, BRC, BCO, PMA, Corenet, REVO, PMA, ICAEW and Law Society – to produce the recommendations, aiming to equally reflect the needs and opinions of landlords and tenants and the specific considerations of different sectors.
The changes come into effect in April 2019 to give adequate time for accounting procedural changes.
Paul Bagust, RICS global property standards director, said: "It is hugely encouraging to see all sides of the property industry collaborating and supporting this new document and committing to working to the highest professional standards.
"This professional statement offers best practice on ensuring occupiers are given clear and concise information on all of the service charges they can expect to pay up front. So, it will help to better protect both landlords and tenants by avoiding costly – and often devastating - disputes over what can be a substantial business overhead."