Real estate investors and asset managers face a loss of revenue unless they comply with stringent new UK service charge requirements relating to service charge periods starting from 1 April 2019.

The Royal Institute of Chartered Surveyors (RICS) published a new professional statement in September 2018, “Service Charges in Commercial Property”, under which service charges will become subject to new mandatory requirements. These must be followed as a matter of professional obligation and are underpinned by RICS core principles. The statement also sets out best practice, but gives members the opportunity to depart from this for justifiable reasons, noting that “in rare circumstances strict compliance may not always be possible”.

The statement ups the ante in relation to potential service charge disputes which, even now, can have a significant impact on an owner’s time, costs and reputation.

Matters which are currently only “best practice” will be elevated by the statement to being compulsory, or very close to it. So, for example, the requirement to provide statements of annual expenditure within four months of the end of the service charge year has become a core principle. If the relevant manager misses the deadline, they would have to show that compliance was not possible due to unusual circumstances. Not that they merely forgot to comply or did not have the appropriate systems in place to enable them to comply.

Existing leases will not be directly overridden by the statement, so existing lease concessions will continue to apply. Meanwhile, it’s a good time to check that standard form leases for buildings are compliant with the new rules and list all of the services and expenditure which the landlord needs to recover. Failure to do so exposes a landlord to voids.

Ask your managing agents or in-house managers what they are doing to ensure compliance with the new rules, and ensure that you have the appropriate safeguards in place.