If you are a landlord or tenant requiring advice or assistance with service charges in commercial property, the expert lawyers here at Lewis Nedas can help.
As the owner of the property, the landlord is responsible for providing services and utilities to the property including; heating, lighting, water, gas, electricity, maintenance and insurance where relevant. The landlord must almost always include a service charge in the tenant’s lease agreement in order to finance these services and utilities. The lease agreement will contain the service charges due and the period they are due for, which is usually based on how much of the property the tenant occupies. Service charges should be calculated fairly and in accordance with the law and accompanying guidance.
This article looks at the recently published Professional Statement by The Royal Institution of Chartered Surveyors (RICS) Professional Statement: Service Charges in Commercial Property (first edition) and provides an overview of the guidance included in the statement.
If you require specific advice on service charges, or any other matter relating to commercial property, contact our team today. You can get in touch by calling 020 7387 2032 or complete our online enquiry form and we will get back to you right away.
Guide to Service Charges in Commercial Property 2019
The recently published Professional Statement will apply to all service charge periods commencing April 2019. It outlines best practice for the administration and management of service charges, superseding the current third edition of the RICS Code of Practice on service charges in commercial property. At present, RICS members are not obliged to follow the Code of practice; however the soon to be implemented Professional Statement includes mandatory obligations for RICS members and firms regulated by the RICS when managing of service charge accounts.
What are the Mandatory Requirements in the Professional Statement?
The Professional Statement includes nine mandatory requirements. These are:
- Any recovery of expenditure sought by the owner and manager must be in accordance with the terms of the commercial lease for the property.
- Managers and owners must never seek more than 100 percent of the actual costs in the provision and supply of services.
- Service charge budgets must be issued annually to all tenants alongside explanatory commentary which explains the service charges.
- Owners and managers must also ensure that all tenants are provided with an approved set of service charge accounts on an annual basis.
- All tenants must also be provided with a service charge apportionment matrix annually.
- Money held in relation to service charges must be held in a discrete bank account.
- Any interest earned on money held in relation to service charges must be credited to the account.
- Practitioners acting on behalf of tenants must advise that where a dispute arises, tenants may only withhold a service charge payment amount which reflects the actual sum in dispute.
- Practitioners acting on behalf of landlords must advise that where a dispute has been resolved, a service charge that has been raised incorrectly must be adjusted immediately.
These requirements are mandatory but are also supported by a set of guiding principles and very detailed best practice reports, guidance and sample service charge reports. The Professional Statement also provides guidance notes on interpreting, negotiating, operating and drafting of commercial leases – but these principles do not override the actual terms of the lease.
What may be a difficult legal position for many landlords and tenants is where the terms of an existing lease are not in compliance with the mandatory requirements. If you are in this situation, you should seek proper legal advice on the specifics of the lease and your circumstances right away.
Contact our Property Litigation Solicitors Mayfair and Throughout London Today
A tenant should always be aware of what they are being billed for when the landlord undertakes work relating to the premises. Likewise, landlords must be aware of their accounting obligations or else risk exposing themselves to criminal liability. In the course of dealings, parties to a lease agreement should be fully informed of their statutory obligations and recommendations under the RCIS Professional Statement pertaining to service charges.
At Lewis Nedas, our team of Property Litigation Solicitors have broad experience in both commercial and residential property litigation. We have successfully advised clients with highly complex and multi-faceted cases. To speak with one of our Property Lawyers, please contact us on 020 3811 3589 or complete our online enquiry form.
As the owner of the property, the landlord is responsible for providing services and utilities to the property including; heating, lighting, water, gas, electricity, maintenance and insurance where relevant. The landlord must almost always include a service charge in the tenant’s lease agreement in order to finance these services and utilities. The lease agreement will contain the service charges due and the period they are due for, which is usually based on how much of the property the tenant occupies. Service charges should be calculated fairly and in accordance with the law and accompanying guidance.
This article looks at the recently published Professional Statement by The Royal Institution of Chartered Surveyors (RICS) Professional Statement: Service Charges in Commercial Property (first edition) and provides an overview of the guidance included in the statement.
If you require specific advice on service charges, or any other matter relating to commercial property, contact our team today. You can get in touch by calling 020 7387 2032 or complete our online enquiry form and we will get back to you right away.
Guide to Service Charges in Commercial Property 2019
The recently published Professional Statement will apply to all service charge periods commencing April 2019. It outlines best practice for the administration and management of service charges, superseding the current third edition of the RICS Code of Practice on service charges in commercial property. At present, RICS members are not obliged to follow the Code of practice; however the soon to be implemented Professional Statement includes mandatory obligations for RICS members and firms regulated by the RICS when managing of service charge accounts.
What are the Mandatory Requirements in the Professional Statement?
The Professional Statement includes nine mandatory requirements. These are:
- Any recovery of expenditure sought by the owner and manager must be in accordance with the terms of the commercial lease for the property.
- Managers and owners must never seek more than 100 percent of the actual costs in the provision and supply of services.
- Service charge budgets must be issued annually to all tenants alongside explanatory commentary which explains the service charges.
- Owners and managers must also ensure that all tenants are provided with an approved set of service charge accounts on an annual basis.
- All tenants must also be provided with a service charge apportionment matrix annually.
- Money held in relation to service charges must be held in a discrete bank account.
- Any interest earned on money held in relation to service charges must be credited to the account.
- Practitioners acting on behalf of tenants must advise that where a dispute arises, tenants may only withhold a service charge payment amount which reflects the actual sum in dispute.
- Practitioners acting on behalf of landlords must advise that where a dispute has been resolved, a service charge that has been raised incorrectly must be adjusted immediately.
These requirements are mandatory but are also supported by a set of guiding principles and very detailed best practice reports, guidance and sample service charge reports. The Professional Statement also provides guidance notes on interpreting, negotiating, operating and drafting of commercial leases – but these principles do not override the actual terms of the lease.
What may be a difficult legal position for many landlords and tenants is where the terms of an existing lease are not in compliance with the mandatory requirements. If you are in this situation, you should seek proper legal advice on the specifics of the lease and your circumstances right away.
Contact our Property Litigation Solicitors Mayfair and Throughout London Today
A tenant should always be aware of what they are being billed for when the landlord undertakes work relating to the premises. Likewise, landlords must be aware of their accounting obligations or else risk exposing themselves to criminal liability. In the course of dealings, parties to a lease agreement should be fully informed of their statutory obligations and recommendations under the RCIS Professional Statement pertaining to service charges.
At Lewis Nedas, our team of Property Litigation Solicitors have broad experience in both commercial and residential property litigation. We have successfully advised clients with highly complex and multi-faceted cases. To speak with one of our Property Lawyers, please contact us on 020 3811 3589 or complete our online enquiry form.
