The new RICS Service Charge Code

November 10, 2011

The second edition of the RICS Code of Practice for Service Charges in Commercial Property (the “Code”) came into effect on 1st October 2011. 

As with the first edition of the Code, it is not mandatory but builds on the core principles to promote “best practice” promoting communication, transparency and timeliness. The Code affects landlords, tenants, managing agents and their respective representatives and it is hoped that whilst the Code is not law, as leases are renewed or new leases granted they will increasingly be drafted in line with the Code’s principles. The guidance notes also acknowledge that there will be occasions when using the Code is simply not appropriate.  However, in such circumstances, the reasons for not following the Code should be made clear to all parties.  

The guidance notes go on to state that owners and managers should be aware that, if an allegation of professional negligence is made against a practitioner, the court is likely to take into account any relevant guidance notes and, if appropriate to the circumstance, whether the practitioner has followed them. In the event that it has, a practitioner complying with the Code is unlikely to be considered negligent.

Full details of the Code can be downloaded from the RICS website:

http://www.rics.org/site/scripts/download_info.aspx?fileID=9649&categoryID=455

Reasonableness

In the recent case of Garside and another v RFYC Ltd and another [2011] UKUT, it was held that when determining whether service charge costs have been reasonably incurred, the financial impact on the tenant must also be considered.

In this case the tenant did not dispute that the works carried out were necessary and the cost reasonable but that they should have been phased over a period of time to spread the costs. On appeal the tribunal held that by giving “reasonable” a broad common sense meaning the financial impact on tenants must be considered.  Whilst landlords must now consider this in deciding when works are to be carried out and if the costs should be spread, tenants “cannot escape liability by pleading poverty”.

 


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