RICS to update service charge Code of Practice

RICS have issued a Draft Professional Statement, which they propose as an update to the current Third Edition of the Code of Practice for Service Charges in Commercial Property.

The draft consultation version of the current Code of Practice has a target implementation date of 1st April 2018. The consultation process runs from 25th October until 6th December 2017.

All interested parties are invited by RICS to review the proposals and comment online, by visiting this link:

https://consultations.rics.org/consult.ti/servicechargescommercial/consultationHome

As one of the leading suppliers of property management and accounting software, Trace Solutions have been recognised by RICS as a key stakeholder in the consultation process.

Our initial review of the proposals has identified the main difference between the current and proposed version: their intention to reclassify the Code of Practice as a ‘Professional Statement’. This will make the Code mandatory under RICS rules, with key issues highlighted in the proposal as “must do’s”.

It does not appear that we will need to make any significant changes to our software to support your compliance.

Initial analysis suggests some of the key changes are:

• All parties “must” act in accordance with RICS Rules of Conduct
• Service charge apportionment schedule for the property “must” be provided annually to the tenants
• Owners and managers “must” not seek to recover more than 100% of service charge costs
• Service charge budgets “must” be issued annually to tenants
• Signed statements of actual expenditure “must” be provided annually to tenants
• All recoverable expenditure “must” be in accordance with the terms of the lease
• Service charge funds “must” be held in discrete or virtual bank accounts
• Interest on service charge accounts “must” be credited to the service charge

We strongly advise our clients to review the RICS proposals yourselves, as it may require changes to your processes or working practices. We ourselves will continue to carry out a full review of the proposals and will issue a further update at the end of November.

In the meantime,  if you have any other comments or concerns at this stage, please do not hesitate to contact your Account Manager.