New professional statement for ‘Service Charges in Commercial Property’
A new professional statement for ‘Service Charges in Commercial Property’ has been issued by the SCSI to its members for comment before coming into effect in April 2020. The new statement will for the first time set out mandatory requirements for SCSI/RCSI professionals and firms in the specific area of Service Charges in the management of Commercial Property. This development represents a significant step forward in the better regulation of the actives of landlords and their agents whilst protecting the rights of tenants. It also reinforces the SCSI/RCSI’s commitment to setting the highest standards possible for the management and administration of service charges.
Code Compliance
The current service charge code is one of the most downloaded documents from the SCSI website. It has been highly influential in the adoption of best practice principles and procedures for service charges within the commercial property sector. It is increasingly used in legal judgements and referred to in leases.
Many landlords currently require their managing agents to comply with the code when delivering their services and often are appointing agents in order to deal with the time consuming and additional requirements that the code presents.
However there are instances when best practice has been simply ignored. It is expected that the new edition of the code will increase the level of compliance across the industry dramatically.
The new code with mandatory compliance will reinforce the need for professionals involved in managing commercial service charges to perform their role with diligence, integrity and impartiality. Professionals may face disciplinary consequences under the new code should they not adhere to the mandatory requirements specified by the code.
Best Practice Principles
Along with the mandatory requirements, which will represent the minimum acceptable standards of performance for firms and individuals involved, the statement will also include a set of best practice principles. The principles underpin and support the mandatory requirements and will focus on:
- Transparency of service charges
- Not profiting from provision of services
- Fair division of costs between occupiers
- Value for money
- Excluding certain items e.g. initial costs relating to the design and construction
As with the existing code the new professional statement cannot override the terms of existing leases.
The SCSI’s intention is that the increased regulatory importance of the statement will cause all parties to carefully consider its principles and requirements before entering into new leases.