In buildings with multiple occupants, the owner often retains responsibility for common services provided for the benefit of the building's inhabitants, such as maintenance of communal areas. A service charge enables the costs of such common services to be shared among several occupiers, but frequently give rise to disputes between landlords and tenants.
The Royal Institution of Chartered Surveyors (RICS) has published a new code of practice on Service Charges in Commercial Property that aims to provide a clear set of recommendations to benefit all sides. The code, which will be brought into force on 1 April 2007, applies in England and Wales, but provides pertinent guidance on the most desirable structure for a service charge in relation to all types of properties. The provisions of the code should be borne in mind when implementing a service charge in new leases and at lease renewal.
The guidance aims to ensure service charges operate on a "not for profit, not for loss" basis, and advocates the use of manager's budgets and recognised methods of apportionment in a move to promote greater transparency of costs and discourage hidden mark-ups. Overall, the code aims to eliminate poor communication as the single biggest issue giving rise to dissatisfaction over a poorly managed service charge.
The code is available to view on the RICS's Service Charge website: http://www.servicechargecode.co.uk/.