UK: Service charges in commercial property new code

Last Updated: 10 August 2006
Article by Mark Heighton

A revised service charge code for the industry was launched in June by the Royal Institution of Chartered Surveyors. It contains much more detail than the previous 2000 version and (unlike previous versions of the code) has been given the status of a guidance note by the RICS in order to recognise how important service charges are in todays property market and therefore is regarded as best practice.

To view the article in full, please see below:

Full Article

A revised service charge code for the industry was launched in June by the Royal Institution of Chartered Surveyors. It contains much more detail than the previous 2000 version and (unlike previous versions of the code) has been given the status of a guidance note by the RICS in order to recognise how important service charges are in today’s property market and therefore is regarded as "best practice".

The revised code has been given a lead in period so that it will come into effect for service charges commencing on or after 1 April 2007. It has been specifically designed for larger properties and if it is to be used for smaller properties this will require managers and occupiers to apply common sense as to the scale and applicability of the code.

The code has been endorsed by the BPF, BRC, BCO, BCSC and PMA. This new code aims to:

  • deliver a budgetable and forecastable part of occupiers’ overheads;
  • ensures service charges are "not a profit not for loss" and that are cash neutral to the owners income stream;
  • encourage transparency and communication in the relationship between landlords and tenants; and
  • remove service charges as an area of conflict.

The code will be used in 3 different situations. The first is when negotiating new leases. It is hoped that new service charges clauses in leases will specifically require adherence to the code. The second relates to lease renewals. Again it is hoped that (so far as is permitted by law) that renewed leases will be brought up to the standard as set out in the code. The third occasion in which the code will be used is in existing service charge clauses where it is hoped that these will be interpreted as far as possible in line with the principles and practices set out in the code, unless the lease specifically stipulates a different approach which therefore has legal force.

The code recognises that the areas that have caused most problem in the past relate to communication between property managers and users and the need for transparency in the accounting procedure. By being transparent both in the accounts and explanatory notes, the property manager will prevent disputes. Specific requirements of the code include:

  • a right for each occupier to challenge the propriety of expenditure where reasonable;
  • the owner will inform occupiers of the plans for the property in so far as they have an implication on the service charge;
  • regular meetings will be held with occupiers and a clear communication structure will be maintained;
  • when substantial works are planned, summary details of the results of tenders and the process gone through will be communicated to the occupier;
  • the manager will issue budgets to occupiers with an explanatory commentary at least one month prior to the start of the service charge year and reconciliations following the year end to all users within 4 months of year end;
  • service charge costs will not include such costs which are matters between the owner and an individual occupier for example enforcement of covenants for collection of rent and any costs arising out of the failure/negligence of the manager or owner;
  • the fee for the management services is the reasonable price for the total cost of managing the provision of the services at the location. This total price will not be linked to a percentage of expenditure. The total price will be a fixed fee for a reasonable period of time for example 3 years;
  • apportionment of costs to each occupier will be fair and reasonable and applied consistently throughout the property having regard to the physical size, nature of use and benefits to and use by the occupiers;
  • occupiers will not be charged through the service charge towards the costs attributable to unlet premises;
  • where services are provided for the benefit of specific occupiers only, these costs will be allocated only to the specific occupiers that benefit from them.

The terminology in the code requires managers to comply with the 86 parts of the code. The emphasis of the code is on communication and transparency and it is recognised that there are a number of issues on which more research is required. For example the steering group has recognised that the constraints of the lease renewal procedure under the Landlord and Tenant Act 1954 may cause problems to those hoping to get the code implemented. Also it is recognised that apportionment of service charges on mezzanine floors can cause problems and the steering group is calling for market research to be carried out as to what happens in practice in this area.

Finally it is important that the notes have been given the status of a guidance note. This means that the code is intended to embody "best practice". Although practitioners are not required to follow the advice and recommendations contained in the code it provides a security blanket when it comes to cases of professional negligence. Where an allegation of professional negligence is made against a practitioner, the court is likely to take account of any relevant guidance notes in deciding whether or not the surveyor acted with reasonable competence. It does not mean that a practitioner will be adjudged negligent if he has not followed the practice recommended in the code nor that he is free from negligence if he does follow the code. However where practitioners do depart from the practice recommended in the code they should only do so for good reasons.

Please click here for link to new code.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 08/08/2006.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.