The second edition of the RICS Service Charge Code for commercial properties came into force on 31 December 2025, marking a significant milestone in the regulation of commercial property service charges.
The updated Code is mandatory for all Royal Institution of Chartered Surveyors (RICS) members and sets the benchmark for how service charges should be managed, administered, and accounted for across the commercial and mixed-use property sector. Whether you are a landlord, a tenant, a managing agent, or an adviser, the new Code will affect you.
Why the Updated Code Matters
Service charges have long been a source of friction in commercial property relationships. Disputes over the reasonableness of costs, a lack of transparency in budgeting and expenditure, and inconsistent management practices have historically created tension between landlords and tenants. The first edition of the Code went some way towards addressing these concerns, but the commercial property landscape has evolved since its introduction, and the second edition reflects that evolution.
The updated Code seeks to strengthen three fundamental principles: fairness, transparency, and accountability. It provides a comprehensive framework governing the entire lifecycle of service charge management, from budgeting and expenditure through to accounting and reporting.
Among its most significant provisions, the Code now imposes explicit mandatory timescales: managers must issue budgets, including an explanatory commentary, at least one month prior to the start of each service charge year and must provide tenants with approved year-end accounts showing a true and accurate record of actual expenditure within four months of the service charge year end. Where these timescales cannot be met, managers must provide a timely explanation of the delay.
Importantly, the Code is now mandatory for all RICS members, meaning that chartered surveyors, managing agents, and other RICS-regulated professionals must comply with its provisions as a condition of their membership. Non-compliance may result in disciplinary proceedings and reputational consequences.
For landlords and tenants alike, the practical effect is that the Code establishes a widely recognised industry standard against which service charge practices can be measured. Even where parties to a lease are not themselves RICS members, the Code is increasingly treated by the courts and by dispute resolution bodies as a key reference point when assessing the reasonableness and propriety of service charge arrangements.
Practical Implications for Tenants
From a tenant’s perspective, the updated Code is a welcome development. The emphasis on transparency means that tenants can expect greater visibility over how their service charge contributions are calculated, how funds are spent, and how any surpluses or deficits are managed. The Code reinforces the principle that managers must seek to recover no more than 100% of the proper and actual costs of providing services — in other words, landlords should not seek to profit from the service charge regime.
A new mandatory requirement obliges managers to provide a full service charge apportionment matrix with each budget and year-end account, clearly showing the detailed basis of calculation and the total apportionment per schedule for each unit, giving tenants the tools to verify how their individual liability has been calculated.
For existing tenants, the Code offers a framework against which current service charge practices can be reviewed. Where a landlord’s or managing agent’s practices fall short of the standards set out in the Code, tenants are in a stronger position to challenge those practices, whether through direct negotiation or through formal dispute resolution mechanisms.
What Landlords and Managing Agents Should Do Now
For landlords and their managing agents, the updated Code requires a disciplined approach to service charge management, including detailed budgeting, timely and transparent reporting, proper apportionment of costs, and clear communication with tenants throughout the process.
Service charge monies, including reserve and sinking funds, must be held in discrete bank accounts, and all interest earned must be credited to the service charge account. The Code also introduces expanded best practice guidance on environmental, social and governance (ESG) considerations, cautioning that while sustainable property management is encouraged, landlords must ensure that costs included in the service charge relate to genuine services and are recoverable under the lease.
Landlords and managing agents should undertake a thorough review of their current service charge practices to identify any areas where they may fall short of the Code’s requirements. This may involve updating internal procedures, revising standard documentation, improving the quality and frequency of reporting to tenants, and ensuring that all personnel involved in service charge management are familiar with the Code and trained accordingly. Where managing agents are engaged, landlords should satisfy themselves that those agents are RICS-regulated and committed to full compliance.
It is also worth noting that the Code places considerable emphasis on the early and proactive resolution of disputes. Where disagreements arise, the Code recommends mediation and independent expert determination as particularly effective methods of alternative dispute resolution (ADR), both of which are typically quicker and more cost-effective than litigation.
Looking Ahead
The second edition of the RICS Service Charge Code represents a meaningful step forward in the professionalisation and standardisation of service charge management in the commercial property sector. It reflects a broader trend towards greater transparency and fairness in landlord-tenant relationships, and its mandatory status ensures that its impact will be felt across the market.
