Housing association tenants of long leasehold flats are to be included under a revised service charge code, alongside other proposed changes announced as part of a consultation by RICS
Previous editions of the service charge code that were originally developed in 1997 only applied to leaseholders within privately owned developments.
It is used by the courts and in the ‘First-tier Tribunal (Property Chamber)’ to settle disputes about service charges, alongside evidence provided by RICS and other professionals.
Due to the increasing number of residential leasehold blocks which are owned and managed by social housing providers, the industry is now seeking agreement from the Levelling Up Secretary that will ensure housing associations and local authority housing providers follow the new code.
With around 4.6 million leasehold properties in England alone, the new service charge code impacts every leaseholder and the service charges they pay.
Proposed enhancements to the service charge code will ensure greater transparency in relation to service charges and associated expenditure.
What do the proposed changes to the code include?
- Enhanced requirements of agents and landlords to declare all commissions and a justification for receiving them.
- Additional requirement for landlords and agents to set realistic service charge budgets for new developments.
- Industry standard cost classifications to reflect the commercial service charge code and provide consistent standard headings for service charge budgets and expenditure.
With the increasing costs of managing blocks of flats including insurance premium rises, particularly where buildings need to be made safe, there is a need for a clear service charge code that helps guide landlords and managing agents on managing buildings, service charge funds, forward planning and keeping leaseholders informed.
Enhancements to to code will improve consistency within the industry
Antony Parkinson, senior specialist for Property Standards at RICS, commented: “Proposed enhancements to the Code will improve consistency within the industry and transparency for leaseholders in relation to service charges, agents fees, long term planned preventative maintenance plans and reserve funds.
“I encourage all leaseholders, landlords, registered providers, managing agents and anyone else affected by the Code to participate in the consultation and share feedback on the proposals.”
‘Promoting desirable practices in relation to the management of any residential property’
Jeff Platt, technical author of the new Service Charge Code, also stated: “Since the 1st Edition of the Code was published in 1997, Housing Associations and Local Authorities have evolved into large scale providers of leasehold, shared-ownership and rented homes where the costs of services and property management are recovered as variable service charges.
“Leaseholders and tenants paying those charges should expect to receive similar best practice management standards from all landlords, managers and managing agents.
“The proposed enhancements bring the Code into line with the Secretary of State’s powers to approve a Code of Practice designed to promote desirable practices in relation to the management of any residential property subject to a variable service charge.
“I encourage all landlords, managing agents, leaseholders and shared-owners to consider how the Code will benefit themselves and their consumers and to participate in the consultation by providing feedback on the proposals.”
