Why the Updated RICS Service Charge Code Means Higher Standards for Property Managers
If you manage commercial property, the second edition of the RICS Service Charges in Commercial Property professional standard has been effective from 31 December 2025. It raises expectations around budgeting, certification, apportionment, service charge funds and transparency with tenants.
The standard is mandatory for RICS members and RICS-regulated firms. For others, it is still the main benchmark for good practice in commercial service charge management. This matters because service charge disputes often turn on whether the process was fair, reasonable and properly evidenced.
What the new code actually changes
The standard, often still called the Code, replaces the 2018 edition. It was published in June 2025 and reissued in October 2025 to clarify that it is effective from 31 December 2025. RICS has also said it expects the new provisions to be fully in place for service charges with 31 December 2026 year ends and beyond.
It is not an Act of Parliament and it does not override the terms of a lease. However, where a lease is silent or unclear, the standard is an important guide to what reasonable service charge management should look like. You can read the standard itself on the RICS website.
| Area | What is now expected |
|---|---|
| Management fees | Set at a fixed level for the service charge year, not based on a percentage of spend |
| Landlord profit | No profit from services beyond a reasonable commercial management fee |
| Year-end accounts | Approved accounts showing a true and accurate record of actual expenditure |
| Apportionment | A clear apportionment matrix provided with budgets and accounts |
| Service contracts | Competitive tenders or quotations generally at least every 3 years where appropriate |
| Service charge funds | Discrete or virtual bank accounts, with interest credited to the service charge account |
Fixed fees and no profit from services
Percentage-based management fees are no longer considered appropriate because they can reward higher spending rather than value for money. The standard expects management fees to be set at a level for the service charge year and to reflect the work required to manage and administer the services.
Landlords and managers should recover no more than 100% of the proper and actual costs of providing the services, plus a reasonable commercial management fee. Older leases may still contain percentage wording, and the lease remains important, but the direction of travel is clear. If your client money handling needs tightening, our guide to reconciling client money under RICS rules is worth a read, and the wider principles in RICS and ARMA best practice still hold.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
Certified accounts and independent review
Year-end accounts must show a true and accurate record of actual service charge expenditure and should be issued within 4 months of the service charge year end. Managers should approve and certify the accounts, confirming that the expenditure reflects the costs incurred in providing services to the property.
The standard also recommends independent accountant review of annual service charge statements, in line with ICAEW guidance. Done well, this reassures tenants rather than burying you in paperwork. Done badly, it is where disputes begin. Clean year-end service charge statements make certification simpler, and proper commercial property management accounting keeps the numbers in order across the year.
Apportionment, value for money and reserves
Tenants want to know why their share is what it is. The standard requires a service charge apportionment matrix to be provided with both the budget and the year-end account. Floor area remains the most common and often simplest method, while rateable value apportionments are no longer recommended because they may not reflect benefit or use of services.
If you have ever had a tenant question their percentage, you will know how fast that conversation sours without clear workings. Our note on apportionment methods explains the options, and we cover the common service charge mistakes that tend to trigger challenges in the first place.
Value for money is also more explicit. Costs should be kept under review, with contractors and suppliers generally asked to submit competitive tenders or quotations at least every 3 years where appropriate. Service charge monies, including reserve and sinking funds, must be held in discrete or virtual bank accounts, and interest should be credited back to the service charge account. That makes budgeting for repairs and reserves more than a finance exercise. It is part of good governance.
What you should do now
Start with your leases. Many require the manager to follow, or have regard to, the RICS standard. Then check your budget timetable, year-end certification, bank account structure and apportionment process.
If you also handle blocks of flats, the same discipline runs through residential property management accounting, and an outsourced finance function can carry the year-end load. A specialist accountant for landlords helps where mixed portfolios are involved, and where arrears creep in, our piece on handling arrears and disputes is a useful backstop.
Frequently asked questions
Is the RICS service charge code legally binding?
No. It is a professional standard, not legislation. However, it is mandatory for RICS members and RICS-regulated firms, and it is an important benchmark for reasonable service charge management.
When did the new code take effect?
It became effective from 31 December 2025, with RICS expecting full adoption for service charges with 31 December 2026 year ends and beyond.
Can landlords still charge a percentage-based management fee?
The standard says percentage-based fees are no longer considered appropriate. Management fees should be set at a level for the service charge year, although existing lease wording still has to be considered.
Do year-end accounts need an independent review?
The standard recommends that annual service charge statements are reviewed by an independent accountant, with the manager also certifying the accounts.
Get your service charge accounts in order
If the new standard has left you unsure whether your process holds up, speak to FHP Accounting. We work with managing agents and landlords as experienced accountants in Nottingham, and we can make sure your certification, apportionment and reserves stand up to scrutiny, including the property tax angle for owners. Call 0115 648 8686 or get in touch for a free consultation.
I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
