The New RICS Service Charge Code: What It Means for Landlords, Tenants & Property Managers

Editor’s Note – Updated November 2025
Since we first published this article in July, the Royal Institution of Chartered Surveyors (RICS) has issued the amended Second Edition (October 2025 reissue) of its Service Charges in Commercial Property Professional Standard.
This version confirms the Code is effective from 31 December 2025, applying to all service charge budgets and reconciliations issued from 1 January 2026 onwards. It also reinforces key updates around budgeting timelines, management fee transparency, procurement reviews, and tenant engagement, with new RICS templates to support voluntary funding and retention agreements.

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The commercial property sector is about to see significant changes in how service charges are managed, with new mandatory standards coming into effect on 31 December 2025. The Royal Institution of Chartered Surveyors (RICS) has released the long-awaited second edition of its Service Charges in Commercial Property professional standard, marking a fundamental shift toward greater transparency, fairness, and operational efficiency in an often contentious area of property management.
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At Re:volve Real Estate, we welcome this update as a much-needed evolution of best practice, one that enhances trust between landlords and tenants while providing clearer frameworks for property managers. We believe strongly that raising standards isn't just good practice; it's good business.

​A Professionally Endorsed Standard
The new edition is mandatory for all RICS-accredited professionals, establishing a minimum expected level of compliance. Developed by an expert group representing key industry bodies including the British Property Federation, British Retail Consortium, The Law Society, and UK Hospitality, this update builds on the success of the 2018 edition.
The standard aims to improve uniformity, fairness, and transparency while offering robust guidance to landlords, tenants, solicitors, and property managers alike.

As Paul Bagust, RICS Head of Professional Practice, explains: "The increased breadth and depth of this standard will mitigate disputes and accelerate dispute processes towards conclusion, improving transparency, trust and confidence in all matters related to commercial service charges."

Peter Forrester FRICS, co-author of the update, notes: "The second edition continues the evolution, rather than revolution, of industry best practice guidance in the management and administration of service charges. It reinforces the need to operate service charges with professional scrupulousness, diligence, integrity and impartiality."
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Jonathan Lovejoy MRICS, co-author, adds: "The truly collaborative process allowed us to incorporate points raised by all parties objectively and professionally. This new release strikes a balanced perspective for both landlords and tenants ensuring it continues to shape the very best practice in service charge management."

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Three Game Changing Tools for Property Management

1. Retaining Collected Funds for Deferred Works
Service charge budgets sometimes include works that are delayed for valid reasons - supply chain issues, access constraints, or contractor availability. Previously, this led to confusion, unexpected credits, and sharp budget increases the following year.
The new Code provides a formal mechanism to retain already collected funds for works that will take place in the next service charge period.

These funds are:

• Clearly earmarked for the specified works
• Held in an interest-bearing account
• Reported transparently as "agreed retention of funds already collected"

This avoids unnecessary budget reissues and supports better year-on-year forecasting for both landlords and tenants.
 
2. Forward Funding Major Projects

Larger projects such as roof renewals or major plant replacement often strain tenant cash flow if recovered all at once. A £500,000 roof replacement, for example, could create significant financial pressure when demanded as a single payment.

The updated Code introduces forward funding arrangements that allow landlords to:

• Begin collecting contributions in advance, spread over multiple years (for instance, that £500,000 roof project could be spread over 3-4 years)
• Hold funds in trust accounts, separate from general service charge income
• Offer tenants a smoother, more predictable financial commitment

The benefits are twofold: landlords can plan more confidently while tenants avoid the shock of one-off demands. These agreements sit outside lease provisions, requiring mutual agreement and, where appropriate, legal advice.
 
3. Payment Plans for Deferred Recovery

Sometimes urgent works must proceed immediately, but tenants may struggle with large, lump-sum recovery in a single year. Essential fire safety works costing £200,000, for example, could be recovered over 24 months rather than demanded immediately.
The new standard allows landlords to fund works upfront and recover costs gradually through structured payment plans with key safeguards:

• Recovery over an agreed number of years
• No interest charged, provided instalments are paid on time
• Protection for vacating tenants via clear repayment terms
• Transparent inclusion in service charge accounts under "deferred recovery"

​This option is particularly valuable for essential but unbudgeted remedial works and demonstrates commitment to long-term tenant relationships.

What This Means for You

For Landlords: The new Code provides tools to manage large capital expenditure more strategically, potentially improving tenant retention and reducing disputes. However, you'll need to review your current practices and ensure compliance with new mandatory timeframes.

For Tenants: Greater transparency and predictability in service charge management, with new options to spread large costs over time. You'll also benefit from clearer dispute resolution processes and enhanced protection against unreasonable charges.

For Property Managers: New mandatory requirements mean reviewing current procedures and systems. However, the enhanced framework provides stronger defenses against challenges and clearer guidance for complex situations.
 
From Compliance to Commercial Common Sense

The updated Code recognises that service charge management isn't always black and white. It introduces tools that support balanced, well-judged decisions without losing sight of professional obligations.

Whether it's deferring recovery, forward funding major works, or retaining funds for delayed projects, the focus is on clarity, flexibility, and accountability. The new guidance empowers landlords and managers to approach complex situations fairly, with full transparency for occupiers.

At Re:volve, we see this as more than technical compliance, it's about applying sound judgment, communicating clearly, and making decisions that stand up to scrutiny.

Anna Main, Managing Director of Re:volve Real Estate, says: "This updated RICS Code reflects how commercial property management is evolving, balancing professional standards with practical flexibility. At Re:volve, these principles guide our daily work to build trust and deliver clarity for both landlords and tenants."
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How Re:volve Can Help

With the new standard becoming effective on 31 December 2025, now is the time to prepare. At Re:volve, we can help you understand what these changes mean for your specific situation:

• Compliance Reviews: Assess your current practices against the new mandatory requirements
• System Alignment: Ensure your procedures and documentation meet the enhanced standards
• Strategic Planning: Explore how the new tools could benefit your property portfolio
• Stakeholder Education: Help communicate changes to tenants and other stakeholders

 
These principles are already embedded in our day-to-day approach:

• Clear, timely and well-supported budgets and reconciliations
• Strategic cost recovery aligned with asset performance and long-term value
• Proactive occupier engagement to reduce disputes and build trust
• Robust financial controls and reporting fully aligned with the Code's mandatory requirements

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Looking Ahead

The October 2025 reissue of the RICS Service Charge Code provides final clarity on compliance expectations, timing, and professional accountability. With the standard becoming fully effective from 31 December 2025, all stakeholders — landlords, tenants, and managing agents — should now ensure their 2026 budgets, systems, and reporting align with the mandatory requirements.
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At Re:volve Real Estate, we’re already implementing these principles through early budget reviews, enhanced commentary templates, and transparent communication with occupiers. These changes don’t just meet compliance — they reinforce our commitment to fairness, accountability, and long-term trust across every service charge we manage.​
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Let's talk. Contact us today to see how Re:volve Real Estate can support your compliance with the new standard and drive better outcomes for everyone involved.