LRC response to the consultation on the draft 4th edition of the RICS service charge guide


Reply of the Law Reform Committee of the Property Litigation Association to the consultation by the RICS on a new professional statement for service charges in commercial property

The Property Litigation Association (PLA) responds to the consultation by the RICS on a new professional statement for service charges in commercial property as set out below.  PLA members specialise in all aspects of property litigation including commercial, residential and agricultural property law.  We are (more than 1200) lawyers who come from a variety of firms in terms of size and location.

  1. The proposal that the code is upgraded to an RICS professional statement is a welcome addition as it means that its provisions are mandatory.  However, this change will only reap rewards if the RICS is able to police surveyors’ behaviour. That in turn relies upon receiving complaints about the behaviour of others.  In other areas where RICS professional statements apply, there is a general reluctance to complain to the RICS about another surveyor’s behaviour and we have concerns therefore that the upgrade will have limited impact in practice.
  1. The core principles which have been highlighted are not new concepts, as many if not all are present in the existing Code. It is, however, a good idea to draw attention to these core principles so that there is absolute clarity regarding the management of service charges.
  1. The dispute resolution section has been enhanced.  We note that the ADR options which are considered are now limited to mediation and independent expert determination.  There is no mention of other forms of ADR, in particular the alternative forms mentioned in the existing Code, being Arbitration and Early Neutral Evaluation. We can understand why Arbitration is not recommended because of cost, but it is not clear why there is no consideration of ENE (apart from in the glossary).  Generally, we consider that all forms of ADR should be promoted in the Code but are not adverse to the Code recommending that mediation and independent expert determination are better suited than other forms of ADR.
  1. The new section regarding sinking funds, reserve funds, depreciation charges and forward funding is well thought through and will be a helpful addition to the Code.
  1. With MEES and EPCs becoming critically important, it is right that they should be mentioned in the draft new Code.
  1. We welcome the increased prominence given to the importance of surveyors maintaining independence and identifying where conflicts of interest may arise. By acting appropriately in relation to each should, we hope, minimise areas of dispute.
  1. There is a new appendix governing handover procedures (following the sale of property or the replacement of service charge manager).  The detailed guidance should greatly assist surveyors and landlords in smoothing these events along.