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RICS Service Charge Residential Management Code : What are the implications for those who manage residential leasehold properties?

The RICS Service Charge Residential Management Code, 3RD Ed (“Code”) came into force on 1 June 2016. Only minor amendments have been made from the 2nd Edition.

The Code applies to private landlords and managers of leasehold properties of flats, houses and all other dwellings in England, where a service charge, which varies according to the costs incurred or to be incurred, is payable. It does not apply to commonhold properties.

NB: There is a separate RICS code of practice, which applies where tenants pay rent only – RICS Rent Only Residential Management Code.

For the purposes of the Code, the “manager” can be the landlord, a member of staff of a corporate landlord, a managing agent, or a group of flat owners who have formed themselves into a formal management or maintenance company (a Residents’ Management Company), (which could be limited by share or guarantee), or a recognised or ‘informal’ tenants’ association. It could also be a Right to Manage company set up in accordance with the Commonhold and Leasehold Reform Act 2002.

The Code sets out a procedure for dealing with the whole area of management of residential leasehold properties for managers. It provides an exhaustive list of guidance to managers from not only their duties and responsibilities, but through to accounting for other people’s money, dealing with disputes between tenants, repairs, insurance and complaints about managers and managing agents.

Key points of the Code:

  • As it applies to a wider audience than simply a landlord; it acts as an over-arching procedural code to all those persons and bodies (as defined as managers), in respect of leases, managing agent agreements, service charge agreements, residents’ associations articles of association, etc.
  • It sets out the “should” procedural expectations for managers of residential leasehold properties, as well as the “must” legal obligations placed on landlords, and others where applicable.
  • It should be used by managers as a helpful checklist, to ensure that they are complying with their should and must duties and obligations.
  • Managers should always consider the Code when taking management decisions and in conjunction with all and any other statutory requirements, terms of the lease or tenancy agreement, cost effectiveness, convenience, efficiency, reasonableness and the quality of service.
  • The existence of the Code and where it can be seen and/or purchased, should be brought to the attention of all tenants of the residential leasehold dwellings.

Implications for Managers

The contents of the Code may be used in evidence and taken into account, if relevant, in court and tribunal proceedings, especially those for the appointment of a new manager where landlords or managers have failed to comply with the Code (Section 24 of the Landlord and Tenant Act 1987, as amended by section 85 of the Housing Act 1996.)

Whilst compliance by managers of the guidance contained in the Code is not mandatory, managers should be able to justify departures from it.

In light of the ramifications in court or tribunal proceedings detailed above, it seems that managers should be prepared to justify any departure by them from the Code in tribunal or court proceedings.

The Code expects a manager to understand their statutory obligations in respect of anti-discrimination or anti-harassment law, prevention from eviction, quiet enjoyment of property, etc. Furthermore, that any contract between a landlord and managing agent is normally governed by the Supply of Goods and Services Act 1982 and Unfair Terms in Consumer Contracts (Amendment) Regulations 2001 (SI 2001/1186)) – that services shall be provided to a reasonable standard, time and cost.

However, what the guidance aims to do is to codify all those manager duties detailed in the documentation regarding the tenant occupation of the residential leasehold property as well as in statute and case law, into one procedural Code. The Code can be seen as a reference book for managers in dealing with all management of residential leasehold property matters, and to be invoked by tenants when disputes arise.


 

June 2016

 

Key Contact

Lucie Barnes