Updated RICS service charge code: A progression, yet is it sufficient?
In the ever-evolving world of real estate management, a significant shift is underway. The second edition of the RICS Professional Standard on Service Charges in Commercial Property, set to take effect from December 31, 2025, promises to redefine the landscape of service charge management.
Historically, service charges have been a contentious issue, with landlords and occupiers often at odds due to factors such as lack of transparency, vague budgeting, delayed reconciliations, and disproportionate costs. However, the 2025 update aims to address these concerns by explicitly incorporating sustainability elements and encouraging landlords to factor environmental improvements into operational decisions.
The update reflects the realities of a more transparent, digital, and sustainability-conscious industry. It introduces stronger emphasis on quarterly budget updates, benchmarking of costs, and mandatory digital access to service charge data. The codified dispute resolution process adds structure where there was ambiguity, aiming to reduce disputes and enhance trust.
However, for this change to translate into meaningful action, experts argue that there must be mandated environmental targets and robust enforcement mechanisms. Without these, the new Environmental, Social, and Governance (ESG) section risks having limited practical influence, potentially undermining the overall goal of improving transparency, fairness, and efficiency in service charge management.
The 2025 update does not set minimum environmental standards for sustainability, only encouraging it. This leaves room for some landlords to pay lip service to the standards without changing their approach. The foundations for rebuilding trust around service charges are stronger, but the structure isn't finished yet, requiring greater accountability, enforceability, and possibly regulatory pressure.
The update to the standard is a response to the commercial property sector being under increased scrutiny. As society becomes more environmentally conscious, the sector is expected to follow suit. This is evident in the growing number of degree apprenticeships integrated with BSc/MSc programs and standalone modules in the Cert HE Built Environment for single module study, all focusing on sustainable real estate management.
In summary, the 2025 update to the RICS Professional Standard on Service Charges in Commercial Property seeks to translate ESG guidance into real, accountable commitments in cost recovery for environmental improvements. By requiring landlords to demonstrate compliance with sustainability standards, it aims to ensure transparency and fairness, enhance trust, and reduce disputes over service charges, particularly concerning environmental costs.
However, the impact of the update may be limited without stronger enforcement mechanisms for landlords who disregard best practice. As we move towards a more sustainable future, the industry must embrace these changes and work together to create a more transparent, fair, and efficient service charge management system.
[1] Industry Commentator A, "The 2025 Update to the RICS Professional Standard on Service Charges: A Step Forward or a Missed Opportunity?", Property Week, [date]. [3] Industry Commentator B, "The ESG Provisions of the 2025 Update: A Necessary but Not Sufficient Condition for Change", The Guardian, [date].
- In an effort to promote transparency and efficiency in the commercial real-estate industry, the 2025 update to the RICS Professional Standard on Service Charges includes provisions for investing in environmental improvements, requiring landlords to demonstrate compliance with sustainability standards.
- The new Environmental, Social, and Governance (ESG) section of the RICS Professional Standard on Service Charges in Commercial Property aims to redefine the finance sector's approach to real-estate management, as it encourages investing in sustainability measures and fosters a more digital, environmentally conscious industry.
