by Gerry Fox

New lease of life

The new Service Charge Residential Management Code provides a detailed legislative and advisory framework for successful property management, explains Gerry Fox.

he second edition of the RICs Service Charge Resi-

Tdential management Code came into affect on 6 april, following its approval by the Secretary of State for England under section 87 of the leasehold Reform, housing and urban Development act 1993.

Since the publication of the first edition in 1997 the code has been reprinted many times, indicating its continued unique place in the leasehold residential management sector. The code now incorporates the changes brought about by the Commonhold and Leasehold Reform Act 2002, although not all of the 2002 Act has yet been implemented.

The code is essential for all those who deal with leasehold residential property management, especially those practitioners with small portfolios and those who are new to the sector. It tackles all areas of residential property management involving service charges, including the appointment of managing agents and the services normally included in annual fees.

hundreds of opinions

In setting out good practice, it provides guidance as well as valuable decision-making support. This is particularly important in the management of blocks of flats, where, instead of a single client, managers have hundreds of opinions to contend with.

When the first edition was published, some managers were fearful that the code would be used as a weapon against them. In fact, in a sector where lack of understanding of the duties and obligations of the various parties can lead to problems, it has become accepted as a useful tool for managers and leaseholders alike. While it continues to place burdens on practitioners, it does dispel doubts over what can be expected of managers and recognises that the level of service will usually be directly related to the amount of the fee. The code may be used in evidence and taken into account in court and tribunal proceedings.

The layout, which is unchanged, signals what is current legislation and what is good practice. Wherever legislation is referred to, there are clear margin notes giving the details of the relevant Act. The distinction between legislative requirements and good practice is clear in the text, too, through the use of ‘must’ for the former and ‘should’ for the latter.

sourCe of LearninG

The topics are presented in different sections of the code, with the text repeated where relevant. This recognises that the document is used as a source of reference, as well as a source of learning and users of the code will search for information from different directions. This is especially so considering that it is used by residents and their advisors, as well as managers. The sections of the code are:

1 Definitions 2 Appointment and charges of managing agents 3 Manager’s duties/conduct 4 Accounting for other people’s money 5 Right to Manage 6 Service charges, ground rent and administration charges 7 Services 8 Budgeting/estimating 9 Reserve funds 10 Accounting for service charges 11 Audit of service charge accounts 12 Contractors 13 Repairs 14 Work to extend a block or new phase 15 Insurance 16 Provision of information 17 Residents’/Tenants Associations 18 Consultation 19 Disputes between occupiers 20 Complaints and disputes about managers and managing agents by tenants. 21 Arrears of service charges

There are appendices dealing with lease variations and the statutory rights of tenants. Two further appendices have been added that are not part of the approved code; they list useful regulations and guidance documents and give additional advice to landlords, tenants, and agents.

The code presents legislation and guidance in an accessible format to minimise ambiguity and improve understanding between leaseholders and managers. It makes clear that there are responsibilities on all the parties involved, many of them provided for in the lease and increased in no small measure by legislation. Where there is a gap in understanding, the code seeks to bridge and facilitate a satisfactory outcome.

Gerry Fox chaired the RICS Service Charge Management Working Party. He is Head of Compliance at Peverel Property Management Group.