Service charges: an end to bad practice at handover?
Landlords who set service charges on their tenants can expect a new code of conduct to be published shortly.
Changes being considered by the Royal Institution of Chartered Surveyors (RICS) will affect how information about service charges is passed to new owners or agents.
Service charges and accounts have often been overlooked even when sales have been finalised. The RICS is anxious to end bad practice that have seen substantial sums of money in sinking or reserve funds being kept by vendors.
"Other problems have been caused because managing agents have refused to reconcile and complete accounts for fear of not being paid for the work involved," Michael Wear of Bond Pearce, says "RICS wants an exit strategy - including preparing accounts for handover - agreed at the appointment of any managing agent".
The institution is considering some changes to their code of conduct for services charges in commercial property.
The proposals will be published in an information paper which is intended to encourage good practice. The main proposal is that there should be a protocol to be followed where the building is sold or the managing agents change. The protocol envisages an ordered disclosure of information to the buyer or other successor so that there can be a smooth handover. In this way the existence and status of any reserve or sinking fund becomes apparent at an early point. Conversely, the buyer will know well in advance the extent of any arrears in the payments due on the service charge account. "This will help with answering the right questions at the right time" adds Michael Wear.
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