The Code serves as a benchmark of best practice for managers in the residential leasehold sector. It has been approved by the Secretary of State, meaning that courts and tribunals will take it into account when deciding cases.
We look below at what has changed from the 3rd edition and why the latest edition is essential reading for those who own, occupy or manage long leasehold residential property.
The key takeaways
· The RICS Code sets out industry best practice relating to the management and administration of residential service charges in England.· The Code has been approved by the Secretary of State and came into effect on 7 April 2026.
· Having been approved, it is admissible in evidence in court and tribunal proceedings.
· Significant changes include updates to reflect legislative changes such as the Building Safety Act 2022 and Fire Safety (England) Regulations 2022, new requirements around the approval of service charge statements, and obligations concerning insurance commissions.
· The 4th edition of the Code will be relevant to the day-to-day management of residential properties including blocks of flats, and when service charge disputes arise. It is essential reading for residential landlords, long leaseholders, managing agents and their advisers.
What is the RICS Service Charge Residential Management Code?
Under the Leasehold Reform, Housing and Urban Development Act 1993, the Secretary of State may, by order, approve any code of practice that promotes desirable practices in relation to any matters concerned with the management of residential property.The Code applies to leasehold properties in England where a variable service charge is payable.
It is primarily directed at landlords of residential properties and anyone who discharges management functions relating to the provision of services, repair, maintenance, improvements and insurance. It will, therefore, also be relevant to self-managed blocks, including where residents’ management companies and right to manage companies have been set up.
The 1st edition of the Code was published in 1997. The 2nd edition was published in 2009, and the 3rd edition was published in 2016.
The stated aims of the Code are to:
· Improve general standards and promote best practice, consistency, reasonableness and transparency in the management and administration of long leasehold residential property.
· Ensure the timely issue of all documentation including budgets and year end accounts.
· Reduce the causes of disputes and give guidance to resolving disputes where they occur.
The significance of approval by the Secretary of State is that a failure to comply with any provision of an approved Code is admissible in evidence in any proceedings before a court or tribunal. Any provision in the Code that appears to the court or tribunal to be relevant to any question arising in the proceedings will be taken into account in determining that question.
This is particularly important where one or more long leaseholders apply to the First-tier Tribunal (Property Chamber) (FTT) for a determination as to their liability to pay past or future service charges, because the tribunal can have regard to any failure to follow the Code on the part of the landlord or its managing agents.
What has changed in the 4th edition of the Code?
The 4th edition of the Code was developed by RICS in conjunction with a working group comprising various organisations involved in leasehold management, including the FTT, the National Housing Federation, The Property Institute, as well as housing associations, surveyors, block managers and solicitors.The new edition reflects advances in professional practice, and updates to legislation and regulatory requirements, including the following changes:
Key aims and objectives – a fourth key aim has been added to those set out in the 3rd edition. The new core aim is ‘to encourage sustainable, planned and cost-effective long-term management through the use of costed capital expenditure plans funded by adequate reserve fund collections’ (where the lease permits). Where the lease does not allow for payments in advance or reserve/sinking funds, landlords should engage with leaseholders to seek sufficient support to apply to the FTT to vary the leases to enable this or otherwise make leaseholders fully aware of future service charge cost implications so that they can make long-term saving provisions.
Building Safety Act 2022 – a new section has been added that provides an overview of the Act’s provisions, sets out the new duties the legislation imposes on residents and those with repairing obligations in taller residential buildings, and explains the role of managing agents in the new regime. A new Appendix D sets out the additional information that leaseholders should expect to receive if their flat is in a higher-risk building, who should provide it and when. Specific subsections deal with obligations relating to existing buildings that require remediation work, and the ‘leaseholder protections’ designed to safeguard long leaseholders from “crippling bills” associated with fixing building safety defects.
Leasehold and Freehold Reform Act 2024 – a brief section has been added in respect of this legislation, effectively as a placeholder. As the Code explains, whilst the Act has been passed into law, secondary legislation is required to bring many of its measures fully into force. These include a proposed ban on insurance commissions, the introduction of a standardised format for service charges; annual service charge reports; and new rights to request information about the service charge from the landlord. The Code will be updated when the new requirements finally come into force.
Housing associations – the 4th edition of the Code has been extended so that it applies to registered providers of social housing, which the 3rd did not.
Freehold houses and variable estate rent charges – the new edition of the Code has also been extended so that its core principles should be followed by those managing freehold estates, where freehold owners are required to pay estate charges for communal services. This particular section of the Code was outside of scope for approval by the Secretary of State; non-compliance is therefore not admissible in evidence in court and tribunal proceedings, but RICS members and regulated firms will still be expected to follow it.
Equality Act 2010 – a new section has been added on the duties imposed on landlords and managers not to discriminate in relation to people that have, or are believed to have, a ‘protected characteristic’ under equality legislation (such as on the grounds of disability, gender reassignment, pregnancy, race, religion or sexual orientation). The section explains the concepts of direct and indirect discrimination, and how the duty to make reasonable adjustments might apply in a landlord and tenant context.
Data protection – the section on the General Data Protection Regulations (GDPR) has been updated. Of particular interest, the Code notes the increasing use of CCTV equipment and the additional considerations where it is used, such as the need for appropriate signage, thought as to the location of monitors to avoid unintended viewing, operator licences, training for authorised users and a robust CCTV policy.
Money laundering – this section has been updated in light of further anti-money laundering regulations made in 2017 that require businesses to register with HM Revenue & Customs when they offer certain services. The Code recommends that managers carry out a risk assessment to determine whether they are covered by the regulations.
Approval of service charge statements and accounts – a new section has been added that explains the importance of approving the service charge statement/accounts - to confirm that they represent actual expenditure, and that the costs are in accordance with the terms of the lease – and ensuring that the person approving them acts with professional care, diligence, integrity and objectivity. Service charge accounts should be subject to an annual examination by an independent accountant.
Event fees – the Code requires that, where fees become payable by a leaseholder on the happening of an event, such as a sale or a subletting, these should be made clear and prominent, for example in any pre-sale information the manager provides.
Commissions – leaseholders should be notified every year of any remuneration, commission and other sources of income or other benefits received by the landlord or managing agent in connection with the placement or management of insurance or for the provision of services or utilities.
Management agreements – information has been included in the new edition about ensuring that the terms of engagement between landlords and managing agents clearly set out the services to be provided and that fees and service levels are clear, reasonable, proportionate and transparent. A separate section on accounting for other people’s money has been updated, including to clarify best practice for the handover process when the managing agent’s engagement comes to an end.
Fire risk assessments – this section has been updated to reflect the introduction of the Fire Safety Act 2021 and the Fire Safety (England) Regulations 2022, which include different obligations depending on the height of the building, such as requiring annual checks of flat entrance doors in residential buildings over 11m and additional duties in high-rise buildings over 18m regarding the provision of key building information to local fire services, monthly checks, reporting requirements relating to firefighting lifts, and wayfinding signage.
Insurance – the section on insurance has been updated, including to highlight additional regulatory obligations where a manager carries out specified insurance-related work, and to reflect guidance set out by the Ministry of Housing, Communities and Local Government with regard to commissions.
Why is the publication of the 4th edition important?
The Code itself makes it clear that it cannot override the terms of the lease, which are of critical importance. It should, however, be read in conjunction with the lease to help identify the best way forward in interpreting the lease terms to ensure the effective management of services and buildings.We regularly deal with disputes concerning residential service charges. Referring to the Code is an important part of assessing whether a landlord or managing agent has or has not provided a reasonable level of service.
From the landlord’s perspective, complying with the Code will hopefully reduce the number of grievances from leaseholders, assist with the resolution of disputes when they arise and minimise scope for successful service charge challenges.
Conversely, leaseholders can point to failures to comply with the Code in court and tribunal proceedings, in particular when seeking a determination from the FTT of their liability to pay service charges and administration charges.
The changes in the 4th edition concerning the building and fire safety align with recent legislative developments, and provide very important guidance about the management of taller residential buildings.
The sections concerning insurance commissions, annual service charge information and freehold estate management charges, follow recent Ministerial guidance and lay the ground for legislation to be brought into force in the future.
One amendment that perhaps does not grab the headlines, but that we very much support, is the increased emphasis on the need to plan and budget for future longer-term service charge expenditure.
Well-written leases will cater for this so that, for example, a reserve can be built-up to cover the cost of refurbishing or replacing expensive lifts, heating systems or roofs. Where leases do not provide for this, however, or they do but the terms are not followed, this can cause real practical and financial problems and is a common cause of disputes between landlords and tenants. Sensible forward planning is an essential part of good property management and benefits everyone.
