The Royal Institution of Chartered Surveyors (RICS) has released the Second Edition of its Service Charges in Commercial Property Professional Standard, effective from 31 December 2025. Replacing the 2018 edition, the update marks a significant evolution in how commercial property service charges should be administered.
Although not a legal requirement, the Professional Standard becomes mandatory for all RICS members, meaning regulated firms must comply or clearly explain any departure from the guidance. For owners, occupiers and managing agents, this is not simply a technical update – it reflects a wider push to reduce disputes, modernise processes and align service charge practice with ESG expectations.
Revolution – what has changed?
Several of the most notable changes aim to improve accountability, transparency and consistency across the industry.
Management fees must now be presented as a clear, fixed cost, rather than a percentage of overall expenditure. This prevents fees from being obscured within other cost headings and enables occupiers to understand precisely what they are paying for. It is also now mandatory for RICS members to disclose the basis of the appointment of the managing agent, including a summary of duties and confirmation that any non-service-charge activities are funded by the landlord.
In support of modernisation, the RICS now requires a full open-book approach to information requests. Members must now use digital systems, where possible. When a building changes ownership or management, a closing statement of expenditure must be approved by the outgoing manager and provided to the incoming party within four months of completion, reducing one of the most common causes of dispute during handovers.
Evolution – refining the first edition
Many of the original principles remain, but with sharper and more prescriptive requirements.
Timeliness, previously encouraged, is now compulsory. Annual budgets must be issued one month in advance of the service charge year, and year-end reconciliations must be completed within four months. This is intended to promote better communication and reduce uncertainty for occupiers planning their own budgets.
Governance expectations have also been more closely tied to those expected by the Institute of Chartered Accountants in England and Wales’ TECH 09/14BL. Where required by the lease, a formal sign-off statement for year-end accounts must be supported by an independent review – a step designed to increase confidence in the accuracy of financial reporting.
Cost-apportionment guidance has been expanded, with greater emphasis on floor-area-based apportionment as the fairest approach. Rateable-value-based methods are now discouraged unless the lease expressly requires them. As ever, the lease is king, and property managers will need to ensure their methodology aligns with contractual machinery.
The updated Standard requires disclosure of insurance commissions and insurance claims, helping occupiers understand the rationale behind premium recharges.
Status quo – principles that remain constant
Despite these changes, the core aim of the Standard is unchanged: to promote fairness, transparency and collaboration. Service charges must reflect the terms of the lease, costs must be reasonable, and tenants should not subsidise landlord improvements or voids. The Standard remains a vital reference for negotiations and dispute resolution, even for parties who are not RICS-regulated.
Why this matters now – practical implications
The revised Standard arrives at a time of increased scrutiny of operational efficiency, ESG performance and value for money. For landlords and managing agents, the changes present both challenges and opportunities.
For landlords and managers, stronger governance and tighter deadlines will require more robust accounting systems and clearer internal processes. Digital-record requirements may prompt investment in property management platforms, and an increase in transparency obligations – particularly around insurance and procurement – may require cultural as well as procedural change.
Occupiers, too, face changes. Earlier budgets and more detailed reporting can improve financial predictability, while open-book practices and clearer disclosure reduce uncertainty and may help prevent disputes. Furthermore, the emphasis on ESG and stewardship could accelerate improvements in building performance and operational efficiency.
Ultimately, the Second Edition signals a shift towards more accountable, transparent and digitally enabled service charge management. For firms willing to embrace this, it provides an opportunity to demonstrate professionalism, build trust and deliver a better occupier experience – exactly what many stakeholders are currently seeking from their property advisers.
