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Seven years on, the RICS has now published the 2nd Edition of its service charge standard, effective 31 December 2025. And much like the 1st Edition, it lands at a moment where the industry again feels ready for evolution. But this time the change is not driven by the need to bring the sector up to scratch; instead, it reflects how far we have already come.

The 2nd Edition builds squarely on real market experience — the good, the challenging, and the lessons learned along the way. It strengthens the framework where needed, clarifies areas that caused friction, and supports a more consistent, confident approach across the industry.

Two points stand out immediately:

• The nine mandatory principles remain at the heart of the code, signalling that the RICS believes the industry is now comfortable operating within these minimum standards.

• Market learning is embedded throughout — especially around cashflow, disputes, mixed‑use schemes, safety legislation and financial reporting.

 

Mandatory requirements: now part of the industry’s DNA

In 2018, the nine mandatory requirements represented a major step change. They set clear rules for recovery, budgeting, accounting, interest treatment, apportionment, and conduct during disputes. These principles are retained and reinforced in the 2nd Edition, and their continued presence is telling.

RICS has judged that the core framework remains sound, workable and widely adopted. The original concerns that mandating certain behaviours would be too burdensome no longer apply; the industry has matured. Most managing agents now work comfortably within these parameters, and indeed, expect to.

The RICS’ confidence in restating these principles, rather than diluting or revising them, is perhaps the strongest endorsement of how far property management practice has progressed over the past decade.

 

A more transparent, accountable approach to timelines

The first edition introduced firmer expectations around the issuing of budgets and year‑end accounts, but application varied.

The 2nd Edition now formalises these expectations more clearly:

• Budgets must be issued at least one month before the start of the service charge year.

• Year‑end accounts should be provided within four months of year end.

Crucially, if these deadlines cannot be met, the updated standard requires proactive communication, explaining why and when the information will be issued. Silence is no longer acceptable.

This marks a shift from mandatory content to mandatory communication, reflecting how important timely dialogue has become in managing modern multi‑let buildings.

 

Market learning in action: the industry challenge, now recognised and addressed

One of the most significant lessons since the first edition has been the impact that payment disputes can have on building operations. Across the industry, managing agents have repeatedly encountered situations where occupiers — unable or unwilling to make a part‑payment — withheld the entire service‑charge demand. Even small disagreements could halt full payment, creating immediate cashflow strain and delaying essential works.

This is a reality familiar to every managing agent. Most of us have sat on both sides of the table:

• advocating for payment to maintain services,

• and supporting tenants who felt charges were unclear or incorrect.

The consequences of full non‑payment were predictable but damaging: delayed works, contractor issues, increased arrears, safety concerns, and further disputes caused simply because necessary services could not proceed.

Recognising this persistent issue, the 2nd Edition incorporates the principle confirmed by the Supreme Court in Sara & Hossein Asset Holdings Ltd v Blacks Outdoor Retail Ltd: tenants should pay what is demanded and argue later.

This does not remove occupiers’ rights to challenge. Rather, it separates cashflow from dispute resolution, ensuring that buildings can continue to function while discussions take place. It also provides a more structured, fair and transparent approach to handling the disputed element of any charge.

This combined approach reflects real‑world experience: it is pragmatic, balanced and designed to support constructive dialogue — especially important given that, in practice, another service charge invoice is in most situations never far away.

 

Clarity on accruals, balance sheets and transparent reporting

The new edition goes further in strengthening financial reporting. Key developments include:

• clearer requirements for showing material accruals,

• a stronger emphasis on accounts that reflect actual cost,

• best‑practice encouragement for including balance sheets or cash reconciliations, and

• improved guidance around supporting notes, controls and verifications.

This responds directly to variations in market practice. While many agents have operated to these standards for years, the new guidance helps create consistency and trust across the sector.

 

Forward funding, retention and payment plans — finally addressed comprehensively

Areas that created confusion under the 1st Edition — particularly how to treat:

• unspent budgeted funds,

• contributions for future works, or

• deferred recovery of large sums —

are now addressed with precise guidance and even voluntary templates.

This reflects changing expectations: tenants want predictability, landlords require certainty, and managing agents need a defensible structure that aligns with lease provisions while also working in practice.

The new guidance strikes a thoughtful balance.

 

Mixed‑use schemes, ESG obligations and safety legislation

Significant evolution has taken place in the built environment since 2018. The RICS has responded by:

• adding substantial guidance on mixed‑use developments,

• clarifying the impact of the Building Safety Act 2022,

• updating cost classifications, and

• expanding coverage of ESG‑related spend, including when recovery is appropriate.

These additions align the professional standard with building types and regulatory frameworks that now define much of the modern commercial property market.

 

Conclusion — a code shaped by the industry it serves

Looking back at 2018, the first edition brought long‑awaited structure and enforceability. The second edition brings something different: maturity.

It reflects an industry that has:

• absorbed the earlier reforms,

• identified what works and what doesn’t,

• developed a stronger understanding of transparency and accountability,

• and faced real‑world challenges that required clearer, firmer direction.

 

The retention of the nine core mandatory principles demonstrates RICS’ confidence in how far the market has come. The strengthened guidance around disputes and payment behaviour shows a recognition of the key issues that have caused operational and financial strain. And the additional clarity around reporting, ESG, mixed‑use schemes and safety legislation ensures the code remains relevant to the buildings we manage today.

Above all, the 2nd Edition supports constructive engagement — enabling landlords, agents and occupiers to focus on operating buildings properly rather than becoming stuck in cycles of dispute and delay.

 

Back in 2018 I wrote that the industry should be relieved RICS was raising standards before legislation forced it.

 

In 2025, the sentiment remains: better to lead than be led.

 

The new standard sets a higher benchmark for us all — and in doing so, strengthens trust in the entire commercial property ecosystem.