And is this a ‘service’?

It is almost 3 years since we reported, in September 2018, on the much anticipated RICS Professional Statement re Service Charges in Commercial Property. Whilst directed to commercial and not residential property, one would have hoped that this important Professional Statement, which sets out mandatory requirements which must be followed by those administering service charges, would impact upon the residential property world. Sadly, it appears that in many cases, such hope is misplaced despite the fact that residential property has some statutory guidance and requirements.

In the Weekend FT paper for the w/e commencing 31 July, 2021, it is reported that “errors in service charges leave residents fuming”. It goes further: “Many believe mistakes are at best the result of ineptitude. Others wonder if sometimes there might be a simpler explanation: fraud.” This is a serious charge.

The FT investigation took evidence from residents across the country and revealed widespread errors in how residential service charges are calculated and passed on. “Errors are often exposed and rectified only after residents lobby for information, comb through receipts and chase refunds.” However, it should not be left to the residents, rarely qualified to investigate the charges made, to calculate the service charges. Sadly, leaving aside the anguish caused to overcharged residents, the legal routes for tackling unjust charges made by property management professionals, are complicated, particularly in the case of replacing the managing agents through a legal ‘right to manage’ and are always expensive.

So, in the absence of any consequences for those making the errors, residents are left alone to investigate the charges claimed. Residents in one luxury central London development say they have identified more than £2M of potential service charge errors over a five-year period. It is reported that the landlords recognized that “historic service charge errors by the estate’s managing agents were identified” and new managing agents are to conduct a full review. But it should not be this way. Covered by the RICS Professional Statement or not, the professionals calculating the service charges should always have an eye on the standards set by their professional body.

If you wish to hear more about service charges, why not contact Hatherleigh Training?

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