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New residential service charge guidelines need legislation

31/01/2012

Stephen Richards

Stephen Richards, Director in our Property Management team has welcomed new guidelines on residential service charges.

However he warns that without Government legislation, rogue landlords could still mislead lessees, who may end up paying too much for service charges without realising it.

Guidelines revised to protect residents

A committee of professional bodies including the Association of Chartered Certified Accountants, the Institute of Chartered Accountants of England and Wales, the Royal Institute of Chartered Surveyors and the Association of Residential Managing Agents have issued extensive new guidelines to bring greater transparency in the way agents and landlords manage and account for service charges. The guidelines are aimed at achieving a standardised approach which will protect residents and keep them better informed.

Government legislation needed to enforce guidelines

However as Stephen warns, without Government legislation, landlords who are not members of professional bodies will have no obligation to comply.

He said: “While we support the changes, they are best practice guidelines rather than statute, and so risk creating a two tier system of those landlords who apply good and transparent accounting control for service charges, and those that don’t. The losers in the latter case will be the lessees.”

Standardising service charge expenditure

He added: “If generally adopted across the industry, it will standardise the way in which service charge expenditure is presented, so there will be a common benchmark against which standards can be measured. It should also help prospective purchasers with their choice of property as they will be able to compare the true state of finances of competing developments. However, it still leaves loopholes for the unscrupulous who can choose not to follow the guidelines. Legislation, which was originally proposed in the Commonhold and Leasehold Reform Act 2002, but not implemented, would have been far preferable.”

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