Service charges on commercial property are one of the most common sources of friction between landlords and tenants, and the rules have just undergone their biggest shake-up in decades. Under the updated RICS professional standard that took effect on 31 December 2025, landlords must now issue budgets at least a month before the service charge year starts and provide full reconciliations within four months of the year ending. For anyone renting or managing commercial space, that shift from vague annual demands to a fixed, transparent timetable is the single most practical change in a generation.
I’ve been following commercial property regulation for long enough to notice a pattern: every few years a new code lands, but most tenants never read it until a dispute has already started. The difference this time is that the RICS standard is compulsory for all RICS-accredited professionals, and it sits alongside the Leasehold and Freehold Reform Act 2024 (LAFRA 2024), which introduces legally enforceable requirements on how demands are formatted and what information must be shared. If you’re a tenant, the window to get your paperwork in order is now. If you’re a landlord, the cost of getting it wrong has gone up significantly. Here’s what you actually need to know.
What the new service charge standard actually means for your lease
The most important thing to understand is that the RICS standard is not legislation, and it cannot override the terms of your lease. That sounds like a technicality, but it has real consequences. If your lease says the landlord can recover certain costs, the standard can’t unilaterally remove that right. What it does instead is set a benchmark that RICS members and regulated firms must follow unless they have a good reason not to, and they must justify any departure in writing. In practice, that means the standard becomes the default position in any negotiation or dispute.
What I’d do if I were a tenant right now is pull out my current lease and compare it against the standard’s list of non-recoverable costs. The standard explicitly says that landlord investment costs, asset management, rent collection, void property costs, initial capital costs like original fit-out or new plant installation, future redevelopment costs, and any expenditure arising from avoidable overspending or poor maintenance cannot be recovered through the service charge. If your lease currently allows any of those, you have a strong basis to push back or renegotiate at the next rent review or lease renewal. For landlords, the risk is that a tribunal or arbitrator will treat the standard as the industry norm, and departing from it without clear justification will look unreasonable.
Why the timing of budgets and reconciliations matters more than you think
Late budgets are not just an inconvenience. Under the new standard, if a landlord fails to issue the budget at least one month before the service charge year starts, or if the year-end accounts arrive more than four months after the year ends, they must provide an explanation. That explanation becomes part of the record and can be used in a dispute. More importantly, the 18-month rule under the Landlord and Tenant Act 1985 still applies: landlords cannot recover costs incurred more than 18 months before the demand is issued unless they served a prescribed notice within that window. Miss that deadline, and the cost is simply irrecoverable.
Consider a scenario where your landlord’s service charge year ends on 31 March 2026. Under the new rules, the reconciliation must land in your hands by 31 July 2026. If it arrives in September, the landlord has to explain why. If the delay means some costs were incurred more than 18 months before the demand, those costs may be lost entirely. That is not a theoretical risk. I’ve seen tenants accept late reconciliations for years without realising they could have challenged the underlying costs. The new standard gives you a clear timetable to hold the landlord to.
What I tend to notice is that tenants focus on the total amount demanded but rarely check the timing. The new rules make timing a first-order issue. If you’re a tenant, mark the reconciliation deadline in your calendar and chase it the day it passes. If you’re a landlord, build your internal processes around that four-month window now, because the first year under the new standard will catch a lot of managing agents off guard.
Where most tenants and landlords get the new rules wrong
The most common mistake I see is treating the RICS standard as optional. It is not optional for RICS members and RICS-regulated firms. They must comply, and any departure must be justified. The second mistake is assuming the standard replaces the lease. It doesn’t. The third is ignoring the new rules on management fees and commissions. Each of these has real financial consequences.
Assuming the standard overrides your lease terms
The standard itself says it cannot override the terms of a lease. But that does not mean the lease always wins. If a dispute reaches a tribunal or court, the standard will be used as evidence of what reasonable practice looks like. A landlord who charges costs the standard says are non-recoverable will need to explain why the lease allows it and why it was reasonable to rely on that clause. That is a much harder conversation than it used to be. The safest approach for both sides is to align the lease with the standard at the next renewal or rent review.
Ignoring the ban on percentage-based management fees
Under the new standard, management fees can no longer be calculated as a percentage of the budgeted or actual service charge. They must be fixed at the start of the service charge year. This is a significant change because percentage-based fees create a perverse incentive: the more the landlord spends, the more the managing agent earns. Fixed fees remove that conflict. If your current management agreement still uses a percentage, it needs to be rewritten before the next service charge year begins. A tenant landlord lawyer can review your existing agreement and advise on how to transition to a fixed-fee structure without triggering a dispute.
Failing to disclose insurance commissions
Under LAFRA 2024, landlords must disclose any commission or payment they receive in connection with building insurance policies. If they fail to do so, they cannot recover the insurance premium through the service charge. That is a hard stop. I have seen landlords lose thousands of pounds in recoverable costs simply because they did not put the commission figure in writing. The disclosure must be clear and provided to the tenant. If you are a tenant and your service charge demand includes an insurance premium without a commission breakdown, you have grounds to challenge the entire line item.
Overlooking the new rules on void property costs
The standard explicitly says that void property costs, including rates, insurance, and services attributable to empty units, and the marketing of empty units, cannot be recovered through the service charge. This is a common area of dispute because many leases have broad recovery clauses. The standard now draws a clear line: the landlord bears the cost of empty space. If your service charge includes a line for void costs, you should query it immediately. The landlord may argue the lease allows it, but the standard says it should not, and that tension will be resolved in favour of the tenant in most tribunal settings.
→ Scroll right to see all columns
| Cost category | Recoverable under new standard? | What changed |
|---|---|---|
| Management fees | Yes, but fixed only | No longer a percentage of budget or actual spend |
| Insurance commissions | Only if disclosed | Non-disclosure means premium is irrecoverable |
| Void property costs | No | Rates, insurance, and marketing of empty units are landlord’s cost |
| Initial capital costs | No | Original fit-out and new plant installation excluded |
| Negligence-related costs | No | Expenditure from poor maintenance or avoidable overspending |
| ESG expenditure | Only if genuine service | All other ESG initiatives funded by landlord |
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How to manage your service charges under the new rules: a practical guide
The new standard gives you concrete tools to control what you pay and when you pay it. The key is to use them before a dispute arises, not after. Here is what to do at each stage of the service charge year.
Review your budget before the year starts
Under the new rules, the landlord must issue the budget at least one month before the service charge year begins. That budget must include an apportionment matrix showing how costs are split between occupiers. Do not just file it. Go through every line item and compare it against the list of non-recoverable costs in the standard. If you see void property costs, capital improvements, or any ESG expenditure that does not constitute a genuine service to your unit, flag it in writing before the year starts. The landlord cannot recover costs you have not agreed to, and the budget is your first opportunity to push back. If you are unsure whether a cost is recoverable, a property lawyer can review the budget against your lease and the standard in a single session.
Check the reconciliation within four months of year-end
When the year-end accounts arrive, you have a limited window to challenge them. The standard says the landlord must provide the reconciliation within four months of the service charge year ending. If it arrives late, the landlord must explain the delay. Start by checking that the actual costs match the budgeted figures. If there is a significant overspend, ask for the invoices and receipts. Under LAFRA 2024, you have the right to access contracts with suppliers, invoices, receipts, insurance policies, and historic records going back up to six years. Only genuinely commercially sensitive information can be withheld. If the landlord refuses to provide documents, that refusal itself becomes evidence in any subsequent dispute.
Challenge non-recoverable costs immediately
If you identify a cost that the standard says should not be recovered, do not wait for the next reconciliation. Write to the landlord or managing agent within 30 days of receiving the demand. State which cost you are challenging, cite the relevant section of the RICS standard, and ask for the cost to be removed or credited. If the landlord insists the lease allows it, ask them to explain in writing why the departure from the standard is justified. Most landlords will remove the cost rather than defend it, because the standard is now the benchmark and any departure needs a good reason. If they refuse, you have a clear paper trail for a tribunal or alternative dispute resolution.
Use alternative dispute resolution before going to tribunal
The standard explicitly says that parties should seek to resolve differences through alternative dispute resolution (ADR) in the first instance rather than pursuing court action. ADR is faster, cheaper, and less adversarial than a tribunal. If you have a dispute over a specific cost, write to the landlord proposing ADR. If they refuse, that refusal can be raised at tribunal. Many service charge disputes are resolved in a single ADR session, and the cost is usually split between the parties. It is worth including an ADR clause in any new lease or renewal.
- 1Review the budget before the year startsFlag any non-recoverable costs in writing within 30 days of receiving the budget. Use the RICS standard’s list of excluded costs as your reference.
- 2Check the reconciliation within four monthsCompare actual costs against the budget. Request invoices and receipts for any overspend. The landlord must provide them under LAFRA 2024.
- 3Challenge non-recoverable costs in writingCite the specific section of the standard and ask for the cost to be removed. If the landlord refuses, request a written justification for the departure.
- 4Propose alternative dispute resolutionIf the dispute continues, suggest ADR before escalating to tribunal. Most disputes are resolved in a single session at a fraction of the cost.
What happens if the landlord does not comply with the new rules
The consequences of non-compliance are real. Under LAFRA 2024, if a landlord issues a service charge demand that does not follow the prescribed format, that demand may be unenforceable. If they fail to disclose insurance commissions, the entire insurance premium becomes irrecoverable. If they miss the 18-month window under the Landlord and Tenant Act 1985, the costs are lost. And if they try to recover tribunal or court costs through the service charge, they cannot do so unless a tribunal specifically orders otherwise. For RICS members, non-compliance also carries professional consequences, including potential disciplinary action. The standard is not optional for them, and the regulator is paying attention.
Frequently asked questions about commercial service charges
Can my landlord charge a management fee based on a percentage of the service charge? ▾
What happens if my landlord does not provide the reconciliation within four months? ▾
Can I challenge costs that my lease says are recoverable? ▾
Do the new rules apply to mixed-use buildings? ▾
What documents am I entitled to see under the new rules? ▾
Can my landlord charge me for empty units in the building? ▾
The new service charge rules are the most significant change in commercial property regulation in decades, but they only work if you use them. The single most practical thing you can do right now is pull out your most recent service charge demand and check whether the budget was issued at least a month before the year started, whether the reconciliation arrived within four months of year-end, and whether any of the costs listed are ones the standard says should not be there. If you find a problem, raise it in writing now, not at the next reconciliation. The standard gives you the tools. The only question is whether you use them.
If this was useful, you might also want to read Understanding Service Charges for Commercial Rentals in the UK.
Sources and Further Reading
Commercial Property Rental Checklist: Ensure You’re Prepared to Rent in the UK — A practical checklist to run through before signing any commercial lease, covering deposit, fit-out, and service charge considerations.
New Rules for Service Charge Accounting. Cox Hinkins, 2025.
The New RICS Service Charge Standard: What It Is and Changes for 2026. Stevens & Bolton, 2025.
UK Real Estate Sector 2026 and Beyond. Charles Russell Speechlys, 2026.
