How Do You Prepare Service Charge Accounts That Fully Comply with RICS Guidelines?

Introduction

From 1  April 2026, RICS will mandate that service charge accounts must be prepared on an accruals basis, with budgets issued at least one full calendar month before the service year, year-end statements delivered within four months of the service charge year-end (or with a delay notice), funds kept in ring-fenced accounts, fixed management fees (not percentage-based), and an independent review in accordance with ICAEW Technical Release TECH 09/14 (Revised).

1. What Are RICS Service Charge Accounts and What’s New in the Second Edition Effective April 2026?

The Royal Institution of Chartered Surveyors (RICS) released the second edition of its Service Charges in Commercial Property standard in mid-2025, which will become mandatory for contracts with service years ending on or after 31 December 2025.

This updated version enhances transparency, financial clarity, and tenant protection. Key changes include:

• Fixed management fees only (no percentage-based charging permitted).
• Ring-fenced accounts to keep tenant funds separate from landlord accounts.
• Stricter budgeting/reporting timelines – budgets must be issued one month prior; year-end statements within four months.
• Independent review required unless the lease mandates a statutory audit.

These revisions reflect demand for defensible practices in property management especially critical for multi-national portfolios spanning the UK and UAE, where lease structures are increasingly aligned with RICS benchmarks.

2. What Core Principles Must Every Compliant Service Charge Account Satisfy?

3. What Exactly Should Your Budget and Year-End Pack Contain?

Pre-Year Budget Must Include:

• Detailed Line-Item Breakdown: maintenance, cleaning, utilities, reserve funds, insurance.
• Explanatory Commentary: justification for increases or allocations.
• Issuance Timeline: delivered at least one full calendar month before the next service year. 

Year-End Statement Must Include:

• Income vs. Budget Comparison: with variance explanations.
• Balance Sheet Summary: including opening and closing reserves.
• Manager’s Certificate: signed and dated compliance statement.
• Independent Review Report: in line with ICAEW TECH 09/14 (scope, limitations, and conclusions).

4. Why Is an Independent Review Required and What Should It Cover?

ICAEW TECH 09/14 provides a structured review engagement, offering assurance without the cost of a full audit. Reviews are suitable where leases don’t mandate audits.

A compliant review includes:

• Examination of supporting documents/reconciliations.
• Analytical procedures (variance/budget checks).
• Confirmation of ring-fenced funds.
• Evaluation of cost apportionment and methodology.

This review-level assurance aligns with RICS and adds persuasive weight in First-tier Tribunal (Property Chamber) or arbitration.

5. What Service Charge Costs Are Recoverable and What Aren’t?

Recoverable (if lease permits):

• Cleaning, repairs, security, utilities.
• Insurance premiums.
• Management fees (fixed, disclosed in advance where permitted by lease)

Not Recoverable:

• Capital improvements.
• Landlord’s general overheads, depreciation, or speculative capital projects.
• Void property costs.

Any rebates or commissions must be fully disclosed. Clear delineation strengthens tenant trust.

6. Common Pitfalls to Avoid and Best Practices to Adopt

Common Pitfalls

• Late budgets/accounts without notices.
• Percentage-based management fees are non-compliant from 1 April 2026.
• Commingling funds with landlord accounts.
• Missing review documentation.
• Poor cost apportionment.

Best Practices

• Calendar automation for deadlines.
• Segregated accounting using dedicated bank accounts/coding.
• Tiered fixed-fee management by property type.
• Engage accountants early for review planning.
• Maintain apportionment matrices and procurement evidence.

7. How Do UK–UAE Differences Influence RICS Service Charge Compliance?

While RICS applies in the UK, UAE landlords can adopt its principles for credibility:

8. What Should a Well-Structured, RICS-Compliant Service Charge Pack Look Like?

A complete pack should include:

• Cover Letter with signed/dated manager’s certificate.
• Budget + Commentary (issued one month in advance).
• Apportionment Matrix showing methodology.
• Year-End Report (Income & Expenditure, Balance Sheet, variances).
• Independent Review Report (ICAEW TECH 09/14 or audit if required).
• Supporting Documents: invoices, lease clauses, bank statements, schedules of interest receivable.
• ADR Guidance: lease dispute protocols.

FAQs

1. Are RICS service charge standards legally binding?
No. They are not statute but form part of leases and are widely upheld in tribunals as best practice.

2. Can TECH 09/14 substitute for an audit if the lease specifies one?
No. An audit remains mandatory if required by lease. TECH 09/14 applies only if leases allow.

3. How early must budgets be shared with tenants?
At least one full calendar month before the service year.

4. Can landlords retain interest earned on service charge funds?
RICS states that interest earned (after charges/taxes) should be credited to the service charge account.

5. How should delays in delivering year-end accounts be handled?
Landlords must promptly inform tenants with revised timelines and reasons.

Conclusion 

Preparing RICS-compliant service charge accounts is more than compliance; it builds tenant trust, reduces disputes, and strengthens professional credibility.

From timely budgeting and ring-fencing to fixed fees and independent reviews, each detail matters.

Unlock transparent, tenant-friendly service charge accounting today.
👉 Book a free consultation with Veritus Consultancy to access your tailored compliance checklist, templates, and UK–UAE advisory insights.