What surveyors and property managers need to know about the new Service Charge Residential Management Code in force from 7 April 2026

The Royal Institute of Chartered Surveyors has published the fourth edition of the Service Charge Residential Management Code, which comes into force on 7 April 2026. The Code, which sets out RICS' expectations for management of residential leasehold properties in England, has been extensively rewritten and updated to reflect the Building Safety Act 2022 (BSA). In this article, we explore what's changed and what RICS members and regulated firms acting as managing agents need to know.

Background

The first edition of the Code was published in 1997 and was last updated in 2016: before the tragic fire at Grenfell Tower which was a watershed moment for the property industry and led to wholesale legislative change in the form of the Fire Safety Act 2021, the BSA and their swathes of secondary legislation. Unsurprisingly, therefore, the changes to the Code are significant. And these have been a long time in development, with RICS consulting on the revised Code in 2022 and the period since then spent by the Ministry of Housing, Communities and Local Government considering the changes.

The Code itself is part of a suite of Professional Standards published by RICS which set mandatory requirements as well as best practice guidance for its members. Breach of the mandatory requirements could justify disciplinary action and courts will consider the Standards as setting out best practice in the event of a negligence claim.

To whom does the Code apply?

The Code applies to landlords, self-managed blocks and self-managed lay boards, such as residents' management companies (RMCs) and right to manage (RTM) companies, as well as to any person engaged to discharge the management functions of any long leasehold, assured, assured shorthold, contractual and regulated tenancies or licences to occupy of residential property in England where a tenant is required (or may be required) to pay a variable service charge.

Since the last edition, more of the Code has been extended to cover for-profit and non-profit registered providers of social housing (ie housing associations). The principles of the third edition applied to registered providers, but the new Code is clearer on which provisions are applicable to registered providers and local authorities: see sections 1.3 and 1.4 of the Code.

What are the key changes?

The Code has been extensively amended and property managers will need to read it in full and review their processes and standard documents to ensure compliance. The key changes can be summarised as follows, but are not a substitute for a detailed examination of the Code, which can be found here. Further, RICS has helpfully provided a redline version of the Code available to download on their website here.

Previously, section 1.7 of the Code set out seven key guiding principles to be considered when making management decisions (statutory requirements, terms of the lease or tenancy agreement, cost effectiveness, transparency, efficiency, reasonableness and quality of service). These have been expanded, with three new principles added: consumer service level expectations, health & safety of occupiers and visitors, and structural integrity of buildings. These reflect the increased focus on building safety since 2017.

Again, unsurprisingly in light of new BSA Golden Thread obligations, record-keeping is a theme throughout, with section 3.13 requiring managers to "maintain efficient records… [and] seek advice from clients and professional indemnity insurers where necessary", and section 7.3 setting out the record-keeping required for client money. Section 3.1 encourages managers to document client instructions.

The existing version of the Code also pre-dates Brexit, so the data protection provisions (especially in sections 3 and 14) needed to be updated to reflect the UK's GDPR regime. Section 3.3 of the Code also deals with the increased use of CCTV, encouraging managers to have a robust CCTV policy and ensure that they identify the data controller of the CCTV footage. Similarly, section 3.8 encourages managers to have comprehensive personal safety procedures.

As the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 also came into force after publication of the existing version of the Code, the money laundering section (3.10) has been updated to reflect this. In particular, the new Code notes that businesses need to register for money laundering regulation by HMRC if they offer company services to other companies as part of their business. Risk assessments for the purpose of complying with the RICS' 'Countering financial crime' Standard should also include an assessment of whether managers are covered by the 2017 regulations.

The increased focus on mental health in the workplace that has emerged since the COVID-19 pandemic is reflected in the Code, with section 3.12 encouraging managers to signpost staff to mental health support services and provide adequate training and support to agency or temporary staff. Similarly, a new mandatory obligation at 3.13 requires:

"You must comply with all applicable employee-related health and safety, fire safety and building safety requirements. You should devise and maintain, with specialist help if necessary, a health and safety policy and arrange regular health and safety, fire and any other applicable risk assessments of places of work. The health and safety policy should be communicated to all staff, who should be adequately trained and kept up to date at all times."

The guidance on services charges under chapter 5 and management agreements under chapter 6 have been revised extensively, reflecting the increased scope for dispute in light of the increasing level of costs sought to be recovered via service charges due to increased scrutiny of building safety, and industry concerns such as the safety of RAAC or concrete transfer slabs.

Additional guidance for managers holding client money has been added in new chapter 7, making clear that managers must hold client money in a separate designated account and only use the money for a specified purpose: see section 7.2.

Fire risk assessments are dealt with in a revised section 8.4, which reflects the Fire Safety Act 2021 and the Fire Safety (England) Regulations 2022 requirements for responsible persons to implement and maintain a fire management plan, provide fire safety information to residents, ensuring flat entrance doors and fire doors are checked annually and quarterly respectively. The chapter also highlights the additional duties involved in managing higher-risk buildings (HRBs) over 18m in height.

By far the most extensive changes are in Chapter 9, which contains a detailed summary of obligations on managers under the BSA, including setting out the key definitions, and the key obligations on accountable persons (APs) and Principal Accountable Persons (PAPs). This section is key as the overlap between those subject to the Code and those who are duty-holders under the BSA is likely to be substantial. This chapter also sets out the key duties of APs and PAPs and deals with which costs can be recovered via service charge: something which was changed significantly by the BSA as the Act's leaseholder protections include a prohibition on passing on cladding remediation costs to residents via service charge. The scope of this prohibition was recently considered in Almacantar v de Valk [2025] UT 298 (LC).  New Appendix D also sets out the additional information that leaseholders should expect to receive if their flat is in a HRB, who should provide it and when.

Insurance-specific changes

Section 3.13 encourages managers to take out appropriate professional indemnity (PI) and client money insurance, highlighting that the risks of operating without it are significant.

In addition, the other types of insurance that should be considered has been expanded to include cyber insurance, terrorism insurance, directors' and officers' liability insurance (for residents' management companies or right-to-manage companies), plant and machinery cover, staff personal accident and key person insurance. Managers are also advised to draw the policyholder's attention to the existence of excess insurance where insurance cannot be obtained without a large flood or fire excess.

For all insurance types, the extent and level of cover should be regularly reviewed, particularly in relation to reinstatement value. Section 13.5 explains average clauses, which apply in the event of underinsurance if they are included in the policy terms. These enable insurers to reduce the amount indemnified proportionate to the level of underinsurance. This year, a UK-based provider of RICS rebuild cost valuations warned of the increasing risk of underinsurance in commercial buildings.

Commissions are also addressed extensively in section 13.6 reflecting the proposed ban in the Leasehold and Freehold Reform Act 2024 on insurance commissions being passed on via service charge, and the enhanced regulatory focus on these following the vehicle finance litigation.

In relation to duties of AP and PAP, section 9.3 recommends that managers should declare any dutyholder roles they hold and the duties engaged to their PI insurer and ensure that adequate cover is in place.

Section 11.2 encourages managers to carry out due diligence on the competence and organisational capability of service providers, and this includes checking whether they have appropriate PI cover.

Dispute resolution is dealt with at 4.3 where ADR is encouraged ("the landlord should try to resolve the dispute by informal means and consider suggesting mediation or arbitration by agreement, rather than litigation, as a way of settling disputes") and resolution by ombudsman or first-tier tribunal is suggested for disputes concerning level, quality and/or cost of services recovered as service charges. All letting and property agents must be a member of the Property Ombudsman or the Property Redress Scheme, and all registered social housing providers must be in the Housing Ombudsman's jurisdiction. However, there are a number of issues to be considered when choosing the appropriate dispute resolution method or form of ADR and managers are likely to be guided at this stage by their PI insurer and any appointed solicitors.

What does this mean for surveyors and property managers?

The revision of the Code is good news for all those involved in managing residential property, including leaseholders, as it clearly sets out good practice, enabling professionals to know whether they are compliant. The length of the Code reflects the wide range of obligations on property managers and the increasing complexity of the legislation. When dealing with BSA issues, the courts have consistently demonstrated a commitment to enforcing the aims of the BSA, heightening the risk environment in which property managers operate.

The new Code also reveals consistent emphasis on prudent record-keeping and written policies and procedures, which represents good risk management in any event and is in line with the court's approach as explained by Mr Justice Leggatt in the infamous passage in Gestmin SGPS S.A. v Credit Suisse [2013] EWHC 3560 (Comm), where he concludes: "In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts."

What's next

The Code is likely to be updated again in the near future as a number of measures yet to come into force from the Leasehold and Freehold Reform Act 2024 are highly pertinent.

Subscribe to RPC's Thinking to help evidence compliance with section 3.13's recommendation to "take steps to keep yourself informed of developments in the law affecting residential management to enable you to keep wholly within the law."

For more on the BSA and the new dutyholder regime, a selection of our articles on this topic are as follows:

• 'New building safety requirements'
• 'Unpacking the Building Safety Act's industry overhaul'
• 'BSA: new guidance for principal accountable persons to assist in registration with BSR'
• 'Fire Safety Act 2021: Clarification for the Responsible Person'
• 'Fire Safety Act 2021: New tool to assist 'Responsible Persons' to prioritise reviewing fire risk assessments'