The long awaited Third Edition of the RICS Code of Conduct for Residential Management has now been approved by the Secretary of State and is effective from 1 June 2016. It applies only to residential leasehold properties in England, and the RICS summarises the aims of the Code as being to:
The three new provisions that have been highlighted by managing agents are about the Format of Accounts, Commissions received by Managing Agents, and transparency with Related Parties.
HSCPM has for years been following the Accounting Guidance Note TECH03/11, but this now raises the status of this document:
'... if the lease does not specify the form and content, service charge accounts should be prepared in accordance with TECH03/11.'
In the Code, 'must' is used to indicate a legal obligation, but 'should' is used to indicate best practice. Having said that, Tribunals take a dim view of managing agents who fail to follow the ‘should’ parts of the Code.
The Service Charge accounts ‘should’ now have a note declaring 'all sources of income and benefits to the managing agent arising out of the management of the property'.
At HSCPM we do not take commissions from any contractors or suppliers, so this is not an issue for us. Where we provide the benefits of our buying power on our insurance Block Policy, we do receive a commission and this is declared; where the insurance is not on our Block Policy, we do not receive anything. We have been looking with interest this year at Service Charge accounts produced by our competitors to see how they handle this.
Thirdly, a managing agent ‘should’ also declare in a note to the Service Charge accounts any 'connection with any proposed company, individual, contractor or supplier'. Many years ago we realised the benefit of having an in-house maintenance team to go to emergencies on Friday afternoons, for example, and Ashby & Horner Ltd has been doing excellent work for us for many years. We can trace the roots of A&H back to around 1690 in Aldgate, and they can now offer maintenance and decoration services in apartments in the Blocks we manage and elsewhere. Similarly, our Chartered Surveying Company, Ashby Building Surveyors Ltd, is expanding its activities to other clients.
So at HSCPM we welcome the Third Edition and hope that it achieves its aim of raising property management standards and transparency.