The growing pressure on service charges: rising costs and new RICS standards
Commercial property service charges have historically been a complex and sometimes misunderstood aspect of leasehold commercial properties. In recent years, skyrocketing service charges and unclear leases have seen some tenants paying large, unexpected fees several years into their tenancy.
RICS has recently released a new Professional Standard for commercial property service charges to protect both tenants and landlords, preserving the delicate balance between covering necessary costs and avoiding overcharging.
Here, we’ll cover everything you need to know about the current state of commercial property service charges, including what they are, why they’ve risen in recent years, and how the new standard could impact you. We’ll also provide advice on how you can protect yourself from unexpected costs as a leaseholder and enter your tenancy agreement with confidence.
What are commercial property service charges?
Commercial property service charges are costs tenants pay for services and maintenance of their property, in addition to their rent. In commercial property leasing, service charges can cover costs such as building insurance, landscaping, repairs, security, and cleaning.
Your lease should provide details of any service charges, including what can be charged, when charges are due to be paid (often quarterly, but not always), and how costs may be allocated among multiple tenants.
Why have service charges increased?
Average service charges increased by as much as 49% between 2019 and 2024[1], for a number of reasons.
- Maintenance backlogs: During the COVID-19 pandemic, service charges fell dramatically due to reduced maintenance costs for unoccupied units and the suspension of non-urgent projects. After the pandemic, however, landlords rushed to complete multiple projects quickly, incurring higher costs.
- Increased service and material costs: We’ve also seen a sharp increase in many of the costs associated with service charges over the last few years, including a 92% increase in building insurance, 73% increase in utilities, and 36% increase in repair and maintenance costs1.
- Predictions based on historical data: Because service charges, budgets and estimates are based on historical cost data, the increased post-COVID rates continue to inflate current cost projections.
This ‘perfect storm’ of cost increase has led to more disputes between tenants and landlords regarding commercial property service charges. To mitigate these conflicts, RICS recently published the second edition of its Professional Standard for service charges in commercial property, which came into effect on 31 December 2025.
The new RICS professional standard: what it means for you
According to RICS Head of Professional Practice, Paul Bagust, the new property service charge standard “will mitigate disputes and accelerate dispute processes towards conclusion, improving transparency, trust and confidence in all matters related to commercial service charges.”
RICS-regulated managing agents will now be bound to strict new regulations regarding service charges, protecting both tenants and landlords.
Protection for tenants
Some of the key updates in the 2025 commercial property service charge standards mean that tenants will benefit from:
- No over-charging: Landlords cannot recover more than 100% of their actual expenditure.
- Strict timelines: Budgets must be issued at least one month before the service charge year begins, and approved accounts must be provided within four months of year-end to avoid lengthy reconciliation delays.
- Clear apportionment matrix: Landlords must issue a clear matrix setting out the percentage of costs each tenant pays in the interest of transparency and to prevent unfair charges, especially in mixed-use schemes (e.g. retail and residential).
Protection for landlords
Of course, fairness on both sides of commercial property service charges is essential, and the RICS standard provides protection for landlords as well as tenants.
In the event of a disagreement regarding commercial property service charges, tenants should not withhold service charge payments unless there’s a clear, mathematical or computational error. Instead, they should pay what’s owed according to their lease agreement and begin the formal dispute process. If the dispute is resolved in their favour, the landlord will be expected to reimburse the amount owed.
While the new RICS Professional Standard for commercial property service charges is a welcome step for both tenants and landlords, we expect it may take some time before the standard’s positive impact is fully realised, as RICS-regulated managing agents catch up with the latest compliance requirements.
Advice for leaseholders
If you’re a tenant entering into a commercial property lease, it’s essential that you fully understand and agree with the terms of the commercial property service charges outlined in your lease agreement.
Below are our recommendations for protecting your best interests when entering into a commercial tenancy.
Seek professional advice
It’s crucial to speak with a professional before signing a commercial property lease. They will be able to highlight anything in your lease, related to service charges or otherwise, that may be cause for concern or further clarification, which may mitigate surprise costs down the line.
Commission a commercial survey
Commissioning a commercial building survey and a schedule of condition before entering into a lease agreement will establish whether the property is suitable and identify potential additional costs arising from the building’s condition.
Negotiate a service charge cap
In many cases, it’s possible for tenants to negotiate a cap on their commercial property service charges before signing a lease. The cap limits your liability and ensures costs can’t exceed the set threshold, protecting you from unforeseen costs during your tenancy.
If you’re thinking about leasing a property and would like to arrange a professional consultation or lease survey before finalising your commercial agreement, contact Bradley-Mason LLP. Our friendly, expert team would be happy to help.
[1] The Property Institute (2024). Service charge index. Available at https://www.tpi.org.uk/media/4nopqoeu/web120424-the-property-institute-service-charge-index-april-2024.pdf [Accessed February 2026]