Residential block management is becoming increasingly regulated, transparent and accountable. For directors of Residential Management Companies (RMCs) and Right to Manage (RTM) Companies, understanding what good property management should look like has never been more important.
The fourth edition of the RICS Service Charge Residential Management Code came into effect on 7 April 2026, replacing the previous edition published in 2016.
The updated Code reflects a decade of significant change in residential property management, including new building and fire safety legislation and greater expectations around transparency. It also places increasing focus on how managing agents budget, collect, protect and spend service charge money.
For RMC and RTM directors, the Code provides a valuable benchmark for assessing the management of their development and the performance of their managing agent.
What is the RICS Service Charge Residential Management Code?
The Code sets out standards and best practice for the management and administration of service charges in residential leasehold property in England.
Its objectives include improving professional standards, promoting consistency and transparency, encouraging the prompt issue of budgets and year-end accounts, and helping to prevent and resolve disputes.
For RICS members and RICS-regulated managing agents, the Code is particularly important. However, its relevance extends much further, providing useful guidance for landlords, RMC and RTM directors, leaseholders and others involved in residential management.
Why does the new Code matter to RMC and RTM directors?
Being a director of an RMC or RTM Company is not simply about approving expenditure or attending an occasional meeting.
Directors can find themselves involved in decisions concerning substantial sums of service charge money, major works, building safety, contractors, insurance, long-term maintenance and disputes between neighbours.
A good managing agent should therefore do considerably more than collect service charges and arrange repairs.
The relationship between the board and managing agent should enable directors to make properly informed decisions, understand the financial and operational position of their development and identify matters requiring specialist advice.
The updated RICS Code reinforces many of these principles.
1. Greater transparency over service charges
Leaseholders should be able to understand what they need to pay and why.
Good service charge management should therefore include clear budgets, meaningful supporting information and financial reporting. This allows leaseholders and directors to understand and scrutinise expenditure.
For directors, this means asking whether the annual budget genuinely reflects the anticipated needs of the development rather than simply rolling forward last year’s figures.
Managing agents should identify significant variances and explain them where appropriate.
Transparency is not simply about providing more paperwork. It is about providing useful information so that directors and leaseholders can understand how the managing agent manages their money.
2. Planning for major expenditure
One of the most important responsibilities in block management is looking beyond the current financial year.
Roofs, external decorations, lifts, communal systems and other major components inevitably require repair or replacement.
Where the lease permits reserve or sinking funds, sensible long-term planning can help reduce the risk of leaseholders suddenly receiving substantial demands when major works become necessary.
RMC and RTM directors should therefore consider whether their development has:
- an appropriate programme of planned maintenance;
- an understanding of the likely lifespan of major building components;
- suitable professional surveys where required; and
- reserve fund contributions that reflect anticipated future expenditure, subject always to the provisions of the lease.
Effective management requires forward planning rather than a purely reactive approach.
3. Procurement and value for money
The cheapest quotation is not necessarily the best value.
Contractor selection should take account of matters such as competence, appropriate insurance, health and safety, experience, quality and the ability to deliver the required works.
Managing agents should also have appropriate procurement procedures and be transparent about relationships with contractors and any fees or other financial arrangements connected with the provision of services.
For directors, the key question should be:
Can we demonstrate that this expenditure is reasonable, properly considered and in the interests of the development?
4. Section 20 and major works consultation
Failing to meet consultation requirements can create significant financial and reputational risk for an RMC or RTM Company.
Where statutory consultation requirements apply, directors and managing agents need to identify and follow the correct process.
Good management means considering Section 20 requirements before making commitments, rather than discovering afterwards that consultation should have taken place.
Directors should expect their managing agent to recognise when consultation may be required and, where necessary, recommend seeking appropriate specialist or legal advice.
5. Building safety and risk management
Since the previous edition of the Code, the regulatory landscape has changed significantly.
The Building Safety Act 2022 and Fire Safety Act 2021 have increased the focus on building safety responsibilities, competence, record keeping and effective management of risk.
The precise duties applying to a development will depend upon the building and the parties involved.
A managing agent can assist clients in identifying, coordinating and monitoring compliance requirements, but appointing an agent does not automatically transfer statutory responsibilities away from the relevant dutyholder.
RMC and RTM directors should therefore understand the respective responsibilities of all parties and engage appropriately competent specialists where necessary.
6. Communication should be part of good management
Many service charge disputes begin not because expenditure was necessarily inappropriate, but because residents did not understand what was happening or why.
Clear communication can make a significant difference.
This includes explaining planned works, significant expenditure, budget changes and decisions affecting the development in a timely and understandable way.
It does not mean that every leaseholder will agree with every decision. It does mean, however, that those responsible should be able to explain their decisions where appropriate.
7. Company governance matters too
For RMC and RTM developments, property management and company governance frequently overlap.
Directors may also need to consider company meetings, statutory records, Companies House filings, changes in officers and other company administration.
Good governance helps directors document decisions properly and ensures that the company meets its corporate obligations
At Larchfield Asset Management, company secretarial and administration services can form part of the wider support provided to RMC and RTM directors, depending upon the requirements of the individual company and the agreed scope of appointment.
What should directors be asking their managing agent?
The new Code provides a useful opportunity for boards to review their current management arrangements.
Directors may wish to consider:
- Are our service charge budgets clear and realistic?
- Do we receive useful financial information during the year?
- Do we consider reserve funds and future major works properly?
- Do we plan maintenance effectively, or continually respond to emergencies?
- Are contractor appointments and procurement decisions properly documented?
- Do we identify Section 20 requirements early enough?
- Do we understand the key compliance risks affecting our development?
- Do we provide leaseholders with clear information about significant decisions and expenditure?
- Are the respective responsibilities of the board, managing agent and specialist advisers understood?
- Does our managing agent operate to recognised professional standards?
If the answer to several of these questions is unclear, the board may wish to review its current management arrangements.
Professional standards in residential management
At Larchfield Asset Management Limited, we believe effective block and estate management requires a combination of professional knowledge, financial control, forward planning, transparency and communication.
As an RICS-regulated firm, we follow recognised professional standards while taking account of each development’s individual requirements, governing documents and applicable legislation.
For RMC and RTM directors, professional management should provide more than administration. It should provide the information, systems and support needed to make informed decisions about the long-term management of their development.
Looking for professional block and estate management in Torbay and South Devon?
If your RMC or RTM Company is reviewing its current management arrangements, or you would simply like to discuss the management of your development, please contact Larchfield Asset Management Limited to arrange an initial conversation.
This article provides general information only and should not be relied upon as legal advice. The requirements applying to an individual development will depend upon its leases, company documents, building characteristics and particular circumstances.
