Tenants would be quick to notice a landlord billing them for an incorrect rent payment as often this figure is fixed and remains the same from one quarter to the next.When Service Charge demands are received tenants rarely take the time to check whether the items being charged for are within the agreed service charge items specified within their lease.
In the current economic climate landlords and tenants need to pay greater attention to service charge costs as these can often make a building that offers an attractive rent a very expensive commitment if service charges costs are taken into account.
Geoff Springthorpe, Head of Property Management, Holloway Iliffe & Mitchell said; “Landlords will try and ensure that any shared costs incurred either inside or outside their buildings that are for the benefit of all tenants are recharged via the service charge.”
Tenancy agreements will set out the items that can be incurred under the service charge. Other items, for example improvements to the building or alterations specific to an individual tenant will in the majority of cases not be eligible for payment from service charge funds.
Once a tenant has signed their lease it is too late to modify their service charge obligations but instructing a surveyor to undertake a Service Charge Audit may uncover inaccurate cost apportionment or ineligible items being charged which can reduce future costs and may even produce a partial refund of previous service charge payments.
Craig Powell, Associate Director, Holloway Iliffe & Mitchell commented:
“Tenants need to minimise their outgoings and insist that they are only contributing to costs that represent good value and are apportioned on a fair basis.”
For companies negotiating a lease renewal, or relocating to a new commercial property, often they can negotiate individual service charge commitments. Sometimes landlords will offer to cap service charge payments to allow occupiers to accurately budget for future bills.
Landlords and Tenants will always have a different agenda when it comes to service charges. This means a tenant needs to constantly review its service charge bills to ensure that it is only paying for items that it has agreed to at the outset of the lease.
