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Service Charges - Tips on how to avoid problems and save money

Paul Engelbrecht of Hughes Paddison Solicitors advises that there is an ever increasing debate on service charge issues between commercial occupiers trying to maximise savings, and landlords trying to recover as much as possible.  Both parties have to elicit the contractual provisions of the lease as there is no guidance or regulations as there are with residential tenancies. 

Steps have been taken by both landlords and tenants to positively reduce service charge costs but inevitably it will come down to commercial flex between Tenant’s being able to afford it and Landlords having quality premises in demand.

Large scale service charge regimes are never completely “watertight” but landlords should as far as possible ensure that:

  1. There is a clear concise list of recoverable items.  Reliance on a “sweeper” clause is not a substitute for a specific inclusion of items of services.
  2. Leases should reflect reality and it is important to anticipate what will happen in practice.  Any omissions at the outset could cause a long term lack of recovery.
  3. Leases need to be consistent.  All tenants should have the same contributions to ensure an equal recovery.
  4. Proper and regular communication is essential in alleviating friction between competing needs for flexibility and certainty in service charge provisions.  It is the tenant’s money that is being spent so it is reasonable for them to expect proper and accurate service charge budgets and accounts with clear information produced in a timely way.
  5. Long term flexibility and communication are key as introducing a service item in the lease that may not specifically be covered in the service charge provision is far less likely to be ignored or resisted by a tenant if it has been properly consulted beforehand.

If you have any questions please contact Paul Engelbrecht at Hughes Paddison on telephone number 01242 586868 or email pe@hughes-paddison.co.uk.