Commercial service charges

What commercial service charges are and why you may need a chartered surveyor to guide you through the issues involved.

A service charge is a means by which a landlord can recover from tenants the cost of maintaining and repairing a building and providing certain services.

Typical costs can include:

  • Repairs extending to major structural repairs
  • General maintenance services including cleaning, refuse collection, lighting, heating, air-conditioning, and security

Staffing costs:

  • Property management expenses or fees
  • Sinking fund contributions to cover replacement of plant and machinery including the upkeep of common areas.

Insurance costs:

  • Commercial leases usually have service charge clauses which govern the operation of the service charge regime.

Our industry wide endorsed professional statement on Service Charges in Commercial Property sets down best practice in the management and administration of service charges in commercial property,.

Our Code for leasing business premises specifies service charge provisions as one of 10 requirements to ensure that a lease is Code-compliant.

Commercial service charges form part of the lease of multi-let commercial buildings such as office blocks, retail developments such as shopping complexes, business parks and industrial estates.

Over the last 30-40 years, payment of commercial service charges has moved typically from a fixed annual sum to a structured regime, usually consisting of payments quarterly in advance.

Although alternatives to the service charge regime have been put forward, it remains dominant in the market.

Service charge regimes are frequently a source of friction between landlord and tenant, above all because the landlord is in effect spending the tenant’s money. Disputes over service charges are very difficult to resolve and frequently end up in court.

Chartered surveyors specialising in commercial service charge issues can advise, act on behalf of landlords and tenants, and resolve service charge disputes between them.