Archive for February, 2009

At your service.

One of the most contentious areas in the landlord and tenant arena is that of service charges.  Charges for residential tenancies are to a degree governed by statute requiring, for instance, consultation between landlords and tenants before expenditure under the Landlord and Tenant Act 1985.  Disputes may be resolved by the Leasehold Valuation Tribunal.

However, service charges in the commercial sector are not so governed and depend on the wording of the lease negotiated between the parties.  In an attempt to guide the parties into reasonable terms, the property industry produced the Service Charge Guide now published as the Service Charge Code for Commercial Property by the RICS (there being one each for England and Wales, for Scotland and for Northern Ireland) and has the status of a Guidance Note for Chartered Surveyors.  The RICS is to release further information papers (for instance on sinking funds, reserve funds and depreciation charges) in the near future.

Despite that and despite recent reports that some large landlords are reducing, substantially, their service charges to retailers, service charges still lead to numerous disputes.  These might revolve around whether the head of expenditure falls within the definitions in the lease, how the sum claimed has been calculated or divided between the payees, whether a sum can be claimed outside the specified procedure in the lease and whether the cost of long-term works can be claimed from a short term tenant.

The Code states, for instance that service charges costs “will include reasonable costs of maintenance, repair and replacement (where beyond economic repair)” and whilst the same or similar words might be repeated in the lease, what is reasonable and when matters are really beyond economic repair can lead to considerable argument.

To hear more about the Code and some of the reported cases, contact Hatherleigh Training.