Wednesday, July 15th, 2009 in Commercial, News, Service Charge
In the current economic climate landlords and tenants will continue to consider in great detail the service charge provisions in leases and to review what expenditure is and is not recoverable. Service charge disputes are likely to become more common according to CMS Cameron McKenna.
This came about after a legal decision of Boots UK Limited -v- Trafford Centre Limited in 2008 when the High Court held that the landlord could pass on the cost of entertainments, Christmas decorations, a Christmas grotto and a large permanent television screen to its shopping centre tenants via the service charge.
The court held that all these items were each a facility, an amenity or an attraction, rather than a form of promotion of the shopping centre and therefore the entire cost was to be included in the ordinary service charge with no contribution from the landlord. In contrast, had these items been classified as a promotion, then the cost of providing them would have had to be shared between the landlord and the tenant. Source Dorsey & Whitney
. A summary is downloadable from Ashursts.
Forsters explain in more detail the items Boots contested and why the judge found against them.
Tags: retail service charge, shopping centre service charge
Tuesday, June 23rd, 2009 in News
A report from United Arab Emirates about residential landlord, Nakheel (Dubai World subsidiary) dropping service charges on its residential holdings at its Discovery Gardens development.
Tags: dubai world, Nakheel, residential service charge
Saturday, June 6th, 2009 in Residential, Service charge audits
Over the weekend we read an interesting article in The Times in which asks the question
There is no evidence that the annual service charges on our flat have been audited. What are our rights?
The answer, by expert Mark Loveday, states correctly that there are no legal requirements to have audits.
Most properly presented annual service charge accounts are signed by a managing agent or an accountant to certify their accuracy.
He makes passing reference to this becoming a legal requirement in future. Naturally, we think that audited accounts are the best possible security for all parties, landlord, tenant and managing agent.
When this does become law, the need for a common format for presentation of the annual service charge statement for residential properties will necessitate changes for many sites.
Tags: flats service charges, residential property, service charge
Thursday, June 4th, 2009 in Residential, Service Charge
The Government has commissioned an independent review into charging and metering for water and sewerage services. This is being run by Defra and Chaired by Anna Walker, Chief Executive of the Healthcare Commission.
In a headline-grabbing reaction, the Property Week says that part of the proposals would leave landlords liable for unpaid water bills from departing tenants.
The review is still at the consultative stage and interested parties have until 28th August 2009 to respond to the interim report.
Tags: residential landlord, water rates
Tuesday, June 2nd, 2009 in Service Charge
It has been reported in Property Week and Retail Week that Westfield Shopping Centre has dropped its service charges for tenants.
The top weighted rate for 2009 of £12.98/sq ft – compared to the original budget projection of £13.94/sq ft that was given to retailers around Christmas 2008.
Driven by ‘unhappy retailers’ who campaigned for a reduction in overheads, it seems this has been achieved by a mixture of cost cutting and streamlining services.
Tags: service charge, shopping centre service charge, Westfield shopping
Thursday, April 16th, 2009 in Commercial, News, Service Charge
The majority of commercial service charge leases are drafted on the basis that the service charge is paid in advance. There are thus large sums of money lying in service charge bank accounts, on which interest accrues throughout the year.
(more…)
Tags: service charges
Wednesday, April 15th, 2009 in Landlord
When we started specialising in service charge audits they were frequently undertaken as part of the property owner’s general annual audit. This was not a satisfactory situation because specialist knowledge is needed for accurate service charge accounting assessment. (more…)
Tags: audit, property, service charges
Monday, April 6th, 2009 in Residential, Service Charge
Property Week Law Report summarises a recent case between the Peabody Trust and Paddington Walk Management. It clarifies the steps that managing agents have to undertake and the associated timeframes in order to recovery service charges.
The case highlights two points: first, the hurdles landlords and management companies face in recovering service charges and, second, why there are so many disputes in this respect.
Summing up: Paddington Walk Management v Governors of Peabody Trust
The trust disputed a claim of £160,000 for service charges by Paddington Walk because of late claims and a lack of consultation.
The county court held for the trust on the points of lateness and lack of consultation.
It said managing companies needed to comply strictly with the Landlord and Tenant Act 1985.
Tags: service charge law
Monday, April 6th, 2009 in Landlord, Service Charge
An ongoing discussion between large retailers and the UK’s biggest landlords (members of the British Property Federation) has surfaced because retailers object to paying rents quarterly in advance saying this causes them cash flow issues. Responding, the BPF landlords ran a pilot scheme in four shopping centres to reduce overheads through service charges by delaying maintenance projects and ”and by mutually identifying changes to service requirements.”
This is very interesting because it’s been historically the landlord who sets out the level of ‘services’ that tenants receive in a shared occupancy building.
What if the tenants were able to choose the level of service they wanted in future – for example, weekly cleaning rather than daily or increased security cameras / guards near their stores. A menu-driven approach would mean that the days of one-size-fits-all may end and a more flexible service could be delivered enabling retailers to pick and choose from a range of services to suit their particular needs.
the areas where the cost review is focusing its attention include:
- Engagement with retailers
Hours of operation
Cleaning and environment
Waste management
Security
Administration, procurement and purchasing of services
Plant and fabric maintenance
Utilities and energy management
Customer service
Marketing
The BPF press release
Tags: British Property Federation, retail service charge
Sunday, April 5th, 2009 in News
Leading global real estate investment manager PRUPIM is to allow the majority of its UK retail tenants to pay rent on a monthly basis for a temporary period in the response to the economic conditions faced by the retail sector.
PRUPIM estimates that up to 1,500 tenancies will be eligible for the 12-month scheme which takes effect from March. Retail tenants will have to commit to electronic payments, which may necessitate up to 12,000 additional collections.
“This is a quick and simple means of delivering immediate relief to the retail sector which is facing tremendous pressure on cash flows,” said PRUPIM Head of UK Asset Management, Peter Best.
“The UK is now officially in recession and months of deteriorating trading conditions on the High Street and beyond have necessitated new thinking. PRUPIM considers it has an obligation to identify ways of providing support to the retail sector,” he said.
“While this initiative requires significant additional administration, it will allow retailers more flexibility in terms of helping to manage cash flow during extraordinary economic times. It also helps PRUPIM maintain its strategy of preserving long term, sustainable returns from property investment. This approach is not a permanent move and we will review its effectiveness as appropriate,” he added.
PRUPIM has also today announced a revised Small Retail Business Policy which allows the payment of monthly rents on a permanent basis for smaller retail businesses. These will include the majority of companies, partnerships or individuals with up to three tenancies with PRUPIM, where the rents do not exceed £50,000 per annum per unit.
“Retailers have been telling us that these initiatives will assist them in the current environment and we have been listening and responding. PRUPIM puts good customer partnerships at the heart of our business strategy and this initiative is intended to deliver just that. Although there will be some exceptions to our approach, we hope this initiative will provide relief to most retailers in a difficult climate,” said John Duxbury, Director of Retail Asset Management.
