Andrew Salmon comments that, normally, all service charge expenditure for a property is amalgamated annually and firstly apportioned to the individual units in the agreed percentages. Next, the appropriate proportion of this annual expenditure for any unit with a void period is then apportioned to the landlord. However, in the case of a new building, where there is only a gradual take-up of the available units, this traditional method may be unfairly prejudicing the landlord. This is because, in the early part of the year, the expenditure on such costs as security and common electricity may be quite low. With the increase in occupancy, these charges may rise dramatically but the landlord has to pick up the void percentage of the whole year’s expenditure, rather than a proportion of the lower cost when the various units were actually void.
A fairer split could be to separate the individual expenditure items into those incurred when the property was filling up and those incurred when the building was fully let. The landlord would then only pick up his proportion of the costs in the first period and not a proportion of the annual total.
Obviously, the apportionment could be split over even shorter periods and there are other questions of fairness to be considered, such as the temptation to hold back payment until the later (non-void) period. However, overall, this revised method may be a fairer way of apportioning the first year’s service charge to the landlord of a new property.
Archive for the ‘News’ Category
Wednesday, January 11th, 2012
Unfair to Landlords?
Thursday, January 5th, 2012
Service charges: Achieving a fair balance
A recent article by Shoesmiths considers the balance required between landlords’ desire to maximise income and tenants’ wish for improved terms of acceptance. Inevitably this often comes to a head over service charges.
Read the full article here
Tuesday, January 3rd, 2012
Housing association loses court case for claiming service charges
Alex Wellman of Inside Housing has reported that a problem has arisen over the service charge claimed by a housing association for the maintenance of an estate where some of the properties are privately owned. Two Rivers Housing lost an appeal recently against a previous judgement so that non-tenants of the association did not have to pay for a proportion of the cost of the cutting of grass on the estate.
Read the full article here
Thursday, December 15th, 2011
Should facilities managers be involved in negotiating service charges?
In FM World it was reported that 80 per cent of respondents to the latest FM 100 Poll believe facilities managers should be involved in negotiating service charges paid by their organisation to the landlord. Many FMs have said they are not involved, but would like to be.
Read the full article here
Monday, December 12th, 2011
Managing agent settles out of court
An article on the Rentman website notes that the largest ever leaseholder tribunal case between managing agent Peverel – owned by the family trust of property tycoon Vincent Tchenguiz – and London’s St George Wharf Residents’ Association has been settled out of court for an undisclosed seven-figure sum.
Read full article here
Sunday, November 20th, 2011
Court rejects legal fees in service charge
Andy Stern in the Property Owners Directory points out that the Lands Chamber of the Upper Tribunal has ruled against a freehold owner that claimed legal fees in its bid to recover unpaid service charges. The London Rent Assessment Committee had initially determined that a lessee of Castelnau Mansions in southwest London should pay £11,258.02 in unpaid service charges for his flat. An amount of £4,663 for legal fees was included as an item in the service charge accounts.
Read the full article here
Monday, October 17th, 2011
A council is to give housing priority to people who have been in employment for more than two years.
A report in Inside Housing states that Westminster Council has said it wants to reward those actively seeking work while at the same time discouraging a ‘benefits culture’. Currently residents are given priority according to need including factors such as homelessness, medical needs and young children. Now the council has decided to give priority to households where the main applicant has been working under a written contract for at least two years.
Read the full article here
Monday, October 17th, 2011
Service charge complaints up 46%
Brian Milligan of the BBC has highlighted the fact that flat-owners’ complaints about service charges have risen by 46% in two years to 7,600, figures show. They queried the amount they were being asked to pay for maintenance and repairs, the Leasehold Advisory Service for England and Wales said. In some cases flat-owners have been asked for payments of tens of thousands of pounds by those who manage the blocks they live in. But an agents’ association said actual numbers of complaints remained low.
Read the full article here
Thursday, September 15th, 2011
Compliance with the new SRA Handbook
Patrick Cannon in Property Week notes that the Solicitors Regulation Authority (SRA) has recently published its “Draft supervision and enforcement strategy for conveyancing”, which it plans to finalise in October this year. This paper explains how the SRA will deal with – or as the paper puts it, “engage with” – solicitors whose conveyancing work is in breach of the new SRA Handbook which is effective from 6 October.
The new handbook is intended to move away from prescriptive rules and introduce more flexibility. To that end, there will be 10 mandatory principles, fleshed out by the code of conduct with lists of “outcomes” and “indicative behaviours”.
Thursday, September 15th, 2011
Mall Development Falls to Early 1990s Levels
The rate of shopping centre construction activity has fallen to similar levels seen during the early 1900s recession, limiting opportunities for retailers to expand, according to the latest research from CB Richard Ellis, reported in Shopping Centre.
Shopping Centre development has fallen to less than 25 percent of levels recorded in the first half of 2007, immediately before the onset of the credit crisis, and continues to contract in Great Britain with new completions set to provide less than 3m sq ft of space in 2011. More than half the total of new shopping centre space completed this year is accounted for by Westfield Stratford.
However, unlike the early 1990s recession when new scheme proposals and consent levels declined sharply, the overall development pipeline has remained relatively stable. The decline continues to be more to do with nominal delays that schemes being scrapped altogether, albeit “distressed” schemes – those where developers are in administration or cannot progress schemes for financing reasons – have inevitably grown in number.
Due to the length of time it takes to get planning consents and the cost of holding land for development, it is clear that some shopping centre schemes will inevitably be cancelled resulting in further pipeline contraction. CBRE expect the current pipeline total of around 60m sq ft to fall to about 40m sq ft over the next three years.