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 ‘service charge’ 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
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
Could do better!
According to a report by Property Week, the Occupier Satisfaction Survey 2011 questionnaire based on the Code for Leasing Business Premises, shows that commercial property tenants in the UK are slightly more satisfied with the service they receive from landlords than last year, although service charge arrangements remain a particular area of discontent. The survey was commissioned by the Property Industry Alliance in conjunction with the UK chapter of CoreNet Global.
Tuesday, August 23rd, 2011
Service Charge Compliance Index (SCCI) Results 2011
The RealService Best Practice Group (RSBPG) has published its second benchmarking Index, which shows the extent to which some of the UK’s leading owners and managers are complying with the requirements of the RICS Service Charge Codes for commercial and residential properties. The results show that property owners and managers are still finding it challenging to demonstrate compliance with the requirements set out by the RICS.
Read the full report here
Tuesday, July 19th, 2011
Service Charge Audit – Specialist Service
Websters’ senior partner, David Goddard writes that, 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.
- Landlords and tenants have transparent financial relationships
- Tenants trust that the service charge is correct and fair at no added cost to the landlord
- A reduction in investigations by tenants into service charges, saving time and money for landlords
- Specialist advice on current techniques for the internal accounts team
- Almost all general practice accountants and auditors unfortunately do not have the specialist knowledge and experience to fully understand your needs
Since that time many large landlords in the UK have moved to providing independent audited accounts for their service charges thus removing one cause of landlord : tenant conflict.