Tuesday, November 9th, 2010 in Commercial, Landlord, Managing Agent, News, Residential, Service Charge
HMRC and the Treasury appear to be on a new offensive to collect overdue tax. In an article by Olswang LLP Alicia Videon explains how landlords or managing agents might wish to protect themselves.
The very significant increase in the number of winding-up petitions and administrations linked with HMRC and the Treasury since the July election (an approximate doubling), has raised a clear flag as to the government’s intentions towards companies that are behind with their tax payments.
Read the full article here
Wednesday, October 13th, 2010 in Commercial, Landlord, Managing Agent, News, Residential
Once again Property Week has shown in its survey of tenants’ satisfaction that there are major concerns about the adequacy of service from landlords. Read the full article here.
Wednesday, June 23rd, 2010 in Commercial, Landlord, Managing Agent, News, Residential, Service Charge
David Goddard notes that a further imposition has been put on Landlords and Tenants with the Governments CRC Efficiency Scheme, as this article by by Reynolds Porter Chaimberlain explains.
The CRC Energy Efficiency scheme is a mandatory scheme affecting the whole of the UK, which requires participants to annually buy and surrender allowances priced in pounds per tonne to cover the amount of CO2 a participant emits each year. It is part of the 2008 Climate Change Act, which was introduced to try to meet the Government’s target of reducing greenhouse gases by 80% by 2050. The scheme’s main purpose is to drive down energy consumption.
Read the full article here
Sunday, March 21st, 2010 in Commercial, Landlord, News, Residential
A law report summarised by Charlotte Wicks of Cambridge solictiors, Mills & Reeve discusses the implications for UK service charge VAT treatments in the light of a recent European Court of Justice case. She writes
A recent decision of the European Court of Justice has cast doubt on HMRC’s long held view that service charges relating to common areas follow the VAT treatment of the services supplies under a lease.
If service charges are treated as a separate supply then an additional charge to VAT would arise on both commercial and residential properties where the landlord has not opted to tax.
Landlords of commercial property which is VAT opted are not affected by this issue. However, if HMRC practice does change, landlords of residential property or un-opted commercial property will need to start to charge VAT on service charges. This may require landlords to register for VAT (if they are not registered already). Landlords should now seek to amend old leases and agree new leases to ensure that VAT can be charged on service charges pertaining to common areas. Action should not be required on old leases which are silent as to VAT because with these leases it ought to be possible to add VAT to the service charge if a change in HMRC practice starts to apply the standard rate.
Tenants who can recover VAT but do not currently pay VAT on such service charges may see this as an opportunity. They could ask their landlords for a VAT invoice on these service charges in order to recover the input VAT incurred.
In all likelihood given the uncertainty over the case, this is an issue which will be litigated in the UK courts. Watch this space!
RLRE Tellmer Property sro v Financní reditelství v Ústí nad Labem (2009) STC 2006
Wednesday, March 17th, 2010 in Commercial, Managing Agent, News, Service Charge
Shopping Centre magazine hosted a round table discussion on Facilities management and “Total Facilities Management” or TFM during March.
Link to our scan of the article below.
100301-shopping-centre-tfm-article
Or link to Shopping Centre Magazine website.
Wednesday, November 25th, 2009 in Commercial, Landlord, Managing Agent, News
The Estates Gazette published a summary of some LBS MBA students’ research into service charges and how they are the cause of friction between landlord, tenant and property managers. Property Services sponsored the reserach and a summary of the work is on their website.
Tags: Master of Business Administration
Wednesday, October 28th, 2009 in Commercial, Landlord, News, Residential, Service Charge
The short term reduction of the standard rate of VAT, from 17.5% to 15%, introduced from 1 December 2008 in a bid to help alleviate the effects of the recession is due to come to an end at 31 December 2009.
The rate will then return to 17.5%, unless the Government decides that the economy still requires the added stimulus that this reduction was designed to provide and extends the period beyond that date.
Our experience shows that when the rate was reduced some suppliers passed on the benefit of the reduced VAT rate, as the Government had intended, by keeping their net costs unchanged, resulting in a reduction in the gross cost. Other suppliers kept their gross costs unchanged, effectively taking advantage of a “hidden” increase in their net charges.
Presumably, when the VAT rate returns to 17.5%, the gross cost for the former group will simply return to the previous level, whilst the latter group will retain the increased net cost and apply the higher rate of VAT.
In terms of service charge situations the overall effect on a service costing £1,000 plus VAT prior to 1 December 2008 can be summarised as follows :-
|
|
Residential service charges |
Commercial service charges |
|
|
|
Option to tax |
No option to tax |
|
|
|
|
|
| Prior to 1 December 2008 |
£1,175.00 |
£1,000.00 |
£1,175.00 |
|
|
|
|
|
| Rate reduced to 15% : |
|
|
|
|
|
|
|
|
| 1.) |
Net cost unchanged |
£1,150.00 |
£1,000.00 |
£1,150.00 |
| 2.) |
Gross cost unchanged |
£1,175.00 |
£1,021.74 |
£1,175.00 |
|
|
|
|
|
| Rate increased to 17.5% : |
|
|
|
|
|
|
|
|
| 1.) |
Net cost unchanged when rate reduced |
£1,175.00 |
£1,000.00 |
£1,175.00 |
| 2.) |
Gross cost unchanged when rate reduced |
£1,200.54 |
£1,021.74 |
£1,200.54 |
|
| Assumes no inflationary increase in the cost of the service during the period. |
Therefore, for residential tenants and tenants of commercial non-opted buildings there has been a short-term benefit of lower costs from those suppliers who “played fair” and passed on the benefit of the VAT rate cut, offset by a disadvantage of a higher cost base going forward from January 2010 for those suppliers who took advantage of a hidden price increase.
Watch out for your next service charge statement.
For commercial tenants of opted buildings there is no up-side from suppliers who passed on the benefit of the VAT reduction (other than in cash flow terms), only higher costs going forward from 1 December 2008 for those suppliers who took advantage of a hidden price increase.”
Alternatively, you could just use the first paragraph as a bald statement of fact if you think that my subsequent comments are a bit too cynical!
Wednesday, October 14th, 2009 in Commercial, Landlord, News, Service charge audits
A recent article in Property Week written by Christopher Hedley, a director of IPD, about Occupiers and Management highlighted the general dissatisfaction of tenants with how their managing agents and landlords deal with service charges.
The majority felt that the large increases in service charge costs could not be justified and that control and communication of costs by managing agents was poor – so much so that fewer than 10% of occupiers felt they were getting value for money.
The tenants also expressed major concerns over exceptional expenditure and improvement costs. At best these create unpredictable variations in service charges year on year and at worst may be outside the scope of recoverable service charge expenditure.
(more…)
Thursday, July 16th, 2009 in Commercial, Landlord, News, Residential, Service Charge
A nice article in the Liverpool Daily Post about the lease contract between landlord and tenant in mixed-use properties affecting service charge claims.
The question is whether tenants are able to rely on their lease provisions to force landlords into giving the best value for the services they are obliged to provide?
Best value is an ambiguous concept, particularly where the price paid for shared services may be negotiated several years at a time and may not rise and fall rapidly as market conditions vary. But we like the suggestion that the best Landlords will always be BPF Lease Code compliant.
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
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