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!
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.
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
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
