Industry comment, updates and news from the Websters team.

“He who pays the piper….”

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.

In some cases, the leases specify who should benefit from this not insubstantial interest but in many cases it is not clear whether this should be the landlord, as he holds the money in trust, the agent, who has day to day control of the cash or the tenant, who after all has paid the money!

There is a growing trend among tenants’ associations to expect the landlord to credit the interest to the tenants. This may also be an opportunity for landlords to declare their position. Which would reap the most benefit for the landlord; receipt of the deposit interest or the goodwill generated by crediting the interest to the service charge accounts?

Therefore, it can be seen that there are both financial and “goodwill” benefits available to landlords who take the initiative and state clearly and openly what their policy is in relation to interest on monies in service charge bank accounts.


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