We found an article written by Karen Philips at DWF lawyers setting out some clear advice on how tenants can challenge landlords’ service charge demands for the forthcoming year.
She has some good suggestions:
- collaborate with other tenants
- check other sites and compare costs
- consult your landlord early about your dissatisfaction
- react quickly to the demand
- pay the part you have no issue with
- know your lease terms
- check the RICS Service Charge Code of practice
Here’s the article in full, thanks Karen for a timely reminder.
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.
It has been reported in Property Week and Retail Week that Westfield Shopping Centre has dropped its service charges for tenants.
The top weighted rate for 2009 of £12.98/sq ft – compared to the original budget projection of £13.94/sq ft that was given to retailers around Christmas 2008.
Driven by ‘unhappy retailers’ who campaigned for a reduction in overheads, it seems this has been achieved by a mixture of cost cutting and streamlining services.