Service Charge Disputes Between Commercial Property Landlords and Tenants
Disputes over commercial property service charges between landlords and tenants are common and can be notoriously complex to resolve.
Landlords are keen to ensure that they recover the costs of maintaining their property, whilst tenants can struggle with unexpected rises in service charge costs, which can make it difficult to accurately balance their finances. With both parties coming from completely different perspectives, resolution in such disputes can be hard to reach.
Lupton Fawcett has extensive expertise in this area of law, and we are here to help you to navigate your service charge disputes. We will offer you clear, practical advice – our aim is always to help you to reach a satisfactory conclusion through negotiation and with the minimum of disruption and inconvenience to your business.
Speak to one of our expert Commercial Property Dispute Lawyers for advice today.
What are commercial property service charges?
Commercial property tenants pay service charges to landlords for the maintenance and upkeep of the property they lease. They cover amenities and services which the landlord provides to the tenant, often as part of their lease. Service charges typically cover items such as:
- repairs and maintenance
- heating and air conditioning
- a sinking fund, in case of repairs being required, or necessary maintenance
- property management fees.
Service charges are often included in the tenancy agreement or lease, but there are no standard or statutory provisions, and terms can vary greatly. Tenants who lease properties within multi-occupancy commercial buildings, such as industrial estates, business parks or shopping malls often have service charge clauses included in their lease. This ensures that any repairs or maintenance can take place when necessary and means that the landlord is not left out of pocket if the need to undertake repairs arises.
The importance of the lease
In order to ensure that each party fully understands the services that a landlord must provide, and the related costs to the tenant, the terms should be clearly set out in the lease. The Code of Practice on Service Charges in Commercial Property published by the Royal Institution of Chartered Surveyors (RICS) provides a useful benchmark of standards of management required when leasing commercial properties.
Landlords are legally obliged to present details of applicable service charges under the terms of the lease, providing explicit “best estimates” of the costs expected during the leasehold period.
The service charges should reflect the accurate cost of maintaining the property, and landlords are expected to provide leaseholders with the accounts to demonstrate that the money charged is fair and proportionate. Extraordinary repairs may be paid for by insurance, which is also often paid by the leaseholder, who should be given notice if extraordinary repairs or charges are necessary. The landlord should have their service charge expenditure audited and should share that information with their tenants; if there is any shortfall or surplus, the payments should be rectified.
Why disputes arise
There are numerous reasons why disputes may occur over services charges. In some cases, tenants may feel like they are being overcharged for provision of maintenance. If charges increase annually, or are levied unexpectedly, tenants can feel that they have little control over their expenses and find themselves facing financial difficulties. Equally, landlords do not want to risk undercharging for services that they are obligated to provide and risk finding themselves having to cover any financial shortfall.
Common disputes over services charges include:
- the failure of the landlord to supply a full breakdown of costs when invoicing for a service charge
- non-specific charges for maintenance
- issues over the charging of fees that seem excessive for administration, such as agents’ fees
- disputes over the ownership of a sinking fund, especially when the fund is substantial
- levying service charge invoices without notice or explanation.
Service charges need to be served correctly within the law, including cost breakdowns and any relevant accounts, otherwise tenants may have no legal obligation to pay it.
Why choose Lupton Fawcett?
Lupton Fawcett advise both landlords and tenants in disputes over commercial service charges, and we can offer you expert legal advice if you find yourself facing a dispute. If you need professional help regarding service charges, talk to us today. Our commercial property experts can offer you guidance on all aspects of lease negotiation, dispute resolution and mediation. We will always aim to resolve your issues without the need for litigation, but where this can’t be avoided, we can offer you legal representation and tailored advice.
We provide a personalised service, with sector specialists and extensive resources to ensure we are giving you the best solutions to your problems.
Our Commercial Property Disputes Solicitors act regularly for clients across the United Kingdom including Bradford, Birmingham, Hull, Leeds, Liverpool, London, Manchester, Sheffield, York and Nottingham. We can support your needs wherever you live in England, Wales & Northern Ireland.
For a no obligation initial consultation please either call the office or leave your details using the contact form at the top of this page. We’ll be happy to help.