22 January 2014 #Dispute Resolution
It is common for tenants of multiple occupancy buildings to complain about the level of their service charges. Some are lucky enough to have been able to negotiate a fixed or capped service charge, but in many cases tenants feel they are at the mercy of their landlord or managing agent when it comes to service charges. In modern buildings these can often constitute a significant proportion of the costs of occupation.
Rarely do tenants take issue with service charges, appearing to view them as a necessary adjunct of occupying modern and well-run office buildings. But tenants who are concerned about high or increasing service charges should start by asking a number of key questions about the bills that they are receiving.
Has the landlord or managing agent followed the correct procedure?
The lease will contain provisions dealing with the recovery of service charges and these provisions must be followed by the landlord. It is surprising how often the strict terms of the lease are overlooked and enforcing these can give tenants important leverage in negotiation of service levels and charges.
Do all the items claimed fall properly within the service charge regime?
There is no automatic right for a landlord to recover service charges and their ability to do so will be dependent upon the terms of the lease. A modern lease may well be worded so as to give the landlord the upper hand, but that it is not invariably the case.
Is the landlord accounting properly for vacant parts of the building?
Once again the starting point will be the lease, but it will be very unusual to have a situation where vacant parts of the building are not the responsibility of the landlord rather than the other tenants. In the same way it is worth checking how the service charges are apportioned across the building.
Are management charges being imposed properly?
Sometimes the lease will contain caps on the landlord’s management fee but it is not uncommon for a landlord to attempt both to employ a manager and to impose a management fee on top which may well be challengeable as a double charge.
If interim charges are being sought, are these properly levied in accordance with the terms of the lease?
This list of questions is far from exhaustive, and some of the answers may require legal input. However any tenant with concerns about service charges should start by dusting down the lease and giving it a read.