Service Charges in Commercial Leases
Anyone considering renting a commercial property should be aware of potential Service Charges and how they may affect their lease. Many commercial leases will refer to Service Charges. These are costs incurred by the Landlord for running and maintaining shared parts of the building or estate, which the landlord can charge back to tenants.
Tenants will be responsible for all the Service Charges as outlined in their lease so it is important to make sure that you understand what you are responsible for so as to avoid a financial surprise in the future.
Service Charges may include:
– Maintenance and repairs to shared areas, such as common stairwells and corridors. Tenants should note that this might also extend to areas outside the building, such as roofing and drains.
– Management charges to cover the fees of the landlord’s agents in connection with running the property or estate.
How are Service Charges calculated?
The charges are usually calculated in one of two ways:
1. Fixed – these will be a set percentage of the total anticipated service charges for the entire building.
2. Proportional – these will be based on the area of the tenant’s unit as a proportion of the total area of all the units.
It is becoming increasingly common for Service Charges to include costs for shared services, such as a cleaner or gardener or to maintain a lift. This will apply even a tenant lives on the ground floor and might never use the lift. However, tenants should take a broader view of the property and accept that some charges, although they do not directly benefit from them, will maintain both the quality of the property and attract future tenants.
Taking legal advice to fully understand your Service Charge obligations
There will always be a balance to be struck between the landlord and tenant when drafting commercial leases so it is key that both parties understand how the Service Charge provisions will work in practice and how best to protect their interests.
How can Askews help you?
Askews Legal LLP has a dedicated team of Property specialists who can assist with any commercial property issues. For further advice or to obtain a quote, please contact Kuljeet Sandhu, Head of Commercial Property or Pritpal Chahal Solicitor and Practice Manager at Askews Legal LLP
E: KSandhu@askewslegal.co T: 024 76 231000