How are service charges apportioned between units in mixed-use blocks?

How are service charges apportioned between units in mixed-use blocks?

9:55 AM, 16th July 2015, About 7 years ago 1

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I own a leasehold retail unit that is one of four along the front of a modern mixed-use building with residential flats above. There is a rear courtyard and car park accessible to and used only by the flat occupants.share

The block managers (acting for an RTM company) used to require me to pay service charges towards just the things the shop benefits from (insurance, external repair, window cleaning etc), but recently they have changed it and are now coming after me for contributions towards all costs in the block including the cleaning/electric for flats corridors (I have no access), flats rear garden (I have no access), fire system (doesn’t extend into the shops) etc. Beyond that the charging varies considerably between years, eg one year my unit is charged only a share of costs related to services it benefits from, and in other years a portion of the whole block.

The lease says “…the Property shall bear 25% of the Service Charge Cost properly attributed to the ground floor commercial units” which is unhelpful as it doesn’t indicate the apportionment between resi and commercial, though to my mind it is saying I pay a quarter of costs that benefits the shops and strongly implying the accounts should contain a separate schedule for those costs.

The RICS guidelines on mixed-use apportionment say costs should be apportioned in a way that is fair and considers a) accessibility to services, b) use of services, and c) benefit of services. But what does the law say? The agent is a member of the Property Ombudsman, but I think not ARMA-Q.

Many thanks




12:21 PM, 17th July 2015, About 7 years ago

I've no experience of this sort of setup, but it sounds like you need to have a chat with a solicitor or surveyor with experience of adjudicating the division of management costs.

Also talk with the owners of the other retail units to see what they think. If you approached the block managers as a group to ask why they have changed their practice and how they justify this, you will have strength in numbers and they won't find it so easy to play you off against each other.

I would also have thought your previous history of charges ought to count for something if you end up disagreeing, so prepare your documents and ask the other retail units to do the same.

You may be on sticky ground with charges for the fire system though, as arguably this serves to protect the retail units as well as the residential apartments - it provides an early warning system for the Fire Service, a safety system for you and your customers, etc. The block managers may also be using the fire system as a way to reduce your insurance costs, so you will benefit from it there too.

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