Understanding Commercial Service Charge Apportionments

Understanding Commercial Service Charge Apportionments

by Readers Question

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11:05 AM, 23rd February 2022, About 2 years ago 1

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I have a long commercial leasehold on office space in a mixed residential (apartments) and commercial (offices) development, though the commercial and residential units are distinctly separate buildings.

We receive service charges every 6 months from the landlord’s managing agent. We receive ground rent demands every 12 months from the landlord’s freehold agent.

There have been some exceptional costs for one of the detached residential buildings as a result of its riverside position (that the others in the development do not benefit from).

The landlord notified us under a section 20 L&T (Landlords and Tenants Act, despite us being commercial) of these costs, but said they would not be apportioned to those who benefit from the riverside position, everyone must pay.

These exceptional costs will lead to a doubling of the service charge for this period, so we naturally wanted to check we were getting good value for money and everything is above board.

We believe there are other services we are contributing towards in the service charges which we do not receive/benefit from.

We simply want to check our service charges are fair, reasonable and to establish if it is worth any further action.

I have done this in other residential developments with great success to the benefit of all leaseholders and even the managing agents in other residential developments; identifying savings, properties not contributing and even defending the managing agent when they’re going beyond their contract with the landlord, etc. Yet this being a commercial development, despite them quoting the L&T to us, they don’t like us quoting if back to them.

Our lease however contains clauses similar to that in the L&T in respect to records, receipts and accounts being made available.

“To keep accounts, records and receipts relating to the Service Costs incurred by the Landlord and to permit the Tenant, on giving reasonable notice, to inspect the accounts, records and receipts by appointment with the Landlord (or its accountants or managing agents).”

We have requested these items and received some data, but we have not received the full accounts.

The landlord’s agent claims that they cannot provide us with information on what other properties contribute towards the service charge due to GDPA/DPA, despite us only wanting to know the % contribution by type (eg. there are 5x 2beds contributing X or 2x 1beds contributing Y) or property number (not peoples bank details or names) or sq footage or whatever they’re apportioned by.

The landlord’s agent also claims that they cannot provide us with the contract between themselves and the landlord due to commercial confidentiality, despite it appearing on the service charge and being subject to the above lease term (a record).

We have no way to establish if the service charges add up to 100% without the accounts or apportionment matrix.

We have no way to establish if the landlord has actually appointed the managing agent and if we are receiving the services from them which we’re paying for.

We have no way to understand if our service charges are fairly apportioned.

How can we move forward?

Is there an ombudsman, tribunal, arbitration or another route?

Must we take it to court? Can we do this ourselves or must we take expensive legal assistance? Which court?

If we convince a residential leaseholder to demand the information under L&T can the managing agent just cite GDPR/DPA and refuse again?

Your advice is much appreciated.


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12:57 PM, 23rd February 2022, About 2 years ago

As always, the devil will be in the detail. The starting point, as usual, is RTBL ... Read The Bl**dy Lease.

Read your lease to see what precisely you are required to contribute to. Usually, in mixed developments, there are 'schedules' where different groups of leaseholders pay for different groups of expenditure; e.g. flats in block A pay for the expenses of block A, but block B don't pay for block A expenses.

I would have expected your lease to define 'commercial unit expenses' and perhaps have a contribution towards buildings insurance, structural repairs to your specific building etc. Check the specific wording of your lease in this regard.

I would have expected the service charge budget - and hence the interim service charge demands - to be set out with various schedules and groups of payers too. So, check the fine details of the budget sent to you.

The appropriate body for adjudicating these things - so far as residential flats is concerned - is the First-tier Tribunal (Property Chamber). I've never known a commercial tenant use this route (nor query serve charges) so it might be best to telephone them and ask before submitting an Application.

Lastly, it might be worth speaking with some residential leaseholders to see if they are discontented too. If they are ... join together. Many hands make light work, as they say.

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