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Service charge – What’s usually included?

7th November 2019

Here at Rory Mack Associates, our property management services provide a lifeline for private and corporate clients with commercial and residential property portfolios. Our transparent and experience-led service ensures all client requirements are catered for professionally. Service charge collection is just one of the many areas we assist with. For landlords and owners, understanding what’s usually included in this service charge guarantees the deep understanding needed to successfully manage their property or portfolio of properties. 

In this blog post, we take a closer look at service charges in commercial properties and the code of practice that ensures fairness, uniformity and transparency throughout the industry.

Service Charges in Commercial Property – an overview

Service Charges in Commercial Property, 1st Edition is essential reading for any new or established commercial property landlord or owner. Implemented on 1st April 2019, this document actually supersedes all previous editions, despite it being the 1st edition. 

Like previous editions, Service Charges in Commercial Property, 1st Edition, was compiled by the Royal Institution of Chartered Surveyors (RICS). It provides vital guidance for RICS members and regulated firms to ensure best practice is promoted and called upon when it comes to the application of service charges for commercial properties throughout the UK. The edition also delivers advice on how to reduce disputes related to service charges and resolve any grievances that may occur to ensure a happier landlord-tenant relationship.

What should a service charge include?

According to Service Charges in Commercial Property, 1st Edition, the service charge is designed to help the owner of said commercial property to recover any costs or charges that may be incurred as a result of managing the property. 

The service charge includes any maintenance, repair or replacement costs of any equipment or materials used to ensure the property’s operation. These costs must however be reasonable and stipulated in the lease as part of the service charge arrangement. Any works or services outside of this description may be included if they intend to be provided by the owner. However, these must be agreed upon by all parties, particularly if they are subject to reimbursement by the tenant or occupier.

Why is the code of practice beneficial?

Following the RICS’ guidance on service charges for commercial property is beneficial for both owner and occupier. For the owner, the application of a reasonable service charge arrangement allows them to recover all expenditure on services, especially if the property is fully let. As part of a service charge arrangement, a manager will be appointed for a fee. This ensures the owner can leave the management and administration of the highlighted services to another professional for extra ease. For occupiers, the guidance guarantees fair treatment and transparency.

For all parties involved in the letting and management of commercial property, promoting best practice as per the latest edition of Service Charges in Commercial Property ensures general standards can be improved. Disputes involving service charges can also be minimised as a result. In addition to supplying helpful guidance for commercial property owners and occupiers, the code of practice is supportive of solicitors and managers of service charges, especially when it comes to the negotiation, drafting, interpretation and operation of service charge arrangements.

Need assistance with service charges?

If you are a commercial or residential property owner looking for assistance with service charges, we can help. Our property management specialists are experienced in the negotiation, collection and budget forecasting of service charges, as well as the organisation of any reactive and planned maintenance that may be included. 

Contact our dedicated property management department directly for further details about our bespoke management service.