Services and Service Charges

The use of service charge provisions is usual in commercial leases, particularly where tenants share common facilities.

As a tenant you should ensure that the following key factors are considered and covered by the service charge provision in your commercial lease:

1. The obligation on the landlord to provide services
   In order to minimise disputes and to ensure the provision of vital services at an appropriate level the landlord should be under strict obligation to provide them.
   
   
2. To what services and expenditure the clause extends
   You should check what services and expenditure the landlord is seeking to provide and ensure that you are happy to pay for these items
   
   
3. How the expenditure is to be apportioned between the various tenants
   Possible methods for apportionment are by reference to rateable value, floor area, anticipated use of services or as a fixed percentage. Whatever method is used there are potential advantages and disadvantages to you as the tenant. You will want to ensure that you do not become liable for any unlet units.
   
   
4. The procedure for certifying the expenditure and the apportionment
   You should ensure that certification is undertaken by a independent surveyor or accountant.
   
   
5. When and by what means the service charge is payable
   Typical service charge provisions will stipulate that the service charge is to be paid periodically in advance by the tenant. Are advance payments based on the previous year's actual expenditure or on an estimate of the likely expenditure in the current year? If the latter, you should insist on the amount payable being certified by the landlord's surveyor.

Andrew Woods
Partner

14 August 2003