On behalf of a large supermarket chain client we recently reviewed an apportionment issue that arose due to a change of managing agent.

This store was located on a Shopping Park that used a Weighted Floor Area (WFA) apportionment method – the larger the store, the greater the discount to the service charge.  The theory behind the WFA apportionment being that a larger floor area doesn’t necessarily proportionately represent a greater benefit from the services provided. 

Our clients lease specified the weighting formula to be used and that, as the Anchor store, they would receive the greatest discount.

The new managing agent forwarded the first quarter’s charge based on the budget and it was significantly higher than anticipated, so alarm bells rang!

The apportionment schedule was reviewed, and it was apparent that the charges had been issued on a Gross Internal Floor Area basis (GIA) with no discounts for larger units, as required by the lease terms.  The managing agent was alerted to this error and identified that they had made mistake when calculating the liabilities. 

Revised invoices were issued, and the charges were compared to the correctly calculated liability recorded in our database, Verivi.  The invoice still didn’t match with the anticipated charges, so was queried again!  The agent found that they had used the total budget figure to calculate the liability, rather than the one schedule that our clients contributed towards.

As a result, credit notes for were obtained for our client and the apportionment details were re-issued correctly, with a saving of over £200,000 from the originally issued on account charges.

Lack of familiarity with specific lease terms and poor resourcing on handover to a new managing agent can lead to errors being made.  We upload Scheme Budgets to Verivi, calculating the anticipated liabilities for all our clients.  So, when invoices are received, we can immediately spot if an error has occurred and quickly get it resolved before payment is made, avoiding complicated time-consuming account reconciliations and amendments having to be made later.

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