In the first 3 months of 2022, Assure have recovered £6,000,000 of service charge costs for our clients.
We categorise all savings that we achieve by type and thought we would highlight a few types that we commonly see.
Outstanding Credits can arise when YE credits don’t arrive in a timely manner or are applied to the occupiers account without ever issuing a credit note. Year End accounts are often slow to be reconciled. The RICS Code states that reconciliations should be completed within 4 months of year end; but we know that this only happens for 26% of all Shopping Centre currently (see the Assure 2022 Index ), the others must be chased, sometimes repeatedly, for months. Our method of ‘accelerated savings’ means that when we take on a new client, we can fast track savings results by requesting and auditing statements of account for all lease expenses – rent overpayments, insurance overlaps, YE Bal credits, on account adjustments – that might not have been picked up by your accounts team. Have you had your service charge payments fully reconciled?
Apportionment errors can occur in Weighted Floor Areas or due to Rateable Values changing. When the share of the SC liability is calculated based on Rateable Value, if the RV of any store in a scheme is altered, it impacts on the % share everyone in that Scheme will contribute. If an occupier’s RV reduces, it should mean that their share of the service charge will also reduce, but this often gets missed or delayed. Have you successfully challenged rateable values on your premises?
Accounting Discrepancies are always an important category of saving, particularly after the last couple of years. During the pandemic, occupiers might have chosen to pay in full, part pay, not pay at all and then pay, do deals, get concessions and/or reductions, as well as having reduced their accounts payable resources whilst furlough was available. This has often resulted in big headaches for accounts teams, as lease expense accounts have gotten in a bit of a tangle. We forensically review statement of accounts and transaction histories, identifying where payments might have been mis-allocated or not applied, where and why arrears might have occurred, and put matters right. This means that your finance team can write off accruals and reduce withheld sums. Do you know if your service charge account is fully up to date?
Savings as a result of Budget Queries make up a significant savings category. Many Landlords and managing agents did amend budgets during the lockdown periods, but there were a consistent group who didn’t or who wanted to carry out major works, provide marketing or increase soft services sooner than necessary. Assure challenged those Landlords to work harder to reduce the cost burden on their occupiers during the most difficult trading periods. We are now working with Landlords via working groups and tenant’s forums to fully scrutinise proposed expenditure and ensure efficient and cost-effective provision of services, as well as challenging those less engaged Landlords to find ways to save money. We can share innovative ideas for cost saving and provide our Assure Index benchmarking data to help ensure that our clients pay less service charge that they might otherwise have done. Have you had your service charge liabilities benchmarked?
A great start to 2022 for our clients!
To find out how we can help with reducing your occupancy costs, contact us by completing the form below: