Exploring Service Charges Outside of the UK

 

On our current International Projects covering Germany, Spain, France, Poland, Norway, the Netherlands, Belgium, Ireland , Czech, Italy, Australia and the US we have saved over £2.7 million so far this year, with further savings on the way.   All thanks to our skilled international team!

Service charge outside of the UK can be quite different, surprise, surprise!  Each country works in its own way, and service charges are often called something else:

  • CAM (common area maintenance) or OPEX (operating expense) in the US.
  • Exploitation charges in Poland.
  • Provision for services in the Netherlands.
  • Frais de service (Service Fees) or Charges Communes Generales (General Common Charges) are the most used in France depending on if it is a distribution park or office building.  Budgets are Rapport au budget des frais de service (Service fee budget report) and reconciliations depends on the managing agent and will be either Releve de Depenses (Expense Statement) or La reddition de l’année (The surrender of the year).
  • Budget for common expenses and liquidation of charges in Spain, etc.

For communication purposes, we have found it is important to use the local terminology.  Some language that we use in the UK, such as audit, may be toxic in other countries, so we must take care of the specific terms that we use.  We need to make sure that nothing gets lost in translation.   

Beyond using the correct terminology, we need to know which language to use and whether certain countries are comfortable with the use of English as a business language or not.  In countries such as the Netherlands and Norway, the managing agents seem more than comfortable to communicate in English.  However, the experience differs per country.  For example in Poland they seem to prefer communication in Polish.

With terminology figured out, let’s move on to budgets.  In the UK as we all know, budgets are produced at the beginning of each service charge year, preparing tenants for their specific costs to be expected in the coming year.  Budgets are not produced in all other countries as they are in the UK.  For example, in the US service charge costs are based on the prior years reconciled accounts.  Service charges are therefore challenged at year-end, once the reconciliation is received as opposed to being challenged and reviewed during the service charge year.  In Germany, it is not common to see service charge budgets either, again only year-end reconciled accounts.

Other countries may also include services that would not commonly be included within service charge in the UK.  For example, property taxes (similar to council taxes) are included within the service charge in Poland and can make up a significant portion of the costs (although the Landlord is often required to cover half the cost of taxes in Poland).  This can be the case in the US and France as well.  Furthermore, the budget detail provided in the UK is not a common occurrence elsewhere.  Besides in the US, it is not common to see any sort of apportionment matrix or how the tenant’s share is calculated.  Generally only a list of cost categories with the tenant’s share is received, rarely indicating how it is calculated or containing a description of the cost categories.  But in countries such as the US and Germany, the floor area of the premises will almost always be stated in the lease.

Then we run into challenges we wouldn’t expect to see in the UK.  For example, in Germany, year-end reconciliations must be queried within 4 months or they are binding based on German law and management fee caps are often tied to a percentage of net rent. Germany often uses direct debit for payment, making it hard to challenge if sums are debited directly from the client’s account. A common experience across Europe is the expectation to pay the charges and not ask queries, so sometimes it can be difficult to get responses or the response that we need. Furthermore, protections, such as caps are only seen in the UK and US.

Our skilled International Team enjoy the challenge of exploring, investigating and auditing lease expenses outside of the UK.  If you are interested in discussing the international cost saving possibilities across your portfolio, please contact us by completing the form below:

 

 

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