Navigating Service Charge Complexities: How We Help Protect Our Clients

When clients are dealing with lease renewals or negotiations, we are often asked to provide advice to assist in navigating service charge complexities and avoid potential pitfalls.

We recently supported a client with valuable pre-contract advice as they prepared to renew the lease on their store in a regional shopping centre.  The shopping centre had historically apportioned service charges based on Rateable Value.  However, this method is no longer considered fair and reasonable as per the RICS Professional Statement.  If the apportionment basis were changed to the more acceptable basis of floor area (GIA/WFA), then this would result in the client’s liability increasing significantly.

Understanding the potential impact, we suggested negotiating a cap at the current liability.  The data held in our bespoke database, Verivi, which is used to create the Assure Index, helped us compare this with industry standards, proving the current liability to be good value.  The managing agent agreed to a cap based on the Rateable Value level, with Consumer Price Index (CPI) increases subject to a maximum of 3% each year.

Subsequently, the service charge apportionment did change from Rateable Value to a Floor Area basis, which would have resulted in our client’s share increasing from £100,000 to £350,000.

Thanks to the pre-contract advice and the cap negotiated, the client was protected from this drastic increase.  The cap ensured that their liability remained manageable and aligned with the initial terms, avoiding a sudden and substantial financial burden.

At Assure, we specialise in identifying potential issues and providing proactive solutions.  By utilising our bespoke database, Verivi, we can accurately compare lease terms with apportionment methods, ensuring any discrepancies are found.

Service charges can be a complex and contentious issue, but by addressing any potential discrepancies at the outset and negotiating favourable terms, we help our clients achieve value for money and avoid unexpected increases in their liabilities.

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If you are an occupier looking to gain control over your occupancy costs, our experienced team are here to help.  Fill out the contact form below, and one of our specialists will be in touch to discuss how we can assist you.