Assure were instructed on a new Service Charge management contract for a multi-site retailer, who had previously been managed by another consultancy. We always kick start new instructions with a thorough review of the lease, financials and an account reconciliation. A fresh pair of eyes will often identify new issues or new ways of resolving old disputes!

For one store in particular, a problem with the weighted floor area had previously been identified, but it had become a long running, unresolved dispute with the Managing Agent, with both parties entrenched in their views.

The method of apportionment to determine the liability was based on a Weighted Floor Area (WFA) formula – so the larger the unit, the greater the discount received. The weighting formula gives significant discounts to stores over 25,001 Sqft.

Our client’s premises were comprised of two units. They were receiving benefit from the WFA on the larger of the two units only. The units our client occupied were identified separately in the apportionment matrix, so the weighting was being applied individually rather than jointly, which was detrimental to the overall share applied.

The larger unit was over the highest threshold of 25,001 Sqft, and the smaller unit was under the lower threshold of 3,000 Sqft– so the smaller unit did not receive the benefit of any weighting. However, by combining the units together in the apportionment calculation, the overall WFA was lower than the sums of the units separately assessed and reduced the floor area by approx 2,000 Sqft!

Our challenge was made on the basis that the lease allowed for variation of the apportionment basis in fair and reasonable circumstances. As the units were held under one legal interest and occupied as such, it would only be fair for the total area to be included in the apportionment and receive the full benefit of the weighting formula.  The method of apportionment should be consistent across the Centre, so the full weighting must be applied.

On account charges had previously been withheld and were in excess of the value of the dispute, but with our involvement, it was possible to reconcile the account fully, resolve historic arrears and make payment, subject to the Managing Agent agreeing to the revised apportionment basis and issuing credits.

This resulted in an agreement being reached to reduce our client’s annual liability by 14%, which represented an initial saving of £40,000 – plus the ongoing benefit of the corrected apportionment for the remainder of their lease term and a more positive relationship with the Landlord.

Sometimes issues are quite easily identified, but the methods that Assure use when ‘on boarding’ new clients and the professional relationships that we have built with Landlords and managing agents, mean that we are better placed than our competitors to resolve long running disputes.

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