What Needs To Be Covered Under Service Charges In My Commercial Property Lease?

If you are a landlord or tenant for a multi-let commercial property or estate, the service charges within the commercial property lease needs to be carefully considered. A poorly drafted or vaguely worded cost-sharing provision with the service charges of the commercial property lease could quickly become reasons for serious disputes.

This is why you need to speak to our commercial property lease experts. If you are a landlord, we can ensure that you and your property are protected and that the commercial property lease clearly explains how service charges and operating costs are split and paid. If you are a tenant, we can review the lease before you sign it to ensure you are protected and you know what to expect with regards to service charges and operating costs.

The commercial property lease for a multi-let property or estate will need to include what is recoverable. This should be a list including the things included in the service charges. You can expect to have things like cleaning, security, landscaping, lighting, insurance recharges, management fees and more stated within this part of the lease. There may be some things that explicitly exclude payment from the landlord. This could include things like tenant benefits, letting costs or remedies for original defects for example.

It is important that the budgeting and caps are clearly stated within the commercial property lease too. This means that an annual budget is required, along with on-account payments and an end-of-year reconciliation with audit rights. Within some commercial property leases you will see an annual percentage cap on increases for example. These may also be a smoothly mechanism for major works to make it more affordable for tenants.

You may notice that there is a part of the commercial property lease within service charges that talks about fair apportionment. The basis for this needs to be stated with regards to the floor area, rateable value or a fixed percentage for example. A method to recalculate these areas needs to be provided if a part was vacated.

Within the lease there needs to be full transparency. The landlord needs to provide breakdowns of the service charges within the commercial property lease. This should include copies of major invoices on request. It should also include advance notice for works that are above a stated threshold. You may also want to review the planned maintenance within the lease. This could be a sinking or reserve fund where appropriate. The rules and contributions along with permitted uses and interested should be clearly laid out.

It is essential that you have clear boundaries surrounding the service charges within the commercial property lease. This will help to can reduce the risk of arguments when bills arise. This will be especially important after major repairs or upgrades.

Need help drafting or negotiating your commercial property lease for a multi-let property or estate? Contact our commercial property lease solicitors in Peterborough now.