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Barr Ellison Solicitors – commercial property
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7 August, 2019 - 09:28 By News Desk

Tenants must become savvier about what they’re paying for

I think it’s fair to say that as a general rule, many of us dislike the idea of more administration. Additional red tape is rarely welcome, writes Kurt Richards, Associate, Commercial Property and Asset Management, Carter Jonas Cambridge.

However, on the 1st April this year, The Royal Institution of Chartered Surveyors (RICS), the professional body that promotes and enforces international standards across many areas of property industry, changed the rules governing commercial property service charges from being merely advisory to strictly mandatory.

Perhaps it’s because of the uncertain times we’re living through (regulations are reassuring), but the stiffening of service charge protocols has been largely welcomed across the commercial property sector. In fact these requirements are expected to aid efficiency, improve transparency and, vitally, safeguard both landlord and occupier interests. 

There is now a mandatory requirement for RICS members to operate within nine basic principles developed over the last 20-25 years.

These are sensible, balanced guidelines designed to protect the interests of all parties. The new rules have been broadly endorsed by property bodies representing landlords as well as tenants. 

In reality, the majority of our clients delegate matters to us to take the worry of compliance away from them. Every year there are more and more regulations, and it falls upon the managing agent to comply. 

Almost all of our corporate clients are very good, they are very happy for us to obey all legislation and expect us to do so. 

Anything that we, as a profession, can do to improve the operation and transparency of service charges, the better; that said, service charges will always be an area for dispute. 

Even the least litigious tenants worry that landlords spend their money without authority or care. They are aware that a landlord’s main focus is to maintain the value of their asset. 

A high-handed landlord’s response may be to maintain and improve a building at the tenant’s expense arguing that, “after all, they are wearing out the lifts and air-con.” 

Generally speaking, tenants have got to become savvier about what they’re paying for. Take the example of an occupier wishing to lease space for five years in a 15-year-old building. 

If they are taking professional advice, they won’t want to be footing the full bill for renewing the air conditioning in three years. To prevent this happening, caps on service charges are becoming more common.

Adding to a tenant’s awareness is that fact that charges tend to be a higher proportion of rents than they used to be and inflation has pushed them up even more. It’s now considerably in the interest of the tenant to keep a close eye on the charges. 

As management specialists, our job is to provide timely, transparent accounts and ensure any issues are dealt with quickly and fairly. With regards to the legislation which has just come in, there is nothing in code which is inherently unfair. 

With the new regulation now in place, management specialists refusing to act for unruly clients will become more and more common. 

Luckily, having consulted my counterparts across the industry, I know this is very much the exception and not the rule.

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