THE property industry is failing to come to terms with the proper management of service charges. Too many landlords and their agents ''hide behind their leases'' and provide their tenants with the minimum of information, according to surveyors Drivers Jonas.
As well as paying their rent and rates, occupiers of commercial premises also have to pay service charges for items such as lifts, landscaping, security, air conditioning, signage, and such like.
Drivers Jonas warns that unless the industry puts its own house in order the Government could step in with a statutory code of practice, similar to that which operates in the residential sector.
Drivers Jonas partner John Sismey says:''The last Government threatened the property industry with legislation on lease terms but the 'voluntary' adoption of a code of practice averted intervention.
''The present Government's attitude to business means that they are keeping a close watch on us.''
Launching his firm's 12-point voluntary code, Sismey warns that tenants could vote with their feet by moving to buildings where the landlord takes a ''responsible and honest approach'' to service charges.
During the recent slump in the office market service charges rose to 35% of total property costs. ''Though charges now account for 15% of outgoings, tenants still expect a fair deal and if the market slackens they will get more aggressive in pursuing their due,'' he predicts.
Research carried out by Drivers Jonas reveals that half of all service charge accounts take more than six months to prepare, while 20% take more than a year. Delays are the same whether managing agents are used or whether landlords manage the buildings themselves.
Bruce Patrick, of Drivers Jonas's Glasgow office, says that the situation can be just as bad in Scotland.
''Tenants everywhere are concerned about how landlords are spending their service charges. People are fed up handing over hundreds or thousands of pounds, which the landlord then spends without any real consultation. Our code of conduct aims to persuade landlords to treat tenants as customers - and the property as a product.''
Service charges in some shopping centres have now become alarmingly high, and shell-shocked tenants are wheeling in their own firepower in response.
''In the most prestigious malls, service charges can be as high as #6 per sq ft per annum. So anyone with a big unit is in for a hiding.
''Some of the large national multiples are now employing surveyors who do nothing else but monitor and negotiate their service charges,'' says Bruce Patrick.
But not all landlords are at fault. Drivers Jonas singles out Standard Life, BAA plc, and Hammerson plc as ''particularly enlightened'' landlords who have changed their approach to tenant management and service charges over the last few years.
Phil Brown, a director of Hammerson UK Properties plc which manages the company's office portfolio, says: ''Our view is that it is essential for property owners to give value for money when it comes to service charges.
''Not only that, we believe that the charges should be transparent and presented in a timely manner.''
The Drivers Jonas 12-point code of practice includes items such as:
n The need for competitive estimates for major items of expenditure - and that annual contracts should be reviewed at least every three years.
n Service charge budgets should be set in advance of the start of the relevant financial year. With limited exceptions, expenditure should remain within budget.
n Interest earned on surplus service charges should be credited to the service charge fund.
Full details of the code can be obtained from Bruce Patrick at the Glasgow office of Drivers Jonas.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article