This article was originally written for and featured in Fresh Business Thinking.
If you are a tenant in a multi-let building or of a unit on an estate it is very likely that you are required to pay a service charge to your landlord representing a proportion of the cost that the landlord incurs in providing the ‘services’ set out in the lease. Being very clear on the service charge provisions is an important part of lease negotiations when taking on a new property as the charge is very often reserved in the lease as an additional rent. This means that if you fail to pay the service charge then the landlord would have all of the options open to it as if you had defaulted in paying the principal rent. (for example forfeiture of the lease, rights of distress, interest charges or refusal to accept a break notice) and not simply a claim in debt.
Here are what we consider to be some of the more important issues to look out for when reviewing a service charge clause:
In general service charge provisions tend to be fairly standard and should ideally be drafted taking into account standards set out in the Code for Leasing Business Premises. However, not all clauses are the same and so the points above should go some way towards helping you ensure you are dealt with fairly with minimal surprises when you receive your service charge demand.
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