A commercial service charge is a contribution from tenants within a multi-tenanted property, office or area to cover shared services and amenities such as cleaning, insurance and security.

What Does A Commercial Service Charge Cover?

A service charge is essentially a way for the landlord to recover the costs of maintaining and managing communal areas and services that benefit all tenants in the property.

– Cleaning and maintenance of common areas (lobbies, hallways, external areas).

– Security services such as CCTV, alarm systems, and on-site security personnel.

– Repairs and maintenance for shared elements of the building like roofs, walls, and lifts.

– Building insurance which covers the structure of the property against damages

– Utilities like lighting, heating, and water in shared areas.

How are Service Charges Calculated?

Service charges are often apportioned based on the size or proportion of the tenant’s occupied space relative to the entire property. The landlord typically prepares an annual budget for anticipated costs, and tenants pay their share accordingly, either as a lump sum or in installments. At the end of the service charge year, a reconciliation is performed, where actual costs are compared to the budget. If there are discrepancies, tenants may receive a refund or be required to pay additional amounts.

Transparency and Disputes

Service charge disputes can arise if tenants feel the charges are excessive or unjustified. In the UK, landlords are expected to provide a transparent breakdown of how service charges are calculated and spent. Seeking professional advice is recommended if there are any disagreements or concerns about the charges.