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Dear Sir/Madam,
A BENCHMARK FOR THE FUTURE
The cost of service charges and the unfairness of the system of charging have long been a thorn in the side of tenants in multi-let buildings. This is often regarded as a triple whammy along with the cost of rent and business rates and is not helped by the operation of a system often without accountability and transparency.
The Problem
In February last year Loughborough University reported their findings after an 18 month study that covered a period of 5 years and dealt with 161 buildings and 15.5 million sq feet. They found that:
Out of the £942 million service charges levied on multi let properties £427 million or 45% needed attention and investigation
- The average service charge cost was £4.70 psf but 41% paid £8.07 and 20% an average of £10.24psf
- Yet only 10% of the cost variations were due to location, size, the VAT situation or air conditioning
- Many tenants did not realise that service charges are controllable costs and therefore found it difficult to budget.
The solution
The RICS responded and after consultation with other property groups has issued the Code of Practice for Commercial Service Charges. Unlike the commercial lease code reported in our newsletter in August this carries authority for RICS members but other managing agents are encouraged to follow it as a benchmark for best practice. Residential managers may also benefit from this.
What does this mean for Managing Agents?
- Better communication and consultation
- Increases transparency and accountability
- Better service standards and provision
- Deals effectively with administration and apportionment of costs
- The code gives technical support and examples
We believe that there will be an impact on property values where a reduction in unnecessary service charges increases values. Also happy tenants are long standing tenants which can increase the investment value of a well managed property.
The code is effective from 1 April 2007 so dont be a fool download this from the RICS site by clicking the link below:
http://www.rics.org/NR/rdonlyres/F720AF5F-2C7B-4E0A-9924-D41E92553957/0/ServiceChargesinCommercialPropertyweb3.pdf
This is part of a regular series of topical articles provided exclusively by RDN Surveyors past letters can be downloaded from the library by clicking http://www.rdn.co.uk/newsroom.htm
If you would like any further information or add your own comments please reply to this e mail or contact Roger Nelson on 0800 902 0466
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