Topic
Service charges in commercial property
Service charges are about allocating costs accurately, with documentation that tenants can understand. When the underlying data is in order, reconciliation becomes far less dramatic.
In brief
Service charges are costs shared by several tenants, such as operations, cleaning, energy, caretaker services and other shared functions. Allocation often depends on floor area, the lease, the type of premises and agreed exceptions.
A good process requires control of cost types, allocation keys, tenancies and documentation. If the underlying data lives in several spreadsheets, reconciliation soon becomes more eventful than it needs to be.
What needs to be in place
Allocation keys
Floor areas, exceptions and lease terms must be up to date before reconciliation.
Cost structure
Costs should be categorised so tenants understand the basis.
Reconciliation history
Previous reconciliations and changes should be easy to find.
Questions and answers
What is normally included in service charges?
It varies by lease and property, but typical items include operations, energy, cleaning, security, service agreements and shared technical installations.
What matters most for good service charge reconciliation?
Accurate underlying data. You need to know which costs to allocate, who should pay, which key applies and which exceptions the lease permits.
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