Landlord service charge increase issue

[GuyMor]

Hello fellow businessman, after some advice.

We lease a unit in a commercial old mill. We have a contract signed 3 years ago for 12 months and rolling since then. The contract is for c. £350/month in service charge. We received an invoice (with no notice) in Nov for £1950/month and the same for Dec 23. Initially, it was for the maintenance of the building, but since we're not in charge of things like the roof (which is leaking), now the official response is this is due to an increase in electricity and water costs. To mention, we pay our own electricity bill for our unit so it's only the hallway and the one lift.

If the increase was in line with anything reasonable, we would probably just agree to it. But, not only it is unreasonable, they also can't tell us what the future SC would be "in the new budget" so we can't even make informed decisions if to terminate and move out. All we know there was a significant increase to balance the annual budget, and there will be some kind of increase "in the new year". The contract is very long and I am sure they are covered in black and white for SC but I wonder if there's nothing we can do as tenants to fight this increase?

The official email to us:
"We are hoping to clear up some of the confusion surrounding the service charge costs.

When we initially budgeted for the service charge, we were unaware of the large value of the Electricity and water costs, due to the financial climate. Through the year, it has become apparent that the amount budgeted for Electricity and water was far too low. As a result, we have had to revise the budget and spread the increase over the following months for the service charge to avoid issuing a large balancing charge on reconciliation. Unfortunately, this means that there will be a significant increase for a few months, but this will drop back down on approval of the new budget.

Please note that these are the actual costs to the Landlord from our end-of-year actual service charge budgets."

It's probably wise to get a solicitor involved, but, I'm concerned we'll end up paying hundreds if not thousands to fight something just to pay it to someone else and then have us move out because of the "future budget"

 

[bovine]

You need to understand the contract, it will be detailed what they can and cannot do in there. I suspect what they have done is covered by clauses in the contract and is legitimate, but run it by a solicitor to explain it. Did you go over the contract with a solicitor before you signed it?

 

[Newchodge]

You need to understand the contract, it will be detailed what they can and cannot do in there. I suspect what they have done is covered by clauses in the contract and is legitimate, but run it by a solicitor to explain it. Did you go over the contract with a solicitor before you signed it?

IF the contract allows increases like this, I would next check that they are not including the elctricity which you pay for, in their calculations. Ask for specific details of all costs over the years you have been there.

 

[fisicx]

Does the service charge show the breakdown? They need to show how the £1500/ month for electricity per leaseholder is apportioned. It feels like they have received a huge bill and are trying to recover their costs.

 

[WaveJumper]

Putting aside anything that might be in the small print, I will say in all my years of. Dealing with service charges, they can sometimes be underspent by in which case obviously tenants receive refunds , worst case, events have transpired which for some reason have incurred unexpected expenditure, in your case this is the extraordinary hike in energy costs which had not been taken account of in the budget produced for the year in question.

You should have had a copy of the service charge budget at the beginning of the year, and should now have been given a copy of the final expenditure with a report giving detail on the various headings ie power, water, security etc etc. If you have not received full details of expenditure ask for one, plus any other details they have regarding the electricity etc.

The service charge is obviously covering common parts, ie the electric and sadly if you think about the massive hikes in cost over the last year to be honest its not a surprise and probably quite helpful they are not trying to recoup the overspend in one foul swoop.

As an aside I was only just talking about electricity costs today as I ran service charges with electricity costs alone at over 750k I dread to think what these had escalated too I am pretty glad I don’t have to write the end of year reports anymore.

Ask for the full details but personally think you will be wasting your money taking any legal route.

 

[GuyMor]

As it stands, they are saying there has been increase in water and electricity but also "major" repairs to roof and communal parts.

Are tenants liable for the construction if the building?

Can anyone recommend a solicitor who will give us initial advice on this?

 

[IanSuth]

Are tenants liable for the construction of the building?

Depends on lease

Old place we were in the lease said we had to cover up to eaves height - we still ended up in an argument when poorly maintained gullies on roof led to a leak and ceiling collapse - we ended up going 50/50 on the ceiling repair because fighting would have cos loads and still been at the whim of the courts as to who had to pay

 

[fisicx]

Can anyone recommend a solicitor who will give us initial advice on this?

Why not just use the one who advised when you took over the lease.

In any case, the lease will define which parts of the building are your responsibility and which are the landlords. They can only get you to pay if it’s in the lease.

 

[GuyMor]

I just find it unjust that the tenant is liable to fix a roof that is "broken". That damage to the roof is over a period of time, the tenant has no control of it.

When I let my property out, my tenant isn't liable to any major building repairs..I am as a landlord.

Even if the lease says the tenant is liable,.is that lawful?

Anyway, that's why we want to consult with a solicitor rather than advice over the internet

 

[fisicx]

Even if the lease says the tenant is liable,.is that lawful?

Yes.

You signed the lease. You are liable for everything in the lease. Did you get legal advice before signing?

 

[Newchodge]

Even if the lease says the tenant is liable,.is that lawful?

Of course it is lawful. You agreed to it. Did you bother to get legal advice before signing the lease?

 

[IanSuth]

I just find it unjust that the tenant is liable to fix a roof that is "broken". That damage to the roof is over a period of time, the tenant has no control of it.

When I let my property out, my tenant isn't liable to any major building repairs..I am as a landlord.

Even if the lease says the tenant is liable,.is that lawful?

Anyway, that's why we want to consult with a solicitor rather than advice over the internet

Do not equate landlord/domestic tenant regs and landlord/lessee commercial contracts - different rules as in the first the landlord is assumed to be the more powerful party. In the second both parties are expected to take legal advice.

They are as chalk and cheese and B2C and B2B selling regs

 

[WaveJumper]

As above totally different scenarios, and this is why its so important get proper legal advice when taking on a commercial lease and i would add even more so if there is a hefty service charge attached. I guessing here, but I bet the service charge covers a whole host of other areas they could also come back and bite you where it hurts