Friday, 28 September 2007

Check the small print

Shropshire companies in rented properties should check their lease carefully to avoid service charge arguments.

That's the message from Sarah Heath, our Commercial Property Specialist, who said tenants should seek professional advice before they entered into any rental agreement. "The drafting of the lease is the critical part of the deal and it’s crucial that tenants proceed with care."

Sarah said many landlords believed a commercial lease gave them the right to do anything they liked.
"Some landlords run up costly maintenance work bills, assuming that their tenants will not have checked the details of their lease, and so will just automatically pay up. But tenants should take care to check the small print of their lease, because although the service charge clause may seem complicated, generally if it doesn’t allow for something to be done, it can’t be done.

"Your professional adviser should also be able to help ensure your lease does not include catch-all clauses that will cover the landlord, and that it limits the amount that can be paid to any management company to an agreed percentage."

Sarah said the landlord could only recover the cost of the services which were set out in the lease, and even then, only if the right procedures had been followed. "The courts are more frequently taking a closer look at service charge issues relating to business leases – looking at the work the landlord has carried out, what the costs were, and whether the work was necessary from the tenant’s point of view.

"If you think the price of carrying out the work seems high, ask your landlord for detailed plans and, if your lease gives you the right, a breakdown of the costs." Sarah said whether the costs were reasonable would depend on the length and terms of your lease, and whether the landlord had considered all possible methods of repair, rather than just replacing everything.

"Tenants are no longer expected to pay for major refurbishment which they’ll see little or no benefit from in the lifetime of their lease, so if you’ve only got a short time left, consider whether your landlord’s request is appropriate. But you must not ignore the service charge issue and hope it will just go away – ask your landlord for full details, and if it gets very technical, instruct a surveyor to act on your behalf.

"And if you’re going to dispute the service charge, put your concerns in writing. This may help at a later date if you need to apply for compensation."