Service charges in a commercial building

A commercial service charge review should connect the lease's recoverable costs to the building's budget and accounts. The RICS professional standard addresses administration and transparency, with its second edition effective from 31 December 2025 and published transition clarification. ^[1]

Identify the charging structure

Check the tenant's percentage, any separate cost pools, caps, exclusions and treatment of vacant units. Ask how expenditure on lifts, security or estate roads is allocated where occupiers receive different benefits.

Compare the current budget with recent actual expenditure. Distinguish recurring services from a major replacement or improvement, and establish the contractual basis for each disputed category.

Request an explanation that can be tested

Specify the entry, accounting period and supporting information needed. Read a year-end adjustment alongside payments already made so the same cost is not misunderstood as an additional charge twice.

Repair obligations may overlap with service charge responsibilities. Insurance contributions should be reconciled separately where the lease treats them as insurance rent. A professional standard informs practice but does not automatically rewrite every tenant's lease; identify the contractual and professional questions distinctly when raising a complaint.

Establish which costs your unit is meant to share Obtain the service charge provisions and identify the services, areas and cost categories to which the tenant contributes. A building can have separate pools for offices, retail units, parking or a wider estate. Ask how your unit is allocated to each pool and which percentage or calculation applies. If your premises have their own entrance and no use of a particular facility, that fact may prompt an enquiry, but it does not alone establish that the lease excludes the associated cost. Start with the contractual allocation.

Check the treatment of empty units, landlord-occupied space and services supplied to only some occupiers. Ask for the apportionment schedule and explanation of material changes from the previous year. A percentage shown on an invoice is easier to evaluate when the denominator and relevant floor areas are known. If measurement figures differ from the letting particulars, ask which method the lease uses. The objective is to understand the charging structure rather than infer fairness from whether your bill resembles the amount paid by a nearby business. ## Read budgets and year-end accounts as different records A budget estimates expenditure for a period, while a year-end account records the relevant actual costs and resulting adjustment. Compare the periods and the payments already credited before treating a balancing demand as a duplicate charge. Ask how deferred work, provisions or money collected for future projects are treated. A large movement between budget and actual expenditure deserves an explanation tied to specific categories, especially where the business planned its occupation costs using a figure that did not disclose a known unusual project.

Investigate substantial replacement or improvement items separately from routine services. Obtain the scope of work, cost allocation and contractual basis for recovery. If the work benefits a wider estate or changes the building beyond ordinary maintenance, explain the concern precisely. A project being commercially sensible for the landlord does not by itself answer whether the lease permits the particular cost to be charged to your unit. Conversely, dissatisfaction with the timing does not establish that an otherwise authorised expense is automatically excluded. ## Use the RICS standard for the question it addresses RICS' second-edition service charge standard addresses management and transparency and took effect from 31 December 2025, with published transition clarification. ^[1] If you raise a professional-practice concern, identify the accounting period and the provision relevant to that concern. Ask whether the manager is an RICS member or regulated firm and how the transition applies. Keep this analysis distinct from interpreting the lease. A professional requirement can be significant without automatically replacing the contractual wording governing a particular tenant's payment obligation.

Request the specific records needed to test your concern, such as an allocation explanation, supporting expenditure detail or reconciliation of a carried-forward amount. Explain whether you are questioning the arithmetic, recoverability, management process or evidence of the service delivered. Combining every concern into an allegation that the building is badly run can make the financial question harder to resolve. A clear request allows the manager to provide a targeted answer and gives an adviser a manageable issue to assess if the response remains incomplete. ## Resolve the account without losing the wider record Where an error is acknowledged, ask for the correction to appear in the ledger and relevant statement. Clarify whether it affects only your account or the allocation across the building. If a proposed settlement involves carrying money forward or spreading payment, record the terms and the accounting treatment. Do not assume a verbal agreement with a property manager changes the lease or binds the landlord in every respect. The person making the agreement needs the appropriate authority, and the financial record should reflect what was actually agreed.

Seek advice before withholding sums, offsetting an unrelated complaint or accepting a settlement that releases wider issues. Preserve the lease, accounts, supporting documents and correspondence for the disputed period. If the business is assigning or ending the lease, ask how unresolved adjustments are treated between the parties and whether later accounts may still matter. A clean handover of the premises does not necessarily close the service charge account. Keeping the period-specific record intact helps distinguish a legitimate later reconciliation from an unexplained demand that needs further investigation.