Disputes with tenants over commercial property service charges are a headache that most landlords dread. These are all too often evident at this time of year, as new budgets are issued and reconciliations are prepared. However, service charge expert, Jamie McNeil, maintains that landlords benefit most from happy and speedy resolution of commercial property service charge disputes.
An unresolved dispute, no matter how minor, has the potential to seriously affect the operation and reputation of a Landlord. For example, opportunities to get empty units off your books may be lost if unresolved disputes mean you are unable to disclose accurate service charge information to a prospective tenant.
It may also delay or affect your ability to sell a commercial property, as it cannot be truly “ready for sale” if service charge disputes exists, or historic service charge reconciliations have not been completed.
Tenants with commercial property service charge disputes, withhold money as they wait for clarification of issues or resolution which often leads to cash flow problems for landlords.
Perhaps most seriously, Landlords reputations can be irreparably damaged. Landlords who have lost the goodwill of one tenant may never do business with that tenant again.
Most successful public-facing businesses understand the value of good service. If handled well, a disgruntled customer with a complaint can quickly become a loyal customer who recommends the brand to others. Although acting in a B2B environment, there are good reasons for commercial property landlords to also adopt an equally proactive stance when dealing with service charge disputes.
In addition to helping avoid some of the potential problems mentioned above, transparency and speed in conflict resolution will enhance the confidence of your stakeholders and shareholders. It will also help ensure accurate property valuations and importantly in our current acutely competitive market, it will promote loyalty from tenants.
The benefits are good, the downside bad and achieving resolution is easier than perceived. So why are many companies bogged down in protracted disageements with landlords? The answer is often that many landlords are simply unaware of the extent of the dispute until it has already dragged on for some time and caused problems.
Many commercial property landlords outsource property management to management agents. While many agents are proactive and responsive to disputes, not all are. Commercial property service charge disputes can be time consuming and a hassle to deal with. For some agents, it is easier and more cost-effective to ignore complaints or drag the matter out in the hope of a change in circumstances that will see the matter get resolved by default. After all, it is not their reputation or bank balance at stake, and they can always claim they are waiting for instructions so why should they spend valuable hours on sorting out problems that might just go away in the end?
As a landlord, it is your responsibility to make sure your agent is acting in the way that you want them to. The introduction of frequent and strict service charge performance measures linked to the management fee is one way to ensure your managing agent gets the message. And although it will take a little bit of time and effort to ensure a smooth operation, the benefits it will bring are surely worth it.
Note to editors
Jamie McNeil is a Chartered Surveyor with 25 years’ experience advising the UK’s largest and most successful commercial property landlords. He has extensive experience in the setting up and running of service charges and dealing with commercial property service charge disputes . Jamie founded McNeil Commercial, to assist both landlords and tenants in relation to service charge matters.
McNeil Commercial Ltd, 7 Chelsea Road, Bath BA1 3PD
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