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The short answer to the question, ‘When do you need service charge caps?’ is ’On older buildings’. The service charge covers the running costs of the building, which include: cleaning, lift upkeep, air-conditioning, building security, and general building maintenance. If the building is older it is most likely going to cost more to keep running. For example, it is distinctly possible that the lift will break down or the common parts will need to be painted; all costs which are passed down to the occupiers through the service charge.
Eugene O’Sullivan, an experienced Chartered Surveyor at Morgan Pryce, says: “I recently had an old client come back and tell me how the service charge cap I negotiated for him saved his company £20,000 in extra maintenance charges after a large storm damaged the roof and the costs of repairs were passed onto the tenants in the building. Our client was the only tenant in the building able to fight this cost, as we had established a service charge cap when negotiating his lease.”
An average service charge runs between £8 per sq ft and £12 per sq ft, depending on the building’s facilities; for example, if the reception is manned, the property will be at the higher end of the spectrum than a building with no entrance hall.
This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.