"I am taking a pharmacy lease of part of the building, but the landlord wants a service charge. What safeguards I should be looking for?"
Service charges are included in leases of part of a building to enable landlords to recover costs incurred maintaining, repairing and providing services to the building’s common parts and structure.
There are a number of points to consider when agreeing the pharmacy lease:
- The services that the landlord is to provide should be carefully defined. For example, the cost of repair and maintenance of the building and lighting and heating of the common parts.
- The landlord will seek to recover any cost incurred in relation to the building. You should include specific exclusions to limit this, such as advertising of the building, rent recovery, enforcement of lease provisions and building improvements/development.
- There should be an obligation in the lease on the landlord to provide the services to ensure that the building does not fall into disrepair. The landlord should act reasonably and properly and in the interests of good estate management.
- The proportion of the service charge that you are required to pay should be stated in the lease. This could be a fixed percentage or by reference to the floor area or rateable value of the pharmacy. The latter two, or just by reference to a “fair and reasonable” proportion, would usually be more accurate.
- A service charge cap would limit the amount that the landlord could recover from you and give you certainty as to the maximum annual amount.
- The service charge statement should be certified by a qualified independent surveyor and there should be a mechanism for disputes.
You should negotiate the service charge to make the amount you pay to the landlord as certain as possible.