Corporate landlords must do better on service charges, occupiers' survey says

The Occupier Satisfaction Survey (4-page / 482KB PDF) found that occupiers were happier overall with their landlords than in 2010, but noted that low satisfaction with service charge arrangements had barely changed from the previous year.

The Occupier Satisfaction Survey measures the satisfaction of corporate occupiers in the UK based on the Code for Leasing Business Premises in England and Wales (15-page / 544KB PDF).

Occupier satisfaction levels were highest when tenants were asked about the leasing process, rent review terms and conditions achieved in lease negotiations and the process of relinquishing a property. Landlords were scored at an average of 6.2 out of 10 in these areas.

Sustainability was an important issue for occupiers, according to the survey. Landlord interaction on environmental issues received the lowest score, averaging 4.0 out of 10.

Service charges are paid by tenants to cover the costs a landlord incurs in providing maintenance, insurance and other services, such as the lighting and cleaning of common areas, to a building. The RICS Service Charge Code of Practice (88-page, 1.3MB PDF) provides guidance on how best to manage service charges.

Satisfaction with service charge arrangements received an average mark of 4.3 out of 10, with 75% of respondents noting that there had been no change in their overall satisfaction with landlord arrangements since the previous year. Almost a quarter of respondents stated that either "a minority" or "none" of their landlords provided a service charge budget.

"This is clearly an area where landlords need to make considerable improvements, especially given the fact that 88% of all respondents in the survey pay service charges for the properties they occupy," the survey said.

Matthew Baker, a property expert with Pinsent Masons, the law firm behind Out-Law.com, said that better communication between landlords and tenants was essential.

"The underlying theme of the RICS' Service Charge Code is to encourage better communication between landlords and tenants, whether that is by the timely issue of service charge budgets, the timely issue of year end reconciliations or the provision of full details of works done and costs incurred," he said. "Disputes occur when there has been a breakdown in communication and can be costly in terms of time, money and damaging landlord and tenant relationships. The commonsense approach of talking to each other has to be the way forward."