Most property investors have heard of service charges and service charge audits, but do you know what they are?
Any property where there is a lease will likely have service charges. Service charges are the common costs of operating a building which are then recovered from the tenants. These include reasonable costs such as maintenance, repair and replacement of fabric, plant, and equipment and materials necessary for the property’s operation. This is for both residential properties and commercial properties.
The relationship between landlord and tenant is governed by the lease, and this lease will specify what expenses can be recovered from tenant. It is also this lease that will determine whether the accounts prepared summarising the expenditure and recoverability need to be certified/audited by an accountant.
In many cases landlords appoint an accountant to certify expenditure regardless of the requirement in the lease to add credibility to the amounts demanded from the tenants.
This is a very basic overview but service charges and service charge audits can be quite complex and generally require specialist attention.
Sonal Thakkar – Supervisor
Westbury Accountants and Business Advisors is an accountancy practice based in London. Westbury have been providing Accounting and Tax solutions to small and medium sized businesses since 1936. Talk to the team at Westbury on 0207 253 7272 or visit http://www.westbury.co.uk.