This is a sum of money payable by
a tenant on account of services provided by the proprietor
and is often collected quarterly in advance at the same
time as the rent. A service charge usually arises when
a property is in multiple occupation, such as an office
block or shopping centre.
Typical service charge items include
the repair and maintenance of the external or structural
parts of a building. Also, costs arising from repair
and upkeep of common parts, together with managing agent's
fees and a sinking fund. A service charge payment can
be capped in order to limit the amount of a tenant's
financial liability.
In addition some service charge costs
have a limit to the amount of increase that applies
during the term of a lease. For example, the charge
cannot rise in excess of the movement in the Retail
Price Index.
This provision enables the tenant
to restrict future service charge liabilities.
