Audit of Service Charges
There are many service charges that come with leasing a property, many of which are not explicitly explained to the tenant. Sometimes these charges are hidden, or wrongly included within other items in the tenant’s invoice. That’s where a tenant advisor comes in, they help tenants complete an audit of service charges and verify that the tenant is paying the right amount.
Below we offer some examples of what tenants need to look out for and explain the importance of auditing service charges on the lease.
Landlords or property managers will very often promote low charges when advertising the property, but tenants often find themselves surprised by the high charges on their invoice – it’s important before signing the lease to know all the charges to avoid unexpectedly high invoices.
A tenant representative will come in to audit these charges analyzing the property’s current building charges in relation to those of comparable properties – those of similar size, location and services. They will then compare the building charges and carry out a detailed analysis of the most important charges. They will look for any unjustified building charges, which should be covered by the owner or another tenant of the property, helping tenants negotiate lower service charges.
Type of charges
There are three types of charges: the common charges between the tenant and landlord; private charges of the tenant; private charges of the landlord. During the control it’s vital to make it clear what charges are paid by the tenant and get a clear distinction between the private and the common charges.
An example of a service charge that the tenant representative will help to analyze is the cost of exiting a lease. The lease document often states that the tenant is obliged to reinstate the premises in the same state before they moved in. If not restored, they will be charged a compensation fee, and these can rise immensely. A tenant representative will negotiate these charges, so that the tenant can be prepared for the cost of moving out and is not surprised by the final bill.
There are a number of similar clauses and charges that the tenant needs to review before signing the lease. For more examples of common charges and tips for tenants specific to your area? Contact our team.