The Apportionment of Service Charges

Service charge (According to the Landlord and Tenant Act 1985, section 18) can be
regarded as a payable costs to be incurred by the owner/renter of the property (both residential
and commercial) every month for services rendered by owner/landlord/building management.
It is usually calculated per square meter, based on the units owned/occupied. Regarding to its
apportionments, there is commonly a complicated situation found by all parties involved when
allocating service charges. To do the allocation of service charges for the building, a service
charge experts (appointed surveyor) need to choose the right equation used to partition the
landowner's expense of dealing with the building between the occupants in that building
(SCDG, 2014). In some cases, it is critical that the allotment of service charges is chosen before
entering the lease as it can bring about additional issues which is demonstrated in the current
case of Windermere Marina Town Ltd v Wild & Anor [2014] UKUT 163 (LC) (EGI, 2014).
There is no standard service charges distribution and allocation strategy for all UK
leasehold property (Noor, et al., 2010). There is a practically boundless assortment of allotment
systems right now being used in the UK. The normal element of all of these strategies is that
they pick a specific part of an individual abodes to use as a state of examination with the other
individual abodes in a building or residential area (RICS, 2012). The most generally utilized
allocation techniques are the apportionment based on rateable value, floor space, bed space,
and equal apportionment (SCDG, 2014). Most likely the same with that methods, Adams
(2007) has been categorized the apportionment methods based on rateable values, degree of
use, floor areas, and percentage of fractions including allocation on unit basis. Each has its
proponents and each has its benefits and weakness.
The apportionment by which taking into account of rateable values utilizes the current
local authority rates framework that was once used to ascertain what is currently termed council
tax (SCDG, 2014). It includes charging the leaseholder by looking at the rateable value of an
individual dwelling with the joined rateable value of all the abodes inside of the building. For
instance, if the rateable value of the all apartments within a building goes to 1000,000, then
an individual with a flat that has a rateable value of 50,000 ought to pay 5% of the aggregate
expenses for the building.
Rateable value have been supported by a few landowners, or picked by their draftsmen,
in light of the fact that they present the component of objectivity (Adams, 1991). Then again,
issues emerge in the early years of any improvement when the value have not been set up and

at any period when occupiers, or others entitled, appeal. Moorcroft Estates Ltd v Doxford
(1980) 254 EG 871 illustrate the issue; there the distribution was, sensibly, to the particular
value occasionally. The judge decided that this implied not at the base date for occupants
payments, but when each element of costs was charged. The outcome complexities of
estimation can, at best case scenario, be envisioned. Council consented to take the separate
values as at the base date. This just takes care of a percentage of the issues when most values
have been appealed and the bids are settled, by agreement or tribunal decision, at distinctive
dates and with backdated impact, maybe covering a few past service charge years. The order
of occasions may be fortuitous (Eccles, et al., 2011).
Floor space allocation method includes charging the leaseholder by contrasting the floor
zone of an individual dwelling with the joined floor area of all the individual residences inside
of the building (RICS, 2009). For example, if the floor space of the all the flats in a building
goes to 1,000 sqm, then an occupier with a 50 sqm flat ought to pay 5% of the aggregate
expenses for the building.
Concerning the to the floor space apportionment method, the significant issue may well
lie in building up the floor ranges of each of the contributing parts and also that of the entire
advancement or other service charge totality (Adams, 1991). The issues have so far surfaced
in reported cases on rent audits. In National Westminster Bank v Arthur Young McClelland
Moores & Co [1985] 2 EGLR 13, a permit for modifications listed floor areas to be utilized for
rent review purposes. The arbitrator has come at diverse territories, utilizing a code of
measurement presented after the lease was made, as he held that that was what might be done
in the market; his decision was vindicated, yet it delineates the need both to make clear how
areas are figured and to evaluate every contributing premises by a uniform measure. (The issues
of later additions or deductions are viewed as later). If letable floor zones are indicated, it
cannot be expected that the estimations will be concurred, so either a definition, or a technique
to determine contentions, is crucial. An issue additionally found in rent reviews emerges where
the lease contains a concurred proclamation of floor areas which can be later indicated to be
truthfully incorrect. The determination of that disparity in review identifies with a solitary
property, either that being inspected or that being utilized as a similar, yet in service charge
designation it influences both the individual premises and the totality of the service charge
contributing premises (SCDG [2], 2014).

Bed space allotment technique includes charging the leaseholder by contrasting the
quantity of bed spaces in an individual flat with the aggregate number of bed spaces in all the
individual residences inside of the building. For instance, if the aggregate number of bed spaces
in all the flats in one corridor goes to 40, then a resident with 2 bed space ought to pay 5% of
the aggregate expenses for the building (SCDG, 2014).
Apportionment by using degree of use give the most sensible and reasonable system, however
it is likewise one which makes the most issues (RICS, 2009). Previous older leases which
accommodate reasonable allocations or to the detriment of all user produce these issues. Such
a basic formulation came about, after a change of overseeing operators and another system for
allocating charges, in a 350 percent increment on the earlier year for no additional services in
the case of Concorde Graphics Ltd v Andromeda Investments SA (1982) 265 EG 386; PM 2/1
67. In case of sensible is utilized as a part of a general apportionment equation, the cases on
the statutory provisions for residences now in ss. 18-30 Landlord and Tenant Act 1985, for
example, Yorkbrook Investments Ltd v Batten (1986) 52 P&CR 51, are likewise applicable to
commercial property. For years, in any case, the pattern has been immovably far from such
short phrases (Adams, 1991).
Notwithstanding the vulnerability and the potential for debate in the general service
charges payment by using reference to utilize equation, a few components of the reasoning
behind it ought to inform the portion plan (Eccles, et al., 2011). The courts have ruled against
interpreting the general formula to stimulate the varying demands of the constituent premises.
In the Campden Hill Towers Ltd v Marshall (1965) 196 EG 989, where the occupier needed to
pay towards repairing a typical service channel serving another section of flats area in the
establishment. Just the most broad separation of regimes between the diverse services required
by differentiating sorts of accommodation appears to be sensible, and the differentiations must
be clear and consistent.
Utilizing rates, extents or divisions keeps away some of the issues connected with the
other three methods (Eccles & Holt, 2012). The fundamental issues here emerge where the
entirety of the parts does not create unity. Interestingly, in the variety powers for flat leases
presented by Part IV of the Landlord and Tenant Act 1987, a occupier can make an application
and request for the court's authority where the aggregate contribution deliver over-recovery
(see s.35 (4) (c)) despite the fact that the court may summon different tenants to be joined in
the proceedings, under s. 35(5) and the Guidelines of Court. Under-recovery falls under s. 37

just and obliges deliberate activity by an expressed high proportion of all the influenced tenants
and the landlord. Another issue is over-complexity, the flat lease where every contribution
comprised of five components (for instance, 1/12th of a few costs, 1/43rd of others, 1/278th of
others etc). The surprising fact at the authoritative and computing complexity and the expense
of that practice of ingenuity. Over-recovery may be limited by the court by method for creative
understanding as illustrated in Jollybird Ltd v Fairzone Ltd [1990] 2 EGLR 55. Underrecovery, however, has not been also powerless of legal determination regardless yet reported.
To be sure, a few cases delineate the aversion of the courts to intervene even to avert a worst
case or unfairness (Adams, 1991).
In Alton House Holdings Ltd v Calflane (Management) Ltd [1987] 2 EGLR 52,
residents of flats and carports needed to pay between them 100% of the expense of services
delivered by the defendants who were support trustees. Main damages in the cellar of the block
were attended to and paid for, at first, by the Litigants. The commercial lessees of the basement,
a petrol filling station and office, do not make a contribution to the service charges. The
defendants claimed that there was fastened to be a deficiency in recovery, in light of the fact
that the flats (and carports) lessees could not be obliged to reimburse all the costs. The delegate
judge declined to rule on the point, as no occupant was gathering to the proceedings, although
he demonstrated that s.19 of the 1985 Act, forcing the sensibility restriction, may not affect the
service charge allocation. On the suspicion that there may be a deficiency, he decided that the
landlord had no commitment to make it great, so that the Litigant's claim to set off that cost
when representing rents gathered failed. Their expenditure was portrayed as voluntary. Prior,
in Myles v Hall (unreported decision of 14th January, 1980), the Court of appeal ruled, in
passing, that where 11 flats in a building paid 100% of the service charges the deal on a long
lease of the previous caretakers flat gave no privilege to have the commitment re-apportioned
over all 12 units, even though that had been deliberately offered. Such a circumstance may now
come quite close to the 1987 Act.
To sum up, a leaseholder can confirm whether the Landlord/Appointed Surveyor utilize
the right apportionment methods by checking their lease. A few leases just express an altered
rate of the aggregate expenses for the building and/or residents which that is ascribed to an
individual flat. In the event that a rate is expressed in a lease, then this is the thing that a
landowner is obliged to utilize. Different leases may state just the allotment system and no
different figures. If this case, the landowner is legitimately obliged to precisely ascertain the
service charge allotment using the method expressed as a part of the lease. Various leases

express no chance to get of sharing the expenses between properties. In these sorts of cases,
the typical practice is basically to allocate the expenses similarly between all the properties.
The fact of the matter is whether this is legitimately right or not may differ from case to case.
As in such a large number of different parts of leasehold agreements, whether for retail, office
and industrial or private property, close relation and solid communication between property
owners/managers, agents and solicitors can stay away from the most exceedingly bad issues by
creating a clear and proper agreement in the lease. There is basically no formula delivers the
best result for landlord or occupant, however a more extensive airing of experience of the
practical effect of the decision among them would be valuable.

References
Adams, J. E., 1991. Allocation of Service Charges Contributions. Property Management,
9(3), pp. 253-257.
Eccles, T. & Holt, A., 2012. Service Charges in Commercial Property: measuring code
compliance. Facilities, 30(11/12), pp. 488-503.
Eccles, T., Holt, A. & Zatolokina, A., 2011. Commercial service charge management:
benchmarking best practice. Journal of Corporate Real Estate, 13(4), pp. 200-215.
EGI, 2014. Windermere Marina Village Ltd v Wild. [Online]
Available at: http://www.egi.co.uk/legal/windermere-marina-village-ltd-v-wild-and-others/.
[Accessed 5 June 2015].
Noor, M. N. M., Pitt, M., Hunter, G. & Tucker, M., 2010. Compliance of RICS code of
practice for commercial service charges. Journal of Corporate Real Estate, 12(2), pp. 135144.
RICS, 2007. Typical causes of service charge disputes, London: Royal Institution of
Chartered Surveyors.
RICS, 2009. Apportionment of service charges in mixed use developments, London: Royal
Institution of Chartered Surveyors.
RICS, 2011. Service charges in commercial property: A guide for occupiers, London: Royal
Institution of Chartered Surveyors.
RICS, 2012. Residential Service Charge Disputes, London: Royal Institution of Chartered
Surveyors.
SCDG [2], 2014. How to Dispute a Service Charge. [Online]
Available at: http://www.servicechargedisputeguide.info/how-to-dispute-a-service-charge/
[Accessed 5 June 2015].
SCDG, 2014. Service Charge Dispute Guide. [Online]
Available at: http://www.servicechargedisputeguide.info/apportionment-of-service-charges/
[Accessed 10 June 2015].
UK Legislation, 1985. Landlord and Tenant Act 1985. United Kingdom:
http://www.legislation.gov.uk/.
UK Legislation, 1987. Landlord and Tenant Act 1987. United Kingdom:
http://www.legislation.gov.uk/ukpga/1987/31.

Law Cases Used:

Windermere Marina Town Ltd v Wild & Anor [2014] UKUT 163 (LC)
Moorcroft Estates Ltd v Doxford (1980) 254 EG 871
National Westminster Bank v Arthur Young McClelland Moores & Co [1985] 2 EGLR 13
Concorde Graphics Ltd v Andromeda Investments SA (1982) 265 EG 386; PM 2/1 67
Yorkbrook Investments Ltd v Batten (1986) 52 P&CR 51
Campden Hill Towers Ltd v Marshall (1965) 196 EG 989
Jollybird Ltd v Fairzone Ltd [1990] 2 EGLR 55
Holdings Ltd v Calflane (Management) Ltd [1987] 2 EGLR 52
Myles v Hall (unreported decision of 14th January, 1980)