A service charge is payment to the landlord for the provision of insurance, maintenance, repair, management and any other services at the commercial premises, the building in which the premises lie, or communal areas.
Unlike residential service charges, there are no statutory obligations on the landlord to be reasonable when operating a service charge in respect of commercial premises. If the lease is for the whole (as opposed to part) of a property or building, it is unlikely that the lease will include a requirement for a Tenant to pay a service charge. Instead, the Tenant will typically covenant to put and keep the whole property in a good state of repair and condition, although this may be limited to the state of repair and condition at the outset, usually evidenced by a photographic schedule of condition annexed to the lease. The lease will outline the basis upon which the service charge apportionment is calculated, usually as a percentage (based on square footage), or on a ‘fair and reasonable’ basis.