Most tenants think that once they have entered into a fixed-term lease, then their rental will be fixed for the duration of that lease. Sadly, this is never the case, because gross rents include the service charge, which is always variable.
We have spotted a few instances, which could be the beginning of a new trend, where the service charge has been increased, due to higher energy costs. When the cost of providing services increases, such as the cost of power for running of air-conditioning for the tenant, this will invariably be passed onto the tenant.
Every lease will have a provision to allow the landlord to adjust the service charge. It is reasonable to question where and why these costs have increased, and a fair landlord will usually give an explanation, but insisting on solid proof can be difficult. Why? Because audited accounts between the landlord and their energy provider is usually confidential information.
The increase in service charge is not normally hugely onerous and can be between an additional $0.10 and $0.25 per sq ft. However, some tenants may be caught off guard on this issue and it is something to be prepared for, particularly during this period of high inflation and cost increases.
For more information, view our latest
Office Market Update