Commercial service charges remain a complex and highly topical issue in commercial property. There is a series of problems frequently observed in property management relating to how service charges are managed.

Some of the issues, such as poor compliance with the RICS Code, have recently been addressed at the British Council for Shopping Centres Conference (BCSC). And, further raising the profile of the issues a Service Charge Summit is expected to be staged by the RICS in November this year to address some of the areas of conflict pertinent to service charges.

Peter Knight, director of Manchester-based commercial property managers Knight Site Solutions highlights the issues that are frequently observed in practice relating to the following areas.

Accounting practices. Confusion can be avoided if the service charge reconciliation statement for the year is prepared on an accruals basis. Unfortunately, practice (as well as our research into the subject) suggests that a lot of companies use the cash basis for recording service charge monies. Given the level of spending at some locations, as well as, the nature of accruals accounting, a proper balance sheet must be put together as well. This becomes even more important in the event of sinking fund or utilities deposit collection.

Procurement. Services contracts are often centrally procured by the landlord or the managing agent, which may lead to inappropriate levels of services at a particular building. Furthermore, the costs incurred by the occupiers may be non-recoverable under the terms of the contract, which can result in overcharging.

Management fee. Not all management contracts provide a detailed description of the activities carried out by the management team, which creates ambiguity. Even less often, management contracts specify time required to perform the tasks and respective hourly rates. Hence, a lack of transparency and a ground for a dispute. On the positive side, the industry is shifting from percentage fees to fixed fees, which represents a much more sensible approach to pricing.

Lack of dialogue. As in any sector, insufficient amount of communication creates problems. Hardly ever an appropriate forum is convened to agree on the level of services, KPIs and the budget for the property. We believe that such dialogues between the landlord, and tenants, and the managing agent are paramount to achieve high operation qualities of the property as well as satisfied customers.

These are of course only some areas which require stakeholders’ attention. However, we believe that if the above aspects of property management are sorted out at a higher level, a lot of technical issues can be resolved much easier.

Lack of legislation and separation between the customer and the consumer (for many properties, the managing agent provides its services to the landlords, while the tenants represent the end user or consumer) reduce the incentive to comply with best practice and continuously improve their services for many providers. We believe that a ‘best practice’ approach to service charge management will not only help to avoid disputes (and quite often unnecessary legal costs), but also improve property performance.

Peter Knight can be contacted via www.knightss.co.uk

Manchester is one of the most popular places to live and work outside of London. A thriving private sector and a historic commercial centre mean that Manchester has survived well through the major changes of the twentieth and twenty first centuries that have hit other areas of the UK badly.

Manchester is known internationally as the city of a thriving music scene and hosts many music tourists every year, paying homage to their Manchester musical heroes. A melting pot of ethnicities and cultures, the city offers a diverse mix of activities and attractions. Rough and ready or exclusive and exquisite, Manchester has the whole lot and everything in between!

Manchester was a city both of the Empire and of the Industrial Revolution and as such has been a major commercial centre for centuries. After the decline of manufacturing industries, Manchester still had a strong financial and legal network.

Finance jobs and legal jobs in Manchester are easier to find than in many other cities in the UK. The service sector also thrives, with hospitality jobs, customer service jobs and retail jobs remaining buoyant despite the recession. The private sector does better in Manchester than in any city outside of London. Public sector jobs are under pressure currently due to the recession, but the public sector remains a large employer through the NHS, schools, universities and council.>/p>

Manchester is home to a rapidly growing technology sector, with many digital companies doing well and recruiting for IT jobs and Design jobs. Manchester has an above average number of people seeking work in relation to available vacancies.

Paul Willan of Greg’s Properties said; “Professional companies may want to consider a move to a Manchester city centre as I envisage that the population in Manchester will grow substantially in the next fifteen years and this will help the city remain an attractive and popular city. The knock on effect for city centre based companies, can only be a positive one. It is clear that Manchester is capable of attracting new business and investment and it will maintain its reputation as a world-leading, forward thinking city”.

CHECK OUT HIGHLIGHTED MANCHESTER PROPERTY IN THIS VIDEO

Loss Assessors have welcomed moves to speed up the pay-out process to businesses and individuals making a valid claim on their insurance policy.

Currently, if an insurance company takes a long time to pay a valid claim for fire damage or other losses, or refuses to pay it altogether, the policyholder can sue but cannot recover any loss they may suffer as a result of the delay. Businesses are entitled to contact the Financial Ombudsman Service (FOS) which may award compensation but this does not provide any protection for small or medium size businesses just above the FOS limits.

The Law Commission of England and Wales and the Scottish Law Commission says it is now time to change the law and are proposing that insurance contract law be changed to reflect normal contract law whereby an insurer’s primary obligation should be to pay valid claims after a reasonable time. More importantly, it is proposing that insurers who unreasonably delay or do not pay a valid claim should be liable for damages under foreseeable loss.

David Hertzell, the Law Commissioner leading the project for England and Wales, said: “In this respect, insurance contract law is unfair, unprincipled and out of step with today’s commercial realities. Small businesses, such as those struggling to get back on their feet after the recent riots, or after floods, are particularly vulnerable to late payment of insurance claims. We are seeking a solution that balances the insurers’ need to investigate claims against policyholders’ expectations that valid claims will be paid on time”.

Reacting to the news, Geoff Williams, director of Manchester-based loss assessors Cherry and Griffiths, said: “This is positive news for businesses and will give them additional protection when making a valid property insurance claim.

“Time is critical to a business faced with the devastating consequences of fire damage or another catastrophe. As well as the physical losses, fire damage causes severe disruption to productivity and can put the survival of the business under threat. It is crucial a claim is dealt with promptly by a claims handler and comprehensively to ensure the business is back on its feet as quickly as possible.

“Insurance companies will explore every possibility to reject a claim but these delays will cost businesses further in loss of income and reputation as well as add to the stress of the business owner”.

Now could be a good time for investing in the UK commercial property, as new research has revealed prices have recently dipped.

According to the IPD UK Monthly Property Index, the cost of commercial property in Britain fell by 0.5 per cent during May 2012, the most significant decline since November 2011.

It takes costs down to 35.3 per cent lower than they were during the height of the property boom in June 2007.

However, income return stayed steady at 0.5 per cent last month.

Peter Knight, Managing Director of Manchester based Knight Site solutions said: “Despite the uncertainty caused by wider economic factors, it’s not all doom and gloom. This may be the ideal time for investors to step in and buy commercial property, particularly when office building sites are expected to outperform other buildings over the coming years.

Peter continued: “We are continuing to see positive levels of activity for commercial properties although the market remains challenging”.

“Rates are extremely competitive in the North West and there are some excellent deals to be had, which is fantastic news for new or expanding businesses and individuals looking for property as an investment. “In recent months, we’ve helped many businesses to secure new properties and take advantage of the value in the market.”

Rent reviews are often regarded as one of the pitfalls of commercial property tenancy but they needn’t be cause for fear or anxiety if you seek specialist advice.

If you’ve never approached a commercial property management company previously to deal with site acquisition or lease advice, now might be a good time to ensure you have a highly experienced property consultant to fight your corner with your landlord.

The frequency at which rent reviews take place will already be agreed within the original lease and their purpose is basically to alter the rental rate according to the current market level.

Most rent reviews take place every five years but businesses are advised to seek professional guidance before the event (at least 12 months prior to the review date) so you can plan any response. It’s also useful to monitor the rental market for comparable properties to get an idea of what is realistic and acceptable to your business. Rent reviews are usually upward-only and it’s therefore wise to prepare for this eventuality, so that you’re in the best position to negotiate a better rate.

Landlords usually provide written notice that a review is to be activated and a figure will be given for the new rent. If you disagree with the sum quoted, you must appeal immediately in writing or ask your commercial property management company to oversee the objection on your behalf. The terms of your lease may detail a deadline for any appeal against rent reviews and if you fail to meet it you could be paying over the odds until the end of your lease or the next rent review.

Peter Knight, managing director of Manchester-based commercial property management company and construction consultants Knight Site Solutions Ltd, said: “Businesses should remember that a rent review is by no means a done deal, and that bargaining or negotiation is an accepted part of this process.

“It is entirely possible that a landlord will arrive at their rental figure from looking at the highest rents in a particular area and the best premises, in other words not comparing like for like. A variety of factors affect rental value in addition to size and location of premises including the conditions of a lease and whether there is maintenance or repair liability and this information should be an influencing factor to any value changes.

“Seeking the advice of a property management specialist is the best way of negotiating your position and securing a favourable rent but make sure you act early to give them time to prepare your case.”

It’s been a good few months for Britain’s construction industry, sparking hopes of a recruitment surge. The construction industry grew at the fastest pace in nearly a year in February, bolstering expectations that the UK will escape a double dip recession.  Data from economic research firm Markit signalled a solid rise in construction output, which extended the period of continued growth to 14 months. There was also a sharp rise in new work intakes.

“The slowdown in UK construction sector output growth recorded in January was reversed in February, with a solid increase in activity indicated,” says Sarah Bingham, economist as Markit and author of the construction survey. “The rise in output was supported by a stronger commercial expansion. Perhaps more encouraging was the sharp increase in new business received, which should keep firms busy in the coming months.”

All three sub-sectors – housing, commercial and civil engineering – showed growth. Commercial construction was the strongest, expanding at the fastest pace since September 2010, while residential and civil engineering bounced back from contractions last month.

As confidence in the market grows, construction businesses will look to expand and recruit. Consultants at P3 People Management, Manchester’s leading HR consultancy, who work with businesses within the construction and property trade across the UK, can ensure you get the right staff.

Charlotte Gallagher, director of P3 People Management, says: “There has never been a greater time to ensure companies in construction, which sadly has not been immune to the economic downturn, are getting the very best from their recruitment process. A company’s success is highly dependent upon the people working within it – your staff have the opportunity to make a positive or negative impact on your business – so it is important you recruit the right people”.

Charlotte added: “Getting the selection process wrong carries considerable losses in terms of recruitment costs, lost sales, missed deadlines and lower staff morale. Businesses need to match the dynamics of your company, the career opportunity and the candidate, giving you the opportunity to do more than just fill a position.”

If property recruitment issues may affect you try P3 People Management on 0161 941 2426 or visit www.p3pm.co.uk

Property Aspects Magazine would like to thank P3 People Management for their contribution to this article.

Negotiating a lease is one of the hardest tasks facing any business seeking to acquire new commercial premises which is one of the reasons many turn to the advice of a profession property manager.

A wrong decision can have significant financial repercussions on the business which can be enough to threaten the business’s survival, especially in the current economic climate, and much care is needed from the outset to determine the implications of the lease.

Thankfully, small businesses will receive additional support in the New Year thanks to The Royal Institute of Chartered Surveyors (RICS), which is set to launch a freely available lease which aims to support small high street retail businesses.

In today’s world where 24-7 business is commonplace, the need for power back-up should be high on the agenda for many firms, according to electrical contractors.

Even with a comprehensive electrical maintenance programme and regular testing of your electrical installations in place, it’s impossible to eradicate the risk of power outages altogether as businesses are often affected by external factors. Construction work, the weather and load demands on distribution networks, for example, can all result in loss of electricity and impact on business productivity.

The consequences of such a power supply failure can be dire, from lost data and failure of security systems to an inability to trade or serve customers, all of which can result in lost income. For financial institutions and other 24-7 business services, this is not an option and a safety net must be sought.

What will property professions need to do to assist with the effective discharge of the disclosure and acknowledgement obligations?

If property professionals assume a duty to discharge these obligations on behalf of property owners, should they face the same consequences as the owners, where they fail to do so?

For guidance on the consent, disclosure and acknowledgement under the Green Deal Scheme and implications for estate agents, lettings agents, solicitors and others in the property professions, please get in touch:

GREEN DEAL IMPLICATIONS FOR PROPERTY PRACTITIONERS

For more information and a copy of our Green Deal Passport for professionals, please send your details to  info@m3publishing.co.uk

All businesses, regardless of their size, have a responsibility to protect their employees by ensuring electrical installations are safe and working correctly.

A fire alarm, for example, will be useless in an emergency if the smoke detector is defunct or the alarm isn’t audible which is why it is crucial companies plan for regular maintenance of their electrical installations in order to reduce that risk.

It is simply not enough to rely on an office/warehouse caretaker alone to take on this role because in the event of an incident your business will be liable if you cannot prove your electrical testing procedures were carried out by an experienced and qualified electrical contractor with the right paperwork…