New code aims to end disputes

SERVICE CHARGES:A NEW code of practice has been introduced for applying service charges in the commercial property sector.

The non-binding recommendations should help to settle disputes between owners and occupiers of commercial property, according to the code's authors.

Launched yesterday, the code is a joint initiative by the Irish Property and Facility Management Association (IPFMA) and the Society of Chartered Surveyors (SCS).

It is based on a code developed by the Royal Institution of Chartered Surveyors but fully reflects Irish law and practice, according to David O'Brien, past chairman of the IPFMA.

"The whole area of commercial service charges has been a potential source of dispute between landlords and tenants, owners and occupiers, for many years," he says, adding that the new code should help to settle disputes and clarify existing terminology and definitions applied in the sector.

The code relates to the charges applied on a cost-sharing basis in properties that have more than one occupier. The wide range of charges include items such as marketing, sinking/reserve funds, capital/set-up costs, transport management costs and treatment of non-core income.

"The service charge should be on a 'not for profit, not for loss' basis," says O'Brien. "This does not mean suppliers of services cannot make a reasonable profit on the services they provide, but the costs should be transparent so that all parties - owners, occupiers and managers - are aware of how the costs are made up."

The two bodies stress that, while the new code is not applied on a mandatory basis, they urge their own members to make full use of the recommendations. They also say that, while it need not affect existing leases, it should become a part of all new leases.

"Although this new code cannot be applied to existing leases, it does offer clarity and consistency to this complex area by providing a clear set of recommendations, standard definitions and descriptions regarding the expenditure elements in commercial service charges, as well as advice on the basis of computation," says Felix McKenna, past president of the SCS.