Service charges at the end of the term

By Edward Glass

As a lease approaches the end of its term, can a landlord push through significant capital expenditure under the service charge? Capital expenditure on the property at this point will not necessarily benefit the tenant at all, or at the most for a very limited time.

To what extent these expenses can be recovered under the service charge will depend on the wording of the lease. Most leases will be drafted in such a way as to make the tenant liable for costs ‘expended or incurred or which may become payable’. The clause may also allow a payment to provide for ‘anticipated expenditure’. Leases, however, are not necessarily drafted with such clarity. What if, six months before the end of the term, the landlord decides the property needs expensive roof repairs, newly fitted common parts or a new central heating/air-conditioning system?

The courts have provided some guidance. It is clear that costs ‘incurred’ after termination cannot be recovered. A landlord might enter contracts to start work before the end of the term, but to be ‘incurred’ the work must have started…

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