Structuring the ownership of mixed use buildings requires care
both initially and then during the management of the
building. In a recent case, an investor in the residential
parts of a mixed use building faces a significant service charge
shortfall that was avoidable.
Residential tenants benefit from a statutory requirement that
their service charge must be reasonable (section 19 of the Landlord
and Tenant Act 1985). The relevant provision also states that
residential service charges demanded before the cost is incurred
(e.g. on account service charge payments or contributions to a
sinking fund) must be reasonable too. The question was – when
the lease says the residential undertenant will pay a percentage of
what has been paid by an intermediate landlord, is it presumed
reasonable?
