ICSC - European Service Charge Guide

International Council of Shopping CentersEuropean Service Charge Guide

International Council of Shopping Centers European Service Charge Guide

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1 Editorial reviews

Members of the International Council of Shopping Centers (ICSC) Retail Asset Management Committee set out their thoughts below as to why this report is important to the industry. Martyn Chase, Chairman, European Retail Sector Head, DTZ and Chairman, ICSC Retail Asset Management Committee Fairness and transparency in the management of services charges is essential, especially as the majority of developers and shopping centre management companies – as well as increasing numbers of retailers – operate cross border. Larger operators have clear service charge guidelines which are understood and respected by their management and tenants. However the service charge schedules of some, often smaller, operators across Europe may not be as clear and our research showed that there is a great disparity in process and management models across Europe. This guide, written by the shopping centre industry for the industry, will help clarify an issue that has always caused debate between landlords and tenants. Good landlords and managers are already adopting these practices and others in the industry should strive to meet them as well. Ashley Blake, Head of Retail Portfolio Management, Land Securities Good management of service charges is crucial to the performance of shopping centres across Europe but is an area where there is often a large gap in performance between the best and worst managers. This report aims to help the industry with a handy guide to how service charges work across all 27 countries in Europe. It does not aim to impose standardised service charge procedures as many European countries have different market practices, legal requirements and traditions, but it does set out the key good practices that the best landlords and managers should adopt. It also illuminates these with case studies. Landlords and managers who seek to adopt best practice on service charges will improve their relationships with their tenants and the attractiveness of their centres both to retailers and shoppers.


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Jan Kubí ek, Fund Manager, ING Real Estate

From time to time, in well established Western European markets but even more often in fast or faster growing countries, we can see a certain immaturity of asset or property manager approach towards service charge management. This is usually demonstrated by significant unjustified or hard to explain annual increases in service charges, showing that these managers do not care because the tenants are obliged to cover these costs, according to contract. Those practices lead to defensive positions by tenants and to requests for caps on service charge levels undermining the net rental income return, by questioning the division of rent and service charges. However, the final losers in this game remain landlords. At the end of a lease contract, the tenant will recalculate the total accommodation costs and reflect higher service charges in a future, agreed rental level. This means that if a service charge budget is not properly managed, it might consume any expected rental growth and, therefore, future capital value growth. Put simply, if a relatively high multiplier (15x or more) of achieved rent is used for determination of value, the landlords are in reality losing much more than the tenants. It is this fact that aligns tenant and landlords on proper and effective use and control of a service charge budget. I hope that this report will help to promote this alignment and contribute to easing of relationships which can, at times, be tense. António Matias Lopes, Managing Director Southern Europe, Multi Mall Management Efficiency in service charges is one of the main priorities of management companies in their role serving new shopping centres everyday, bringing value to owners, generating passion in tenants and telling a new story to their customers every day. Product development is more than technical quality control it is about the continuous improvement of clients’ satisfaction. This guide will help to create a good understanding amongst all the players in the business, creating conditions to establish better practices, fairness and transparency for service charge costs, using case studies to show how best practice can help to standardise operational quality.


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2 Acknowledgments

ICSC gratefully acknowledges the contributions of the following individuals to this report:

2.1 The ICSC Retail Asset Management Committee

Martyn Chase, Chairman, European Retail Sector Head, DTZ and Chairman, ICSC Retail Asset Management Committee Ashley Blake, Head of Portfolio Management, Land Securities Mattias Böning, Chief Executive Officer, mfi Management für Immobilien Robert Bonwell, CEO EMEA Retail, Jones Lang LaSalle Peter Bradley, Asset Management Director, Corio Clemens Brenninkmeijer, Country Manager – The Netherlands, Redevco Michael Dessolain, CSO, Unibail Rodamco Ben Grose, Head of Retail Asset Management Prof. Dr. Filipa Fernandes MBA, Head of Research and Innovation, SES Spar European Shopping Centers Michael Flesch, Managing Director, MAB Development Karsten Hinrichs, Managing Director ECE Projektmanagement Jan Kubí ek, Fund Manager, ING Real Estate António Matias Lopes, Managing Director Southern Europe, Multi Mall Management Allard Thiadens, Head of Department, Property & Asset Management, Cushman & Wakefield Gontran Thüring, Executive Vice President Asset Management, Klépierre-Ségécé

2.2 ISOM, Multi Mall Management Portugal

José Barbosa, Regional Operations Manager, Multi Mall Management Portugal Miguel Kreiseler, Centre Manager, Multi Mall Management Portugal Carlos Miranda, Operations Manager – Armazéns do Chiado, Multi Mall Management Portugal Américo Silva, Operations Manager – Almada Forum, Multi Mall Management Portugal Nelson Soares, Operations Manager – Forum Montijo, Multi Mall Management Portugal


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2.3 The survey respondents

Austria Josip Kardun, Deputy Managing Director Development, ECE Projektmanagement International

Belgium Jeroen V.M. Hafkamp, Chief Executive Office, Shopping Center Management Services

Bulgaria Özgür Yavuz, Managing Director, Investa Property Solutions

Czech Republic Jan Kubí ek, Fund Manager, ING Real Estate Denmark Per Nyborg Thomsen, Director, ICP Denmark A/S

Estonia Mati Pops, Commercial Director, Baltic Operations, Citycon Oyj Finland Tuire Nyberg, Managing Director, Ikano Retail Centres Finland Oy France Bertrand Courtois-Suffit, Director General, Kharis Conseil

Germany Jochen Klemens, Associate Director, Head of Shopping Center Management Germany, Jones Lang LaSalle Christine Wegner, Head of Shopping Center Management Germany, Jones Lang LaSalle

Greece Alexandra Dalagiorgou, Property Management Executive, Acropole Charagionis S.A.

Hungary Judit Kiss Balatoniné, Secretary General, Hungarian Council of Shopping Centers

Italy Pietro Malaspina, Director, Institutional Relations, Sierra Developments Italy S.r.l. – Sonae Sierra Group

Latvia M rcis Bud evskis, Member of Board, Business Development and Lease, Linstow Center Management SIA

Lithuania Rida Tamkovidait , Head of Letting Department, Resolution Property Management

Luxembourg Jeroen V.M. Hafkamp, Chief Executive Officer, Shopping Center Management Services

The Netherlands Françoise E.A. Dechesne, Director, MAB Development Norway Sigbjørn Hoem, Country Manager, Steen & Strøm

Poland Micha Muc, Property Management Finance Director, DTZ Management Polska Portugal Pedro Teixeira, Secretary General, Associação Portuguesa de Centros

Comerciais

Romania Ali Ergun Ergen, Chief Executive Officer, Baneasa Developments SRL Russia Natalia Oreshina, General Director, Art Properties Serbia Jelena Gracan, Consultant, Retail Brokerage Services,

Colliers International Slovakia Franti ek Para ka, Retail Services, Cushman & Wakefield

Property Services Slovakia

Spain Mª Victoria Gozálvez, Director, Asociación Española de Centros Comerciales

Sweden Peter Hallberg, Leasing Manager, Apotek Hjärtat

Turkey Avi Alkas, SCSM, SCMD, CLS, Chairman, Turkey, Jones Lang LaSalle, Turkey United Kingdom Martyn Chase, Chairman, European Retail Sector Head, DTZ

Mike Davidson, Head of Retail Operations, Land Securities Properties

Table 1: Survey respondents

2.4 Editor

Richard Hammerton, Firstproof


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3 Executive summary

This report aims to present and analyse the main characteristics and issues relating to service charges across Europe. The guide details the most common practices in 27 European countries, with notes on each country. Case studies are used to highlight good practice, with service charges in a number of European countries based on their accepted service charge regimes. Reasonableness and transparency in the management of services charges are essential and, in this report, the main costs in the various service charge headings are covered, as well as their significance within a budget. The types, distribution, collection and accountability for service charges are also covered, as well as reserve funds, insurance and types of extra costs (non-recoverable). Sustainability is a key factor in the current market and is examined in a case study, as well as systems for processing and registering information, innovation and development of sustainable practices. Recognition of the qualifications of property managers dealing with service charges is imperative today, especially in the current economic climate, as properly qualified and/or certified managers are essential to ensuring organised management regimes that provide high service-level performance for those in the real estate and retail industry. The key message of the report is that although service charge regimes vary from country to country in Europe, there are key standards that should apply to all. These are: Managers should manage the service charge in a reasonable, ethical and transparent way. There should be open communication between managers and tenants throughout the process. The manager should seek to achieve cost effectiveness for the services he provides, subject to providing the quality of service delivery needed. The manager should seek to provide the services in a sustainable way where appropriate. Service charges should be managed by properly qualified professionals. The ICSC Retail Asset Management Committee will continue to monitor service charges in shopping centres and plans to update this report from time to time. It will consider the merits of proposing a code of practice for service charges in shopping centres for the European industry to adopt.


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4 Types of costs

The following breakdown allows us to identify and, depending on the situation in each country, define what types of costs are included in service charge budgets. This list is not exhaustive but describes the most important items.

4.1 Electricity, gas, water and drainage

The utilities are the major components of service charge budgets. Electricity forms a major part of these expenses and is mainly used for lighting, heating and cooling. Sometimes, in Europe for instance, electricity or gas may be sold by the owner to the retailers with a margin, due to the fact that he transforms high voltage into a low one. The water costs may include amounts related to sewage treatment systems. Gas consumption is mainly related to heating water for general use and air conditioning.

4.2 Security, cleaning, maintenance and landscaping

The shared services such as security, cleaning, communal area repair and maintenance and landscaping are the principal services provided for the regular day-to-day operation of the shopping centre. Usually, the costs from each category are largely dependent on the operational strategy and the size of the resident team in each area. Normally, these services are provided by specialised outsourcing companies. The routines necessary for proper operation, conditioned by the specifics of each centre, should be considered in defining the size and qualifications of the teams. The quality of services provided and the economic constraints also need to be taken into account. Contracts with service providers may be specific or more comprehensive. If the strategy is to have more comprehensive contracts, an additional cost division may be proposed for the price of different categories (staff, equipment, consumables and others). This way they ensure that the increases are indexed to their respective cost and not to the general contract. For example, if the human resource costs are increased by 10% by law, only this item is increased, allowing the remainder to increase by an inflation rate of 2%.

4.3 Waste

Waste, as an independent cost (from cleaning or other), is related to its relative weight and the possibility of incurring significant adjustments imposed by national or community legislation. An additional way to add value is to give management the ability to monitor the environmental costs, to determine specific key performance indicators (KPIs) and implement best practices, to enhance the environmental performance of the centre and to safeguard the financial return associated with the recycling of various materials (paper, packaging, glass and others).


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4.4 Property taxes

Considering that each country has its own legislation relating to property taxes, these figures should be treated differently and separately from the budget of common expenses.

4.5 Centre management cost

Because running a shopping centre is a complex business, a resident management team is recommended for each project. These teams, whose size may vary according to the company's strategy and centre size, are responsible for the proper management and supervision of the operation and the direct monitoring of tenants and visitors. The space reserved for these teams at the centre can be considered as a common space or rented by the management company or landlord’s representative.

4.6 Property management cost, facilities management cost and management fees

Property management cost is related to rent collection, tenant selection, tenants’ contract management and other activities related to the landlord. Facilities management consists of services relating to the operation of a building. Typically this includes such activities such as maintenance, security or cleaning. Usually the management fee is a percentage of the service charge cost. In order to create a different type of incentive, some companies change to a fixed fee, which can include an extra bonus for the service charges being well managed and under control, or related to the generation of savings.

4.7 Marketing (budget and extra landlord contributions) and mall income

As a mall’s performance depends on its reputation and attractiveness to visitors, it is usual to define a specific marketing budget for advertising, marketing campaigns or events purposes. This budget may be managed by a tenants’ association, the landlord/management or both. In many cases, the landlord makes regular or discretionary contributions to this fund. Revenue from extra mall income through the rental of temporary spaces in the common areas of the centre can be returned to the service charges, or to the marketing budget or provide additional income to the landlord.


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5 Service charge distribution, collection and accountability

5.1 Distribution and collection

The costs associated with the regular operation of a shopping centre, benefiting both the stores and the visitors, are paid by the tenants located in the centre. It is necessary to split the service charge costs between a centre’s tenants. The most common method of apportioning the cost for each tenant is to divide the total cost by the gross leasable area (GLA) corresponding to each store - a value proportional to its leasable area. Service charges are often weighted in order to attract the best, most relevant tenants, and those will benefit the other tenants in the mall. The amount charged can be reduced partial or totally, according to market practices or contractual agreement. The costs of the service charges are divided by all tenants so, whenever there is a vacant unit, it is necessary for deficits to be fully reimbursed by the landlord or spread amongst tenants, according to local practice and contracts. Payments for the service charges are usually made by the tenant in advance, monthly or quarterly. In some cases they may be charged in the month to which they relate. These amounts are usually invoiced in conjunction with fixed remuneration/rent. As there is a lag between the issue of the invoice and payment, advance payments allow full compliance with obligations with suppliers and service providers.

5.2 Accountability for yearly service charge

For most operators, it is common practice to present a service charge budget for approval by the landlord or the tenants. The increasing amounts are often defined in the lease contract and can rise with inflation. Usually the service charge costs are aligned with the management strategy for the mall, namely quality levels and type of services to be provided through common services. The budgets are submitted in advance or, alternatively, with the presentation of accounts for the previous year. In several countries, it is common for the service charge reconciliation to be audited, internally or externally, by independent entities. Shortfalls from caps to tenants can arise, and they can either be fully covered by the landlord or spread amongst tenants. When service charge costs are invoiced in advance, the banks may pay interest on service charge accounts. This interest may be paid to service charge accounts (sometimes offset against bank charges) or considered as extra (small) income for the landlord. For the landlord, the tendering of service contracts is a form of transparency and the management company can ensure that it is paying the appropriate market prices for those services. A best practice guide or a set of principles for service charges issued by a professional organisation also contributes to increase transparency and accountability.


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6 Reserve fund

In some countries it is common to manage a reserve fund that is used to meet any unexpected costs that may arise in the future; this is primarily intended to address unexpected costs or extraordinary works.

7 Insurance

In order to preserve the value of a property and to safeguard the interests of its various stakeholders (tenants, owners, visitors and management) several approaches to insurance policies may be possible. Insurance can cover anything from the cost of broken glass to the full replacement of property and lost profits. Some countries may include property insurance and/or the cost of an insurance premium for terrorism in the service charge cost.

8 Types of extra costs (non-recoverable)

In some countries it is common to prepare and submit to the landlord, a medium-term investment plan. This plan typically includes costs for renovations or projects whose impact or cost is high and needed by the property. In non-recoverable cost we include all the costs that are specific and tenant-related and that are invoiced directly from the supplier or invoiced later by the service charge management. For example, if the shopping centre buys gas directly from the supplier and then uses part of it for direct distribution to stores, all costs associated with individual consumption from the tenants cannot be considered as a common cost.


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9 Most common service charge practices in Europe

At the beginning of 2011, ICSC undertook a survey of 27 European countries to identify the most common service charge practices in our region. The findings presented are the result of the statistical analysis of the raw data from the survey “Best practices for service charges in Europe” which was developed by the ICSC Retail Asset Management Committee.

9.1 Most common costs

We can see that most costs associated with the service charges are recoverable from the tenants.

Energy / Gas / Water Q20

Security Q21 Cleaning Q22

Maintenance Q24 Landscaping Q23

Property Taxes Q30 Centre Management Costs Q26

Property Management Q25 Facilities Management Q27

Sustainability Costs Q31 Building Insurance Q28

Terrorism Insurance costs Q29 Recoverable Non-recoverable Other Table 2: Most common costs

9.1.1 Electricity, gas and water

In all countries, according to the survey, the costs of common electricity, gas and water consumption are recoverable from the tenants. Notably, it was the only question in the survey which returned the same answer from all participants. Q1 Are common area electricity, gas and water costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 27 100%

Non-recoverable 0 0%

Other 0 0%

Total responses 27 100%

Table 3: Common area electricity, gas and water costs


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9.1.2 Security, cleaning, maintenance and landscaping

Common security costs are recoverable from tenants in 26 countries, as are the costs of cleaning common areas. Only in Sweden are these costs considered non-recoverable. Common area repairs, maintenance and landscaping costs are recoverable in 25 countries. Q2 Are common area security costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 26 96%


Other 0 0%


Table 4: Common security costs

Q3 Are common area cleaning costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 26 96%


Other 0 0%


Table 5: Common area cleaning costs Additionally, in Estonia, repairs are non-recoverable but maintenance is recoverable. Italian law makes a distinction between ordinary and extraordinary maintenance; only ordinary maintenance costs (those that include repairs) can be charged to tenants. In France these costs are recoverable, except sometimes for very important repairs or investments (according to lease contract clauses). If it is stipulated in the lease contract, maintenance can be included as recoverable in Russia. Q4 Are common area repairs and maintenance costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 25 92%


Other 1 4%


Table 6: Common area repairs and maintenance costs The common landscaping cost is non-recoverable from tenants in Sweden and the Netherlands. It tends to be recoverable in Russia, if it is not of a capital investment nature. Q5 Are landscaping costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 25 92%


Other 0 0%


Table 7: Landscaping costs


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9.1.3 Waste

The survey did not include a direct question concerning waste management. However, if we assume that it is included in cleaning costs, we can say that waste cost is recoverable in 26 countries. Q6 Are common area cleaning costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 26 96%


Other 0 0%


Table 8: Common area cleaning costs

9.1.4 Property taxes

The percentage of countries where property taxes are non-recoverable from tenants is about 37%. This includes Estonia, Greece, Italy, Latvia (some have triple net contracts), Lithuania, the Netherlands, Norway, Portugal, Serbia and Turkey. In Spain these are non-recoverable for anchor tenants; and there are also attempts to exclude them from the service charge scope in Austria. In Russia, in the event that property tax levels are raised, then the service charge can increase accordingly (some leases have this provision but some do not). The tenants pay property taxes directly to the government in the UK. Q7 Are property taxes normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 16 59%


Other 1 4%


Table 9: Property taxes

9.1.5 Centre management cost

In Sweden and the Netherlands (except for the biggest centres) the centre management cost is non-recoverable. In Germany it is recoverable if specified, up to a pre-defined amount. Q8 Are site/centre management costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 24 89%


Other 1 4%


Table 10: Site/centre management costs In the majority of countries (17) the centre management accommodation is treated as part of the common area. In Denmark, Greece, Germany, Poland and the Czech Republic the accommodation area is rented by the managing agent. In Belgium and Luxembourg it can either be treated as a common area or rented by the managing agent/landlord. In Italy and Russia it is usually provided by the landlord.


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Q9 What is the market practice for the treatment of costs for the centre/site management accommodation?

Number of countries

% of countries

Treated as common areas 17 62%

Rented by the managing agent/landlord's representative 5 19%

Other 5 19%


Table 11: Costs for the centre/site management accommodation

9.1.6 Property management cost, facilities management cost and management fees

The property management cost is non-recoverable in Italy, the Netherlands, Portugal, Spain, Sweden, Turkey and the United Kingdom. In Poland it depends on particular lease agreement provisions and in France, according to the Conseil National des Centres Commerciaux (CNCC) “Charte des relations bailleurs – locataires" or "Charter for good practices between landlords and tenants", it depends (service charge management – yes; marketing management – yes; rent collection – no) – even if a few landlords do. In Austria the main part is recoverable and only the cost of services which are clearly for the landlord remain with the landlord. In Russia these costs are also known as “head office” overheads. Q10 Are property management costs (rent collection, tenant management, etc.) normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 16 59%


Other 4 15%


Table 12: Property management (rent collection, tenant management, etc.) costs In 89% of the countries, the facilities management cost is recoverable from tenants, except for Russia if it is capital in nature; and in Hungary, Norway and Sweden this cost is non-recoverable. Q11 Are facilities management costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 24 89%


Other 0 0%


Table 13: Facilities management costs The management fee is a percentage of the service charge in Belgium, Denmark, France (mostly a percentage, but more and more it is a fixed fee), Greece, Italy (percentage fees on service charges can vary between 3% and 6%, inverse to the size of the service charge budget; fixed fees are sometimes applied in small centres with limited rental income), Luxembourg, the Netherlands, Norway, Portugal, Romania and the United Kingdom. In the UK there is a growing trend for management fees to follow the RICS Code and be based on the actual cost of managing services. A fixed fee is common in Bulgaria (some landlords pay an extra bonus when the service charge budget is well managed and under control), Estonia, Finland, Hungary, Serbia, Spain and Sweden. In Lithuania and Slovakia, it’s possible for the management fee to be fixed or a percentage of the service charge. In Austria, the Czech Republic and Poland it is based on rental income.


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For Germany there is no separate management fee for the service charge, due to the contract being on a monthly base, so it is on annual final account. In Russia it is included in the sum of service charge. In Turkey it is a percentage of total rent or a combination of fixed minimum against a percentage of rent and fixed fee. The change from percentage to fixed fee is also in response to requests from tenants, in order to provide a different incentive to the management company. Q12 Is the management fee for the service charge usually based on:

Number of countries

% of countries

A fixed fee 8 30%

A percentage of the service charge 12 44%

Other 7 26%


Table 14: Management fee

9.1.7 Marketing (budget and extra landlord contributions) and mall income

The market practice for administrating the marketing budget is through the service charge and under the landlord’s control in 19 countries. In Belgium, Denmark, Finland, Hungary, Italy and Latvia this is done both through the service charge and under the landlord/landlord’s agent’s control and via a tenants’ association. In France, where a tenants’ association is more common, a 2010 High Court decision declared that by law the obligation (through the lease contract) is for a tenant to be a member of a tenants’ association. Therefore, more and more marketing budgets are directly managed by landlords/management companies but it always comes from the common service charges budget. In Austria, Germany and Luxembourg it is via a tenants’ association.

Q13 What is the market practice for administrating the marketing budget?

Number of countries

% of countries

Through the service charge and under the landlord/landlord’s agent control

19 70%

Via a tenants’ association 6 22%

Other 2 8%


Table 15: Administrating the marketing budget

Most landlords make contributions to the marketing budget. In 13 countries they do it on a regular basis and in 13 in a discretionary way. Only in Luxembourg does the landlord not contribute. Q14 Do landlords usually contribute to the marketing budget for the property?

Number of countries

% of countries

Yes 13 48%

No 1 4%

Discretionary 13 48%


Table 16: Landlords usually contribute to the marketing budget


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Mall income is fully credited back to the service charge in Estonia and Serbia. In the other countries, it is retained by the landlord as additional income. In Bulgaria the kiosks also pay service charges. In some cases in France, mall income is credited back to service charge. In Germany it is paid to the tenants’ association, in most cases. In some Hungarian centres, it can be given to the advertising budget. Both practices are applied more or less with the same frequency in Italy; the centre management company receives a fee varying between 10% and 20% of mall income. In Latvia some entities consider 40% as the extra marketing contribution and nearly 10% covers service charges. Q15 What is the market practice for the treatment of mall income (non-core income)?

Number of countries

% of countries

Retained by the landlord as additional income 25 92%

Credited back to service charge 2 8%


Table 17: Mall income (non-core income)

9.1.8 Sustainability costs

Sustainability costs are recoverable in Bulgaria, Denmark, Finland, Hungary, Norway, Spain, Turkey and the United Kingdom. They are considered non-recoverable in Austria, Belgium, Estonia (green electricity is recoverable), Germany, Greece, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Romania (capital expenditure is not included as a charge), Slovakia and Sweden. In the Czech Republic and Serbia they have not been introduced yet. In France they are a key matter under discussion between landlords and tenants through their own associations. In Italy they are recoverable only if they can be classified as normal site or building management costs. In Portugal, usually, current operational costs are recoverable from tenants and investment costs are paid by the landlord/owner. In Russia they do not have this issue, therefore it is not in the lease as a separate clause. Q16 Are any costs related to sustainability recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 8 30%


Other 6 22%


Table 18: Sustainability costs

9.2 Most common service charges: distribution, collection and accountability

9.2.1 Distribution and collection

9.2.1.1 Market practices for apportioning service charges between tenants

In 24 countries the most common method of apportioning service charges between tenants is the floor area basis. In Bulgaria sometimes it is complicated because of the leasing deals. In Germany it is a fixed amount for anchors (capped rates above 1,000m2). In Hungary it can be multiplied with a factor depending on the position and the type of the unit. In Latvia anchors might get special deals, e.g. paying x% from full service charge, lowering their cost per square metre. In Turkey, anchors and some preferred brands usually enjoy capped service charges. In the United Kingdom there are still a significant number of centres that have apportionment based on ratable values.


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In Greece, property value per square metre is used and usually factors such as the specific location of a store in a mall, the access to escalators/lifts, or the size of a store itself compared to total GLA are taken into consideration to calculate the property value per square metre for every store in a shopping centre. In Italy weighted GLA is common. In Poland fixed percentage as well as floor area basis and capped or NIL service charge is the norm for anchor tenants (especially hypermarkets). Q17 What is the market practice for apportioning service

charges between tenants?

Number of

countries % of countries

Floor area basis 24 89%

Other 3 11%


Table 19: Method of apportioning service charges

9.2.1.2 Weightings

The weighting is not used in service charge budgets in Austria, Germany (only by square metres and participation), Latvia (anchors only/not as common as "for most contracts" but "yes" as anchors in most properties), Russia, Serbia and Sweden. Q18 Are weightings commonly used within shopping centre

service charges?

Number of


Yes 20 77%

No 6 23%


Table 20: Are weightings commonly used?

9.2.1.3 Vacant units cost

In Austria and Romania the shortfall resulting from vacant units is spread amongst the tenants. In Portugal the shortfall is the responsibility of the landlord or the management company and in Slovakia it depends on the contract but the cost is usually passed onto the tenants. In the other countries, it is normally fully reimbursed by the landlord. In Russia it is fully covered by landlord. In the Czech Republic it is mainly covered by landlords but a few market major players spread the shortfall amongst the tenants. In Finland it can vary from site to site. Q19 What is the market practice for dealing with shortfalls to the service charge from vacant units?

Number of countries

% of countries

Shortfall fully reimbursed by landlord 22 81%

Shortfall spread amongst tenants 2 8%

Other 3 11%


Table 21: Shortfalls to the service charge from vacant units


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9.2.1.4 Frequency of payments

In most countries the payments are made in advance monthly or quarterly. In Latvia, Estonia, Germany and Russia they are made monthly in arrears. Q20 What is the usual frequency of service charge payments by tenants?

Number of countries

% of countries

Quarterly in advance 9 36%

Monthly in advance 12 48%

Monthly in arrears 4 16%


Table 22: Frequency of service charge payments by tenants

9.2.2 Accountability for yearly service charges

9.2.2.1 Budget presentation and how soon it is provided

Austria, the Czech Republic, Germany, Hungary, Norway, Poland, Romania and Turkey do not provide a budget report to tenants prior to the commencement of the service charge year. The remaining countries present the report up to three months in advance. In Belgium the report can be presented from three months before up to two months after. Q21 Is a budget report provided to tenants prior to the

commencement of the service charge year?

Number of


Yes 19 70%

No 8 30%


Table 23: Budget report provided to tenants prior to the commencement of the service charge year

Q22 How soon prior to the start of the budget year is this provided? Number of countries

% of countries

Between 1-3 months before 11 65%

Between 0-1 month before 6 29%

Other 2 6%


Table 24: How soon prior to the start of the budget year is this provided?

9.2.2.2 Service charge reconciliation to be audited

Service charges are externally audited in Bulgaria (usually by one of the big four accounting firms), Finland, France (but not always; audits are either account audits or "professional" audits – to verify good practices, adherence to laws, etc.), Norway, Slovakia and Sweden. Service charges are internally audited in Belgium (externally also), the Czech Republic (by the landlord only), Denmark, Estonia (open books), Germany, Greece, Lithuania, Luxembourg (externally also), Poland (in some cases the tenant has the right to check his service charge costs), Serbia and Turkey. In Austria, Italy, Latvia (open books), the Netherlands, Portugal, Romania (sometimes can be externally audited) and Spain (except fund-owned condominiums) this is not a market practice. In Russia it is market practice that this can be audited, but it is also market practice that tenants refrain from the right to audit/review the correctness/fairness of the reconciliations.


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Q23 Is it market practice for the service charge reconciliation to be audited?

Number of countries

% of countries

Yes - externally audited 6 22%

Yes - internally audited 13 48%

No 8 30%


Table 25: Service charge reconciliation to be audited

9.2.2.3 Shortfalls and bank interest over service charge bank accounts

In Austria, Belgium, the Czech Republic, Estonia, Greece, Italy (in a majority of cases), Luxembourg, the Netherlands, Romania, Serbia and Slovakia the deficit that arises from caps granted to tenants is spread amongst tenants. In the remaining countries it is fully reimbursed by the landlord. In some centres in Bulgaria, the landlord spreads the cost between the other tenants. In Finland it can vary from site to site. In Latvia caps are avoided at all costs, but, if given, rent (landlord) covers the cap. Q24 What is the market practice for the treatment of service charge shortfalls that arise from caps granted to tenants?

Number of countries

% of countries

Shortfall fully reimbursed by landlord 15 55%

Shortfall spread amongst tenants 11 41%

Others 1 4%


Table 26: Shortfalls that arise from caps granted to tenants The market practice for administering interest on service charge bank accounts in Belgium, Bulgaria, Finland, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Spain, Sweden and the United Kingdom is that it is fully credited to the service charge. The UK is the only country where separate bank accounts are in use and, even when in combined accounts, it is still offset against bank charges. Offsetting against bank charges and being credited to the service charge, is common in Denmark, Estonia, France, Greece, Italy, Serbia, Slovakia and Turkey. In the Czech Republic a very small amount is kept by landlords. In Latvia service charges are invoiced for the current month, so interest is minor or even negative, as landlords at times credit self-budget, so that interest remains with the landlord. In Hungary neither bank charges nor interests are charged. In Austria, Romania and Russia it is used as additional income. Q25 What is the market practice for administering interest on service charge bank accounts?

Number of countries

% of countries

Fully credited to the service charge 11 42%

Offset against bank charges and credited to the service charges 8 31%

Other 7 27%


Table 27: Administering interest on service charge bank accounts

9.2.2.4 Dispute process between landlord and tenant relating to service charges

In most countries (12) Court proceedings are the normal way to resolve disputes between a landlord and a tenant. Appointed-expert determination is common in Estonia, Lithuania and Romania. A professional organisation dispute resolution guide occurs in Slovakia and Sweden. In Luxembourg a professional tribunal is used. In Belgium, Portugal and Turkey this has not been observed. In the Czech Republic it is mainly through negotiations between parties. In France most use Court proceedings, even if there is a possibility in some lease contracts for arbitration (according to the CNCC’s charter).


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In Austria disagreements only happen with big retailers who have their own facility management departments, and disputes are usually settled bilaterally through internal experts. A professional organisation dispute resolution guide is used in Hungary; or the landlord proves the amount of the service charges. Q26 What is the normal dispute process between a landlord and tenant in the case of disagreements on service charge costs?

Number of countries

% of countries

Court proceedings 12 44%

Professional organisation dispute resolution guide 3 12%

Appointed-expert determination 3 12%

Professional tribunal 1 4%

Other 7 28%


Table 28: Normal dispute process between a landlord and tenant

9.2.2.5 Tendering of service contracts

It is not a market practice to tender the service contracts for service charges in Denmark, Greece, Germany (due to market prices) and the Netherlands (only for some big assets). In Italy tendering procedures vary considerably from centre to centre. In the Czech Republic the major landlords tender on a regular basis. Q27 Is there a market practice in tendering the service contracts for service charges in your country?

Number of countries

% of countries

Yes 22 85%

No 4 15%


Table 29: Tendering the service contracts

9.2.2.6 Best practice guides

A best practice guide or a set of principles for service charges issued by a professional organisation exists in Finland, France (edited by CNCC and revised in 2010, it is called the “Charte des relations bailleurs – locataires" or "Charter for good practices between landlords and tenants"), Germany, the Netherlands, Norway, Turkey and the United Kingdom (updated RICS Code of Practice launched in May 2011). Q28 Is there a best practice guide/set of principles for service charges issued by a professional organisation in your country?

Number of countries

% of countries

Yes 7 26%

No 20 74%


Table 30: Best practice guide/set of principles for service charges


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9.3 Reserve fund

A reserve fund is operated in Bulgaria (but not very common practice), Denmark, Estonia, France (sometimes, according to lease contracts), Greece, Hungary, Italy, Latvia, the Netherlands, Serbia, Slovakia and Spain. In the United Kingdom, historically, a significant percentage of centres have run such funds but newer centres tend not to have this. Q29 Is it market practice to operate a sinking fund/reserve fund in shopping centres?

Number of countries

% of countries

Yes 12 48%

No 13 52%


Table 31: Sinking fund/reserve fund

9.4 Insurance

Property insurance costs are usually recoverable in most countries. They are non-recoverable in Estonia, Italy (it is the tenants' obligation under the lease agreements to establish their own insurance for the portion of the building leased), Norway, Portugal, Russia, Sweden and Turkey. In Lithuania, insurance is treated on a case-by-case basis in accordance with the agreement and in the Netherlands recoverable insurance costs only cover glass insurance. In the United Kingdom they are a recoverable but there is often a separate charge. Q30 Are building insurance costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 17 65%


Other 3 12%


Table 32: Building insurance costs Terrorism insurance premium costs normally are non-recoverable in Estonia, Latvia, Lithuania, the Netherlands, Norway, Poland, Portugal and Sweden. In Russia and Serbia this point is still not applicable. Q31 Are terrorism insurance premium costs normally recoverable from tenants under the service charge?

Number of countries

% of countries

Recoverable 16 62%


Other 2 7%


Table 33: Terrorism insurance premium costs

9.5 Common costs additional notes

Tenants are usually open for trade on Sundays in Bulgaria, the Czech Republic, Estonia, Finland, France, Hungary, Latvia, Lithuania, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Sweden, Turkey and the United Kingdom.


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Shops are closed on Sundays in Austria, Germany (except at airports and railway stations. In general shops are allowed to open on four Sundays each year), Greece, Luxembourg (some exceptions) and Norway. Belgium, Denmark, the Netherlands and Spain have regional variations. In Italy, regional laws allow for a maximum of 12 Sunday and festive openings every year, based on a calendar established yearly after consultation between municipal authorities and retail trade associations. In addition, such laws often provide that a certain number of additional Sunday and/or festive openings can be allowed by municipal authorities, again in agreement with retailers' associations. Shopping centre regulations bind all tenants to apply the opening calendar established by the centre management company, which normally provides for the centre and all tenants to stay open whenever legally possible. An exception is made for activities whose opening days and hours are regulated differently from retail, e.g. banks. Q32 Is it market practice for tenants usually open for trade on a Sunday?

Number of countries

% of countries

Yes 17 62%

No 5 19%

Regional variations 5 19%


Table 34: Tenants usually open for trade on a Sunday


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10 Service charge distribution methods across Europe

The information provided is based on the findings of the service charge survey conducted by the ICSC Retail Asset Management Committee in Spring 2011. Please note that all answers given relate to the most widely applied practices in each country; this does not necessarily mean that they are the only ones applied.

10.1 Austria

10.1.1 Most common costs

The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. Taxes are also recoverable, but some big anchors are trying to exclude this from their service charge scope. The cost for centre/site management accommodation is treated as a common area. The management fee is only based on rental income. The facilities management costs are normally recoverable from tenants, and property management is mainly recoverable. Only the cost of services which are clearly for the landlord, remain with the landlord. The market practice for administrating the marketing budget is via a tenants’ association and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants.

10.1.2 Most common service charge distribution, collection and accountability

Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is not common for there to be a weighting. Shortfall related to vacant units is spread amongst tenants and the payments are usually made monthly in advance. The budget report is not provided to tenants. The service charge reconciliation is not internally or externally audited. Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants. The interest on service charge bank accounts is retained by the landlord. Disputes between landlord and tenant over service charge costs are rare, and normally only happen with big retailers who have their own facilities management departments. Disputes are usually settled bilaterally through internal experts. It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.

10.1.3 Reserve fund

Shopping centres in Austria do not operate a sinking/reserve fund.


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10.1.4 Insurance

Building insurance and terrorism premium insurance costs are usually recoverable from tenants under the service charge.

10.1.5 Additional notes

Shops are usually closed on Sundays.

10.2 Belgium


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management costs. The cost for centre/site management accommodation can be recoverable or non-recoverable; both are possible. The management fee for service charges is usually based on a percentage of the service charge. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is usually via a tenants’ association and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants.

10.2.2 Most common service charges distribution, collection and accountability

Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units is, in most cases, fully reimbursed by the landlord. The payments are usually made quarterly in advance. The budget year presentation occurs from one month before to two months after, depending on the date of settlement of previous year. The service charge reconciliation is internally and externally audited. Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants. The interest on service charge bank accounts is fully credited to the service charge. Use of the normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is rare because everything is covered by the lease contract. It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.

10.2.3 Reserve fund

Shopping centres in Belgium do not operate a sinking/reserve fund.


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10.2.4 Insurance



The opening of stores on Sundays is dependent on its geographical location, since there are regional variations in place.

10.3 Bulgaria


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management costs. The cost for centre/site management accommodation is treated as common areas. The management fee for service charges is usually a fixed fee, but some landlords usually pay a bonus when the service charge budget is well managed and under control. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control. The landlords usually contribute to the marketing budget for the property. Mall income (non-core income) is retained by the landlord as additional income, and the kiosks also pay a service charge. Costs related to sustainability are recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Some differences can occur as a result of leasing deals. Food court and after-hours tenants pay higher values. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly, in advance. The budget year presentation occurs one month before the start of the year. The service charge reconciliation is externally audited, usually by one of the “Big Four companies”. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord but, in some centres, the landlord spreads the cost amongst the other tenants. The interest on service charge bank accounts is fully credited to the service charge. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is Court proceedings. It is market practice to tender the service contracts for service charges. In Bulgaria there is not a best practice guide/set of principles for service charge issued by a professional organisation, or specific legislation covering this area. Shopping centres have only been in operation for five years in Bulgaria, so both sides – landlords and tenants – need to develop a code of best practice.


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10.3.3 Reserve fund

Some shopping centres in Bulgaria operate a sinking/reserve fund, but is not a very common practice.

10.3.4 Insurance



Shops are usually open on Sundays.

10.4 The Czech Republic


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management costs. The centre/site management accommodation is rented by the managing agent/landlord’s representative. The management fee for service charges is usually based on rental income. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control; mainly full landlord control. The landlords usually contribute to the marketing budget for property, with the amount reflecting the current market position of the shopping centre. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability have not been introduced yet.


Floor area basis is the market practice for apportioning the service charge costs between tenants, based on the area let, and it is common for there to be a weighting. Shortfall related to vacant units is fully reimbursed by the landlord, but a few major market players pass the cost onto the tenants. The payments are usually made quarterly in advance. The budget year presentation does not occur before the start of the year. The service charge reconciliation is internally audited, but only by the landlord. Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants. The interest on service charge bank accounts is a very low amount and is kept by the landlords. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, mainly relies on negotiations between both parties. It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


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10.4.3 Reserve fund

Shopping centres in the Czech Republic do not operate a sinking/reserve fund.

10.4.4 Insurance




10.5 Denmark


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management costs. The centre/site management accommodation is rented by the managing agent/landlord’s representative. The management fee for service charges is usually based on a percentage of the service charge. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and/or via a tenants’ association. The majority of landlords contribute to the marketing budget for property. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly or quarterly in advance. The budget year presentation occurs from one to three months before the start of the year. The service charge reconciliation is internally audited. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The interest on service charge bank accounts is offset against bank charges and credited to the service charges. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is Court proceedings. It is not market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


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10.5.3 Reserve fund

Shopping centres in Denmark operate a sinking/reserve fund.

10.5.4 Insurance



The opening of stores on Sundays is dependent on their geographical location, since there are regional variations in place.

10.6 Estonia


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. Property taxes and repairs are non-recoverable. The cost for centre/site management accommodation is treated as common areas. The management fee for service charges is usually a fixed fee. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control. The landlords usually contribute to the marketing budget for the property. Mall income (non-core income) is credited back to the service charge. Costs related to sustainability are non-recoverable from tenants, except green electricity.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly in arrears. The budget year presentation occurs from one to three months prior to the commencement of the service charge year. The service charge reconciliation is internally audited, according to an “open books” policy. Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants. The interest on service charge bank accounts is offset against bank charges and credited to the service charges. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is appointed-expert determination. It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charge issued by a professional organisation at present.


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10.6.3 Reserve fund

Shopping centres in Estonia operate a sinking/reserve fund.

10.6.4 Insurance

Building insurance and terrorism premium insurance costs are usually non-recoverable from tenants under the service charge.



10.7 Finland


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management costs. The cost for centre/site management accommodation is treated as common areas, but this can vary from site to site. The management fee for service charges is usually a fixed fee. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is via a tenants’ association, but this can vary from site to site; also it is under the landlord’s control. The landlords usually contribute to the marketing budget for property. Mall income (non core income) is retained by the landlord as additional income. Costs related to sustainability are recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units is, in most cases, fully reimbursed by the landlord. The payments are usually made monthly in advance. The budget year presentation occurs from one to three months prior to the commencement of the service charge year. The service charge reconciliation is externally audited. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord, but this can vary from site to site. The interest on service charge bank accounts is fully credited to the service charge, but this can vary from site to site. It is market practice to tender the service contracts for service charges. Finland has a best practice guide/set of principles for service charge issued by a professional organisation.

10.7.3 Reserve fund

No information was provided.


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10.7.4 Insurance




10.8 France


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, taxes, centre/site management costs and maintenance, except sometimes for very important repairs or investments, depending on lease contract clauses. The cost for centre/site management accommodation is treated as common areas. The management fee for service charges is usually based on a percentage of the service charge; however it is changing to a fixed fee, which gives the right incentives to the management team. The facilities management, service charge management and marketing management costs are normally recoverable from tenants. Rent collection, according to the CNCC’s charter, is non-recoverable, even if a few landlords do recover it. The market practice for administrating the marketing budget is mostly through the tenants’ association. However a 2010 High Court decision declared it illegal for a lease contract to oblige a tenant to be a member of an association Therefore, more and more marketing budgets are directly managed by landlords/management companies but always out of the common service charges budget. The landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income but, in some cases, mall income is credited back to the service charge. Costs related to sustainability are a key matter under discussion between landlords and tenants through their own associations.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Tenants who open for trade on Sundays or later at night usually pay specific common service charges generated by the extra opening (security, safety, heating, ventilation and air-conditioning). Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made quarterly in advance, or in a few shopping centres are made monthly in advance. The budget year presentation occurs from one to three months prior to the commencement of the service charge year. Retailers continue to request the key figures of the forecast budget, but only some shopping centre management companies send these to the tenants. The service charge reconciliation is not always externally audited and audits are either account audits or "professional" audits (verify good practices, compliance with laws, etc.). Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The interest on service charge bank accounts is offset against bank charges and credited to the service charges.


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The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is mostly via Court proceedings even if there is a possibility in some lease contracts for arbitration (according to the CNCC’s charter). It is market practice to tender the service contracts for service charges. There is a best practice guide/set of principles for service charges titled “Charte des relations bailleurs – locataires" ("Charter for good practices between landlords and tenants"). The document was edited by the CNCC and was revised in 2010.

10.8.3 Reserve fund

Sometimes shopping centres in France operate a sinking/reserve fund, depending on the lease contracts.

10.8.4 Insurance

Building insurance and terrorism premium insurance costs are usually recoverable from tenants under the service charge, depending on the lease contracts clauses.


In some specific areas (tourist areas or large urban areas such as Marseille or Paris) and for certain retail activities, such as household goods and furniture, shops and shopping centres can open on Sundays. Also, most centres can open for several Sundays per year, for example during the Christmas period. Most shopping centres in France are co-owned. Therefore, there are two levels for service charge management. The management company is appointed by the co-owners and some of them charge their tenants.

10.9 Germany


The common electricity, gas and water costs are normally paid directly by the tenant or are recoverable from tenants under the service charge. The common security, cleaning, landscaping, maintenance, taxes and centre/site management costs (if specified, up to a specific amount) are also normally recovered from tenants. The centre/site management accommodation is rented by the managing agent/landlord's representative. There is no separate management fee for the service charge per contract as it appears in the annual account. The property management and facilities management costs are normally recoverable from the tenants. The market practice for administrating the marketing budget is via a tenants’ association (the conversation takes place with the centre management), and the landlord usually contributes to the marketing budget. Advertising costs are normally paid by the tenants’ association (marketing budget). Advertising costs do not form part of the service charge. Membership of the tenants’ association is included in a separate contract to the lease contract. Mall income (non-core income) is retained by the landlord as additional income, but in a few cases it can be paid to the tenants’ association. Costs related to sustainability are non-recoverable from tenants.


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Floor area basis for units under 1,000m2 and fixed amount for anchors (capped rates) are the market practice for apportioning the service charge costs between tenants. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly in arrears. Tenants get the annual final account in September of the following year. The service charge reconciliation is internally audited. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord.The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is firstly a conversation between the property manager and the landlord with the tenant. If problems cannot be resolved, then cccCourt proceedings are the next step. Due to market prices, it is not market practice to tender the service contracts for service charges.There is a best practice guide/set of principles for service charges issued by a professional organisation.

10.9.3 Reserve fund

Shopping centres in Germany do not operate a sinking/reserve fund.

10.9.4 Insurance



Shops are usually closed on Sundays, except airports and railway stations. In general they are open on four Sundays each year.

10.10 Greece


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. Concerning total change or remodeling maintenance and taxes, they are non-recoverable. The centre/site management accommodation is rented by the managing agent/landlord’s representative. The management fee for service charges is usually based on a percentage of the service charge. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control, and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants.


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Property value per square metre is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Usually factors such as the specific site of a store in a mall, the access to escalators/lifts or the size of a store itself compared to the total GLA, are taken into consideration to calculate the property value per square metre for every store in a shopping centre. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly in advance. The budget year presentation occurs from one to three months prior to the commencement of the service charge year. The service charge reconciliation is internally audited. Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants. The interest on service charge bank accounts is offset against bank charges and credited to the service charges. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is Court proceedings It is not a market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.

10.10.3 Reserve fund

Shopping centres in Greece operate a sinking/reserve fund.

10.10.4 Insurance



Shops are usually closed on Sundays.

10.11 Hungary


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management costs. The management fee is a fixed fee. The facilities management costs are non-recoverable from tenants. The market practice for administrating the marketing budget can be via a tenants’ association or through the service charge and under the landlord/landlord’s agent’s control. The landlord’s contribution to the marketing budget is discretionary and mall income (non-core income) is retained by the landlord as additional income. In some centres the advertising budget benefits from the additional income. Costs related to sustainability are recoverable from tenants.


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Floor area basis is the market practice for apportioning the service charge costs between tenants, multiplied by a factor that depends on the position and the type of the unit. It is common for there to be a weighting. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly in advance. The budget report is not provided to tenants. The service charge reconciliation is internally or externally audited. The interest on service charge bank accounts is either offset against bank charges and credited to the service charges or alternatively, neither the bank charges nor interest are charged as the amount is not deemed relevant. It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


Shopping centres in Hungary operate a sinking/reserve fund.

10.11.4 Insurance

Building insurance costs are usually recoverable from tenants under the service charge.



10.12 Italy


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. As Italian law makes a distinction between ordinary and extraordinary maintenance, only ordinary maintenance costs (which include repairs) can be charged to tenants. Taxes are non-recoverable and the centre/site management accommodation is provided by the landlord at zero cost. The management fee for service charges is usually based on a percentage of the service charge. Percentage fees on service charges can vary between 3% and 6%, inverse to the size of the service charge budget. Fixed fees are sometimes applied in small centres with limited rental income. The facilities management is normally recoverable from tenants, but property management is non-recoverable. With regard to the administration of the marketing budget, a tenants’ association was the general rule until about ten years ago, but in the majority of cases it is now managed through the service charge and under the landlord/landlord’s agent’s control. In all cases, the marketing budget is always discussed and to some extent agreed with the tenants’ association. The landlord’s contribution to the marketing budget is discretionary and mall income (non-core income) can be retained by the landlord as additional income or credited back to the service charge. Both practices are applied with more or less the same frequency. The centre management company receives a fee varying between 10% and 20% on mall income.


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Costs related to sustainability are only recoverable from tenants if they can be classified as normal site or building management costs.


Weighted GLA is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Total GLA is converted into a weighted GLA by applying weighting to anchor GLA (e.g. hypermarkets 20-30% of GLA, other anchors 50-60%, etc.). Service charges are then apportioned according to the area of the unit, based on weighted GLA. The same process is followed for marketing (advertising and communication) charges, but weighting is different and depends significantly on the expenditure of anchor tenants for their own advertising campaigns on the grounds that they support, albeit indirectly, the shopping centre as a whole. It is not uncommon for the hypermarket to have a very low weighting (10-15%) or to pay no charges at all. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made quarterly in advance. Also, base rent is paid in advance by quarter; percentage rent, if applicable, is paid yearly, normally in February or March of the following year. The budget year presentation occurs from one to three months prior to the commencement of the service charge year. The service charge reconciliation is not audited. Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants and, in a minority of cases, shortfall is reimbursed by the landlord. The interest on service charge bank accounts is offset against bank charges and credited to the service charges. Unless otherwise provided in the lease agreement – as sometimes happens with anchor units – the normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is arbitration. It is market practice to tender the service contracts for service charges, but the procedures vary considerably from centre to centre. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


Shopping centres in Italy operate a sinking/reserve fund.

10.12.4 Insurance

Building insurance costs are usually non-recoverable from tenants under the service charge, because it is the tenants' obligation under the lease agreements to establish their own insurances for the portion of the building leased. In the case of terrorism premium insurance costs, they are usually considered recoverable.


The opening of stores on Sundays is dependent on its geographical location, since there are regional variations in place. In Italy, regional laws allow for a maximum of 12 Sunday and festive openings every year based on a calendar established yearly after consultation between municipal authorities and retail trade associations.


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In addition, such laws often provide that a certain number of additional Sunday and/or festive openings can be allowed by municipal authorities, again in agreement with retailers' associations. Shopping centre regulations bind all tenants to apply the opening calendar established by the centre management company y, which normally provides for the centre and all the tenants to stay open whenever legally possible. An exception is made for the activities whose opening days and hours are regulated otherwise than retail (e.g. banks).

10.13 Latvia


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. The cost for centre/site management accommodation is treated as common areas and taxes are non-recoverable costs. Some have triple net contracts. In Latvia, companies like Linstow do not charge a management fee for service charges. They charge a percentage of the rent invoiced and an asset management property fee. Other companies might charge a percentage of service charge or fixed fee. The property management and the facilities management costs are normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control or via a tenants’ association. Some companies can run informal associations and invoice marketing separately and others include marketing in the service charges. The landlord’s contribution to the marketing budget is common, but the extent of contribution differs a lot. Mall income (non-core income) is, in most cases, retained by the landlord as additional income. A few companies, like Linstow, divide the value of the mall income and retain at least 50% as extra rent income, but almost 40% are used as extra marketing contribution and nearly 10% covers service charge. Costs related to sustainability are non-recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is not common for there to be a weighting, except for anchor tenants. They can have special deals and pay just a percentage of the full service charge, lowering their cost per square metre. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly in arrears. The budget year presentation occurs from one to three months prior to the commencement of the service charge year and each March a report is issued about the previous year’s charges. The service charge reconciliation is not audited, but is covered by a policy of “open books”. Service charge shortfalls that arise from caps granted to tenants are avoided at all costs. If given, rent (landlord) covers the cap. The interest on service charge bank accounts remains with the landlord. Service charges are invoiced for the current month so interest is minor or even negative, and sometimes the landlord’s service charge bank account becomes overdrawn. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is Court proceedings. It is market practice to tender the service contracts for service charges.


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There is not a best practice guide/set of principles for service charges issued by a professional organisation at present. There are three to four main players per market, and each one does it differently.


Some shopping centres in Latvia operate a sinking/reserve fund.

10.13.4 Insurance

Building insurance costs may be recoverable from tenants under the service charge, but terrorism premium insurance cost is non-recoverable.



10.14 Lithuania


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. The cost for centre/site management accommodation is treated as common areas and taxes are non-recoverable costs. The management fee for service charges is usually based on a percentage of the service charge or a fixed fee. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control, and it is common for the landlord to contribute to the marketing budget. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units is fully reimbursed by the landlord. The budget year presentation occurs one month prior to the commencement of the service charge year. The service charge reconciliation is internally audited. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The interest on service charge bank accounts is fully credited to the service charge. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is appointed-expert determination. It is market practice to tender the service contracts for service charges.


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There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


Shopping centres in Lithuania do not operate a sinking/reserve fund.

10.14.4 Insurance

Terrorism premium insurance costs are usually non-recoverable from tenants under the service charge. The building insurance cost is analysed case-by-case according to agreement details.



10.15 Luxembourg


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management costs. The cost for centre/site management accommodation can be recoverable or non-recoverable; both are possible. The management fee for service charges is usually based on a percentage of the service charge. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is via a tenants’ association and the landlord does not contribute to the marketing budget. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units is, in most cases but not always, fully reimbursed by the landlord. The payments are usually made monthly in advance. The budget year presentation occurs one month prior to the commencement of the service charge year. The service charge reconciliation is internally and externally audited. Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants. The interest on service charge bank accounts is fully credited to the service charge. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is through a professional tribunal. It is market practice to tender the service contracts for service charges.


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There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


Shopping centres in Luxembourg do not operate a sinking/reserve fund.

10.15.4 Insurance



Typically, shops are closed on Sundays, but there are some exceptions.

10.16 The Netherlands


The common electricity, gas, water costs, security, cleaning and maintenance costs are normally recoverable from tenants under the service charge. The landscaping costs and taxes are in principle non-recoverable costs. For the bigger schemes dedicated centre/site management costs (estate caretaker) are mainly covered by the service charges. Centre/site management accommodation is treated as common area. The management fee for service charges is usually based on a percentage (approximately 5%) of the service charge. The facilities management cost is normally recoverable from tenants, but the property management cost is not. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and it is common for the landlord to contribute to the marketing budget. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants. For units above a certain amount of floor space (mostly divided over different floors) it is common to have a reduction. Shortfall related to vacant units is in principle a landlord’s (financial) risk. The budget year presentation occurs one month prior to the commencement of the service charge year. The service charge reconciliation for an average scheme is not audited (except for the larger assets). Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants. The interest on service charge bank accounts is fully credited to the service charge. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is Court proceedings. It is not a market practice to tender the service contracts for service charges (except for the larger assets). There is a best practice guide/set of principles for service charges issued by a professional organisation.


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Shopping centres in the Netherlands operate a sinking/reserve fund. One objective of such a fund could be to save Christmas decorations, for example.

10.16.4 Insurance

Building insurance and terrorism premium insurance costs are usually non-recoverable from tenants under service charge; the exception is glass insurance.


The opening of stores on Sundays depends on their geographical location, since there are regional variations in place. These are based on whether an area can be defined as a “tourist” destination or not.

10.17 Norway


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. The cost for centre/site management accommodation is treated as common area. Taxes are considered non-recoverable costs. The management fee for service charges is usually based on a percentage of the service charge. The property management cost is normally recoverable from tenants, but facilities management cost is not. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made quarterly in advance. The budget report is not provided to tenants prior to the commencement of the service charge year. The service charge reconciliation is externally audited. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The interest on service charge bank accounts is fully credited to the service charge. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is Court proceedings. It is market practice to tender the service contracts for service charges. There is a best practice guide/set of principles for service charges issued by a professional organisation.


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Shopping centres in Norway do not operate a sinking/reserve fund.

10.17.4 Insurance



The shops are closed on Sundays.

10.18 Poland


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management costs. The centre/site management accommodation is rented by the managing agent or landlord's representative. The management fee for service charges is usually a fixed fee or based on rental income. The facilities management cost is normally recoverable from tenants, but the property management depends on particular lease agreement provisions. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants.


Fixed percentage or floor area basis are the market practices for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Normally, anchor tenants like hypermarkets pay capped or nil for service charges. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly in advance and there is a yearly reconciliation of service charges at the year end. The budget report is not provided to tenants prior to the commencement of the service charge year. The service charge reconciliation is internally audited. In some cases, the tenant has the right to check their service charge costs. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The interest on service charge bank accounts is fully credited to the service charge. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is Court proceedings. It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


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Shopping centres in Poland do not operate a sinking/reserve fund.

10.18.4 Insurance

Building insurance cost is usually recoverable from tenants under the service charge, but terrorism premium insurance is not.



10.19 Portugal


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. The centre/site management accommodation is treated as common area. Taxes are considered as non-recoverable costs. The management fee for service charges is usually based on a percentage of the service charge. The facilities management cost is normally recoverable from tenants, but the property management is non-recoverable. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control, and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability can be recoverable from tenants. Usually, current operational costs are recoverable from tenants and investment costs are paid by the landlord/owner.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units is the responsibility of the landlord or the manager. The payments are usually made monthly in advance. The budget year presentation occurs from one to three months prior to the commencement of the service charge year. The service charge reconciliation is not audited. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is rarely used, because the value is agreed between the parties on the tenant contract. In Portugal there is no experience of disagreements. It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


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Shopping centres in Portugal do not operate a sinking/reserve fund.

10.19.4 Insurance




10.20 Romania


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management costs. The centre/site management accommodation is treated as common area or leased. The management fee for service charges is usually based on a percentage of the service charge. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control, and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants. Capital expenditure is not included as a charge.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units can be spread amongst tenants, depending on the lease agreements. The payments are usually made monthly in advance. The budget report is not provided to tenants prior to the commencement of the service charge year. The service charge reconciliation is sometimes externally audited, but this is not a market practice. Service charge shortfalls that arise from caps granted to tenants are sometimes spread amongst tenants, depending on the strength of the lease agreements. The interest on service charge bank accounts is offset against bank charges and credited to the service charges. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is appointed-expert determination. It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


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No information was provided.

10.20.4 Insurance




10.21 Russia


The common electricity, gas and water costs are normally recoverable from tenants under the service charge though often it must be separately billed to actuals. The same applies for maintenance cost (if that is stipulated in the lease) and for taxes. In some cases, if taxes are being increased, then the service charge can increase accordingly. Thus, taxes are often excluded if their inclusion would place too much of a burden on the service charge/tenant. The common security, cleaning, landscaping and centre/site management costs are non-recoverable. The cost for centre/site management accommodation is usually the responsibility of the landlord. The management fee for service charges is usually included in the total service charge. The property management (also known as “Head Office” overheads) and facilities management costs are normally recoverable from tenants, except for those that are capital in nature. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and the landlord’s contribution to the marketing budget is common. Mall income (non-core income) is retained by the landlord as additional income. Concerning costs related to sustainability, Russia does not have this issue; therefore it is not in the lease as a separate clause.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is not common for there to be a weighting. Shortfall related to vacant units is fully covered by the landlord. The payments are usually made monthly in arrears. A budget report on actual cost of the prior year is provided and that is what the charge for the current year is based on. At the end of the current year a revision is made in the budget report for service fee, equal to the actual for the year that has ended. It is market practice that the service charge can be audited. But it is also market practice that tenants refrain from the right to audit/review the correctness/fairness of the reconciliations. Service charge shortfalls that arise from caps granted to tenants are fully covered by the landlord. The interest on service charge bank accounts is used as additional income.


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The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is usually Court proceedings. It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


Shopping centres in Russia do not operate a sinking/reserve fund.

10.21.4 Insurance

Building insurance costs are usually recoverable from tenants under the service charge, and terrorism premium insurance costs are not applicable.



10.22 Serbia


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. The centre/site management accommodation is treated as common area. Taxes are considered non-recoverable costs. The management fee for service charges is usually a fixed fee. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and the landlord’s contribution to the marketing budget is common. Mall income (non-core income) is credited back to service charge. Costs related to sustainability are not applicable in Serbia.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is not common for there to be a weighting. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly in advance. The budget year presentation occurs from one to three months prior to the commencement of the service charge year. The service charge reconciliation is internally audited. Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants. The interest on service charge bank accounts is offset against bank charges and credited to the service charges. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is Court proceedings.


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It is market practice to tender the service contracts for service charges. There is not a best practice guide/set of principles for service charges issued by a professional organisation at present.


Shopping centres in Serbia operate a sinking/reserve fund.

10.22.4 Insurance

Building insurance cost is usually recoverable from tenants under the service charge. The terrorism premium insurance cost is not applicable in Serbia.



10.23 Slovakia


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance, taxes and centre/site management cost. The centre/site management accommodation is treated as common area. The management fee for service charges is usually based on a percentage of the service charge or a fixed fee, depending on the contract. The property management and facilities management costs are also normally recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Shortfall related to vacant units is, in most cases and depending on contract, spread amongst tenants. The payments are usually made monthly or quarterly in advance. The budget year presentation occurs from one to three months prior to the commencement of the service charge year. The service charge reconciliation is externally audited. Service charge shortfalls that arise from caps granted to tenants are spread amongst tenants. The interest on service charge bank accounts is offset against bank charges and credited to the service charges. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is through a professional organisation dispute resolution guide.


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Shopping centres in Slovakia operate a sinking/reserve fund.

10.23.4 Insurance




10.24 Spain


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for common security, cleaning, landscaping, maintenance, taxes (excepted for anchor tenants) and centre/site management costs. The centre/site management accommodation is treated as common area. The management fee for service charges is usually a fixed fee plus a variable fee on mall income. The facilities management cost is normally recoverable from tenants, but property management is non-recoverable. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Larger units pay lower rates per square metre and nowadays some anchor tenants even have a cap on service charges. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly in advance. The budget year presentation occurs one month prior to the commencement of the service charge year. The service charge reconciliation is not audited, except for fund-owned condominiums. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The interest on service charge bank accounts is fully credited to the service charge. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is Court proceedings.


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Shopping centres in Spain operate a sinking/reserve fund.

10.24.4 Insurance



The opening of stores on Sundays is dependent on their geographical location, since there are regional variations in place.

10.25 Sweden


The common electricity, gas, water costs and property taxes are normally recoverable from tenants under the service charge. The common security, cleaning, landscaping, maintenance and centre/site management costs are mainly non-recoverable, but it is becoming increasingly common to at least partly recover them and the market is slowly moving towards the European standard. The centre/site management accommodation is treated as common area. The management fee for service charges is usually a fixed fee. The property management and facilities management costs are also normally non-recoverable from tenants. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and the landlord’s contribution to the marketing budget is common. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are non-recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is not common for there to be a weighting. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made quarterly in advance. The budget year presentation occurs one to three months prior to the commencement of the service charge year. The service charge reconciliation is externally audited. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The interest on service charge bank accounts is fully credited to the service charge. The normal dispute process between a landlord and tenant, in the case of disagreements on service charge costs, is through a professional organisation dispute resolution guide.


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Shopping centres in Sweden do not operate a sinking/reserve fund.

10.25.4 Insurance




10.26 Turkey


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. The centre/site management accommodation is treated as common area. Taxes are considered as non-recoverable costs. However, taxes on internal transport systems (escalators, travelators and lifts) are recoverable through the service charge. The management fee is usually a fixed fee. The facilities management cost is normally recoverable from tenants, but the property management is non-recoverable. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and the landlord’s contribution to the marketing budget is common. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting. Usually anchors and some preferred brands enjoy capped service charges. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made monthly, per actuals. The budget report is not provided to tenants. The service charge reconciliation is internally audited. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The interest on service charge bank accounts is offset against bank charges and credited to the service charges. There is no experience of disagreements between a landlord and tenant in Turkey, so there is no normal dispute process in place.


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It is market practice to tender the service contracts for service charges. There is a best practice guide/set of principles for service charges issued by a professional organisation.


Shopping centres in Turkey do not operate a sinking/reserve fund.

10.26.4 Insurance

Building insurance costs are usually non-recoverable from tenants under the service charge, but terrorism premium insurance cost is recoverable.


Shops are usually open on Sundays. The Trade Council of Shopping Centers and Retailers (AMPD) and the Council of Shopping Centers (AYD) are the two Turkish organisations which partner with ICSC in matters related to shopping centre development and operations.

10.27 United Kingdom


The common electricity, gas and water costs are normally recoverable from tenants under the service charge. The same applies for security, cleaning, landscaping, maintenance and centre/site management costs. The centre/site management accommodation is treated as common area. Taxes are paid directly by the tenants. The management fee is a percentage of the service charge, but there is a growing trend for management fees to follow the RICS Code and be based on the actual cost of managing services. The facilities management cost is normally recoverable from tenants, but property management is non-recoverable. The market practice for administrating the marketing budget is through the service charge and under the landlord/landlord’s agent’s control and the landlord’s contribution to the marketing budget is discretionary. Mall income (non-core income) is retained by the landlord as additional income. Costs related to sustainability are recoverable from tenants.


Floor area basis is the market practice for apportioning the service charge costs between tenants, and it is common for there to be a weighting for modern centres (i.e. larger stores discounted). There are still a significant number of UK centres that have apportionment based on rateable values. Shortfall related to vacant units is fully reimbursed by the landlord. The payments are usually made quarterly in advance.


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The budget report is provided to tenants one month before and often after the start of the year. The service charge reconciliation is internally audited. Service charge shortfalls that arise from caps granted to tenants are fully reimbursed by the landlord. The interest on service charge bank accounts is fully credited to the service charge; but only in cases where separate bank accounts are in use. For single accounts, interest is often offset against bank charges. The normal dispute process between a landlord and tenant, in the case of disagreements, is Court proceedings. It is market practice to tender the service contracts for service charges. There is a best practice guide/set of principles for service charges issued by a professional organisation. An updated Code of Practice was launched in May 2011.


Shopping centres in the United Kingdom do not operate a sinking/reserve fund. Historically a significant percentage of centres have run such funds but newer centres tend not to have this.

10.27.4 Insurance

Building insurance and terrorism premium insurance costs are usually recoverable from tenants under the service charge, but as separate charges.




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11 Sustainability

The world is changing and shopping centre stakeholders are aware of this. In the last few years, most of the leading companies are developing sustainability policies and practices. The sustainability policies are developed under the Triple Bottom Line model. The Triple Bottom Line model (TBL), defined by John Elkington and included in the sustainability definition created by the Brundtland Commission of the United Nations in 1987, is a popular concept for understanding social responsibility among corporations looking to incorporate non-monetary values into their business model. This model considers the impact of decisions in terms of social and environmental value, as well as economic value. The preparation of a sustainability policy constitutes a participative process with all the company’s employees and the external and internal company analysis. This policy must be the outcome of the adoption of a set of principles and attitudes by shopkeepers, owners, visitors, employees, the community and service providers. The integration of corporate risks, the risks for the real estate assets and the opportunities for differentiation are the pillars of action of the sustainability policy. These pillars can be identifying as mall management (social matters), environmental management, product management, involvement with the community and team management. This policy lists the strategic issues: security; cleaning, hygiene and health; energy; transportation; hygiene and food safety; quality of services and products; cooperation with local organisations; promotion of innovation. Sustainability should not be an autonomous process but integral and cut across all areas of the company. The results will be more comprehensive and have a higher impact on business.

11.1 Case study – Multi Sustainability Index

Over the past two years, Multi Mall Management Portugal developed the MULTI SUSTAINABILITY INDEX. The MULTI SUSTAINABILITY INDEX model is divided into five dimensions and 15 relevant issues that influence the sustainability performance of the mall. The formulation of performance indicators used the following criteria:

• The need to reflect key performance indicators, i.e. they must reflect the performance management of the dimensions of sustainability policy and/or the performance of core business;

• The ability to be comparable centre to centre, regardless of the unique features of each centre.

It is necessary to formulate a comparable scale to make the different indicators relevant across the board. Thus, for each performance indicator, the following is necessary: understand what is not enough, enough, good, very good or an excellent result for that performance indicator; understand what is the maximum and minimum for different indicators within the same range (taking into account that the performance indicators do not contribute equally to the sustainability of the centre). This model allows an assessment of a shopping centre, a comparative analysis with the average of centres of a similar type and a comparative analysis with the global average. Analysis is performed in two perspectives: macro through the analysis of five dimensions (core business, mall management, product management, environmental management and involvement with the community) and micro with the split of the five dimensions into 15 relevant subjects allowing a more detailed and focused approach.


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This new tool allows a global vision of sustainability through the analysis of indicators that are representative of its strategic themes. It also allows a comparative analysis between shopping centres through its different dimensions and relevant subjects as well as the size and rating of each subject or dimension at each centre. Finally it also stimulates the improvement of aspects of lower-rated relevant subjects by the shopping centre, in order to bring the performance of all assets under management. For owners and managers of shopping centres the MULTI SUSTAINABILITY INDEX allows comparisons between projects with different characteristics and creates platforms for internal and external benchmarking.


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12 Systems for register and processing the information

We stress the usefulness of implementing registration and business information systems in asset management real estate companies. These systems can and should be extended to all areas of activity in a shopping centre including financial, commercial, tenants, marketing and operational. When we consider the operating system, this should address and cover many functional areas relevant to the management of the day-by-day operations of a shopping centre. Thus, a module related on the technical part of the property, with information about the building and about its operation should be included; also a module on marketing, running events and campaigns, a module relating to the customer, including the management complaints and suggestions, a module for sustainability with a special emphasis on issues of environmental context and a last module with KPI project management. The full registration of information and its appropriate treatment will generate indicators for use by the management team that enable the aligning of the strategic guidelines, with monitoring indicators, to improve the technical/operational work and control over sustainability practices.

12.1 Case study – Integrated System of Operational Management Software (ISOM)

To overcome these difficulties and ensure registration and information processing, Multi Mall Management has developed software called ISOM – Integrated System of Operational Management – that allows for registering all the operational events that occur in centres. The system addresses issues related to emergency management, technical issues, operational records and many other requests, allowing the user to extract predefined reports from the information stored. For immediate sharing of events considered relevant, and to avoid the risk of non-dissemination of information to the stakeholders, the system requires the operator to characterise the occurrence and severity of the event. If the occurrence is relevant, the ISOM software issues a predefined email warning. The internal and external teams can access the occurrence information from their computer (internally or externally). With the ISOM software, description and registration information is very straightforward and information for the different areas can be extracted for analysis at any time. This system is located at the Multi Mall Management main server, working in an open network accessible to all employees and access levels in relation to the information held in the system.


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13 Innovation and development

The search for improved operational efficiency and quality raises the need to innovate and develop processes and working tools that can help the management and resolution of all issues pertinent to our business. In general, difficulties arise in two ways: one way is linked to the current management of day-by-day matters and whose resolution generates small improvements, often considered an "Update"; the second way is related to the goal of achieving perfection in the management of specific processes or as added value to the management of the organisation conducting the relevant innovations, often referred to as an "Upgrade ". The main objective of innovation and development is to find new resources and solutions that fit in with the methods of the centres management and that are a strong support tool in key areas of team management – training. Providing training and knowledge to our staff, in order to suit the needs of management teams, with the sharing of best management company practices are key to the integration of people – who are the main key to business success.

13.1 Case study – Multi Mall Management Business School – willing to share

The purpose of Multi Mall Management (MMM) is to provide an unmatched service quality. Conscious of the importance of the people in this process, MMM has created a business school. Its main focus is leveraging the knowledge of MMM in Europe. This is achieved through the graduation and certification of all management teams through an internal training course tailored to each individual to create a global platform for creative thinking and shared differential based on the excellence of the management services provided. To ensure the objective outlined in the strategy is met, an annual training course is devised which takes into account individuals’ needs identified internally, whilst keeping up-to-date with the knowledge and relevant management trends. After developing the business school’s training strategy, the training is planned in such a way that it can be monitored and allows opportunities for improvement. Occasionally additional training may be given, taking ever-changing social and economic factors into account. By sharing knowledge through training, our teams are better prepared and able to innovate and develop their activities, contributing to new "updates" and "upgrades". Our MMM Business School is willing to share.


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14 Ethics and transparency

Creating and maintaining a healthy long-term relationship with the various stakeholders is one of the objectives of transparency and ethics in business. This relationship is made up of trust and openness, constantly demonstrated through open tenders, evaluations, open-books strategies and accountability policies. Over the past few years, ethical issues have gained greater importance in business as a result of the global crisis that began in the US financial market and its connection to the real estate sector through sub-prime mortgages. The leading companies are moving forward with policies which include transparency. In addition to the financial reports required by law, these companies present sustainability reports, social reports, payroll reports and a lot of corporate information that allows the market to look deep into their business models and identify any conflicts between the practices and theories that they advocate. One objective of these policies is not only to fulfill legal requirements but also to go beyond the law, complying with and implementing best practices. The shopping centre should be a business where visitors win, tenants win, landlords win, service providers win, management wins, and the community wins. It is a real ALL-WIN business, but this is only possible when ethics and transparency are present.


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15 Certified companies – safety in asset management

Several issues are associated with large scale real estate investments in assets such as shopping centres. One of the primary issues relates to the security of the financial investment, and another one relates to the complexity of its daily management. Delivering the management to external entities has some advantages and some disadvantages. The main advantage that is recognised is that the investment will be managed by a company with substantial knowledge and experience in this area, thus maximising profitability. However if there are not strict criteria in choosing the right company to run the project, the risks associated with managing the investment may increase. A company that has sustainability of its business as its objective, in addition to long-term strategy, is not afraid to share their business models and methods, considering that these are the advantages that help them win in the marketplace. It seeks continuous improvement in its processes and ensures that the entire organisation is using best practices and that management methods are introduced and uniform. Companies with this type of management are seeking to certify their models in order to target their management processes, identify strengths and risks of the organisation, create and enhance the knowledge encoded (properly structured) and ultimately ensure existence of legal and ethical limits and barriers to enable the proper and correct functioning of the business, even in the most unfavourable conditions. There are several examples of the certifications that ensure and guarantee the recognition of management models. There is ISO 9001 "Quality" which relies on the precise definition of procedures for the management of the company to ensure consistently the same rigour and quality in the provision of customer service, or ISO 14001 which is associated with the implementation of good environmental practices.

15.1 Case study – Forum Montijo ISO 14001 Certification 2005/2008

ISO 14001:2004 is an international standard that establishes the best practices to be adopted in implementing the Environmental Management System. This is a model recognised throughout the world, intended to establish procedures by monitoring and operating properly planned actions to promote improved environmental performance and attitudes towards the prevention of pollution. ISO 14001:2004 is beneficial not only to the organisation that implements management systems, but also to customers, internal employees, suppliers, investors, neighbours and society in general, i.e. all stakeholders. In addition to a sustainable image, the benefits are: better organisation of the company regarding the treatment of the environment, greater preventative knowledge of relevant legislation, resulting in anticipated and planned activities, discipline in the execution of tasks, establishment of environmental indicators; continual development of preventative action; better control of emissions/waste produced in order to develop greater focus on their origin, reduction of operating costs through waste reduction, definition of improvement plans with goals and targets, commitments, and teamwork. In 2005 the Forum Montijo shopping centre, located in Portugal and managed by Multi Mall Management, was certified with ISO 14001 Environment and was the first shopping centre in Europe to achieve certification in this area. In the beginning, the shopping centre changed some work processes to ensure that all requirements of ISO 14001 would be met.


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In the process of environmental certification, notable changes were experienced, in particular as regards:

1. Better internal organisation; 2. Knowledge of updated legal matters on this area; 3. Awareness of all parties involved in the management of the mall, including the

management team, service providers, tenants and customers; 4. The provision of ongoing training; 5. An increase in the recognition of the centre’s image; 6. Increased and improved liaison with the local community; 7. Improved cost control.

The first and last point, which refer to internal organisation and cost control respectively, deserve special attention taking into account that these processes are usually seen as bureaucratic and expensive, when in fact it is an organised system and they are a natural way of generating immediate savings, which in large organisations may have a return on investment in less than a year. As an example we quantified the savings generated as a percentage in the major category costs in the first three years of certification Forum Montijo:

• Electricity usage reduced by 31%; • Waste generated reduced by 11%; • Gas usage reduced by 8%.

The reduction in costs, compared with the cost of implementing and maintaining the environmental system ISO 14001, represented a higher monetary saving.


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16 Testimonials

16.1 Case study: Turkey

Jones Lang LaSalle entered the Turkish market when they successfully won the shopping centre management contract for stanbul Cevahir Shopping Centre four years ago. Facilities management of the shopping centre was outsourced to an international vendor on a cost plus fee basis. On termination of the existing agreement, a thorough tender was held and the contract was awarded to another vendor. Benefits included a service commission reduced by half, the requirement that the vendor be party to subcontractor agreements thereby reducing landlord risk and a change to a fixed price fee. The fixed price system resulted in a consistent monthly service charge to the tenants which led to easier budgeting for all concerned.

16.2 Case study: Klépierre-Ségécé Shopping Centres in Lombardy, Italy

Ségécé Italia manages 16 shopping centres in Lombardy, a region in northern Italy. In 2010, it decided to launch a centralised tender for the cleaning, security and snow-removing at these centres. These services have previously been managed by the individual shopping centres with different providers up to this point. It was necessary to gather relevant information on each centre and create suitable tender documentation. The process is on-going with a double objective:

• To improve the quality of services at a high standardised level; • To reduce costs by about 10%.


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16.3 Case study: Pasing Arcaden: How our tenants benefit from geothermal energy

Within spitting distance from Pasing train station in the Munich quarter of the same name, on 15 March 2011, mfi Management für Immobilien AG opened the first phase of their latest shopping centre to 80,000 attendees. Phase two will enlarge the centre by two-thirds by Spring 2013. As a long-time developer, operator and manager of inner-city shopping centres, the company remains true to its established brand “Arcaden”, but breaks new ground with Pasing Arcaden and strikes new paths regarding sustainability which are not taken for granted in the real estate business. High energy costs are, in times of narrow margins, a sensitive issue for retail business. mfi makes sure that these costs are reduced by using eothermal energy. In the case of Pasing Arcaden, a heat pump system for groundwater use was installed. Using two large heat pumps, the groundwater is used for provision of the cold water required – without high energy consumption. The cold water gets to the shops by a central circular pipeline and there supplies the customers’ air-cooling devices. If the refrigeration capacity is not sufficient, an additional mechanical cooling unit can be switched on.

Where is the advantage for the tenants?

16.3.1 Geothermal energy saves money

Split-refrigeration plants with external devices are electric-driven and electricity is expensive. A heat pump makes much more effective use of the cold groundwater for cooling. Thus, they save electricity, which is to the advantage of the tenants: the operating expenses for in-shop air conditioning are lower.

16.3.2 Maintenance expenses rest on many shoulders

Maintenance expenses for the central system are allocated to all associated shops, and the costs for every single tenant decrease.

16.3.3 Default risk decreases

If one module of the cooling system fails, other cooling units automatically take over its function. This reliably prevents total system breakdown and overheated shops.


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16.3.4 Trouble-free maintenance and operation

Maintenance and operation of the central cooling system are managed by mfi. Tenants can concentrate on the essential: their shops. Furthermore, flow meters at the feed pipe guarantee that tenants just pay what for what they use.

16.3.5 An overview of the energy costs and maintenance for a 300m2 shop:

Without groundwater use and central circular cooling pipeline 2,723.00 /p.a. With groundwater use and central circular cooling pipeline 784.00 /p.a. Savings per annum 1,959.00 /p.a.

16.3.6 No individual installation and provision of expensive external devices

Due to the centralised generation of cooling water, tenants can avoid the purchase, installation and maintenance of external devices. The installation is particularly difficult and expensive, because separate pipes for external split-devices have to be installed up to the roof.

16.3.7 Fixed connection fee brings planning dependability

A fair lump sum cost is charged for the connection of a shop to the central circular cooling pipeline based on the size of the leased area. No further investment costs arise meaning there are no further uncertain cost factors. For a shop size of:

up to 50m2 8,000 up to 100m2 11,000 up to 300m2 18,000 up to 500m2 22,000

16.3.8 Investment of individual, usually smaller appliances is not more reasonable!

300m shop: investment split-cooling system (internal and external units) 18,000


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16.4 Case study: Service charge and waste management, Marseille Grand Littoral, France Corio

As part of Corio’s commitment to sustainable development and our quest to optimise service charge levels for our tenants, we have implemented a waste management system at Marseille Grand Littoral in order to both reduce the environmental impact of the centre’s activities and to achieve economies in service charge levels.

16.4.1 A waste management system for Grand Littoral, Marseille, France

In 2009, when Corio took over management of the recently acquired centre Grand Littoral in Marseille, there was no official waste management system in place. The waste was not regularly collected, let alone separated. Corio immediately drew up a tender for the management and recycling of waste and that tender was won by Eaux de Marseille, which rose to the challenge of helping Corio’s centre in seeking to attain ISO 14001 certification. The programme started in 2010, under the management and organisation of a dedicated team consisting of five people working six hours per day, six days per week. To promote the scheme, the waste programme committee appointed ‘waste ambassadors’ to help and advise tenants on implementing the improvements.

16.4.2 Achievements

The volume of waste recycled rose from 30% in 2009 to 45% in 2010; CO2 emissions were reduced thanks to optimisation of waste transport; The centre now has a clear picture of the quantities and types of waste produced; All rubbish is now sorted for recycling.

16.4.3 Targets

49% of waste to be recycled by end 2011, rising to 53% by end 2012; Attain ISO 14001 certification in 2012; Sustainable economies in service charge levels.


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16.5 Case study: White Rose Centre, Leeds, United Kingdom

In early 2009, collaboration between the landlord and key retailers at the White Rose Centre in Leeds resulted in the service charge budget being reduced by 13%, which greatly assisted occupiers at the height of the recession. This was part of a wider initiative that resulted in the introduction of a Ten Point Plan that could be used as a template for challenging costs at any shopping centre. Savings achieved consisted of both sustainable changes to processes, staffing and service levels as well as deferment of non-essential repairs. This was made possible as a result of having transparency and a close dialogue between landlord and occupiers.

16.6 Case study: MyZeil Shopping Centre in Frankfurt, Germany

MyZeil opened February 2009 and is managed by DTZ and STRABAG – STRABAG is responsible for the facility management. It was decided to optimise the service charges after an experience period of one and a half years, because during the pre-opening phase the commissioning was only done on a functional basis. In 2010 the facility manager finalised the service specifications and offered immediate savings of about 500,000 per year by reducing the costs of their sub-contractors. MAB Asset Management instead started the tendering process and made quick wins of about

540,000 per year. After having contracted new conditions, MAB Asset Management again saved an additional 864,000. The process is on-going with a two-fold objective:

• To optimise the quality of services at a high standardised level; • To save costs by re-contracting after tendering by MAB Asset Management.


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16.7 Case study: Taking advantage of the crisis and demonstrating partnership with tenants, Felicia Shopping Centre in Iasi, Romania

In 2009, the whole market suffered from the impact of changes in the global financial market and this fact was also reflected in the development of sales, and thus the profitability of tenants. In order to demonstrate partnership with tenants, asset management together with property management adopted a significant renegotiation programme to achieve at least 5% saving on total budget. After scrutinising service level and adjusting price levels with its suppliers, this target was exceeded and a saving of 15% was achieved. This exercise halted a negative evolving trend from the past and set good prospects for keeping the right cost levels in the future.


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17 What next for cost effective, reasonable and transparent service charges in shopping centres in Europe?

There are disparities between European countries in terms of processes and models of property management which sometimes make it hard to compare service charge costs, but the industry could seek to find ways to compare and contrast shared costs such as security and cleaning, perhaps via benchmarks. Efficiencies can be obtained by the wider use of building management systems and centralised data systems to enable monitoring of costs. As major users of energy, shopping centres would benefit from a clearly defined policy on sustainability, along with the use of ISO 14001 and EMAS whenever possible to strengthen the image of shopping centres positively in society, with the business sector and with governments. The options for energy production must be considered, including the use of micro-production of solar energy, the use of wind generators using natural energy sources, energy from waste materials amongst other initiatives, all of which will provide cost savings and reduced levels of CO2 emissions. It becomes imperative that the certification and accreditation of managers be encouraged, which will improve the recognition of qualifications and will be a differentiating factor for good managers, which is especially important in this economic climate. A properly accredited manager with sustainable business models will provide the ethical and transparent service vital to improving the management of service charges across Europe. Finally, clear and objective dialogue between all those involved in the retail property business – tenants, landlords and property managers – is essential for ensuring reasonableness and transparency in the management of service charges, improving confidence levels from all those involved. So methods to improve communication as an integral part of managing property are essential. Promoting these key themes among all landlords and managers will ensure service charges are run effectively to the benefit of all stakeholders, retailers, landlords and managers.


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18 Appendix

18.1 Table of Figures

Table 1: Survey respondents .................................................................................................... 6Table 2: Most common costs .................................................................................................. 12Table 3: Common area electricity, gas and water costs ......................................................... 12Table 4: Common security costs............................................................................................. 13Table 5: Common area cleaning costs.................................................................................... 13Table 6: Common area repairs and maintenance costs ......................................................... 13Table 7: Landscaping costs .................................................................................................... 13Table 8: Common area cleaning costs.................................................................................... 14Table 9: Property taxes ........................................................................................................... 14Table 10: Site/centre management costs................................................................................ 14Table 11: Costs for the centre/site management accommodation.......................................... 15Table 12: Property management (rent collection, tenant management, etc.) costs................ 15Table 13: Facilities management costs................................................................................... 15Table 14: Management fee ..................................................................................................... 16Table 15: Administrating the marketing budget....................................................................... 16Table 16: Landlords usually contribute to the marketing budget............................................. 16Table 17: Mall income (non-core income)............................................................................... 17Table 18: Sustainability costs.................................................................................................. 17Table 19: Method of apportioning service charges ................................................................. 18Table 20: Are weightings commonly used? ............................................................................ 18Table 21: Shortfalls to the service charge from vacant units .................................................. 18Table 22: Frequency of service charge payments by tenants................................................. 19Table 23: Budget report provided to tenants prior to the commencement of the service charge

year .................................................................................................................................. 19Table 24: How soon prior to the start of the budget year is this provided? ............................. 19Table 25: Service charge reconciliation to be audited ............................................................ 20Table 26: Shortfalls that arise from caps granted to tenants................................................... 20Table 27: Administering interest on service charge bank accounts ........................................ 20Table 28: Normal dispute process between a landlord and tenant ......................................... 21Table 29: Tendering the service contracts .............................................................................. 21Table 30: Best practice guide/set of principles for service charges ........................................ 21Table 31: Sinking fund/reserve fund ....................................................................................... 22Table 32: Building insurance costs ......................................................................................... 22Table 33: Terrorism insurance premium costs........................................................................ 22Table 34: Tenants usually open for trade on a Sunday .......................................................... 23

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Documents

ICSC - European Service Charge Guide