Service Charges: ICSC calls for more transparency and certification

Authors of a landmark industry guide on Shopping Centre Service Charges across Europe, the first of its kind, are calling for clearer dialogue between landlords, tenants and property managers and the certification of management companies to drastically improve transparency in resource management.

The guide, written by the International Council of Shopping Centers (ICSC) Retail Asset Management Committee, was launched during the fourth ICSC Romanian Retail Real Estate Conference on 28 September at the Radisson BLU Hotel, Bucharest.

ICSC is the worldwide not-for-profit retail real estate organisation connecting over 55,000 industry professionals, including investors, developers, retailers, asset managers and government officials who benefit from ICSC research and top-level educational programmes.

Martyn Chase, Chairman of the ICSC Retail Asset Management Committee and a director of DTZ, said: “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 understood and respected by their management and tenants,” he said. “However the service charge schedule of some, often smaller, operators across Europe may not be so 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 which has always caused debate between landlords and tenants.”

Research for the guide was drawn from shopping centres in 27 countries across Europe. Shopping centre management companies that participated contributed information on every aspect of their service charge policies including waste, insurance, energy, accounting, marketing and sustainability.

One of the main authors of the report, António Matias Lopes of Multi Mall Management said: “Clear and objective dialogue between all those involved in the business – tenants, landlords and property managers – is essential for clarifying transparency in resource management for services charges, leaving no doubt amongst any of the parties where responsibility and financial commitment lies.”

He added: “Proper certification and accreditation from an organisation such as ICSC could also be a differentiating factor when landlords are seeking to appoint a management company – especially in this challenging economic climate.  A company which is certified and accredited will have a sustainable business model – essential for transparency in business management.”

The ICSC Service Charge Guide 2011

• The ICSC Service Charge Guide 2011 presents and analyses the main aspects relating to service charges across Europe.
• The guide uses case studies to highlight good practice with service charges in a number of European countries based on their accepted service charges regimes.
• 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:

i)               Managers should manage the service charge in a reasonable, ethical and transparent way.

ii)            There should be open communication between the manager and tenants throughout the process.

iii)            The manager should seek to achieve cost effectiveness for the services he provides subject to providing the quality of service delivery needed.

iv)            The manager should seek to provide the services in a sustainable way where appropriate.

v)             Properly qualified managers should ideally manage the service charge.

“Good landlords and managers are already adopting these practices and others in the industry should strive to meet them as well,” added Martyn Chase.

The service charges report can be read in full: http://www.icsc.org/web/EuropeanServiceChargeGuide.pdf