Within our previous analysis of service charge documents for 756 multi-let commercial office buildings (available at http://www.property-solutions.co.uk/news-events/2011/apr/18/new-service-charge-operating-report-scor-201011-for-offices/), SCOR’s research team found that many documents, especially budgets, often consisted of one page with no additional narrative disclosure to explain service charge expenditure. As a result, it was unsurprising that many of these documents failed to comply with the requirements of the RICS Code of Practice in terms of disclosure and cost transparency.

We are in the process of completing an in-depth analysis of service charge documents from a number of the UK’s largest retail shopping centres. In contrast to the average office document, retail documents are typically provided as lengthy documents that provide an array of different disclosures about the service charge process and the costs at the centre. These can often exceed fifteen pages in length and this extra disclosure should be welcomed by the average retail tenant. However, from our initial analysis, two important points should be noted:
1. Some of this additional lengthy disclosure forms part of a standard ‘reporting’ template used by managing agents and landlords, and as a result, appears to provide certain generic information that is not specific to the service charge costs at the centre being reported on. Much of this would be better delivered as part of a separate ‘occupiers’ handbook, leaving the budget and certificate to focus on the specific reporting of service charge costs.   
2. While the quantity of the information was present, the quality of disclosure within many documents was lacking, especially in the transparent reporting of the Code’s requirements. For example, the basis of the management fee was often unclear, as was the apportionment basis for the service charge costs. Furthermore, documents often failed to use the cost classes and categories prescribed by the Code, making comparative cost analysis virtually impossible for the average retail occupier.

The soon to be published SCOR for retail 2010/11 will provide more detailed findings about these and other Code compliance metrics.
Overall, these observations were slightly surprising and we intend to review a greater sample of retail documents to expand this initial analysis. Based upon this limited sample, it is clear that certain retail service charge documents require a greater balance of information quality over quantity in order to make them more relevant for occupier decision making.