Refurbishment and Replacement of Central Plant

The landlord budgeted for major works on the central plant, distribution services and common parts. We determined the scale of proposed works was inappropriate and our revised plan reduced our client’s service charge liability by in excess of £750k.

Description

Our client retained 40% of the demised area in a 70 000 square feet multi-tenanted office building. The client was not in occupation.

Issues

The landlord declared and budgeted for a major refurbishment of the central plant, distribution services and common parts with cost recovery over a five year term.

The central plant was inoperable and, in addition, an alternative tenant had installed an independent air conditioning system. The landlord proposed adoption of that system, reimbursement of the tenants’ installation costs and recovery through the service charge. The landlord also proposed to relocate the main entrance foyer.

Costs had been collected in advance through service charge certification and on-account demands on an accrued basis. In addition, the managing agent proposed a 10% fee in respect of these capital expenditures which totalled circa £2m.

Process

Detailed technical assessments were undertaken by Property Solutions’ consulting engineers and chartered building surveyors.

The investigations determined that the existing central plant could be repaired at significantly lower costs. Furthermore, the distribution services could be repaired and the common parts were only in need of minor decorative work, not wholesale refurbishment. Finally it was concluded that the main entrance foyer did not need to be relocated as planned.
 
The negotiation process focused on the agreement of a revised scope of work reflecting our technical findings and lower budget. We pushed for the abandonment of proposals to adopt the other tenant’s independent air conditioning system and consequent recovery of costs through the service charge. Property Solutions pressed the landlord to rectify their breach and install an effective air conditioning system to the demised space.

We also demanded the return of accrued sums as these were collected contrary to lease provisions.

Results

Our client’s service charge liability was reduced by in excess of £750k.
Service standards were improved; the service charge reduced, and consequently our client could proceed with a proposed sub-letting. This was a significant return on fee investment.