As certain types of property have become more complex and customers ' or occupiers ' perceptions and expectations have evolved, the services provided by the owners have had to be improved correspondingly. A modern service charge may include provision for the recovery of many different properties or facilities managementrelated services. The existing practice of service charges recovery for commercial properties is not transparent enough to enable the tenants to understand exactly what they are paying for. The service charge costs may include enhancement of the building, where it can be justifi ed following the analysis of reasonable options and alternatives. The practice of service charge should rest on achieving equitable benefi ts for both parties: the owner and the tenant. Keywords: service charges ; commercial lease ; landlord and tenants ; property management ; sinking funds ; reserve funds
COMMERCIAL SERVICE CHARGES DEFINEDAll businesses have to pay for property-related overheads, or ' running costs ' ( RICS, 2008 ). The objective of a service charge is to enable the landlord to recover all likely anticipated expenditure not only for the property in its present form, but also envisaging any reasonable extension or alteration in the future ( Philpott and Hicks, 1994 ). The basic principle of service charges lies in taking the perspective of both the landlord and the tenant. In most circumstances, both parties view the importance of service charges differently, which is defi nitely to their own benefi t. Edward and Krendel (2007) show that the landlord will want to recover all expenditure from the tenant. The tenant on the other hand will try to limit the recoverable items to the necessary services for the property. Martin (1981) defi ned service charges as the cost to a tenant in indemnifying landlords against actual and anticipated expenditure on the protection, maintenance and replacement of those parts and structure, fi nishes and equipment of the property for which no tenant is directly