Service charges for retail space are reasonable when they demonstrably relate to costs actually incurred for the management and maintenance of the property or shopping centre, and when they are proportionate to the market. In practice, reasonable service charges for retail space in the Netherlands typically range between 10 and 40 euros per m² per year, depending on the type of location and the services provided. The questions below help you assess step by step whether what your landlord is charging is actually correct.
What exactly is included in service charges for retail space?
Service charges for retail space are all costs that a landlord passes on to the tenant for services and facilities associated with the use of the space, but which are not part of the base rent. Think of cleaning of common areas, security, lighting of shopping corridors, maintenance of installations, and management fees.
In a standalone retail property, service charges are often limited. Here they typically concern costs for shared facilities such as a common entrance, lift, or car park. In a shopping centre, service charges are generally higher, because there are more shared facilities: marketing and promotion of the shopping centre, central management, shared sanitary facilities, ambient lighting, and sometimes even a central cash register system or music installation.
Service charges are always billed in addition to the base rent and therefore form an essential part of the total rental costs for retail space. It is important to understand this distinction before comparing a rental price: two properties with the same base rent can differ significantly in actual monthly costs.
How are service charges for retail space calculated?
Service charges are calculated based on the actual costs incurred by the landlord for shared services and facilities, distributed among tenants in proportion to the leased floor area. You therefore pay a share of the total costs, proportional to your share of the total lettable floor area of the property or complex.
In most lease agreements, you pay a monthly advance payment on the service charges. At the end of the year, the landlord produces a settlement based on actual costs. If the settlement is higher than the advance paid, you pay the difference. If the settlement is lower, you receive a refund.
The calculation itself is in principle transparent: the landlord is required to provide an itemised annual statement, including a justification of the costs incurred. In practice, this transparency falls short with some landlords, raising questions about the reasonableness of the service charge calculation.
What is a reasonable amount for service charges per m²?
A reasonable amount for service charges for retail space depends greatly on the type of location. For a standalone retail property in a city centre, service charges often range between 10 and 20 euros per m² per year. In a covered shopping centre with extensive shared facilities, service charges can rise to 30 or 40 euros per m² per year, sometimes more.
The location and level of facilities are the most important factors. A shopping centre with intensive marketing, extensive security, and many facilities justifies higher service charges than an open high street with few shared facilities. What is not reasonable: costs that have nothing to do with your use of the space, or costs that are structurally higher than comparable locations in the same city or the same type of real estate.
When guiding tenants in renting retail space, KroesePaternotte has lease contract data going back to 1984 and covering virtually the entire Dutch retail market. This makes it possible to assess on a per-street, per-city, and per-location-type basis whether a service charge level is in line with the market, rather than guessing.
Which service charges may a landlord not pass on?
A landlord may not pass on costs that fall under their own ownership obligations, that have not been agreed upon in the lease agreement, or that have no demonstrable connection to the use of the leased space. Costs for major maintenance, replacement of installations, and structural improvements to the property are in principle at the landlord’s expense.
Specific costs that a landlord generally may not pass on to the tenant:
- Costs for replacement of the central heating boiler or other major installations (this is major maintenance)
- Costs for structural renovation or refurbishment of the property
- Management fees that are higher than what has been agreed in the lease agreement
- Costs for vacant units in a shopping centre that do not contribute to your use
- Costs for services that you as a tenant never use or have never requested
What may exactly be passed on is stated in the lease agreement. Dutch tenancy law offers tenants protection, but freedom of contract is considerable. Always read the lease agreement carefully on the chapter about service charges before signing. A specialised retail agent can assess this for you and negotiate on unreasonable items.
How do you check whether the service charge statement is correct?
You check the service charge statement by comparing it with the specification of costs incurred that the landlord is required to provide, and by verifying whether all items correspond to what was agreed in the lease agreement. Always ask for the underlying invoices if an item appears unclear or disproportionately high.
Go through the statement systematically:
- Check whether all cost items correspond to the descriptions in the lease agreement
- Compare the total amount with the advance paid and ask for an explanation in case of large discrepancies
- Ask about the allocation key: how has your share been calculated relative to the total floor area?
- Check whether any costs have been included that relate to major maintenance or the ownership obligation
- Request access to the original invoices if in doubt about specific items
Do you have well-founded doubts but are unsure how to address them? Via direct contact with a retail specialist you can obtain a second opinion based on market knowledge and experience with comparable contracts.
When should you negotiate about service charges?
You should negotiate about service charges at the time you are discussing the lease agreement, i.e. before signing. Once signed, the agreed terms are binding. Negotiating is certainly worthwhile if the service charge level is higher than market-standard for comparable locations, if the specification is unclear, or if items have been included that you as a tenant will never use.
Concrete situations in which negotiating about service charges is advisable:
- The landlord charges a management fee of more than 5 percent on top of the actual costs
- Marketing contributions for the shopping centre are high but activities are limited
- You are renting a smaller unit but are paying proportionally more than larger tenants
- There are no agreements on a maximum annual increase in service charges
- The description of service charge items is vague or too broadly formulated
Negotiating about service charges feels unfamiliar to many tenants, especially if it is their first retail space. Yet landlords of professional real estate are often genuinely open to this, especially when the tenant provides a well-substantiated argument for why an item is unreasonable. KroesePaternotte negotiates on behalf of tenants based on current market data and years of experience with comparable contracts throughout the Netherlands, from Amsterdam to Groningen. View the current retail space listings or read more about who KroesePaternotte is if you are considering engaging a specialist when renting retail space.
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