_What is a Service Charge?

A service charge is an extra fee paid by a tenant, usually as part of, or in addition to, the actual rent fee. It covers the cost of extra services that are not included in the rent payable for particular premises. The services include; but are not limited to; security, cleaning, repairs, replacements, property management, heating and lighting in common spaces, insurance, utilities, garbage collection, lawn maintenance and other services agreed to be provided by the landlord, but subject to reimbursement by the tenant.

The tenancy agreement stipulates in detail the payment terms and the services covered. In Uganda, service charges vary depending on the property type, building complexity, locational factors, nature of procurement, quality of services covered and terms as agreed by parties in the lease agreement, usually subject to a service charge audit.

The recently passed Landlord Tenant Act 2022 permits a landlord to charge a service fee. The service fee is defined as ‘an amount payable by a tenant as part of, or in addition to the rent which is payable directly or indirectly for services, repairs, maintenance, improvements, insurance or landlord’s costs of management’. This act officially lays a foundation in the administration and compliance of service charge in Uganda.

Service charges are beneficial to landlords as they enable them recoup expenses incurred in maintaining the building as agreed in the lease terms. The tenant, on the other hand, is assured of a well maintained and functional building, as well as accountability, because service fee audits are undertaken periodically, and budgets drawn annually.

It is worth noting that effective communication among occupiers, landlords and managers is a best practice principle for successful service charge management to achieve transparency, accountability and effective service delivery, as recommended by RICS professional statement on service charge (2018).