SERVICE CHARGE ADMINISTRATION ON MULTI TENANTED RESIDENTIAL AND COMMERCIAL ESTATES
ABSTRACT
In the various property management functions, service charge administration is one of the most delicate areas. This is because it is an area that is usually prone to litigation. The intricacies of service charge suggest that the concept be well understood by both the tenants and the landlord. The tenant will want to enjoy the occupation of the property at the lowest cost while the landlord will want the value of his investment be maintained for efficient functioning. This study work therefore looks at the administration of service charge in the multi tenanted residential estates. It identified the concept of service charge, its components, handling of surplus and deficit as well as the method of apportionment of the charge between the tenants in the estates and the mode of payment of the charge in estates. The study also looked at the relationship between the modes of payment of service charge in the estates. It analysis the conditions of the services in the estates while examining the constraints to effective service charge administration in the estates. The study concludes that for effective service charge administration to be achieved, all the parties involved must know their obligations and carry them out accordingly.
 
TABLE OF CONTENTS

Content Page

Title Page    i

Declaration    ii

Certification    iii

Dedication    iv

Acknowledgement    v

Abstract    vi

Table of contents    vii

List of tables    viii

List of figures    ix

List of plates    x

CHAPTER ONE

1.0    Introduction    1

1.1    Background of the study    1

1.2    Statement of problem    3

1.3    Aim and Objectives    3

1.3.1 Aim    3

1.3.2 Objectives    4

1.4    Research questions    5

1.5    Hypothesis    5

1.6    Need for the study    5
 
1.7    Scope of the study    6

1.8    Limitation of the study    6

1.9    Historical profile of the study Area    6

CHAPTER TWO

2.0    Literature review    13

2.1    An overview of property    13

2.1.1 Types of real property    14

2.1.2 Management    15

2.2    The concept of property management    15

2.2.1 Need for property management    17

2.2.2 The property management process    18

2.2.3 Property management functions    19

2.3    The concept of maintenance    20

2.3.1 Types of maintenance    20

2.3.2 Maintenance policy    21

2.4    Private Estates    22

2.4.1 Physical characteristics of private estates    22

2.4.2 Abstract characteristics of private estates    23

2.4.3 Objectives of ownership and management of private estates    23

2.4.4 Problems of management of private estates    23

2.5    Concept of service charge    24

2.6    Service charge for business premises    27

2.7    Service charge for residential premises    28

2.8    Components of service charge    30
 
2.9    Factors affecting the amount of service charge    31

2.10    Determination of service charge    32

2.11    Approach to service charge budgeting    33

2.12    Service charge apportionment    34

2.12.1Methods of service charge apportionment    35

2.13    Service charge collection    37

2.14    Estimated budget expenditure    37

2.15    Accounting and certification of charge    38

2.16    Sinking fund provision    39

CHAPTER THREE

3.0    Research methodology    41

3.1    Population of the study    41

3.2    Sample and sampling techniques    41

3.3    Methods of data collection    41

3.4    Sources of data    43

3.4.1 Primary sources    43

3.4.2 Secondary sources    43

CHAPTER FOUR

4.0    Data Presentation, Analysis and Interpretation    44

4.1    Nature of Data    44

4.2    Methods of Data Analysis    44

4.3    Presentation and Analysis of Data    45

CHAPTER FIVE

5.0    Summary of findings and discussion, implication, recommendations
 
And conclusion    68

5.1    Summary of findings and discussions    68

5.2    Implications of findings    69

5.3    Recommendations    70

5.4    Conclusions    73

References    75

Appendix



LIST OF TABLES

Table 3.1    Analysis of questionnaires administered to the

occupants of private estates in Abuja    42

Table 3.2    Analysis of questionnaires administered to

firms managing private estates in Abuja    42

Table 4.1    Composition of accommodation in private estates in Abuja    45

Table 4.2    Number of years under occupation for tenants in

private residential estates    46

Table 4.3    Number    of    years    under    occupation    for    tenants    in    private

commercial estates    46

Table 4.4    Mode of service charge payment for

private residential estates    47

Table 4.5    Mode of service charge payment for private

commercial estates    47

Table 4.6    Mode of payment of service charge in

private estates    47

Table 4.7    Calculated Expected Frequency of mode of service charge

payment in private estates    48

Table 4.8    Apportionment of service charge in private

residential estates    50

Table 4.9    Apportionment of service charge in private
commercial estates    50
Table 4.10    Tenant satisfaction on amount paid for service charge
administration in private residential Estate    51
Table 4.11    Tenant satisfaction on amount paid for service charge
administration in private commercial Estates    51
Table 4.12    Reasons for dissatisfaction in amount
payable for service charge administration in private
residential Estates    51
Table 4.13    Mean points for reasons involving dissatisfaction in
amounts    payable    for    service    charge    administration    private
residential Estates    52
Table 4.14    Reasons for dissatisfaction in amount payable for
service charge administration in private
residential Estates    53
Table 4.15    Mean points for reasons involving dissatisfaction
in amount payable for service charge administration in
private commercial Estates    54
Table 4.16    Frequency of conducted maintenance and repair
works after complaints in private residential estates    55
Table 4.17    Frequency of conducted maintenance and repair
works after complaints in private commercial estates    56
Table 4.18    Rating of management administration of service charge
in private residential estates    56
Table 4.19    Rating of management administration of service charge
in private in commercial estates    57
Table 4.20    Treatment of budget deficit in service charge in private
residential estates    57
Table 4.21    Treatment of budget deficit in service charge in private
Table 4.22    Treatment of budget surplus in service charge in private
residential estates    58
Table 4.23    Treatment of budget surplus in service charge in private
commercial estates    58
Table 4.24    Modes/types of service charge administration in private
residential estates    58
Table 4.25    Modes/types of service charge administration in private
commercial estates    59
Table 4.26    Problems encountered in service charge administration in
private residential estates    60
Table 4.27    Respondents� consensus opinion on the
problems encountered    61
Table 4.28    Problems encountered in service charge administration
in commercial estates    61
Table 4.29    Respondents� consensus opinion on
the problems encountered    62
Table 4.30    List and condition of services available in
residential estates    63
Table 4.31    Mean point for overall assessment of condition of services
available in residential estates    64
Table 4.32    List and condition of services available in
commercial estates    65
Table 4.33    Mean point for overall assessment of condition of services
available in commercial estates    66
Table 4.34    Provision for clause empowering management in collecting
service charge    66
Table 4.35    Stipulated percentage levied as service charge in
residential estates    67
Table 4.36    Stipulated percentage levied as service charge in
commercial estates    67
 LIST OF FIGURES
Figure 4.1    Assessment of reasons for dissatisfaction in amount
payable for service charge administration in private
residential estates    53
Figure 4.2    Assessment of reasons for dissatisfaction in amount
payable for service charge administration in private
commercial Estates    55
LIST OF PLATE
Map of Federal Capital City showing the districts of

Phase one    12
 CHAPTER ONE
 1.0    INTRODUCTION
The management of service charge remains one of the major time consuming operation in the management functions of the estate manager. This is due to the large amount of money that could be involved and different characters of tenants.
Considering the present advancement in technology and the increase in demand for professional expertise in different human endeavour, there is an increase in demand for residential premises. Since, service charge administration is one of the principal areas of dispute between tenant and landlords / property owners; it therefore remain one of the most difficult tasks in property management.
Generally, the property manager is obliged to provide certain services such as ensuring proper use of the property in habitable manner, supervises the payment of other outgoings, supervision of maintenance work etc and in turn has the right to levy a service charge for doing so.
1.1    BACKGROUND OF THE STUDY.
Property management is indeed a very important aspect of the real estate discipline. It involves the application of skills in ensuring that the property, it�s surrounding and amenities are cared for, in order to give value to both the tenant and the landlord (Nwankwo, 1995). In multi-tenanted buildings, the presence of many tenants requires that special attention be given to the management of the facilities and services in that building. Proper maintenance of the facilities in a building enables the building to perform its functions efficiently, and it also helps to reduce the rate of depreciation and obsolescence in such building.
Service Charge or Service Maintenance Charge is a compulsory levy on tenants or occupiers of property in multiple occupation (in addition to the rent) for the
 discharge of those obligations which would have been borne by each tenant/occupier if he were a sole tenant, but which he cannot now perform due to the existence of several others who have similar obligations. The presence of multiple tenants in a property coupled with the design of the building and the services provided makes management and maintenance more complex as to require a professional approach in its execution. The professional real estate manager�s role is to oversee the management and maintenance of real property in accordance with the landlord�s objectives.
The items usually covered under the service charge include;-
a)    Maintenance and repair of lifts and air conditioning systems.
b)    Maintenance of standby electricity generator.
c)    Provision of security.
d)    Cleaning and lighting of common parts.
e)    Clearing of septic tanks and soak away pits.
f)    Pest control and rodent eradication.
g)    Maintenance of fire fighting systems.
h)    Refuse disposal.
i)    Repair and redecoration of common parts.
j)    Management fee amongst others.
Since the amount expended by the landlord on services costs is recovered from the service charge, it is an area where contention can often arise. The goal is to maintain the service as to retain property in good tenantable condition thereby commanding its full rental value.
1.2    STATEMENT OF THE PROBLEM
 Administration of service charge in the recent years has been a source of concern for managing agents in multi tenanted building especially in Nigeria urban centres. For residential building, it has often resulted to arguments, disputes and misconceptions.
Property manager�s seldom communicates the utilization of the service charge to the tenants. Since the manager is spending the tenants money, they have the right to know what their money is been used for and to know that their money is used for the right purpose.
1.4    AIM AND OBJECTIVES
1.4.1 AIM
The aim of this study is to examine the changes encountered during the administration of service charge with the reference to multi tenanted residential estates.
1.4.2 OBJECTIVES
In order to achieve the aim of the study, the following objectives must be achieved.
1)    To identify the key areas where service charge administration is relevant on multi tenanted estates.
2)    To examine common problems encountered during the discharge of administration on multi tenanted estates.
3)    To assess the problem generated by the management surveyors during the administration of service charge
4)    To make suggestions on better administration processes in the discharge of service charge functions.
1.7    SCOPE OF THE STUDY
 The scope of the study of cover only issue on service charge administration on multi tenanted estates in ungwan rimi Kaduna, Nigeria.
In doing this, two multi tenanted residential estate shall be selected. The estate include Suyaya Estate, Queen Amina Crescent, Ungwan Rimi and No. 13B
Alkali Road Ungwan Rimi, Kaduna. Similarly, relevant property management firms shall be consulted for further information.
DEFINITION OF TERMS
Different authors have made series of contributions on it base on their experiences.
Hanks {1998}, refers to property as �immovable property� especially freehold land. Land is a fundamental necessity of life. It is the base upon and which all social, economic and political activities of man take place.

According to Umeh {1973}, define property� as the production and utilisation of social and economical resources cannot be achieved without land�.
Galaty Fillmore W. {1996}, residential property are used for single family housing, whether in urban, sub urban or rural areas.
Olusegun {2000}, service charge or service maintenance charge is a compulsory levy on tenants or occupier of the property in multiple occupation in addition to the rent for the discharge of those obligations which would have been borne by each tenant/occupier if he were a sole tenant, but which he cannot now perform due to the existence of service others who have similar obligations.
Nwanko {2004}, define service charge as an additional rent collected by the property owner or his managing agent on his behalf , from tenants and occupiers of a property certain maintenance service which the tenancy agreement or lease have made the duty of the property owner to provide.
Service charge in Nigerian is however, more commonly applied to property multiple occupation where it become necessary for the landlord or his agent to
 organise those service like gardening cleaning and lighting of common part
 maintenance of lifts, etc which the tenants cannot organise for reasons of impracticability.
Thorncroft {1978}, defines estates as a legal entity that denotes the character and quality of right which an owner possesses in a property.