Common Billing Errors in Service Charges

Service charges are a normal part of managing and occupying commercial property, but they are also one of the least transparent. Many landlords, project managers, and facilities managers accept invoices without questioning them, assuming the charges are correct and justified. In reality, service charge statements are prone to errors, some simple mistakes, others systemic misallocations, that result in tenants and property owners paying far more than they should. This article explores the most common billing errors in service charges, explains why they occur, and shows how you can protect your budget from unnecessary costs.

Why Service Charge Errors Are So Common

Service charge errors happen because the process of calculating and allocating costs is complicated. Multiple suppliers, contracts, and property functions are bundled into a single set of numbers. Accounts departments often rely on estimates, assumptions, or outdated records when preparing service charge statements. With so many moving parts, mistakes slip through unnoticed. For tenants and property managers, these errors translate into overpayments that directly erode budgets. Understanding why errors occur is the first step toward spotting them and challenging unfair bills.

Misallocated Costs

One of the most common problems is misallocated costs. A service that benefits one tenant or part of a building is charged across the entire property, meaning those who never benefited still pay. For example, cleaning services for an area used by one tenant may be distributed across all tenants, or specialist maintenance for equipment in a single unit may appear on every invoice. These errors often arise from a lack of detailed record keeping or an over-simplified allocation formula. They can be difficult to spot without a careful review of contracts and supporting evidence, but they add up to significant overpayments over time.

Duplicated Charges

Another frequent error is duplication. A cost might appear twice under different headings or across multiple periods. For example, a maintenance invoice might be included in the quarterly service charge statement and again as part of an annual adjustment. Duplications are surprisingly common because invoices are often processed by different people or at different times. Without a detailed reconciliation process, no one notices that the same bill has been included more than once. These errors unfairly inflate the bottom line and are easy to miss unless every charge is checked line by line.

Charges for Services Not Provided

In some cases, tenants are billed for services that were never provided. This can happen when services are planned but cancelled, when a supplier invoices but fails to deliver, or when property managers roll forward budgeted costs without verifying delivery. Examples include security patrols that were contracted but never carried out, or landscaping services invoiced during months when no work took place. These errors often go unchallenged because tenants assume the services were delivered as scheduled. However, cross-checking invoices with actual site activity quickly reveals when charges do not match reality.

Overstated Repairs and Maintenance

Repairs and maintenance are essential, but they are also fertile ground for inflated or overstated costs. Contractors may bill for unnecessary work, include excessive call-out fees, or use inflated materials costs. In some cases, standard maintenance tasks are misclassified as capital improvements, passing costs onto tenants that should be borne by the landlord. These practices result in tenants paying for more than their fair share, while property owners risk reputational damage if not managed properly. Careful review of maintenance records and contract terms is the only way to verify whether these charges are legitimate.

Administrative Mark-Ups

Many service charge statements include an element of administration, covering the cost of managing suppliers and contracts. While a fair administrative fee may be reasonable, some landlords or managing agents apply excessive mark-ups. These can appear as percentages added to every supplier invoice or as flat fees that bear no relation to the actual work involved. In some cases, administrative mark-ups are hidden within other charges, making them difficult to detect. Over time, these charges accumulate into substantial overpayments that do not reflect the real value of the services provided.

Incorrect Apportionments

Service charges should be apportioned fairly among tenants, usually based on floor area, usage, or other agreed methods. Errors occur when the wrong apportionment is applied, either through outdated records, calculation mistakes, or deliberate overcharging. For example, a tenant occupying 20% of the building may be billed for 30% of the costs. These errors may appear small on a single invoice but can add up to large sums over multiple years. Tenants who do not check apportionments carefully may never realise they are paying more than their fair share.

Budget vs Actual Variances

Service charges are often based on estimated budgets, with adjustments made at year-end to reconcile actual costs. Problems arise when budgets are overstated and actual costs are never properly reconciled. Tenants may continue to pay inflated amounts based on outdated estimates, while landlords fail to issue refunds or adjustments. These variances create hidden overpayments that can persist for years if audits are not conducted. Clear reconciliation and transparent reporting are essential to ensure tenants are only paying for services actually delivered at real cost.

VAT and Tax Errors

Service charges often include VAT, but not all charges should be subject to it. Errors occur when VAT is applied incorrectly, either added where it should not be or omitted where it is due. These mistakes create unnecessary costs for tenants and compliance risks for landlords. Tax errors may also arise in business rates recharges or when exemptions are overlooked. Correcting VAT and tax errors requires careful review of invoices and an understanding of the relevant legislation, but the savings can be substantial.

The Cost of Ignoring Errors

Many landlords and property professionals accept service charge statements without scrutiny, assuming that the numbers must be correct because they come from a managing agent or established supplier. The reality is that unchecked errors drain budgets year after year. Even small discrepancies, when multiplied across multiple properties and tenants, add up to large financial losses. Ignoring errors also sets a precedent that tenants can be charged without question, which only encourages further inaccuracies. In contrast, those who challenge and audit their service charges regularly gain control over costs and build stronger, more transparent relationships with their stakeholders.

How to Protect Yourself Against Errors

The best protection is vigilance. Review every service charge statement carefully, compare it against contracts and actual site activity, and look for anomalies in allocation and totals. Keep detailed records of service levels, supplier invoices, and maintenance schedules. If a charge seems unclear, request supporting evidence before making payment. Better still, commission an independent audit. An audit provides a structured, impartial review of all charges, identifies overpayments, and gives you the confidence to recover funds where errors are proven. EG-Audit specialises in uncovering these discrepancies and ensuring property professionals only pay what is fair and correct.

Take Control of Your Service Charges

Common billing errors in service charges are not rare exceptions: they are everyday realities that cost landlords, project managers, and facilities managers thousands of pounds each year. By understanding where errors occur, reviewing charges carefully, and taking proactive steps to audit, you can protect your budgets and ensure costs remain transparent and fair. EG-Audit is here to support you every step of the way. With a clear audit process and evidence-backed findings, we help clients recover overpayments and restore confidence in their financial management.

What’s next?

Read How To Check For Energy Billing Mistakes

and see How Your Audit Report Can Help