A service charge reconciliation is the annual settlement in which a landlord sets the on-account payments a tenant made against what the estate actually spent, producing either a balancing invoice or a credit. Slovak law prescribes no deadline, no format and no audit right for commercial premises, so all three have to come from the lease. What the law does supply is an outer limit: under section 397 of the Commercial Code a claim between businesses prescribes in four years.
What a service charge reconciliation actually is
The service charge itself is a cost category: the tenant’s share of running the common and shared parts of an estate. The reconciliation is the procedure that decides who owes whom once the year is over, and it is worth keeping the two apart because they are negotiated separately and go wrong for different reasons.
The cycle has four steps. Before the year starts the landlord budgets the cost of running the estate. That budget is apportioned across the tenants, normally by lettable area. Each tenant is billed a monthly advance alongside the rent. After the year ends the landlord compares the advances collected against the documented actual spend and issues a statement. Where the spend was higher, a balancing invoice follows. Where it was lower, the tenant receives a credit.
Nothing in that sequence is imposed by Slovak statute. It is a contractual construct, common to gross leases and triple net leases alike, and every element of it is only as strong as the clause that creates it. A lease that provides for advances but not for a statement has created a payment obligation with no accounting behind it.
What the statement has to contain to be checkable
A statement showing one number per category, with no comparison and no key, cannot be checked by anyone. Five elements make it checkable.
First, each actual cost line set against its budget line, so that variance is visible rather than buried in a total. Second, the apportionment key with its base stated: which figure of lettable area was used, and at what date, because a key based on an area that changed mid-year produces a different result depending on the day it is measured. Third, an occupied-days factor for any tenant that took occupation or left during the year. Fourth, the treatment of vacant units, stated explicitly. Fifth, the exclusions, so that capital works, letting and marketing costs, and the landlord’s own overheads are visibly outside the pot rather than assumed to be.
Two of these carry most of the disputes. Vacancy is the larger one and is covered further down. The apportionment base is the quieter one: an estate that grows by a new unit halfway through the year has two possible denominators, and the difference between them lands entirely on the sitting tenants.
Deadlines: what the lease must supply, because the statute will not
There is no statutory deadline in Slovakia for issuing a reconciliation for non-residential premises. If the lease sets none, the landlord is not late in any legal sense until the claim itself starts to prescribe, and that takes years.
The outer limit for commercial parties comes from the Commercial Code. Section 397 provides that unless the law lays down otherwise for particular rights, the limitation period is four years. Section 392(1) starts that period on the day the obligation was to be performed. Section 401 allows the party against whom the right runs to extend the period by written declaration, repeatedly, so long as the total does not exceed ten years from when it first began to run, and section 400 confirms that a change in the person of the debtor or creditor does not interrupt it. Where a lease falls under the Civil Code regime instead, section 101 gives three years from the day the right could first have been exercised.
The practical consequence is uncomfortable for occupiers. A statement that arrives two years after the year it covers is late in commercial terms and perfectly timely in legal ones. The only reliable protection is a contractual delivery deadline, typically 90 to 120 days after the year end, coupled with an express consequence if it is missed. A deadline without a consequence is a diary note. The consequence tenants ask for is preclusion: if the statement is not delivered within the window, the landlord may not claim a balancing payment for that year, while any credit still runs in the tenant’s favour.
Caps, and why the cap usually excludes the lines that move
Three cap structures appear in Slovak industrial leases. A fixed cap sets a ceiling per square metre per year. An escalation cap limits the annual increase, often to an index or a stated percentage. A rolling or cumulative cap allows an underspend in one year to carry forward against an overspend in the next, which sounds generous and mostly benefits the landlord.
The clause that matters is not the cap but its carve-out. Energy, insurance, public levies, security and winter service are almost always excluded from the ceiling, on the reasoning that the landlord cannot control them. That reasoning is sound and its effect is severe: the excluded items are precisely the lines that move. What those lines actually consist of on a Slovak estate, and which parts of them are levies rather than prices, we work through in our post on snow, waste and water. A cap over the remainder governs management fees and routine maintenance, which are the stable part of the bill.
The useful question in a negotiation is therefore arithmetical rather than legal. Ask what share of last year’s actual charge fell inside the proposed cap. Where the answer is a third, the cap is a comfort clause. Where it is most of the charge, it is a real ceiling, and the landlord will have priced it.
The audit right that works, and the one that does not
An inspection right is standard in a well-drafted lease and frequently unusable as drafted. A workable one names five things: a window measured from receipt of the statement rather than from the year end, commonly 30 to 60 days; a place, whether the manager’s office or a data room; a scope covering invoices, supplier contracts and the apportionment schedule, not merely a summary; permission to use an external adviser rather than the tenant’s own staff only; and a cost-shifting trigger, so that where the audit shows an overstatement above an agreed threshold the landlord bears the cost of the audit and repays the excess with interest.
The versions that do not work are recognisable. Inspection at the landlord’s premises during business hours by prior appointment, with no window and no scope, converts a right into a request. A clause making the statement final and binding unless disputed within fourteen days is shorter than the time an adviser needs to obtain the invoices. A ban on advisers paid by results removes the only expert most single-site occupiers can afford.
Vacancy is where the audit usually earns its fee. On a partly let estate the share attributable to empty units is the landlord’s own cost unless the lease says otherwise, because there is no tenant to bear it. A reconciliation that quietly divides the full estate cost across the occupied tenants transfers that cost to them. It is not always deliberate and it is always worth checking, since on an estate at eighty per cent occupancy it inflates every remaining tenant’s share by a quarter.
If you are working through a statement you have just received, or a schedule you are being offered in heads of terms, send it to our team and we will tell you which lines are checkable as drafted and which are not.
Frequently Asked Questions
When must a Slovak landlord issue the reconciliation?
Whenever the lease says. Slovak law sets no deadline for non-residential premises. Absent a contractual date, the only outer limit is the four year limitation period in section 397 of the Commercial Code, which section 392(1) starts on the day the obligation fell due.
What if the statement arrives two years late?
It is late commercially and generally still in time legally. That is exactly why tenants negotiate a delivery deadline with preclusion attached, so that a missed window costs the landlord the balancing claim for that year.
Can a tenant refuse to pay a balancing invoice it cannot verify?
Not simply by objecting. The lease governs, and most leases make the advance and the balance payable on demand. The usable route is a defined inspection right exercised inside its window, which is why the drafting of that clause matters more than the tone of the dispute.
Who pays for the share attributable to empty units?
The landlord, unless the lease provides otherwise. There is no tenant behind a vacant unit, so its share cannot be recovered from the others without an express clause allowing it. This is one of the most common findings in an inspection.
Does a cap protect a tenant against energy and winter costs?
Usually not. The standard carve-outs from a cap are energy, insurance, public levies, security and winter service, which are also the most volatile lines. Check what proportion of the actual charge sits inside the cap before treating it as a ceiling.