Common costs are a recurring topic in discussions between landlords and tenants. How can you, as a landlord, property manager or tenant, make sure the costs are allocated fairly and avoid conflicts at the end of the year?
What are common costs, and why do they matter?
Common costs, often called service charges, cover the operation and maintenance of common areas and shared services, typically cleaning, electricity, insurance and property tax. The costs are usually settled at the end of the year through an annual settlement, and this is where problems often arise. Has everyone paid their rightful share? Have mistakes been made? Does practice match what the lease says? A clear and structured settlement process creates confidence and reduces the risk of conflicts and financial surprises. Read more about what common costs are and how to calculate them.
How should common costs be allocated?
The most common method is to allocate common costs by area, measured according to the Norwegian standard NS 3940. It is a simple and fair model, but it does not always fit. If a tenant has its own agreements for waste management or tailored services, for example, exceptions must be made. This requires good cooperation between the property manager and the operations staff to identify and document such arrangements.
The lease determines what applies
The settlement of common costs must always be based on what the lease says. There is no legal definition of common costs in Norway, so the lease decides which costs can be passed on to tenants, any limitations (such as a cap) and the deadlines for the settlement. Unclear or incomplete leases are a breeding ground for misunderstandings and disagreement. Review your leases carefully, and make any necessary updates early. Read our guide to commercial lease agreements in Norway.
The importance of good documentation and accuracy
An error in the area data or incomplete cost records can lead to a skewed allocation. Accuracy is especially important when the property has both VAT-registered and non-VAT-registered tenants. All invoices and meter readings should be documented and linked to the right tenant, which makes the process secure and traceable.
When does the settlement become complex?
Larger or mixed-use properties, especially where tenants have different needs, call for more advanced systems and more expertise. Digital property management systems can make the settlement far more efficient and reliable. Experience, structure and the right tools are key to delivering a correct settlement.
Trust starts with good property management
A professional and open settlement process creates confidence. Tenants feel looked after, and the landlord builds trust and long-term relationships. With regular follow-up and good control throughout the year, you avoid unpleasant surprises at year-end.
Frequently asked questions about common costs
- What do common costs in an office building actually include? Common costs normally cover the operation and maintenance of common areas and services such as electricity, cleaning, security, property tax, insurance and shared technical installations. What is included should be clearly stated in the lease.
- How do I know that common costs are allocated correctly? Costs are usually allocated by area, but the landlord should document the basis for the allocation and show clearly how the costs have been calculated. Many leases give you the right to request a detailed breakdown, so ask for it if anything is unclear.
- Can I as a tenant influence my common costs? Yes, to some extent. By entering into your own agreements for services (such as waste collection), or by negotiating a cap in the lease, you can limit which common costs you contribute to. Caps are not common, though, so raise it early in the negotiations. Good dialogue with the landlord and a clear understanding of the lease terms are key. See also how common costs affect the total cost of your office.
- What happens if the area data is wrong? Does it affect my share? Yes. Errors in the area data can mean you pay too much or too little. That is why both you and the landlord need correct information, and any changes to the premises should be updated in the system.
- How can I as a landlord avoid conflicts over common costs? By having clear leases, using digital systems that ensure traceability, and presenting the settlement openly and with documentation. Good structure throughout the year makes the final settlement far easier and builds trust with tenants.
Need more insight? Download the guide from Norsk Eiendom, the Norwegian property industry association, for a more thorough review of best practice (in Norwegian).
