Void units and service charges: how to account for the shortfall without distorting year-end figures
When a commercial unit sits empty, its share of the service charge does not simply disappear. The RICS professional standard for commercial service charges states that landlords should meet costs attributable to unlet premises rather than shifting the shortfall to occupying tenants. The lease still governs the legal basis of recovery, but the accounting should clearly show the full expenditure and the landlord’s funding of the void share.
The landlord’s own accounts should recognise its liability in the correct accounting period. The important point is transparency: do not reduce expenditure artificially, create tenant arrears that do not exist or leave unexplained deficits behind.
Why service charge voids cause so much trouble
A service charge budget covers the anticipated cost of running the property and allocates those costs between occupiers according to the relevant apportionment. If a 10-unit office block has a £120,000 annual budget with equal shares, each unit carries £12,000. If two units are empty for the whole period, £24,000 relates to those void units.
RICS says landlords should contribute for void properties as though they were the tenant. If you need a refresher on collection and reconciliation, our complete guide to service charge setup and reconciliation covers the basics.
The common mistakes and what to do instead
| Common mistake | What it distorts | Better approach |
|---|---|---|
| Netting the void share off total expenditure | Understates the true cost of operating the property | Show the full expenditure and identify the landlord’s contribution separately |
| Treating void shortfall as tenant arrears or bad debt | Overstates debtors and bad debt | Record the liability against the landlord rather than a tenant |
| Booking costs in the wrong accounting period | Distorts the landlord company’s results | Recognise costs and accruals in the period to which they relate |
| Leaving an unexplained deficit | Obscures who is responsible for funding it | Reconcile it and clearly document the landlord’s liability |
RICS requires transparency around void units and confirmation that the landlord has borne their cost. Before issuing year-end information, check your process against the compliance requirements for year-end service charge statements.
A worked example
Take a business park where the landlord company’s financial year ends on 31 March but the service charge year ends on 31 December. Three of twelve units have been empty since January.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
If the landlord’s liability accrues throughout the service charge period, its company accounts should recognise the amount attributable to January to March at the March year end, together with any appropriate accrual for costs already incurred. The objective is not to smooth profit but to recognise expenses in the correct accounting period.
That is why well-organised client money and bookkeeping records for commercial property matter. If the chart of accounts distinguishes landlord funding from tenant receipts, reconciling the figures becomes easier. Using Xero bookkeeping for property managers with tracking by property can help maintain that separation.
Keeping the landlord’s own accounts clean
The landlord’s funding of void service charge liabilities should be recorded consistently with the underlying expenditure and the company’s accounting policies. For tax purposes, revenue expenses incurred wholly and exclusively for a property business can generally be deductible, while capital expenditure follows different rules. HMRC also recognises that expenses can remain part of a property business where premises are temporarily vacant but are held for commercial letting.
Avoid counting the same underlying cost twice through both the service charge contribution and another expense category.
Small companies and micro-entities are due to face new Companies House filing requirements from April 2028. They will have to file profit and loss accounts, although the government has confirmed that they will be able to opt out of publishing that information on the public register. Our checklist for small property companies ahead of profit and loss filing explains what to prepare.
Residential blocks operate under a different service charge framework, particularly where developers retain unsold flats. Our guide to what RTM annual accounts should include is a useful starting point, and our residential management company accounting team deals with these accounts regularly.
Where the RICS standard fits in
The second edition of the RICS Service charges in commercial property professional standard became effective on 31 December 2025. RICS and ICAEW have also confirmed transitional arrangements, with RICS expecting the new provisions to be fully adopted for service charge periods with 31 December 2026 year ends and beyond.
The standard specifically says landlords should meet costs attributable to unlet premises and should not change apportionment simply to reduce their exposure to void-service-charge shortfalls. Our summary of what the updated RICS service charge code means for property managers explains the changes, while our RICS and ARMA best practice guide covers the wider accounting framework.
FAQs
Who pays the service charge on an empty commercial unit?
Under RICS best practice, the landlord should meet the share attributable to vacant or unlet premises. The precise contractual position should still be checked against the lease.
Can a landlord charge tenants more to cover void units?
The lease determines what can legally be recovered, but RICS says a landlord should not alter the apportionment simply to reduce its exposure to a shortfall caused by vacant premises.
Is the void service charge tax deductible for a landlord?
Potentially. Revenue expenses must meet the normal tax rules, including being incurred wholly and exclusively for the property business. Capital expenditure is treated differently, so the circumstances and underlying costs should be reviewed.
Get your void accounting right first time
If empty units are making your year-end figures difficult to reconcile, FHP Accounting can help. We provide specialist service charge accounting, commercial property management accounting and support from accountants for managing agents, alongside annual statutory accounts for landlord companies. Get in touch with our property accountants and we’ll take a look at your figures.
I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
