This can often present a major sticking point between a buyer and seller, particularly if the service charge has been poorly managed.
The Standard Commercial Property Conditions require the buyer to pay to the seller any service charge sums already incurred by the seller but not yet recovered from the tenants. These sums may not yet be arrears as they may not yet be due from tenants under the leases. Buyers are often unwilling to agree this position, as it effectively means the buyer is funding the service charge when the seller may have budgeted inappropriately.
It is usually too complicated to apportion service charge at completion as the seller (or its managing agent) may not yet have fully ascertained all sums incurred. There is therefore often a fixed period (between two and four months after completion) in which a balancing statement is prepared by the seller.
Once it is known whether the service charge is in surplus or deficit, any surplus will be transferred by the seller to the buyer. Deficits present a bigger issue; for the reasons given above, buyers will not want to fund a deficit. A compromise position is that the buyer will seek to recover funds due from tenants and pass relevant sums back to the seller to cover the deficit.
The delay between completion and availability of a balancing statement can present a further issue for a buyer in that it will need to operate the service charge from completion but will have no service charge fund with which to do so. A compromise position where there is a surplus of funds in the service charge account, is for a provisional payment to be made from the account by the seller to the buyer at completion, with such payment to be factored into the balancing statement.