Case Study Flashcards
Jenyns Arms
What were the key area of dilapidations in the Property giving rise to the £170,000?
- The boiler had been removed from the building and as a result the system had not been drained down, with a cold winter resulted in burst pipes and water damage.
- The roof had not been maintained across the lifetime of the lease, this required completely taking off, timber beams replaced and new tiles.
- Walls, carpets had not been kept in good condition and required stripping out.
- scott schedule put together by building surveyor
Option 1 Disposal - What was your advice in relation to supersession and disposal post dilaps. Claim?
The dilapidations claim was handled by my supervisor, i was privy too it but was not actively involved. I advised my client after the claim had been settled that disposal could be seen as supersession.
Supersession is not defined but under the RICS Professional Statement for Dilapidations it is understood that the landlord should only for works where they intend to do because of the loss suffered.
I advised this was a contentious matter and that should we been seen to disposing of the property immediately afterwards and this was not disclosed it may be viewed poorly. I did advise that landlords are allowed to make a claim where they are not intending to undertake the works, however this is more likely to be viewed as a loss suffered and diminution in value however this was not how the claim was calculated.
O1 - How did you ensure that advice was robust and accurate?
I reviewed my advice with my internal senior colleague overseeing the project but also with our building surveyor to ensure this was the accurate.
How would disposal inhibit future use of the site?
Loss of the site would significantly limit my clients ability to redevelop the site as it expected in the not too distance future. Yes my client would have the ability to use our powers to enter land for the purposes of flood risk management works, but I anticipated this would involve a significant compensation claim, should a successful business become established on the site. Again disposal could involve years of attempting to regain possession of the land, whether that be via agreement or CPO.
The future use of the site would not be able to wait years for this to be completed and as such retaining would ensure that should these plan need to brought forward e.g. climate change and catchment changes speed up this process the land is secured.
Option 2 - Lettable: Describe the headline scope of works to bring the Property to a safe and lettable condition?
The headline scope of works included
a) new roof including insulation to ensure MEES compliance.
b) redo electrical and mechanic systems, so plug sockets, fire systems compliant with building regs
c) building regs on fire boarding to areas where new floors had to be put in
d) significant structural issues found during strip out, heli bars put in place to make property safe
e) due to water leak, all timbers treated and sprayed to limit mould growth going forward
Option 2 - lettable: What underpinned your advice that this option best met your client objectives?
The requirement to keep the site, reduce their expenditure, risk and liability of the site and to generate an income.
What did underpin this was ensuring compliance with managing public money and how this may look across the different options presented. Spending money on security and protection for a site that does not have potential may not be viewed as best use of funds, but if an increase in capital can be spent but this will then be returned over the coming years this is a better outcome.
Option 2 lettable - What was the estimated cost of remedial and improvement works?
Under the dilapidations schedule our building surveyor costed the remedial works to be £170,000, however this was not all available for the project. As phase one of the works began, further issues were uncovered for example structural issues hidden behind plaster, old chimney stack to be removed. A complete renovation was floated at around £500,000 but the improvement works to make lettable was £350,000.
Op 2: What would the eventual rental have to be, to justify that expenditure?
the return on investment into the property was anticipated to be narrow but that this was accepted in comparison to the loss of the site possible compensation in the future. The rental was advised to be £35,000 per annum and as such I knew that a spend of £350,000 and a term of 10 years would be breaking even for my client. But that completing these works would secure the site, limit the liability and day to day property management for a vacant property.
Op 2 Lettable: What additional funding did you identify was required?
I was aware I had £127,000 for phase one of the works but that this would not be enough to make the property watertight as the work progressed and further issues found. To determine the additional funding required, this was where I requested the contractors to draw up a summary of works to the condition the lettings specialists had advised would attract a tenant - this was an additional £200,000.
Option 3: W&W - What were the risks you identified to your Client in not making the Property secure, both from trespass but also weather-tight.
The risks included trespass which had occurred at the site prior to the works being undertaken and so was a real risk at this location. Due to the nature of the site inside and my client being aware of the property being in this condition that under the Occupiers Liability 1984 which applies to trepassers that a common duty of care is established and due to the age of the property and the disturbed nature of the property asbestos may be present.
Water tight - if the property is not made water tight this will increase the deterioration of the property, risk of collapse, increased management costs and thus further cost should funding become available to undertake works in the future, does also reduce the potential value of the site should there be a shift in policy direction.
Op 3 W&W - What was the cost of that work to protect the Asset in the short-term?
The initial cost of phase one was programmed to match the funding available at £127,000 but was originally around £170,000 as the heating system was removed as I had to review the scheme of works with the building surveyor to keep in line with funding available.
Op 3 W&W: How did this option meet your Clients objectives?
This met my clients objective of protecting future flood risk assets and was complying with best use of public money but was not going to meet their objectives of minimising their risk and liability by getting in a new tenant.
Instructions - Talk us through the procurement process and how you met both the RICS standards, but also DEFRA requirements.
Under Defra procurement rules, a tender process has to be undertaken due to the cost of the scheme of works requested. This tender process was undertaken with three firms submitting their costings. I reviewed these alongside our building surveyor to examine which application would be suitable.
RICS standard includes practice information about construction procurement strategy and knowing the key factors that underpin and project e.g. timings, funding, requirements.
I met the requirements of both because I knew my clients objectives, I knew the funding available and the outcome I wanted for them.
Instructions - How did you manage the budget through the project?
I created a spreadsheet to track the budget. This had a tab for the contractors costs and then tabs for the external consultants i.e. building surveyor and christies.
This spreadsheet contained the amount the purchase orders were raised for and included the details of the invoices submitted by all parties, allowing me to track current spend, amount remaining on PO and opening and closing balances. I would review these figures of a bi monthly basis with my building surveyor who also tracked spend but in more detail against the specific items outlined in the contract. Between us we were able to anticipate the invoices for the month coming based on the works planned in the construction schedule.
Instructions - What mitigations did you put in place for a high inflationary economic environment?
An element of risk was always factors into the monthly costings and programme of works, roughly 10% was allowed for the costs given by the contractors. This meant that as sudden increase in material costs not expected by the contractor would be covered. To mitigate any significant increases, where there was differences between the predicated and actual costs the contractor had presented I reviewed to determine the necessity of the item, whether an alternative was available or if the scope could be reduced. For example, the cost of replacement windows and doors, only those identified as critical were undertaken.
