PM

Question 1

What RICS guidance is there for surveyors operating a service charge?

Answer 1

RICS service charges in commercial property professional statement effective April 2019

Question 2

Is there any other guidance on service charges is there during COVID-19?

Answer 2

RICS released a guide: RICS advice on service charges during COVID-19

Question 3

What are the aims and objectives of the RICS service charges ins commercial property professional statement?

Answer 3

To improve general standards and promote best practice, uniformity, fairness and transparency in the management of service charges Ensure timely issuing of year end budgetsTo reduce the cause of disputes and to provide guidance where these do arise Provide advice to clients, managers and solicitors on management of service charges

Question 4

What is mandatory under the service charges in commercial property professional statement?

Answer 4

All expenditure that the owner or manager seeks to recover MUST be under the terms of the leaseOwners and Managers must seek to recover not more than 100% of the proper and actual costs of the provision or supply of the services Owners and managers must ensure budgets are sent annually to each tenant Owners and managers must ensure that an approved set of service charges accounts showing a true and accurate record constituting the expenditure is provided to all tenants Owners and managers must ensure that a service charge apportionment matrix for their property is provided annually to all tenants Service charge monies must be held in one or more discrete bank accountsInterest must be credited into the account

Question 5

Can you tell me some of the core principles under the service charges in commercial property professional statement?

Answer 5

The service costs - should be transparent so that everyone involved can clearly understand costsCosts and apportionment - costs should be allocated to the relevant expenditure category.Communication and consultation - to provide best service and ensure clarity around the work being done and the benefit.Duty of care - those certifying accounts have a duty of care to act with professionalism and set clear policies on how this should be managed.Right to challenge/ADR - should be available.Timeliness - in communication and preparation of budgets/ end of year reconciliation Value for money - owners/ managers should seek to achieve best value

Question 6

Can an owner of a service charge budget profit from this?

Answer 6

No, but they can charge reasonable costs for management. Again this must be the actual cost incurred for management. Management fees should be on a fixed price basis.

Question 7

What guidance is there on dilapidation in Scotland?

Answer 7

RICS guidance note: Dilapidations in Scotland

Question 8

What is a dilapidation?

Answer 8

A breach of non monetary obligation of lease such as an obligation to repair, reinstate, redecorate or comply with statute

Question 9

What documents would you take with you on a dilapidations inspection?

Answer 9

Lease, any licence for alterations, schedule of condition, plan, any back letters, assignations etc.

Question 10

What RICS guidance is there for property managers?

Answer 10

RICS professional statement - Real Estate Management 2016

Question 11

What is the purpose of RICS Real estate management?

Answer 11

Outline the principles that share the culture of fairness and transparency that underpin the activities of real estate managers

Question 12

What are the 12 principles under the RICS professional statement Real Estate Management?

Answer 12

1. Act in an honest, fair transparent and professional manner2. Carry out work with due skill, care and diligence and ensure all staff employed have the necessary skills to carry out their tasks3. Ensure that clients are provided with terms of business which are fair and clear, with details of the firms complaints handling procedure 4. Do the utmost to avoid conflicts of interest and where they do arise, deal with them openly and fairly5. Not to discriminate unfairly in any dealings 6. All communications with clients are fair, decent, clear and timely and transparent7. All advertising and marketing material in honest and truthful8. Any client money is held separately and covered by insurance 9. Hold appropriate PII/errors or omissions insurance to ensure a customer does not suffer a loss because of a negligent act10. Make it clear the identity of your client and ensure all parties are clear of your obligations to each party11. Give realistic assesssments of rent/ selling prices/ financial costs having regard to market evidence and using best professional judgement 12. Ensure all meetings, inspections and viewings are carried out in accordance with the clients wishes having due regard to security and personal safety

Question 13

What specific advice does the real estate management professional statement provide?

Answer 13

Ethics Securing instructionsManaging real estate Ending an instructionSafety and securityBusiness management

Question 14

What is alienation?

Answer 14

Clause contained within a lease that has the provision for transferring part or whole of the lease to another party.

Question 15

What are the differences between Assignation and Subletting?

Answer 15

Assignation - transfer of lease in full is passed on to incoming party who has direct relationship with LandlordSub-let - relationship stays with the tenant, who hold the relationship with the Landlord

Question 16

Why sub-let rather than assign?

Answer 16

NAME?

Question 17

What is the usual provision for an alienation clause?

Answer 17

Either absolute, open or restrictive clause.Absolute means no provisionOpen means openly allowingRestrictive - subject to some conditions

Question 18

What actions would you consider when dealing with an application for consent for assignation or sub-letting?

Answer 18

Legal costs?Proposed rent?What will the investment value impact be?Terms of lease? And reasonable grounds for withholding consentWhat is the strength of the covenant?Has a rent deposit been agreed?Client will need to be provided with recommendation report Obtain client approval to proceedLicence for assignment/ subletting will be required

Question 19

When did the recent business rate changes come into effect in Scotland?

Answer 19

Apr-20

Question 20

What are the 3 different tax rates in Scotland?

Answer 20

Basic = 49.8p to the £1Intermediate = 51.1p to the £1 for businesses with a rateable value between £51,001 and £95,000Higher = 52.4p to the £1 for businesses with an rv more than £95,000

Question 21

What other changes came in place with regard to business rates from April 2020?

Answer 21

It is now a civil penalty if you fail to give information and penalties for non-compliance are set out in % per time period

Question 22

What is the current ‘tone date’ to establish rateable value?

Answer 22

April 2015.

Question 23

When was the last re-valuation?

Answer 23

Apr-17

Question 24

When is the next re-valuation?

Answer 24

Apr-23

Question 25

What are the relief provisions for empty properties?

Answer 25

50% for first 3 months they’re empty and 10% thereafter Industrial get 100% relief for first 6 months then 10% thereafter100% relief for empty properties which are listed and have a rateable value under £1,700

Question 26

What are the best practice recommendations for issuing and reconciliation of service charge budgets?

Answer 26

Issuing: atleast one month in advanceReconciliation: within four months of year end

Question 27

What do you do when a property gets handed back vacant?

Answer 27

Make sure it’s secureTake regular meter readingsAdvice insurers and comply with their requirements for inspections Regular inspections Make sure local authority are updated with regards to rating liabilityAgree strategy with client for either re-letting or disposal

Question 28

What is a service charge?

Answer 28

It is a cost incurred by the landlord for the running of the property, charges back to a tenant

Question 29

RICS Guidance Note Commerical Property Mgmt 2011READ FOR MORE NOTES

Answer 29

• how pm can be efficient, effective and accountable to client and comply with statute law- primary duty of care to the client- specific advice on many key areas to include PMs core duties of rent collection, service charges, managing buildings, H&S and procurement of 3rd party suppliers

Question 30

Alienation

Answer 30

• read the lease- difference between assignment and sub-letting and impact upon investment value and reasons both are used- upon assignment the new tenant has direct relationship with LL- when subletting, sub-tenant has direct relationship with tenant and pays them rent who then pays rent to LL- absolute alienation clause (not allowing alientation)- open alienation clause (allowing alienation)- qualified alientation clause (subject to conditions)- usual clause says LL consent not to be reasonably withheld- Code for Leasing Premises 2007 states subletting show be allowed at market rent and not passing rent, if market rent is lowerReasons to sublet not assign:- requirement of lease- for part of demise not whole- market rent higher than passing then profit rent- tenant wants to reoccupy in future- new party a lesser covenant strength

Question 31

Actions when dealing with application for consent to assign or sublet

Answer 31

• read the lease- will the tenant give undertaking for the surveyors and legal costs- is proposed rent market and or same as passing rent- what do terms of lease state regarding grant of consent for assignment and sub-letting? Are there reasonable grounds for withholding consent?- what is covenant strength of proposed new tenant? are there accounts and references to consider?- has rent deposit been agreed? is there AGA clause?- the client will need to be provided with a report setting out surveyors recommendations?- obtain client approval to proceed (draw simple diagram to explain privy of contract between the L&T)- if consent is granted, licences for assignment or sub-letting will be required

Question 32

Landlord & Tenant Act 1988

Answer 32

NAME?

Question 33

Landlord and Tenant (Covenants) Act 1995

Answer 33

• relates to assignment of leases- came into force on 1st january 1996 (called ‘new’ leases)- act abolished privity of contract for new leases- gives landlord more scope for setting conditions regarding approval of assignee- introduced AGAs for most recent former tenant only to guarantee lease obligations of immediate assignee as voluntary arrangement to be agreed between L&T- section 17 notice must be served upon a guarantor within 6 months of the tenant defaulting to require the former tenant who has entered AGA to pay arrears- only one AGA can be in place at any time- code for leasing business premises 2007 states that AGAs should not be required as a condition of assignment, unless at the date of proposed assignment the proposed assignee and any proposed guarantor is of a lower financial standing or is resident or registered overseas

Question 34

Landlord Remedies for illegal alienation

Answer 34

NAME?

Question 35

Alterations

Answer 35

• must be carried out by tenant during the lease- they must usually be approved in writing by the landlord prior to undertaking the works- they are usually subject to reinstatement at the end of the lease- some works such as demountable partitioning or other non-structural works may not require landlord’s formal consent so always read lease

Question 36

Licence to Alterations

Answer 36

• to be completed before works commence- obtain undertaking for costs at commencement of instruction- license for alterations has 2 useful functions: to protect the parties at rent review and dilapidations at the end of the lease- most licences require the tenant to reinstate the works as the end of the lease

Question 37

RICS Licence for Alterations Guidance Note 2013

Answer 37

NAME?

Question 38

Actions when dealing with application for consent for alterations

Answer 38

• read the lease, is landlords approval needed for changes / improvements to the demis? eg. consent may not be needed for demountable partitioning- landlord and tenant act 1927 states LL must be reasonable when dealing with requests from tenants for alterations and that landlords consent must not be reasonably witheld- ask for full set of plans and specification- obtain undertaking for surveyors and legal costs- all alterations must be documented in Licence of Alterations- check long-term impact on property (if tenant defaults)- consider whether financial bond would appropriate to be held by the landlord- consider if reinstatement required at the lease expiry- has tenant got necessary planning consent and building regulations- check equality act 2010 and CDM 2015 compliance and there is risk assessment and method statement (RAMS) and public liability insurance in place- provide report to client and obtain instructions- instruct clients lawyer to prepare licence for alterations- inspect the completed works to ensure they are to as agreed

Question 39

Landlord and Tenant Act 1927

Answer 39

• if lease prohibits improvements being made to property without LLs consent, Section 19 of the Act imposes a provision that such consent cannot be unreasonably withheld- if section 19 procedures have been followed, landlord may be obliged to pay compensations for alterations that may constitute improvements

Question 40

Dilaps Key Points

Answer 40

NAME?

Question 41

Choices at Lease Expiry Date for dilaps

Answer 41

1. tenants can do agreed works OR tenant can pay sum to landlord to undertake the worksBreach + Loss + Evidence = Recovery- Section 146 Notice must be served in accordance with 1925 Law of Property Act- most schedules served on draft basis informally first- Claim limited to either cost of works or, in accordance with Section 18 of Landlord and Tenant Act 1927, the diminution in value of the reversionary interest i.e. the difference in value of the property upon possession have the covenants to repair and decorate had not been undertaken- if landlord proposes to demolish or subsequentally refurbish, the value of the reversion could be nil

Question 42

Forms of Dilaps Schedule

Answer 42

• interim schedule (served by LL/T during lease with at least 3 yeaers remaining)- terminal schedule (served usually in last 3 years of lease)- final schedule (served at or after the lease expiry/break caluse date when tenant is out of occupation and landlord wants to agree claim for damages)

Question 43

Format of Dilaps Schedule

Answer 43

• outline repairing obligations- state the remedy and cost of the breach- loss of rent, if appropriate, over period to do the works- fees + VAT for the claim for surveyors and lawyers- negotiations conducted on a without prejudice basis until agreement reached- if agreement not reached, landlord’s surveyor may be required to prepare a Scott schedule for the Court/ADR setting out summary of landlord and tenant position

Question 44

RICS Guidance Note of Dilapidations, 2016

Answer 44

• aim to reduce claims between LLs & Tskey points:- substanial guidance on diminution valuations- explores supersession - the provision that the landlord can only claim the amount lost because of the tenants breach of the lease- endorses the Dilapidations Protocol 2012- relates to interim and final claims in commercial property- emphasises the importance of careful and considered estimate of loss- both parties are to keep to agreed timescales- parties in a dispute are expected to act resonably and make genuine endeavours to settle- seperates the role of the surveyor as aan advisor prior to litigation and then as an expert witness in any litigation- the quantified demand is the complete statement of costs that are sought in damages - to include construction costs and other ancillary and consequential costs

Question 45

Reasons why a settlement is not agreed

Answer 45

NAME?

Question 46

Insurance

Answer 46

• usually the responsibility of the landlord is to arrange and re-charge to tenant- cover for reinstatement of the building for a range of insurance perils (eg fire, storm, flood, subsidence, loss of rent & s/c, terrorism, public liability etc) plus VAT and fees, site clearance/fencing/demolition and inflation and loss of rent cover- usual basis of msmt for building reinstatement valuations is to use gross internal areas for commercial properties, by reference to RICS Building Cost Information Service (BCIS)- insrance act 2016 a key law which introduced more accountability for insureres, new responsibilitiesto policyholders to provide all relevant information and to aim to reduce claims- RICS became a designated professional body for insurance matters in feb 2005 in accordance with current FSA regulations, only registered members can now deal with insurance- insurance premium tax is levied on premiums- comprehensive advice is contained in the RICS Guidance Note on Insurance for Commercial Property Managers 2011

Question 47

Empty Buildings

Answer 47

• building insurance (tell insurers it is empty and note their requirements)- maintain fabric of building- obtain EPC- clear building to remove any combustible material- undertake and record regular inspections for insurance purposes- inform local rating authority for payment of empty rates- arrange security and decommission services and isolate power supplies- seal up letterbox to prevent arson and secure property- planned maintenance programme to include servicing of plant- set frost controls and drain down the water- agreement of disposal strategy and marketing initiatives- maintain asbestos register- landscaping / gardeningLegal Aid, Sentencing and Punishment of Offenders Act 2012 made residential squatting a criminal office which can be subject to police action, commercial landlords must rely on common law power to use reasonable force to remove trespassers form land usually with the use of certified balliff or use civil legal proceedings in County Court

Question 48

Rent Collections

Answer 48

2 fundamental principles: acucracy of information, timing- rent usually paid on english quarter days with demand sent out in advance- it is the cleints money- check terms of lease for timing of payments and interest on arrears (usually ageed % over Bank base rate)- check whether VAT is to be levied- these points also relate to service charge monies which are usually reserved as rents in the lease- the easiest collection method is bank direct debit where any amount of money can be taken from the account. a standing order arrangement which can only take out a previously agreed amount of money- client accounting procedures must comply with RICS regulationscheck system in place to avoid circumstances when rent should not be collected so as to avoid waiving rights to forfeiture- be careful about accepting rent from tenant whose lease has expired and lease was granted outside Act as this may create new protected tenancy

Question 49

What to do when tenant has Rent Arrears

Answer 49

• read the lease- important to recognise warning signs of potential rent arrears eg bounced cheques, persistent late payments and arrival of post-dated cheques- check to see if there is rent deposit in place- normal commercial lease allows for interest to be paid at 2-4% above bank base rate, 7-14 days following rent payment date- read lease to establish what procedures are in place for landlord to recover arrears (check if any previous tenants have privity of contract if an old lease granted before 1 jan 1996, guarantors, or AGA)- consider whether you wish to get possession of the property in the light of level of passing rent (compared to current market rent) and current market conditions. Consider what the chances are for re-letting the property. also compare vacant possession value of property with the investment value, if appropriate and costs of holding a vacant property- as empty rates are levied, many landlords attempt not to allow easy forfeit of lease- landlords should consider action against guarantors, original tenants and subtenants- act promptly to try to recover outstanding monies- seek legal advice as to options available and seek clients instructions- if allowed in lease, charge interest payments for all late payments- consider payment plan with tenant to keep them in occupiation and avoid empty rates

Question 50

What are the remedies for rent default

Answer 50

(these will be influenced by level of rent outstanding, rent payment history and current financial position of tenant)1. court proceedings2. use a rent deposit3. pursue former tenants and guarantors4. serve a statutory demand5. commercial rent arrears recovery scheme6. forfeit lease7. negotiate payment plan8. agree another mutually acceptable arrangement

Question 51

Court Proceedings

Answer 51

NAME?

Question 52

Using a rent deposit

Answer 52

NAME?

Question 53

Pursuing former tenants and guarantors

Answer 53

• check to see if there is an AGA or former tenant if lease was granted before 1st jan 1996- remember that section 17 of landlord and tenant covenants act 1995 sets out strict timetable for recovering arrears from assignor within 6 months

Question 54

serving statutory demand

Answer 54

• this is preliminary sttep to pursuing bankruptcy or winding-up proceedings, can put pressure on a tenant to pay arrears- advisable only when there is no dispute about the level of arrears- the tenant only has 21 days to pay arrears- after this time period, landlord can present a bankruptcy (for an individual) or winding up (for a company) petition to the court if arrears are over £750- court has residual discretion to set aside statutory demand in order to avoid any injustice

Question 55

Commercial Rent Arrears Recovery Scheme

Answer 55

• the tribunals, courts and enforcement act 2007 replaced the ancient law of distress for rent with a modified regime known as CRAR in april 2014- scheme available only to commerical property landlords where a minimum rent is due under a commercial lease- no minimum amount of arrears- can only be used for basis rent demanded plus vat and interest (not s/c or other)- commercial premises only- set of conditions need to be met before landlord can exercise CRARTimeline: minimum 7 days unpaid rent, minimum 7 days warning notice, enforcement agents visit, 2 clear days to follow, re-entry by enforcement agent to seize goods, 7 clear days before sale of goods, fees must be specified on entry notice

Question 56

Forfeiture

Answer 56

• forfeiture clause allows LL to re-enter property and gain possession for a breach of lease (by peaceful re-entry or beginning court action) but procedures must be followed and relief offered to the tenant- special procedures apply for tenant in administration or recievership- must be forfeiture clause in lease- rent must have been properly demanded, but in some cases if rent has been accepted this could acknowledge the continuance of tenancy. a demand for rent or acceptance of rent after breach with knowledge breach has occurred is most patent form of waiver and stop-rent safeguards must be built into rent collecting procedures- lease forfeited by LL re-entering property, either by physical peaceful re-entry or commencing County Court proceedings to recover posession. lease then terminated immediately- tenant has right of relief from forfeiture from court within 6 months, tenant does not have to be warned that lease is to be forfeited- most leases do have seperate re-entry clause if rent is unpaid after certain time period so that formal forfeiture clause does not have to be used- if forfeiture sought for breach of other lease terms (rather than non-payment of rent), the landlord is required to serve section 146 notice of the law of property act 1925 providing details of breach and how it is to be remedied and landlord compensated

Question 57

Section 6 of Law of Distraint Amendment Act 1908

Answer 57

NAME?

Question 58

Section 17 of Landlord and Tenant Covenants Act 1995

Answer 58

• requires LL to act quickly when tenants fall into arrears, must serve section 17 notice on any former tenant and their guarantors within 6 months of start of arrears- until recently it was assumed that requirements would apply only where the current tenant was in defaullt. however the outcome of the case of Scottish & Newcastle plc v Raguz 2007 may lead to landlords having to serve section 17 notices in respect of an undetermined uplift in rent

Question 59

Definition of Repair

Answer 59

• ‘the meaning of repair in found in case law. Key principles have emerged from cases such as Ravenseft Properites V Davstone Ltd 1978 are as follows:- laibility cannot arise in the absence of repair- repair is distinct from renewal - a tenant cannot be expected to hand back wholly different premises- tenant may be responsible for inherent defects- repair is not an improvement- an effective FRI lease is when the landlord is responsible for repairs and re-charges via the service charge

Question 60

Landlords remedy options for breach of lease

Answer 60

1. Serve repair notice2. Forfeit lease3. Serve interim schedule of dilapidations4. Do works and charge tenant

Question 61

Notice to repair

Answer 61

• a notice to service, served under section 146 of law of property act 1925 may be served by landlord during the lease, subject to terms of repair works required of the lease. such notices are usually served to remedy one specific repairing and decorating breach. The notice must be in writing and comply with terms of lease. notice sets out following information:- details of repairing or decorating breach that has occurred- timescale to remedy breach0 course of action proposed if tenant fails to remedy breach

Question 62

Forfeiture

Answer 62

• must be forfeiture clause in lease- landlord wishing to forfeit lease for disrepair will have to servce section 146 notice on tenant - this should state why the tenant is in breach of the repair covenant and outline what must be done to remedy breach- tenant must be given reasonable time to undertake works

Question 63

landlords entry to do works

Answer 63

leading case = Jervis v Harris 1996 in respect of landlords right to re-enter property to undertake repairs, and then claim to recover cost of doing so from the tenant as a debt, in the event of the tenant not complying with repair covenant of their lease. the clause requiring the tenant to reimburse landlord for cost of undertaking repairs was a debt and not damages. it was not a claim for compensation for breach of tenants covenant to repair but reimbursement of the sum spend by landlord- this case gives landlord right to pursue an effective remedy against defaulting tenants, to ensure premises are kept in good repair for duration of term of lease- a jervis v harris clause should be used in following instances when repairs are required:- when tenant is solvent- where landlord wants the lease and rent to continue- landlord wants to retain control to carry out reapir works- where threat of entry may compel tenant to do work

Question 64

Leasehold Property (Repairs) Act 1938

Answer 64

• act applies to leases granted for a term of 7 years+, and has at least 3 years until lease expiry- aims to protect tenants against onerous interim schedules of dilapidations- act requires landlords to serve 146 notice on tenant- court is only to permit enforcement of repairing covenant if alndlord can prove one of the 4 points:1. immediate remedt is necessary to prevent substantial diminution in value of the property reversion2. immediate remedy is necessary to comply with current legislation3. if tenant doesnt occupy whole property, immediate remedy is required in the interests of other occupier4. the breach is capable of immediate remedy at relatively small cost compared with consequences of postponement

Question 65

Restructuring leases/lease engineering

Answer 65

many landlords consider lease engineering to maintain value in their investment or retain a tenant, eg:- granting a longer lease in return for lower rent or rent free period- agreeing to a CVA or pre-pack administration with a tenant- agree to monthly payment of rent- insertion or removal of breaks clauses subject to payment of premium

Question 66

Planned Maintenance Prgramme

Answer 66

3 stages:1. cyclical maintenance - regular activities that are carried out irrespective of condition of building, such as servicing plant, health and safety related maintenance and decoration2. preventative maintenance - dependant on a condition survey prepared by building surveyor which forecasts future repair needs and plans the timetable for undertaking work. this could be replacement of single glazed window with double glazing, upgrading facilities or services and refurbishment work3. responsive maintenance - this is initiated by the building occupier, such as repairing a leak, unblocking drains or undertaking some remedial works to the building

Question 67

Schedule of Condition

Answer 67

NAME?

Question 68

Service Charges

Answer 68

• charges to tenants of multi-tenanted properties of costs incurred by landlord to maintain and manage property- no specific legislation covers commercial property, only resi- many prospective tenants are now trying to negotiate service charge caps, fixed increases of link increases to RPI or CPI to limit future liability- check provisions of lease and remember landlords must be liable for voidusual arrangements:- service charge budget agreed with tenant prior to commencement of s/c year- quarterly billing based on this estimate- annual account prepared at year end- balancing payment made at end of year upon presentation of audited accounts- use of a sweeping clause for unexpected costs- service charge caps are increasingly common in a lease- payments usually reserved as rent in lease

Question 69

RICS Professional Statement - Service Charges in Commercial Property, 2018 (came into effect 1st April 2019)

Answer 69

aims and objectives:- improve general standards and promote best practice, uniformity, fairness, transparency in mgmt and admin of s/c’s in commercial property- ensure timely issue of budgets and year-end certificates- reduce causes of disputes and provide guidance on resolution- provide guidance to solicitors, clients and managers of service charges in negotiation, drafting, interpretation and operation of leases in accordance with best practice (RICS 2018)9 principles:1. all expenditure that owner seeks to recover must be in accordance with terms of lease2. owners must seek to recover mo more than 100% of proper and actual costs3. owners must issue s/c budgets incl. explanatory commentary annually to all tenants4. owners must ensure approved s/c budget accounts showing accurate record of expenditure are provided annually to tenants5. owners must provide s/c apportionment matrix annually to all tenants6. s/c monies must be held in one or more discrete or virtual bank accounts7. interest earned on s/c account must be credited to s/c account after appropriate deductions have been made8. where acting on behalf of tenant, practitioners must advise clients that if dispute exists any s/c payment witheld by tenant should reflect only sums in dispute9. when acting for landlord, practitioners must advise clients that following resolution of dispute, any s/c raised incorrectly should be adjusted to reflect error without undue delay

Question 70

Service Charge Apportionments

Answer 70

1. Floor Area2. Fixed percentages3. Rateable value - difficult if RVs change or are appealed4. Weighted floor area such as for department store in shopping centre

Question 71

Benchmarking service charges

Answer 71

• ensures operational performance standards checked against an industry used index, to ensure best practice and high levels of performance- Real Service publishes annual results from its Service Charge Compliance Index based on 11 companies with over 1000 tenants- 2 well used benchmarking indices used by property managers to benchmark service charges and total costs of occupiation are- OSCAR (JLL) for offices, shopping centres and retail parks- ITOCC (international total occupancy costs code) produced by IPC for commercial property occupiers

Question 72

RICS Information Paper - Sinking Funds, Reserve Funds and Depreciation Charges 2014

Answer 72

• considers key issues relating to use of sinking and reserve funds in commercial buildings- sinking fund formed by periodically setting aside money for replacement of wasting asset (eg major items of plant and equipment such as heating and air-conditioning plant, lifts), it is usually intended that sinking fund will be set up and collected over whole life of wasting asset- reserve fund formed to meet anticipated future costs of maintenance and upkeep in order to avoid fluctuations or an anticipated one-off large increase in amount of s/c payable each year (eg regularly reoccuring iteams such as external clearning / redec)- provides practical advice on administration of these funds and the application of depreciation charges to include:- taking legal advice and achieve full transparency- maintain full communication between landlord and tenant with clear accounting- ensure lease terms are clear

Question 73

User Clauses

Answer 73

• 2 types: relate to planning use and or how property can be used (specific use)- change of use usually subject to landlord consent not to be reasonably withheld- restrictive user clause can depress market rent - eg restriction on hours of working for office buildingPLINTH PROPERTY INVESTMENTS V MOTT HAY & ANDERSON 1975- substantial reduction given in rent at review as user clause related to use as offices used by consulting engineersCO-OPERATIVE INSURANCE SOCIETY V ARGYLL STORES 1978- leading ‘keep open’ case where co-op owned shopping centre in sheffiedl with safeway as anchor tenant, safeway making loss so closed, lease stated had to keep shop open and trading, court held safeway didnt have to re-open

Question 74

Types of Insolvency

Answer 74

• administration (administrator appointed by creditors (Enterprise Act 2002) to rescue insolvent company, act provided more streamlined and out-of-court procedure)- recievership (an Administrative Receiver or Law of Property Act Recieve appointed by creditors to realise assets to repay debts)- company voluntary arrangements (voluntary arrangements with creditors as to how debts will be settled, voluntary liquidation, winding up of company, bankruptcy, court procedure for individual)

Question 75

Administration

Answer 75

• most common rescue route- process commenced by company, lenders or creditors- purpose to create period of protection for company for administrator to deal with assets of company in most appropriate way- period of protection known a moratorium and restricts actions which can be taken against company whilst in place- directors of company continue in office but powers cease- administrator must send proposals to creditors within 8 weeks and then with their agreements will implement strategy (most common are pre-pack business sale, administration trading, close down and wind up)- whilst tenants in administration the options to landlord are limited due to moratorium. if rent still being paid, equivalent amount can be claimed from administrator- administrator may also seek landlords consent to assignment of lease

Question 76

Receivership

Answer 76

• used when company defaults in payment to lender who is secured by a fixed charge- usually only available where floating charge pre-dates 15 september 2003- administrative reciever or law of property act reciever is appointed by creditors to realise assets to repay debts. the receiver takes control of company and realises assets, often by selling the business as a going concerns with view to repay lender- law of property act 1925 reicever is appoints when company defaults in payment to a lender who is secured by property mortgage

Question 77

CVA

Answer 77

• company voluntary arrangement- contract between company and creditors appropriate for when a company is insolvent, but directors believe it has viable future, with financial restructuring- the company appoints insolvency practitioner as nominee to superivse and oversee the implementation of proposed strategy- under this statutory scheme, company agrees terms for repayment of accrued debts- arrangement will be binding on all creditors if it is apporved by at least 75% of creditors having regard to their value of debt

Question 78

Pre-Pack Administration

Answer 78

NAME?

Question 79

Actions if tenant becomes insolvent

Answer 79

• tell client- consider taking legal action before temporary or permanent moratorium is in place- read the lease to see if rent deposit or previous tenant who is liable or guarantor- make early contact with administrator- check amount of monies owing in rent, s/c, insurance- ensure property is insured and tell insurers that it is vacant- submit claim for arrears and if still occupied, make application for rent- consider preparing schedule of dilapidations- consider position regarding empty rates- think about reletting the property