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RICS APC1 > Property Management > Flashcards

Property Management Flashcards

1
Q

What is the key RICS guidance for property management?

A
  1. Commercial property management in England &
    Wales 2nd Edition guidance note.
  2. Real estate management 3rd edition professional
    statement
  3. Service charges in commercial property 1st edition, Professional statement
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2
Q

Name some statutory obligations a property manager needs to be aware of

A
  1. Asbestos management
  2. Business rates
  3. Contamination
  4. Equality Act 2010
  5. EPC & MEES
  6. Fire Safety
  7. H&S
  8. Legionnaires disease
  9. Occupiers Liability
  10. PAT test
  11. Planning
  12. Waste management
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3
Q

What does the Cost of Lease Act 1958 say?

A

A party to a lease is under no obligation to pay other party’s costs i.e each part pays own costs.

Unless agreed in writing

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4
Q

Which are the usual English quarter days?

A

25th March
24th June
29th September
25th December

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5
Q

When invoicing for rent, what should you check for

A

Timing of payments
Interest on arrears
VAT position
If service charge is reserved as rent
Circumstances where rent should not be accepted

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6
Q

When might you not recommend accepting a rent payment?

A

To avoid waiving right to forfeit.

Where an outside the Act lease has expired as it may create security of tenure.

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7
Q

What are warning signs for arrears?

A

Bounced cheques
Tenant ceases trading
Persistent late payment
Arrival of post-dated cheque

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8
Q

Name remedies for rent default

A

Payment Plan
Court Proceedings
Use rent deposit
Pursue form tenants/guarantors
Statutory demand
CRAR
Forfeiture

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9
Q

What type of notice can be used to pursue a former tenant or guarantor?

A

Section 17 - Landlord & Tenant covenants Act 1995

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10
Q

What is the timescales for a S17 notice?

A

6 months

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11
Q

What is the limit of debt for a statutory demand?

A

£750

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12
Q

When did CRAR come into force?

A

April 2014

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13
Q

What did CRAR abolish ?

A

Common Law of Distress (Distraint)

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14
Q

What sum can CRAR not be used for?

A

Service charges

Insurance

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15
Q

How long does the rent need to have been outstanding for to use CRAR?

A

7 DAYS!

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16
Q

Can an enforcement agent enter through a window?

A

No - only an open/unlocked door

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17
Q

Can forfeiture be implied?

A

No - it must be an express provision in a lease

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18
Q

What is the effect of forfeiture?

A

A landlord can re-enter and gain possession for breach of lease.

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19
Q

What RICS guidance relates to service charges?

A

Service charges in commercial property, Professional Statement - 1st Edition (SEP 2018) Effective from 1st April 2019

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20
Q

What is the main change to the new service charge professional statement (1st April 2019)?

A

Mandatory not best practice.

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21
Q

What should service charges be?

A

Not for profit, not for loss

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22
Q

can RICS Service Charge professional statement override the terms of a lease?

A

No - but it can be used to interpret a lease.

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23
Q

What information must be provided to tenants if a service charge is operated

A
  1. Service charge budget (inclu explanatory
    commentary) annually
  2. Approved set of service charge accounts.
  3. Service charge apportionment matrix

(all issued annually)

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24
Q

If a dispute exists, what sums can a tenant withhold?

A

Only service charge sums in dispute.

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25
Q

What is an accrual?

A

Expenses incurred in a period for which no invoice has been received at the period end

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26
Q

What is a balancing charge?

A

Difference between an individual tenants apportionment of expenditure and on-account service charges demand for an account period.

(difference in sums on the estimate compared to the actual)

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27
Q

What is an on-account service charge?

A

An estimated charge raised in advance and anticipation of the final service charge liability, calculated from the service charge budget.

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28
Q

What does PPM stand for?

A

Planned preventive maintenance

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29
Q

What is PPM

A

Maintenance performed purposely and regularly to keep the fabric, facilities and plant and equipment of a building in satisfactory operating condition

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30
Q

How often is a PPM usually prepared?

A

5-10 years, bur reviewed and updated regularly

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31
Q

What is the purpose of a reserve fund?

A

To meet anticipated future costs of a maintenance and upkeep in order to avoid fluctuations in the amount of a service charge payable each year.

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32
Q

What is the purpose of a sinking fund?

A

To periodically set aside money for the replacement of a wasting asset.

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33
Q

What does SICC stand for?

A

Standard Industry Cost Classifications

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34
Q

Why might an occupier decide to sub-let rather than assign a lease?

A
  1. Requirement of the lease.
  2. Relates to part not whole of the demise
  3. If there is a profit rent.
  4. If the tenant might want to re-occupy in the future.
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35
Q

What does the Landlord & Tenant Act 1988 impose on a landlord?

A

To deal with consents diligently and within a reasonable time.

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36
Q

When did the Landlord & Tenant (Covenants) Act 1995 come into force?

A

1st Of January 1996

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37
Q

What did the L&T (covenants) Act 1995 replace?

A

Privity of contract

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38
Q

What is the position of an old pre 1 January 1996 lease?

A

Original tenant remains liable until expiry

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39
Q

What should you request if considering a tenants application to alter?

A
  1. Full plans and specifications
  2. Undertaking of surveyors legal costs
  3. Finance bond held by the landlord
  4. Whether planning or building regs consent needed?
  5. Compliance with legislation e.g Equality Act 2010
  6. Risk Assessment & Method Statement RAMS
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40
Q

What does a breach of a repairing covenant require?

A

Both - Disrepair & Obligation to repair

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41
Q

What is the effect of a section 146 Law of the Property Act 1925 notice?

A

Served on the tenant, during the lease to remedy a specific repairing or decorating breach.

42
Q

What is the impact of a Jervis v Harris clause?

A

Express right for a landlord to enter, carry out repairs and recover costs from the tenant as a debt, not damages.

43
Q

What is the impact of the Leasehold (Property) Repairs Act 1938?

A

Protects tenants by limiting a landlords right to claim damages or forfeiture for disrepair during a tenancy

44
Q

What does the 1938 Act apply to?

A

Leases over 7 years with more than 3 years to run

45
Q

What is a schedule of condition?

A

Limits a tenants repairing liability in respect of agreed items of disrepair during a lease.

46
Q

What is the basis of a typical full insuring clause?

A

Landlord insures tenant reimburses

47
Q

What is an insured risk?

A

Risks that a landlord is obligated to insure against

48
Q

What happens if a property is damaged by an uninsured risk?

A

Tenant responsible for remedying damage under repairing obligations, unless this is limited under the lease.

Tenant continues to pay rent, despite the building being damaged an potentially uninhabitable.

49
Q

What are typical examples of uninsured risk?

A

Flooding
Terrorism
Subsidence
Heave

50
Q

Outline the document RICS Professional Statement Real Estate Management, 2016

A

Professional statement

Outlines principles to shape culture of fairness and transparency

Provides detail on most aspects of real estate management including ethics, new lettings and lease renewals and managing real estate.

51
Q

Outline the structure of Service charges in
RICS Professional Statement commercial property
1st edition, September 2018.

A
  1. Introduction
  2. Mandatory requirements
  3. The core principles
  4. Best practice

Appendix A: compliance checklist
Appendix B: Standard industry cost classifications
Appendix C: Service charge accounting sample
Appendix D: Commercial property service charge handover

52
Q

What use class does a retail pharmacy fall under

A

E(a) Display or retail sale of goods, other than hot food

53
Q

What use class does a food bank come under

A

E(a) Display or retail sale of goods, other than hot food

Make clear sales would be taking place on site.

54
Q

What are occupiers liability Act 1957/84?

A

The 1957 Act relates to - common duty of care to lawful visitors

The 1984 Act relates to - duty of care to unlawful visitors

55
Q

Tell me the relationship between alterations and service charge?

A

increase in floor area - check lease wording for apportionment

if not specific you need to make it fair and reasonable - consider the impact of the alteration on the common parts

56
Q

Is rent collection a cost recoverable via management fees in service charge?

A

No

57
Q

What is privity of contract?

A

Privity of contract is a common law doctrine which provides that you cannot either enforce the benefit of or be liable for any obligation under a contract to which you are not a party.

The underlying premise is that only parties to a contract can sue or be sued under it.

58
Q

What is the difference between a absolute/qualified and fully qualified covenant?

A

An absolute covenant prohibits alienation absolutely.
A qualified covenant prohibits save with the landlord’s consent.
A fully qualified covenant (the most common) says that what is prohibited may only take place with the landlord’s consent, which must not be unreasonably withheld.

59
Q

What are the various forms of corporate insolvency?

A

Insolvency Act 2010 5 types:

  1. Administration
  2. Company & Voluntary agreement
  3. Receivership
  4. Voluntary liquidation
  5. Bankruptcy
60
Q

What is the process of considering a tenants application to alter?

A
  1. Have it submitted in writing
  2. Check the lease for permissions
  3. Consider factors - are they improvements, reinstatement clause
  4. 3rd party input - building regs, planning
  5. Response - issue approval or withhold consent (negatively impact value, seek legal)
61
Q

What does the L&T 1927 Act say in relation to tenants improvements?

A

Sections 1, 2 and 3, give a tenant who has made improvements to a premises during their tenancy a right to compensation at the end or earlier determination of the tenancy. This can occur even if the landlord did not consent to the improvements.

62
Q

Case law relating to unreasonably withheld and without delay?

A

Go West Ltd v Spigarolo [2003] EWCA Civ 17

Depends on complexity of the alterations requested; however, it is likely that any decision should take ‘days not weeks’ and ‘even in complex cases, weeks not months’

63
Q

What happens if the landlord responds too slowly to a tenants request to alter?

A

A failure to give a decision within a reasonable time will be treated as equivalent to a refusal of consent without reasons.

It will also render a landlord liable to pay damages to a tenant.

64
Q

How do dilapidations relate to alterations?

A

Before approving any alterations a landlord should be clear as to whether or not they will require reinstatement on expiry of the tenant’s lease.

65
Q

What is section 3 of the L&T Act 1927

A

Allows tenant to make a court application if alteration request is refused

Tenant is then allowed to claim compensation at vacation for improvements

(Landlord should consider if they could finance the works and could charge additional rent)

66
Q

What are the three key principles of RICS Commercial Property in England & Wales 2011?

A
  1. Acting as agent for the landlord - landlord has ultimate responsibility
  2. Managing third party suppliers - i.e security not necessarily doing everything but by managing others to do so
  3. Duty of Care - to the landlord primarily, but also to tenants ( commercial and reputational duties )
67
Q

What is a liability cap?

A

A liability cap is a contractual agreement that a client can only claim damages up to the amount agreed, even if the law would otherwise award a greater sum in damages.

68
Q

What is the difference between assignment and subletting?

A

• In assignment the assignee / new tenant has a direct relationship with the landlord (contract).

• In subletting, the sub tenant has a direct relationship with the tenant and pays them the rent, who then pays the rent to the landlord.

69
Q

What is the purpose of a licence to alter?

A

• To protect the parties at rent review and at dilapidations.
• Acts as a record of the work that has been completed.

70
Q

What are the usual arrangements for Service Charges?

A

• Service charge budget agreed with the tenant prior to the service charge year.
• Quarterly billings based on this.
• Annual accounts prepared at the year end.
• Balancing payment made at the end of the year upon the presentation of audited accounts.
• Service Charge reconciliation provided to tenants with information as to how the money has been spent / explanation of any unexpected costs

71
Q

What is a schedule of condition and why are they used?

A

• Record of the state of repair and condition of a property before a tenant occupies.
• Agreed by negotiation prior to the lease commencement
• Recorded with supporting photographs and notes/ plans.
• Often contained in the lease
• Limited the tenants repairing obligation in respect of agreed items of disrepair for the duration of the lease.

72
Q

When can you serve dilapidations?

A

• Dilapidations can be served throughout the lease term.
• Interim schedule – served by the landlord or tenant during the lease with at least 3 years remaining.
• Terminal schedule – served normally in the last 3 years on the lease.
• Final schedule – served at or after the lease expiry or break clause date when the tenant is out of occupation and the landlord wants to agree a claim for damages.

73
Q

How would you set up a planned preventative maintenance plan or PPM?

A

Follow RICS GN planned preventative maintenance 1st edition

  1. Obtain client scope of service
  2. Gather detail and information on the property
  3. Inspect
  4. Report

KEY is the PPM schedule spreadsheet contained within the report, which will outline:
condition > Good - Hazardous
timeframe over years > Urgent to long term

74
Q

What impact did the Coronavirus Act 2020 have on rent recovery and repossession?

A

• Prohibited landlords from forfeiting a business tenancy for non payment of rent or other sum between 25 March 2020 and 25 March 2022.
• The Taking Control of Goods and Certification of Enforcement Agents (Amendment) (Coronavirus) Regulations 2020 prevented landlords from using CRAR unless an mount of at least 90 days rent was due.
• This was increased to 366 days rent from 25th December 2020 and up to 554 days rent arrears for enforcement notices served from 24th June 2021

75
Q

Why would you surrender and regrant, rather than use a deed of variation?

A

A Surrender and Re-Grant occurs where variations to a lease are inconsistent with the original lease.

Used for variations that alter either the length of the term or the physical extent of the premises.

76
Q

How would you ascertain if a premium can be charged for the assignment of a lease?

A

If the property is under-rented and a profit rent can obtained.

(there would need to be a year of more ramining on the term)

77
Q

What are the mandatory requirements of RICS PS service charge in commercial property?

A

1 All expenditure MUST be in accordance with the terms of the lease.
2 Recover no more than 100% of the proper and actual costs.
3 Budgets & explanatory commentary, are issued annually.
4 Service charge accounts showing a true and accurate record are provided annually to all tenants.
5 A service charge apportionment matrix for their property is provided annually.
6 Service charge monies held in one or more discrete (or virtual) bank accounts.
7 Interest earned on service charge accounts must be credited to the service charge account.
8 Disputes advice to tenant = only the actual sums in dispute.
9 Must advise clients that following resolution of a dispute, adjusted to reflect the error without undue delay.

78
Q

What are the 4 ps of property management?

A
  1. People
  2. Place
  3. Price
  4. Promotion
79
Q

What are the different types of maintenance?

A

Reactive - repair emergencies
Planned - regular condition schedule checks
Cost reduction - utility switching

80
Q

Service charge in commercial property RICS GN, what does it aim to promote?

A

Best practice, uniformity and fairness
Reduce disputes by providing guidance on resolution

81
Q

What is your understanding of a section 17 notice?

A

Can be used to attempt to recover rent arrears where the lease has been assigned and AGA is inplace

82
Q

How would you pursue a guarantor?

A

Serve a S17 notice under L&T act 1995

83
Q

What time frame does a s17 have?

A

6 months

84
Q

Does an AGA apply to sub-tenants?

A

Only applies to one assignement

85
Q

What does CRAR stand for?

A

Commercial Rent Arrears Recovery

86
Q

Does CRAR apply to residential property?

A

No only commercial, main use needs to be commercial

87
Q

What is recoverable under CRAR?

A

Only rent
Only items which are not fundimental to the business operations
Only items owned not leased or hired

88
Q

What is SCRAR used for?

A

Recovery of service charge arrears

89
Q

What is the process of serving CRAR?

A

A 7day statutory notice is served by the enforcement agent,

7day notice can be reduced by applying to court to reduce due to prior attempts not working out

Enforcement agent completes an inventory

Can only recover the amount to cover the debt

90
Q

What do you know about a statutory demand?

A

Advisable only when there is no dispute

Can be seen as an aggressive tactic

Tenant has 21 days to pay

Debts in excess of £750

91
Q

When would a surrender for rent arrears be most likely considered?

A

In a buyoant market, quick re-let or increase of rent

If another tenant with a stronger covenant is interested in the property

92
Q

What is forfeiture?

A

Agressive tactic to take back possession?

93
Q

How would you go about forfeiture for rent arrears?

A
  1. Check the lease for a forfeiture clause
  2. Ensure rent has been demanded.
  3. After 21 days landlord can change locks.
94
Q

How is forfeiture different for repairs breach?

A

A section 146 of the law of property act 1925 is needed to be served on the teant.

must outline the breach and the remedy.

The tenant has 6 months to remedy the breach.

95
Q

How would you deal with commercial rent arrears?

A
  1. Visit tenant on site to discuss
  2. Seek a payment plan
  3. Failing this check if there is a AGA, Guarantor, former tenant.
  4. Serve a S17 on the guarantor
  5. No guarantor? consider a Statutory demand
  6. Consider a surrender
  7. Forfeiture
96
Q

How could you be sure a vigorous procurement process was in place?

A

The client arranges procurement in accordance with local government procurement practices including tender for larger contracts on a web based procurement portal - these are documented and saved with clear decisions on contractor selection

97
Q

Can you increase a rent or charge a premium or fine for changes of use requests?

A

No, under S19 (3) of the L&T Act 1927 no premium or fine can be charged

98
Q

Can requests for changes of use be unreasonably withheld?

A

Yes no implied covenant must be expressed to not be unreasonably withheld in the lease

99
Q

On what ground could an alteration be refused if the lease says it’s not to be unreasonably withheld?

A

Concerns about the structural effect of the proposed works.

Also competition with landlords adjoining business.

100
Q

Where a lease states for alterations ‘not to be unreasonably withheld’ what is also implied?

A

Must not be unreasonably delayed

(RICS GN Licence for alterations 2012)

101
Q

What is the difference between a licence to alter and a deed of variation?

A

Licence is used for simple alterations/improvements made in accordance with the lease.

Deed of Variation used when tenant is doing something not permitted by the terms of the lease.

102
Q

Why was a deed of variation used for stowell spire?

A

The lease was explicit in the number of antenna allowed, the request included additional antenna therefore a variation was needed.

RICS APC1 (18 decks)

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