Property Management

Question 1

When does a retail and industrial unit have to pay empty rates, and how might a landlord avoid paying rates?

Answer 1

Empty rates are an incentive for the landlord to let a vacant unit, applicable after 3 months for retail and 6 months for industrial. Landlord may avoid by using rates mitigation, meanwhile uses (pop ups, short lets), charity shops, partial occupation, 42 day rule (required period of occupation to trigger rates relief)

Question 2

What are the 4 aims of the RICS GN on Service Charges in Commercial Property 2018?

Answer 2

1. Improve general standards and promote best practice, uniformity, fairness and transparency in the management and the administration of service charges in commercial property.
2. Ensure timely issue of budgets and year-end certificates.
3. Reduce the causes of disputes and to provide guidance on resolution.
4. Provide guidance to solicitors, their clients (whether owners or occupiers) and managers of service charges in the negotiation, drafting, interpretation and operation of leases, in accordance with best practice.

Question 3

What does the Occupiers Liability Act 1984 mean for landowners?

Answer 3

Puts the onus on landowners to provide a duty of care to trespassers, as opposed to the OLA 1957 which offered no recourse for uninvited visitors who injure themselves. OLA 1957 only required a duty of care for visitors.

Question 4

Can you describe the process of dealing with applications to make alterations?

Answer 4

Tenant submits request in writing, with description and specs of the proposed works. Landlord should initially inform tenant of any design guides or constraints, and request any info or docs which haven’t been provided. A cost undertaking should be sought at an early stage (legal fees, managing agent’s fees, possibly building surveyors fees or other third party specialists. Check the lease to determine what is permitted, and each parties obligations. Consult with the client and recommend whether to approve, with modifications, subject conditions or reject. Licence documented, it must be an extension of the lease and correspond to the relevant lease terms. Final Inspection to confirm works are in accordance with agreement, tenant may need to rectify some ‘snagging’ issues or the document may need to be amended.

Additional considerations: Improvements cannot increase rent if funded by the tenant, Landlord may opt for option in section 3 of L&T Act 1927 and fund the works for additional rent. Can the landlord request reinstatement upon expiry? This should be made clear before approval. Reponses should be within ‘days not weeks’.

Licences for alterations in commercial real estate 2012

Question 5

What opportunities might a property/portfolio manager identify to increase capital values?

Answer 5

Development
Redevelopment
Extension of the building
Lease restructures

Question 6

Can you give me an example of a time you applied negotiation and business skills in relation to a contentious issue?

Answer 6

I identified utility payments being made by my client for an occupied property where the tenant was responsible for utilities. I raised the issue to my client and advised them to seek remuneration for the expenses, but advised sensitivity to the conversation with the tenant due to the ongoing pandemic. With approval, I gathered historic invoices and contacted the tenant to make them aware of the matter and discuss a solution. As it was such a large lump sum cost and during the lockdown, I negotiated a payment plan to pay the arrears over a six month period with both the tenant and the provider.

Question 7

What is CRAR?

Answer 7

Commercial Rent Arrears Recovery - legal process for recovering rent arrears from a tenant.
Commercial premises only, rent only, must be a written lease in place, 7+ days overdue (increased during COVID-19), 7 days notice required. Prepared served and enforced by an enforcement agent.

Question 8

CRAR: What is currently permitted?

Answer 8

Since the Coronavirus Act 2022 came into force on the 25 March 2022, Landlords can CRAR except for ‘Protected Rent’ (accrued from March 2020 to July 2021).

The legislation aims to protect the solvency of both the Landlord and the Tenant and allows the parties to apply for arbitration within 6 months.

Question 9

How would you advise a client on Caldebank?

Answer 9

Used to protect against costs for the client, should the matter go to court.

Question 10

What would you do if your clients tenant was in breach of a repair covenant?

Answer 10

Advise client of issue, contact tenant to make them aware. Check lease for covenants. Consider serving s.146 giving warning to tenant and allowing forfeiture, Jervis v Harris clause.

Question 11

What would you do if service charge payments exceed costs at the end of the year?

Answer 11

Return all the money to the tenants. The end of year certificate should be balanced.

Question 12

Which RICS guidance are you aware of in relation to property management?

Answer 12

Real Estate Management 2016 (3rd edition)
Service Charge in Commercial Property 2018 (1st edition)
Code for Leasing Business Premises 2020 (1st edition)
Licences for alterations in commercial real estate 2012

Question 13

What are the functions you fulfil as a property manager?

Answer 13

Service Charges
Rent collection
Manage tenant requests for alienation and alteration
Adhere to clients covenants
Manage repairs and maintenance

Question 14

What the 4 P’s in property management?

Answer 14

Price, Place, Product and Promotion

Question 15

Talk me through a rent arrears / disrepair issue you have dealt with?

Answer 15

Boat manufacturer in Falmouth. Utility bills had not been received by my client until arrears had accrued to £60,000+. I reviewed the lease, determined the tenant was responsible. I advised my client that demanding the full amount may damage L&T relationship and discussed acceptable payment plan arrangements. I arranged a call with the tenant to explain the situation, being considerate of the likely drop in business during COVID-19, and with the utilties provider. I negotiated a payment with both parties and arranged for future bills to be addressed directly to the tenant.

Resturant Tenant in Birmingham fell into arrears during lockdown. Following discussions with my client, I negotiated a payment plan. However, the tenant did not make agreed payments and arrears accrued. I checked for a rent deposit (yes) and guarantors (no). CRAR or forfeiture were not an option due to the Coronavirus Act 2020. Consequently, my clients options were limtied but I advised drawing down on the rent deposit and demanding a top-up. The company went into admistration/liquidation before lease expiry, I made a claim for the arrears.

A tenant in a retail park contacted me regarding multiple issues in the external area of the park. (a) bricks misssing from garden bed wall (b) damaged trolley bay in car park (c) sparse vegetation (d) damaged footpath behind their unit. I reviewed the photos and comments provided and checked the lease of the tenant and other tenants in the park. I determined that my client was responsible for the repairs of (a) and (b), I advised then instructed the FM team to repair. The tenants lease required them to maintain the footpath (d), exclusively used by them. There were no contractual requirements for the vegetation matter, I discussed with my client advising that some attention may improve the appearance of the retail park, benefitting them as well as their tenants and improving the L&T relationship by taking action.

Question 16

What was your advice to your client in managing the void property?

Answer 16

When my clients property became empty, I advised the following:
Inform Insurers and ensure any requirements are complied with
Secure the premises and instruct weekly inspections
Turn off all utilties
Consider rates mitigation to prevent paying empty rates after 3 months.
Discuss disposal strategy

Question 17

What would you advise if a proposed subtenant had a poor covenant strength?

Answer 17

Recommend an AGA, rental guarantor, rental deposit or advise against it.

Question 18

Where would you find guidance on guarantors?

Answer 18

Code for Leasing Business Premises 2020.

Question 19

What are the four objectives of Service Charge in Commercial Property 3rd edition 2018?

Answer 19

RICS - To make service charge matters uniform, fair, transparent. Improve general standards and promote best practice.
T - Timely issue of SC budgets.
D - Disputes: Reduce disputes and guidance for resolution.
S - Solicitors: Provide clear guidance on drafting legal documents.

Question 20

What are the current rules for rent collection?

Answer 20

Coronavirus Act 2022 enables usual remedies for non-payment of rent, except any arrears which arose during the ““protected period”” = 21 March 2020 to 18 July 2021 (or earlier depending on specific tenants restrictions).
Protected rent debt can be referred to arbitration.
Aims to preserve and restore tenants business and landlords solvency.
CRAR and other remedies are now permitted for non-protected rent debt.

Question 21

What was your advice to your client in managing the void property?

Answer 21

When my clients property became empty, I advised the following:
Inform Insurers and ensure any requirements are complied with
Secure the premises and instruct weekly inspections
Turn off all utilities
Consider rates mitigation to prevent paying empty rates after 3 months.
Discuss disposal strategy

Question 22

What are RAMS?

Answer 22

Risk Assessment Method Statement
Risk assessment plus scope of works and risk at each stage. Usually requested alongside tenants requests to carry out works.

Question 23

What are the main parts of the Coronavirus Act 2020?

Answer 23

Prevent aggressive rent collection tactics (including CRAR) and suspension of forfeiture of most commercial tenancies on the grounds of non-payment of rent.

Question 24

Can you tell me about any changes to the Coronavirus Act 2020?

Answer 24

Commercial Rent (Coronavirus) Act 2022
Sets out a ‘protected rent’ from March 2020 to July 2021, and allows Ls and Ts to apply for arbitration within 6 months.
The arbitrator can make an award which covers some or all of the following:
that the protected rent debt should be written off, in part or in its entirety
give the tenant time to pay the protected rent debt by instalments - if this is done, the instalments must be paid within 24 months of the award being made
reduce or write-off any interest payable on the protected debt.

Aims to (as per S.15):
The arbitrator’s award should preserve, or restore and preserve, the viability of the tenant’s business, so far as that is consistent with preserving the solvency of the landlord;
Insofar as it is consistent with the above, the tenant should be required to meet its obligations in relation to payment of the protected rent debt in full, and without delay;
The arbitrator must disregard any actions taken by either party to manipulate their financial affairs in order to improve their position when considering the viability of the tenant and the solvency of the landlord. This means that if the parties have undertaken a restructuring or re-organisation, that must be disregarded when considering viability and solvency.

Question 25

Can you give me an example of a dispute which you resolved through negotiation?

Answer 25

Gutter repair was required by tenant at the start of lease, but documentation was unclear. A section of guttering was now in need of repair and causing water damage. As we were not able to confirm whether the tenant was liable for the repairs upon commencement, I negotiated a solution to the satisfaction of my client and the tenant. The tenant would undertake the repairs and a pre agreed cost was deducted from the tenants existing arrears.

Landlord at Wakefield, Ings Road had made repairs to the damaged guttering in the shared car park. But they did not have the budget to finish the works. The store received many complaints regarding the uneven road surface and an incident occurred causing injury to a customer. I determined that the landlord was obliged to make the repairs, regardless of the budget. I liaised with the landlord and followed through to ensure the works were complete in a timely manner.

Question 26

What could you do differently at the start of the lease regarding poor workmanship?

Answer 26

A schedule of condition is always useful, but particular for older buildings in worse condition.

Question 27

What measures can be put in place to ensure tenants pay rent?

Answer 27

Sufficient due diligence on tenant, review accounts business plan etc.
Rent deposit
Guarantor

Question 28

What are the main purposes of the Act Asbestos Regulations 2012?

Answer 28

1. Places responsibility on the duty holder (landowner).
2. Must assess risk and produce plan to manage it (manage or remove).
3. Produce an asbestos register.
4. Make the register available to all relevant parties.
5. Review register regularly.

Question 29

What are the three types of asbestos and when were they banned?

Answer 29

Blue - Crocidolite: Insulator and most harmful
Brown - Amosite
White - Chrysotile: Cement and least harmful
Blue and Brown were banned in 1985, White was banned in 1999. Since 2000, architects have been required to sign off all plans to confirm no asbestos is used.

Question 30

What would you advise if a property contained asbestos?

Answer 30

I would advice my client to seek further advice from an asbestos specialist, or refer to a recent asbestos management report if one was available.

Question 31

Can you tell me about the example in your submission? (Service Charge in Chertsey)

Answer 31

Service Charge in Chertsey: Resurfacing of Service Yard, apportioned by floor area.
Subletting in Chertsey: Struggling tenant requested consent to assign lease. I reviewed the business plan as no accounts were available. Ordered Dun and Bradstreet report. Advised to accept rather than surrendering as client suggested.
Click and Collect Installations: Checking for lease provisions for alterations/demise.
Retaining Wall, Falmouth: Identified possible defect on the retaining wall. Recorded and photographed. I looked in to the issue when at the office and asked the building surveyors for their view. Advised my client to instruct a building surveyor to assess the wall, following their report, I advised my client to cut back vegetation as per report recommendation.

Question 32

What are the options for non-payment of rent?

Answer 32

Make contact, visit if possible to assess trade.
Consider a payment plan.
Check for a rent deposit.
Check for a guarantor in the lease, or an AGA - S.17 notice within 6 months.
Statutory Demand
CRAR
Forfeiture

Question 33

Can you tell me about dilapidations, what are the notices served and how are issues resolved?

Answer 33

Interim - 3+ years
Terminal - within the last 3 years
Final - Upon expiry, within 56 days after.
S.18 of the L&T Act 1927 limits damages recoverable to the diminution in value (first limb) unless the landlord intends to demolish or redevelop shortly after, in which case there is no claim (second limb).

Question 34

What type of funds can be set up under Service Charge?

Answer 34

Sinking Fund: For major costs relating to replacement/repair of wasting assets (e.g. air conditioning plant)
Reserve Fund: For regular major costs (e.g. external decoration).
Depreciation charge: A measure of the wearing out of an asset. Similar to a sinking fund but based on the initial cost of installation rather than the future cost of replacement.

Question 35

How would you handle clients money?

Answer 35

In accordance with Client Money Handling 2019.
In a separate account named ‘client’ and the name of the client or property.
Confirm the account details to the client
Only make payments with clients written consent

Question 36

Can you tell me about the example in your submission? (Subletting in Chertsey)

Answer 36

My clients tenant, who was in arrears and struggling, requested consent to sublet their lease. I checked the lease and requested details of the proposes underlessee. My client wanted to surrender the lease and start a new one due to the existing relationship. I reviewed a Dun & Bradstreet report for each party and advised against the surrender and to accept the subletting.

Question 37

Can you tell me about the example in your submission? (Retaining Wall in Falmouth)

Answer 37

Identified a bulge in the retaining wall during an inspection. I took photographs and took notes. I considered possible cuases and enquired with the building surveying team. I checked the lease and determined it was my clients responsibility, I advised instructing a building surveyor and following their recommendations.

Question 38

Can you tell me about the example in your submission? (Service Charge in Chertsey)

Answer 38

My client incurred costs for the resurfacing of the shared surface yard, I worked with our service charge provider to apportion the resurfacing costs as well as other costs for the end of year service charge account.

Question 39

Is there a notice which the L can serve to pay for improvements and increase the rent?

Answer 39

Under Section 3 of L&T Act 1927, a tenant may undertake alterations even if the lease prohibits it. As long as they improve the letting value of the premises, are reasonable and in character and do not diminish value of other Landlords property.
In this case, the Landlord may opt to fund the works and charge an additional rent.

Question 40

When it comes to service charge, what is the property manager responsible for?

Answer 40

• ensuring the standard of services provided are monitored
• ensuring the quality and cost of the services provided are regularly reviewed and
• demonstrating that service standards are being delivered and value for money is being achieved.

Question 41

What are some things which should be included on Service Charge Accounts?

Answer 41

• whether the accounts are prepared on an accruals- or, where permitted, cash-basis and
• whether the owner has waived the exemption to charge VAT (opted to tax).
• a description of the intended purpose for any sinking or reserve fund, together with an explanation of the tax
treatment of contributions to and interest earned on such funds, and details of the trust where such monies are held
• a statement of all contributions to and expenditure from the sinking or reserve fund account, together with the account opening and closing balances, and the amount of interest earned and tax paid in the relevant period
• a statement of any forward funding agreed and included in the service charge accounts
• a statement detailing how insurance claims are accounted for
• an analysis of any material variances between budget and actual expenditure, with a detailed commentary to explain trends and variances where these are significant and
• statements by the owner and/or manager, to approve the service charge accounts in accordance with subsection 4.5.3.2

Question 42

What are some thing which you should be included in service charge budgets?

Answer 42

• a comprehensive level of detail to enable occupiers to compare expenditure against estimated budget
• explanations of significant individual costs and of variances from the previous year’s budget/accounts
• a comparison against the previous year’s actual costs, where appropriate
• information on core matters critical to that account
(e.g. levels of allocation, apportionment, contracts, report on tendering, etc.)
• the achieved and/or targeted measures of improved management performance (e.g. successes in delivering improved quality services and greater value for money)
• on-site management team costs, separately identified
• a schedule of opening and closing prepayments and accrued expenses, details and results of the most recent previous and forthcoming tendering exercises. Occupiers are to be advised of the contractors who are providing the services
• a full apportionment matrix that clearly shows the basis of calculation and the total apportionment per schedule for each unit within the property/complex and
• the date of issue.

Question 43

What should the service charge costs not include?

Answer 43

1. any initial costs (including the cost of leasing of equipment) incurred in relation to the original design and construction of the fabric, plant or equipment
2. any setting-up costs that are reasonably to be considered part of the original development cost of the property
3. improvement costs above the costs of normal maintenance, repair or replacement (see section 4.9.5) or
4. future redevelopment costs.

Question 44

When should service charge budgets be issued?

Answer 44

Within one month prior to the start of the service charge year.

Question 45

When should year-end statements of actual expenditure be issued?

Answer 45

Within four months of the end of the service charge year.