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APC Revision > Property Management > Flashcards

Property Management Flashcards

1
Q

What guidance and standards have the RICS published in respect of Property Management?

A

The main ones are:
Real Estate Management, 3rd Edition (2016)
Service Charge Residential Management Code, 3rd Edition (2016)
Service Charges in Commercial Property, 1st Edition (2022)

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2
Q

What type of document is Real Estate Management, 3rd Edition?

A

RICS Professional Statement - mandatory requirements

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3
Q

What does the Real Estate Management, 3rd Edition do?

A

Sets out core principles for managing both residential and commercial property across the globe.

Applies to all members involved in the sale, letting, leasing and management of real estate regardless of tenure.

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4
Q

What ethical standards does Real Estate Management 3rd Edition place on managers?

A
  1. Conduct business in an honest, fair and professional manner.
  2. Carry out work with due skill, care and diligence.
  3. Do the utmost to avoid conflicts of interest.
  4. Do not discriminate unfairly in any dealings
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5
Q

How are vulnerable customers defined in the context of real estate management?

A

Real Estate Management, 3rd Edition defines vulnerability as anything that may have an impact on a person’s ability to make a sound and reasoned decision. Vulnerable customers includes people who require special treatment for physical, mental, emotional or any other reasons.

You must not discriminate based on vulnerability. Appropriate training and procedures must be in place for staff to deal with vulnerable customers and vulnerability should be taken into account in any information or guidance provided to them.

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6
Q

Prior to accepting a management instruction, what should members do?

A
  • Clarify for whom they will be working and how will you be paid
  • Undertake a conflict of interest check
  • Confirm the identity of the client in accordance with RICS guidance on Bribery, Corruption, Money Laundering and Terrorist Financing
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7
Q

Upon receiving a management instruction, what should members do?

A
  • Before confirming terms, communicate with the client and discuss requirements in detail
  • Agree level of feedback and reporting
  • Agree terms of engagement (PMA) with the scope, fees, additional costs/fees, duration, business terms, exclusions and jurisdiction details
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8
Q

How should fees and expenses be dealt with upon instruction?

A

Full clear written details of fees and expenses should be provided to clients at the outset, including:

  • when a fee is paid
  • amount
  • fees payable for additional services
  • inclusive or exclusive of taxes
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9
Q

What core principles set out by Real Estate Management, 3rd Edition apply to lettings and leasing?

A
  • Act honestly, fairly and transparently
  • Due skill, care and diligence
  • Clear communications
  • Ensure it is clear who you are acting for to all parties
  • Give a realistic assessment of likely buying, selling, letting price using best judgement
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10
Q

What terms should be negotiated and clearly communicated in writing upon leasing a property?

A
  • Rent
  • Service charge
  • Length of term and break rights
  • Security of tenure
  • Agreed use
  • Rent review
  • Rights to assign, sublet, share
  • Repairing obligations
  • Any guarantees
  • Insurance
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11
Q

What conditions will affect the appropriate level of rent?

A

Real Estate Management, 3rd edition cites:

  • market evidence
  • state of the wider market
  • location
  • type of property
  • age
  • character
  • size
  • condition
  • lease terms
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12
Q

What core principles in Real Estate Management 3rd Edition apply to managing real estate?

A
  • Act honestly, fairly and transparently
  • Due skill, care and diligence
  • Clear communications
  • Make it clear who you are dealing with
  • Give realistic financial assessments
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13
Q

What should managers have regard for when managing repairs?

A

In accordance with Real Estate Management, 3rd Edition:

  • Tenant and Landlord’s repairing obligations in the lease
  • Manager’s scope in terms of engagement
  • Ensure PPM and adequate service contracts are in place
  • Keep tenants informed
  • Undertake in a reasonable time with minimal disruption to tenants
  • Carry out to a reasonable standard
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14
Q

What should managers do before instructing contractors for repairs?

A

In accordance with Real Estate Management, 3rd Edition:

  • Work within client’s instructions
  • Have regard to efficiency, speed and economy
  • Get a detailed breakdown and multiple quotes
  • Ensure you have sufficient funds
  • Liaise with tenants where appropriate
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15
Q

What financial performance measures should be understood by asset and portfolio managers?

A

In accordance with Real Estate Management 3rd Edition:

  • Rental growth
  • Capital growth
  • Return on capital employed
  • Operational costs

Softer measures

  • Occupier satisfaction
  • Staff satisfaction
  • Accurate and timely actions
  • Environmental performance

Should be benchmarked against comparative data

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16
Q

What measures should be considered in relation to capital values by asset managers?

A
  • development
  • redevelopment
  • extension of the building
  • lease restructures
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17
Q

What factors should be taken in to account in measuring portfolio performance?

A
  • Achievement against required rate of return
  • Variability of returns for different assets
  • Volatility of rate of return - sensitivity
  • Diversification of portfolio
  • Performance against external benchmarks
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18
Q

How should management instructions be ended?

A
  • Written confirmation
  • Handover of documentation
  • Handover to new manager in accordance with TOE
  • Handing over of service charge and client monies

The handover of service charge funds should be in two stages - firstly all monies that have not been committed, then the balance

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19
Q

What is the management code for residential service charges?

A

Service charge residential management Code.

Code of practice, 3rd Edition 2016

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20
Q

Under what legislation should managers not discriminate against leaseholders, client and other stakeholders?

A

Equality Act 2010

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21
Q

Under what legislation should managers ensure that staff are sufficiently trained and act appropriately towards stakeholders.

A

Equality Act 2010

Employment Acts 2002 and 2008

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22
Q

How does Section 30 of the LL&T Act 1985 define a landlord?

A

“To include any person who has a right to enforce payment of a service charge”

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23
Q

In addition to RICS guidance, under what legislation would contracts between landlord and managing agents be governed?

A

Supply of Good and Services Act 1982
Provision of Services Regulations 2009

Implies all contract services should be provided to a reasonable standard, time and cost (usually previously agreed)

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24
Q

What are some examples of services that might fall outside of the main scope and attract and additional fee?

A
  • Attendance at FTT/ UTT
  • Dealing with S20 consultations
  • Supervising substantial tender processes and works programmes
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25
Q

What do managing agents need to do if they are to provide company secretarial services?

A
  • Set out level and extent of services in a separate agreement
  • Abide by the memorandum and articles of the company
  • Abide by Companies Act 2006
  • Differentiate services of company administration from landlord/tenant duties
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26
Q

What are the manager’s obligations for dealing with applications for permissions and consents?

A

Under the Service Charge Residential Management Code 2016:

  • Deal expeditiously and within the scope of your authority
  • Give reasons for refusal if relevant
  • Do not withhold consent unreasonably
  • Respond in a reasonable timeframe

Landlord and Tenant Act 1988 applies to the unreasonable consent and response times points

27
Q

What personal safety measures should be put in place for property management companies?

A

Under the Service Charge Residential Management Code and Health and Safety at Work Act 1974:

  • Ensure safety of staff at all times
  • Agree set procedures and follow them
  • Monitor staff leaving for offsite activities and safe return
  • Ensure adequate training to guard personal safety
28
Q

What health and safety requirements should managers consider?

A

In accordance with Health and Safety at Work Act 1974 and Management of Health and Safety at Work Regulations 1999:

  • Maintain efficient building records for the statutory limitation period of action
  • Comply with all H&S requirements
  • Devise and maintain a H&S policy
  • Arrange regular H&S, fire, general risk assessments
29
Q

What legislation is applicable to money laundering and what are the three broad criminal offences?

A

Money Laundering Regulations 2007
Money Laundering Regulations 2017
Proceeds of Crime Act 2002

  1. Assisting a criminal to launder money
  2. Tipping off a suspect of investigation
  3. Failure to report knowledge or suspicion of money laundering
30
Q

What legislation governs the employment of staff?

A

Equality Act 2010
Employment Act 2002
Employment Act 2008
Home Office Immigration Rules

31
Q

What legislation governs complaints, disputes and redress in respect of property management and lettings?

A

Redress Schemes for Lettings Agency and Property Management Work Order 2014

Commonhold & LRA 2002 - voided lease-determined disputes procedures

S.27A of LL&T Act 1985 - voided lease-determined disputes procedures

LRA 1993 - right to have a management audit carried out (s.76)

32
Q

What rules apply to holding client service charge money?

A

In accordance with the Service Charge Residential Management Code and S.42 of the LL&T Act 1987:

  • Open a separate account with a recognised bank
  • Write to the bank to advise it is client monies and
  • Advise the client in writing of the bank details
  • Have a separate office account and only use client account for client duties
  • Pay in money expediently
  • Never overdraw the account
33
Q

How is a service charge defined?

A

Section 18 of the Landlord and Tenant Act 1985 defines it as:

“An amount payable by the tenant of a dwelling for services, repairs, maintenance, and the landlord’s cost of management, the whole or part of which varies according to the relevant costs”

34
Q

What is the best information available to inform service charge estimates?

A
  • Actual costs where contracts have been agreed
  • Estimates based on current or previous year’s actual expenditure
  • Comparable evidence from similar schemes
35
Q

Is it prudent to underestimate or overestimate service charge contributions?

A

No to underestimate. Under the Service Charge Residential Management, the manager must not purposely underestimate or mislead leaseholders.

Sometimes it may be prudent to slightly over-estimate however it should always be as close to the subsequent final accounts as possible. Contingency sums should be explained.

36
Q

Under what circumstances do leaseholders have the right to withhold service charge payments?

A
  • No summary of rights

- No landlord name and address

37
Q

Should managers collect a reserve fund if not permitted by the lease?

A

There is no entitlement for the creation or holding of a reserve fund where the lease does not permit this. No attempts should be made to collect where the lease does not permit this.

Tenants should be encouraged to make long-term savings provisions and clients should be recommended to consider the benefits of lease variation.

38
Q

What do you do if lease contributions do not add up to 100%?

A

Note this to your client and recommend further advice is taken regarding an FTT application for lease variations

39
Q

What should service charge demands include?

A

In accordance with S47 of LL&T Act 1987 and S21b of LL&T Act 1985:

  • Clear and easily understood
  • Relate to estimates or accounts
  • Landlord name and address
  • Summary of rights and obligations
40
Q

What should be included in the annual statement issued to leaseholders?

A
  • Should be issued at the end of the service charge year
  • Summary of costs and expenditure
  • Statement of balance due to either Landlord or Tenants
  • Auditing/certification if required by the lease
41
Q

What should be included in the summary of costs?

A

Under S21 of the LL&T Act 1985:

  • Comply within 1 month of the request or 6 months post-accounting period (later)
  • Must distinguish costs not incurred, not paid and paid
  • Show total of money received and credited to leaseholders
  • Can recharge reasonable cost of preparation
  • Leaseholders can also request to review the full accounts within 6 months of receiving the summary
42
Q

How quickly must you provide accounts for review upon written request?

A

Under Section 22 of the LL&T Act 1985:

  • Respond within one month
  • From the end of that month for a period of two months, allow them to inspect the accounts and supporting documents
43
Q

When must the S21 summary of service charges be certified by a qualified accountant?

A

If service charges are payable by leaseholders of more than four dwellings

44
Q

What is the legislative provision and timeframe governing the deadline for recovering costs?

A

Section 20B of the 1985 Act stipulates that leaseholders must be notified within 18 months in writing or the costs may not be recoverable.

45
Q

How soon after the end of the financial period should service charge accounts be prepared?

A

Section 20B stipulates that accounts should be prepared within 6 months or any shorter timescales as required by the lease.

46
Q

What legislation governs the prescribed form for demanding ground rents?

A

Section 166 of the Commonhold and Leasehold Reform Act 2002

47
Q

Under what circumstances is ground rent payable?

A

Under Section 166 of the Commonhold and Leasehold Reform Act 2002:

  • Only when demanded
  • Not until 30 days after receipt of the demand
  • Can be demanded up to 60 days prior to the due date
48
Q

How should surpluses and deficits be dealt with in service charge administration?

A

Firstly refer to the lease.

The Service Charge Residential Management Code states that surpluses can be credited against next year expenditure or refunded.

Deficits will be demanded from leaseholders or recoverable during the following year.

Be careful with using the reserve fund as a float unless specifically in the lease. Can lead to irrecoverability under Section 20B of the 1985 Act.

49
Q

What is some health and safety legislation that would govern the management of a BTR asset?

A

Health and Safety at Work Act 1974
Workplace Regulations 1992
Management of H&S at Work Regulations 1999
Gas Safety Regulations 1998
Electrical Equipment Regulations 1994
Furniture and Furnishings Regulations 1988
Control of Substances Hazardous to Health Regulations 2002

50
Q

What is the most notable case in relation to Section 20 consultation?

A

Daejan Investments vs Benson and Orr.

The Supreme Court overturned decisions of the lower courts and tribunals deciding that the main question for tribunals in these matters is: to what extent were the tenants prejudiced by the landlord’s failure to follow procedure?

The landlord’s offer to reduce the works by £50k was deemed to be sufficient to grant dispensation.

51
Q

What are the statutory consultation limits for LTQAs and major works?

A
  • LTQA is a contract of more than 12 months and over £100 per leaseholder inc. VAT
  • Major works - £250 per leaseholder
52
Q

What are some of the proposed changes to the residential service charge code?

A

Under the 4th edition of the Code, some of the proposed changes are:

  • Enhanced requirements for agents and landlord to declare commissions
  • Additional requirement for agents to set realistic service charge budgets for new development
  • Standardised cost classifications
  • Ensure LAs and HAs follow the new code
53
Q

Tell me about a recent Landlord and Tenant case?

A

First Port vs Settlers Court - recent Court of Appeal decision 2022
Overturned earlier decisions by the lower courts and Gala Unity decision.
Decided that Right to Manage companies cannot acquire management responsibilities over the entire estate as well as their individual blocks.

54
Q

How do you consider Health and Safety in the advice you provide?

A

Design for Management

  • Flooring considerations (e.g. non-slip mats for wet weather)
  • Signage (e.g. liability signage, hazard warnings, emergency exit)
  • Identification of design risks (e.g. inability to clean windows safely)
  • Access through tenant’s demise
  • Car park pedestrian routes
  • COSHH requirements
  • Security / CCTV

Service charge budgeting / BTR

  • Appropriate staffing levels - incl. building safety manager
  • Risk assessment costings
  • Sufficient BoH space for staff levels required for H&S

Legal
- Requirement for apartment doors to remain in LL’s demise in accordance with The Fire Safety Act 2021

Mobilisation
- Tenant’s handbooks with full H&S information

55
Q

In Health and Safety, what’s the difference between a hazard and a risk?

A

Hazard - something that can cause harm

Risk - likelihood of it occurring

56
Q

What is the hierarchy of control measures in health and safety?

A
  1. Eliminate
  2. Substitute
  3. Isolate
  4. Engineering controls
  5. Admin controls
  6. PP&E
57
Q

What is the new Fire Safety Act 2021?

A
  • Has significant implications for Responsible Persons in a building
  • Updated the Fire Safety Order 2005
  • Clarified that the Fire Safety Order also applies to the elements adjoining the structure and external walls - e.g. cladding, windows, doors
  • Previously unclear who was responsible for these elements in some instances
  • Forces the Landlord, Owner or Managing Agent to have responsibility over identifying fire safety issues in cladding for example and taking remediation and intermediary measures to secure the building
58
Q

Who is the Responsible Person under the Fire Safety Act 2021?

A

Someone who owns or has control over the building

59
Q

Who is the Duty Holder under the Fire Safety Act 2021?

A

Someone with responsibility for maintenance or health and safety in the building either via a lease/tenancy agreement or a contract

60
Q

Is the Fire Safety Act now in force?

A

Some elements were brought into force in May - e.g. section 1 which extends the provisions of the Fire Safety Order 2005 to include cladding, external systems, windows.

Fire Safety Regulations 2022 come into force in Jan-23 and include obligations for the Responsible Person such as regular inspections of firefighting equipment, regular fire door checks, provision of fire strategies to residents

61
Q

What will the requirements in respect of Fire Doors be?

A

Under the Fire Safety Regulations 2022:

  • Quarterly checks to fire doors in the common parts
  • Best endeavours for annual checks on apartment front doors

Applies to multi-let buildings over 11m

General obligations under the Fire Safety Order 2005 still apply, espc to buildings under 11m

62
Q

How should a leaseholder challenge a service charge?

A
  1. Review the lease
  2. Pay the service charge but make it clear that payment does not amount to an admission that the disputed charges are payable
  3. Write a letter to the landlord / agent
  4. Make a formal complaint if dissatisfied
  5. Make an application to the FTT
  6. Be aware that they have rights under Section 21 to request information, and inspect accounts under Section 22
63
Q

Under which Act and section do service charge demands need to be accompanied by a statement of rights?

A

Section 153 of the C&LRA 2002

64
Q

Under the Tenant Fees Act 2019, what can landlords charge for?

A

Bans most lettings fees and caps deposits at:

  • 1 week - holding
  • 5 weeks - ASTs under £50k
  • 6 weeks - ASTs over £50k

Fees allowed

  • Variations (novation, etc) - £50
  • Early termination (tenant)
  • Default fees (3% over 14 days late) and keys (reasonable & proven)

APC Revision (9 decks)

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