Property Management Flashcards
What RICS guidance is there on service charge and can you give me some of the key requirements?
RICS Service Charge in Commercial Property, 2018
- Budgets issued minimum of 1 month and Recs within 4 months of accounting date
- All expenditure must be inaccordance with the lease
- Ensure apportionment matrix and explanatory comments are issued with budgets
- SC monies helf in one or more individual bank accounts
How do you ensure your communication is clear with tenants?
- Send follow up emails after conversation
- Ensure i am being honest and transparent
- Maintain regular contact and hold regular meetings with tenants
You recommended CRAR at Building 1000, can you talk me through the stages of CRAR?
Compliance stage - 7 day notice of enforcement to give the tenant 7 days to pay
Enforcement stage - enforcement agent attends to take inventory and enter into a Controlled Goods Agreement.
Disposal stage - where the tenant does not make payment or default on an arrangement, enforcement agents will return to the premises and remove the goods. This period is 48 hours from the enforcement stage, giving the tenant 2 days to bring things up to date before any removal action can begin
What can you CRAR and what is the minimum for instruction?
Rent only and minimum 7 days rent outstanding
Can you dispose of goods straight away or is there a period to hold on to them?
must keep for 7 days before disposing
How would your advice at building 1000 have changed 12 months ago?
CRAR would have been unavailable, leaving a payment plan as the best option
What legislation is CRAR associated with?
Tribunals, Courts and Enforcement Act 2007
When did CRAR come into force and what did it replace?
2014 and replaced common law to levy distress
How does CRAR differ from the common law to levy distress?
CRAR only applies to leases and not licences
Only applies to rent
minimum 7 days rent outstanding
Only available for commercial
7 days notice prior to seizing
Agents only attend in business hours
What goods can be seized by CRAR and by whom?
only goods belonging to the tenant
Cannot recover tools of the trade up to an aggregate value of £1,350
Cannot recover goods being used
Enforcement agents can seize
Can the tenant appeal CRAR?
Yes, the tenant has the right to apply to the court for an order that no further steps be taken under CRAR without permission of the court
What is the ultimate question when you make an Licence to Alter recommendation
- Am i competenant enough to advise
- How is it affecting the landlords interests
At the Glasshouse Yard licence to alter, you requested plans detailing the fit-out, did you request anything else?
- Confirmation on undertaking of fees
- Confirmation works would be re-instated
- H&S information and RAMS
- Building Regulations compliance
- Year warranty
Were you qualified to inspect and sign off the fitout at Glasshouse Yard
No, but i inspected with building surveyors who were also acting on the project
Why was the tenant responsible for the fees at Glasshouse Yard
As stated in the lease the tenant is responsible for the reasonable costs associated with documenting the licence
What legislation would allow the tenant to carry out improvement works without Landlord consent?
Section 3 of the Landlord and Tenant Act 1927
What is the difference between a subletting and an assignment?
Assignment transfers interest whereas a sublet does not
- Superior tenant can re-occupy if sublet
- Sublet - the landlord has no direct relationship with the subtenant - relationship remains with their tenant, the superior tenant
How does the Landlord and Tenants covenant act 1995 affect an assignment?
Removed privity of contract for when a lease gets assigned and introduced AGA.
In the assignment at Farringdon Point, you requested tenants accounts, what were you looking for when reviewing?
overall financial performance - if they are able to adhere to the lease obligations.
profits test - net profit should equal 3 times the annual rent (not set in stone, just rough guide)
What is an AGA?
Authorised Guarantee Agreement
Outgoing tenant guarantees the performance of the incoming tenant - they are liable if the incoming tenant defaults
What is an AGA?
Authorised Guarantee Agreement
Outgoing tenant guarantees the performance of the incoming tenant - they are liable if the incoming tenant defaults
Why did you also request a 6 month rent deposit at the Farringdon Point assignment?
To provide the Landlord with additional security
Can a landlord refuse an assignment?
Yes on a lease after 1995 and the tenant is of weaker covenant strength and an AGA is stipulated but refused
- Also if the incoming tenant requires use of the premises for a differing reason than that stated in the lease
What is a PPM and why is it helpful?
Planned Preventative Maintenance
- Ensures any issues are identified and addressed before they develop further
- Ensures H&S compliance
- Less need for major unplanned repair work
- Less chance of unplanned fluctuations in service charge
- Preserves value
What works were required at Riverbridge House and what was the approximate cost?
Priority 1: roof works and fire escapes in poor condition
Priority 2/3: Stairwells in poor condition (need recarpetting/redecorating), car park patch works, and damaged cladding panels
Approximate cost was £150,000
How did you assess the tenders at Riverbridge House PPM?
on a value for money basis
How did you ensure that the works at Riverbridge PPM were carried out safely?
- Contractor insurance policy
- Contractor H&S policy
- Site specific RAMS
- General contractor information
Were the works at Riverbridge House for the PPM carried out in the same year?
No, the Client forward funded and costs were apportioned and split between 3 service charge budgets
Can you withdraw a section 25 notice?
No, only when the landlod has transferred his ownership to a new landlord who wishes the tenancy to continue on the old basis or new and different terms
Can you withdraw a Section 26 notice?
Yes can be withdrawn at any stage
Can you withdraw a section 27 notice?
No it is irrevocable and the tenant has no right to remain in the property once the termination date passes
What are the aims of the Service Charge guidance?
- Improve general standards and promote best practice.
- Encourage uniformity, fairness and transparency in the management of service charges
What would you do if the tenant enters liquidation
- Submit claim,
- liaise with liquidators on whether they are occupying the lease,
- Draw down on the RD,
- surrender the lease
Why is RV not appropriate for SC apportionment
doesn’t represent reasonable use of benefit
When does SC Rec need to be audited?
If stated within the lease – however it is best practice to have large service charge accounts audited regardless
What can be recovered from CRAR
Rent and interest
What options do you have to protect the landlords interest if they remain in the unit after expiry in a contracted out lease?
- Tenancy at Will
- Double rent under L&T Act 1730
- Court order to remove
What does RICS Real Estate Management tell you?
RICS Real Estate Management 2016
- Supports ethical standards and improves fairness and transparency in real estate
RICS Commercial Property Management in England and Wales, what is the overall objective?
Guidance on how people in control of a building should manage, communicate and control income and expenditure and minimise associated risks
How do you protect your Clients interests
Be aware of their goals and objectives and provide a high standard of service,
Can you CRAR a subtenant
Yes – 14 days notice as opposed to 7
Whats the objective of doing reports to Clients
Ensure you are achieving KPIs and providing a high standard of service
Are you aware of any case law on assignment?
Ponderosa INternational Development vs Pengap Securities
- If a transaction has an adverse effect on the landlords reversion, this is a matter which can provide good grounds for refusing consent, provided that the adverse affect is not merely theoretical
How do you have a duty of care to tenants?
- Duty of care to act with professional care, diligence, integrity and objectivity, especially in relation to managing service charge
How do you have a duty of care to Clients?
- Duty of care to act with professional care, diligence and objectivity in managing their interests, preserving/enhancing value and acting in their best interest
- Duty to provide a high standard of service and act in accordance with RICS Rules of Conduct
What are the mandatory reuirements of the SC professional statement?
- Issue budgets minimum 1 month prior to accounting date
- Recs within 4 months
- Issue apportionment matrix and explanatory comments
- Service charge monies held in one or more discrete bank accounts
- All expenditure in accordance with the leae
- Seek to recover no more than 100% of actual expenditure
- Interest earned on service charge account must be credited to the account after appropriate deductions have been made
Give me an example of break notice case law
Osborn Assets v Britannia Life -> T covenanted to paint internally with 3 coats of paint every 5 years. invoices only showed 2 coats
NYK Logistics vs Ibrend Estates -> SoD works not completed and workmen stayed in the unit for an additional week
What does the RICS Real Estate Management Professional statement do?
RICS Real Estate Management 3rd edition, 2016 (professional statement)
- Supports ethical standards
- Improves fairness and transparency for real estate managers
What are some of the ethical principles set out in RICS Real Estate Management?
- Conduct business in a fair, transparent and professional manner
- Not discriminate unfairly in any dealings
- Ensure you make it clear to all parties you are dealing with, the scope of your obligations
- Ensure Client Money is handled correctly
- Avoid conflicts of interest and manage where appropriate
- Ensure Terms of Engagement are issued to clients and are clear, containing CHP
What does RICS Commercial Property Management guidance note do?
RICS Commercial Property Management in England and Wales 2011 (guidance note)
- Summarize best practice in property management of commercial properties
What the key principles of RICS Commercial Property Management guidance note?
- Act as an agent for the landlord in accordance with the lease
- Support financial success and operation of the property
- Collection of monies owed under the lease
- Effective management of the property
Is the RICS Commercial Property Management Guidance note mandatory?
No it is advisory
What does RICS Code for leasing business premises do?
RICS Code for Leasing Business Premises, 1st Edition, 2020
- Improve quality and fairness in negotiating lease terms
- Promote the issue of comprehensive HOTs to make legal drafting process more efficient
Were you definitely able to CRAR at Building 1000 given the Coronavirus Act?
Yes, moratorium was lifted on 25th March 2022
Talk me through the CRAR process
Bailiffs issue 7 day letter
Bailiffs attend and note inventory and enter controlled goods agreement
Tenant has 48 hours to pay
Bailiffs return to seize goods
Good held for 7 days before sold
How can you apportion a S/C
Floor area
RV
Fixed amount / %
What are non-structural alterations and What would make alterations structural?
- Non structural alterations are work to the fixtures and fittings of the property
- Structural alteration is making changes to any part of the supporting structure of the building including to the external walls, bearing walls, foundations and roof
What did the financial review at Farringdon Point include? Any specifics?
Past 3 years audited accounts
Balance sheet
Income statement
What act does AGA relate to?
Landlord and Tenant covenants Act 1995
What do you do if you know you’re over budget and was this relevant to the PPM works?
Advise the tenants and provide explanation (consultation advised under SC professional statement)
No, works did not start until new budget year, after which phase 1 costs were incorporated into the budget. Landlord also forward funded.
What options are available if a tenant has not paid rent?
First speak to tenant and visit site to see if they’re still trading. Then:
CRAR
AGA/Guarantor
RD draw down
Stat demand / winding up petition
Court order
Mentioned you completed an IOSH course – what is that? What did you gain from it? Are you aware of any other H & S courses?
Institution of Occupational Safety and Health
Yes, NEBOSH - National Examination Board in Occupational Safety and Health
You mentioned you enforce Workman’s Permit to Work for particularly high risk works such as working at height, at what point do works become high risk and what happens on low and medium risk works?
Depends on site specific conditions - will be indentified in the site specific RAMS and RA on the level of risk.
Permits required for certian works such as working from height and hot works
When does a landlord have to have an asbestos register? Do all commercial buildings require an asbestos register?
Should always have an asbestos register
Asbestos compeltely outlawed in 1999, so modern properties built after 2000 may not requrie an asbestos register
What are CDM regulations? When are they relevant to your work?
Construction (Design & Management) Regualtions 2015
guides H&S in construction and refurbishments
- Notifiable project - over 30 days or 20 people working on site at once
What can you tell me about ESOS?
Energy Savings Oppertunity Scheme
Mandatory assessment in the UK every 4 years for large firms (over 250 employees, over £44m tunover and balance sheet total of more than £38mil
What is the difference between asset management and property management?
Asset management looks to enhance value outside of tenant relationships whereas PM looks to preserve value and maintain and ensure income
How do you base your fees for property management work?
Fees in SC based on management fee (fixed and reasonable time spent)
Otherwise, agreed in PMA with Clients and Partners
What are the most common methods of apportionment used for calculation of service charge?
Floor area
RV
Fixed / %
If a tenant had a dispute with the service charge, how would you deal? (eg. tenant should not contribute to certain items or has a cap over management fee).
Aim to resolve yourself initially, potentially refer to Partner. otherwise Lease should support and have ADR as recommended in the SC professional statement
What would happen if the dispute could not be resolved?
ADR
Have you any experience of dilapidations?
Yes, however building surveyors lead preparation of dilaps and negotiation of settlements. I am not competant
What are dilapidations?
Requirment to reinstate the premises to the equivalent or materially equivalent condition prior to lease commencement
If you were acting for a tenant why would you recommend they have a schedule of condition done?
To protect their position at lease end and aid negotiations / reduce settlement figure (avoid areas of work that tenant was not at fault for)
Travellers – options for removal?
Instruct security guards to attend and stop increased attendance.
Enforcement agents to attend and serve notice for them to leave (common law notice)
Have enforcement agents re-attend once notice expires
Notfiy insurers as soon as possible
Potentially notify solicitors
Make site secure once removed
Typical s/c in London? How have utilities affected this? What is the advice to landlords and tenants?
Between £10-16 psf
Utilities have largely increased these, however usually in seperate schedules. Consult with tenants on the increase due utilities explaining that the control is lrgely out of our hands
Landlrods 6 month support scheme and then support for vulnerable industies. Try to re-contract with improved rates. Monitor energy usage and implement measures and reductions in usage where possible.
Re-contracting done by utility consultants
You recommended CRAR at Building 1000, why was that your recommendation?
Client was taking a hard stance on arrears following the lifting of COVID restrictions. We knew the tenant was capable of payment and therefore used CRAR as an incentive to get the tenant to pay.
Did you feel that the tenant was capable for paying the arrears?
Yes they were paying throughout COVID-19.
What was the process you followed for CRAR?
Bailiffs sent 7 day notice letter and payment was made within 4 days
Had they been non-response to the 7day warning, what would have been the process?
Bailiffs would have attended to take stock and enter controlled goods agreement.
Provide the Tenant with additional 48 hours to make payment or come to an agreement.
Re-attend to seize goods, holding them for a further 7 days before they can be sold
On the basis that this was Cambridge Research Park, was this an office or a research facility?
Small lab and office
How would the bailiffs know what they can or can’t take?
Instructed and understood that they are only able to take goods owned by the tenant and goods that would not be a breach of peace. I.e no tools of the trade up to an aggregate value of £1,350
You refer to the SC professional statement, what’s the purpose of the SC professional statement?
To improve transparency and reduce disputes in SC
Can you give me a couple of initiatives of how the SC statement makes things more transparent and fair?
All expenditure in accordance with the lease
Never recover more than 100% of actual expenditure
SC monies held in one or more discreet bank accounts
Budgets within 1 month and Recs within 4
Apportionment matrix and explanatory comments issued
What’s the process you go through when receiving and application to assign from the tenant?
Review alienation provision and ascertain what the tenant is entitled to and the landlords obligations.
Request 3 year audited accounts from both assignee and assignor
Sanctions check, credit report and financial review.
If you have a tenant that doesn’t have an AGA in their lease, can one retrospectively be drawn up? i.e if you were to change the lease, how would you do that?
Yes through a deed of variation
In this case, what were the terms of the AGA?
Outgoing tenant guaranteed performance of incoming tenant on payment of all lease sums and repairing liability
If the assignee subsequently assigns their lease, what happens to the original tenant?
They are released from their liability
How would you then protect your clients position if the assignee wants to assign?
They can only assign to a tenant with a higher covenant strength or cannot assign at all
What is the insurance Act 2016?
Improves transparency in commercial insurance law
What are warning signs of tenant default
Poor communication
Persistent late payment
What are service charge recovery options?
Court order
S.146
Forfeit lease
Stat demand
What are some disadvantages of your Property Management systems?
Complex
