Property Management Flashcards
What is the key RICS guidance for property management?
- Real Estate Management 2016
- Service charges in Commercial Property 2019
- Commercial Property Management in England and Wales (2011).
Name some statutory obligations a property manager needs to be aware of
- Asbestos management
- Business rates
- Contamination
- Equality Act 2010
- EPC & MEES
- Fire Safety
- H&S
- Legionnaires disease
- Occupiers Liability
- PAT test
- Planning
- Waste management
When invoicing for rent, what should you check for
Timing of payments
Interest on arrears
VAT
If service charge is reserved as rent
Circumstances where rent should not be accepted
When might you not recommend accepting a rent payment?
To avoid waiving right to forfeit.
Where an outside the Act lease has expired as it may create security of tenure.
What are warning signs for arrears?
Bounced cheques
Tenant ceases trading
Persistent late payment
Arrival of post-dated cheque
Name remedies for rent default
Payment Plan
Court Proceedings
Use rent deposit
Pursue form tenants/guarantors
Statutory demand
CRAR
Forfeiture
What is the effect of forfeiture?
A landlord can re-enter and gain possession for breach of lease.
What RICS guidance relates to service charges?
Professional Statement - Service charges in commercial property, 2018
What should service charges be?
Not for profit, not for loss
What information must be provided to tenants if a service charge is operated
- Service charge budget (inclu explanatory
commentary) annually - Approved set of service charge accounts.
- Service charge apportionment matrix
(all issued annually)
What is an accrual?
Expenses incurred in a period for which no invoice has been received at the period end
What is a balancing charge?
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)
What does PPM stand for?
Planned preventive maintenance
What is PPM
Planned Preventative Maintenance
Maintenance performed purposely and regularly to keep the fabric, facilities and plant and equipment of a building in satisfactory operating condition
How often is a PPM usually prepared?
5-10 years, but reviewed and updated regularly
What is the purpose of a reserve fund?
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.
What is the purpose of a sinking fund?
To periodically set aside money for the replacement of a wasting asset.
What should you request if considering a tenants application to alter?
- Full plans and specifications
- Undertaking of surveyors legal costs
- Finance bond held by the landlord
- Whether planning or building regs consent needed?
- Compliance with legislation e.g Equality Act 2010
- Risk Assessment & Method Statement RAMS
What is a schedule of condition?
Limits a tenants repairing liability in respect of agreed items of disrepair during a lease.
What is the basis of a typical full insuring clause?
Landlord insures tenant reimburses
What is an insured risk?
Risks that a landlord is obligated to insure against
What happens if a property is damaged by an uninsured risk?
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.
What are typical examples of uninsured risk?
Flooding
Terrorism
Subsidence
Heave
Outline the document RICS Professional Statement Real Estate Management, 2016
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.
What is privity of contract?
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.
What is the difference between a absolute/qualified and fully qualified covenant?
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.
What are the various forms of corporate insolvency?
Insolvency Act 2010 5 types:
- Administration
- Company & Voluntary agreement
- Receivership
- Voluntary liquidation
- Bankruptcy
What are the three key principles of RICS Commercial Property in England & Wales 2011?
- Acting as agent for the landlord - landlord has ultimate responsibility
- Managing third party suppliers - i.e security not necessarily doing everything but by managing others to do so
- Duty of Care - to the landlord primarily, but also to tenants ( commercial and reputational duties )
What is a liability cap?
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.
What is the difference between assignment and subletting?
• 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.
What is the purpose of a licence to alter?
• To protect the parties at rent review and at dilapidations.
• Acts as a record of the work that has been completed.
What are the usual arrangements for Service Charges?
• 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
What is a schedule of condition and why are they used?
• 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.
When can you serve dilapidations?
• 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.
How would you set up a planned preventative maintenance plan or PPM?
Follow RICS GN planned preventative maintenance 1st edition
- Obtain client scope of service
- Gather detail and information on the property
- Inspect
- Report
KEY is the PPM schedule spreadsheet contained within the report, which will outline:
condition > Good - Hazardous
timeframe over years > Urgent to long term
What impact did the Coronavirus Act 2020 have on rent recovery and repossession?
• 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
What are the mandatory requirements of RICS PS service charge in commercial property?
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.
When are properties exempt from MEES?
Would affect the character of the property
Where all recommendations have been completed and still not enough
If savings are not paid back within 7 years
Decrease property price by 5% or more
What are the different types of maintenance?
Reactive - repair emergencies
Planned - regular condition schedule checks
Cost reduction - utility switching
How would you deal with commercial rent arrears?
- Visit tenant on site to discuss
- Seek a payment plan
- Failing this check if there is a AGA, Guarantor, former tenant.
- Serve a S17 on the guarantor
- No guarantor? consider a Statutory demand
- Consider a surrender
- Forfeiture
EPC Requirements?
- Granting of new leases must be E or higher.
- From April 1 2023 this will include existing leases too
Future EPC requirements?
- Government Proposed
- C by 2027
- B from 2030.
Fire Safety Act 2021?
- Amends the Regulatory Reform (Fire Safety) Order 2005
- Places a legal obligation on the designated responsible person to commission a fire risk assessment (FRA) that includes the external walls of a building and fire doors to individual flats.
- Fire and rescue authorities have enforcement powers to hold owners or managers to account.
What are Dilapidations?
Breaches of lease covenants that relate to the condition of a property during the term of the tenancy or when the lease ends.
Property Management Best Practice?
1 Conduct business in an honest, fair, transparent and professional manner.
2 Carry out work with due skill, care and diligence.
3 Ensure that clients are provided with terms of engagement which are fair and clear.
4 Do the utmost to avoid conflicts of interest.
5 Not discriminate unfairly in any dealings.
