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APC > Property Management > Flashcards

Property Management Flashcards

1
Q

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

A

Section 17 - L&T 1995

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2
Q

Can forfeiture be implied?

A

No - must be an express covenant in the lease

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3
Q

RICS guidance on service charge?

A

Service charges in commercial property, professional statement - 1st edition (September 2018, wef April 2019)

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4
Q

What is the main change of Service charges in commercial property statement (September 2018)?

A

Mandatory not just best practice

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5
Q

What is a sinking fund?

A

An amount of money set aside to cover any major work which is needed on a property in the future

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6
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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7
Q

What is the RICS guidance note?

A

Commercial property management in England and Wales 2nd Edition October 2011

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8
Q

What does the Commercial property guidance note state?

A

Property manager has two core duties:-
1. The collection of rent, service charge and other sums
2. Property management of the property.

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9
Q

What are the remedies for non-payment of rent?

A
  1. Statutory demand
  2. Arrange a meeting and potentially discuss a payment plan.
  3. Draw down on deposit
  4. Chase guarantor for payment
  5. CRAR
  6. Forfeiture
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10
Q

What would be the point in arranging a meeting?

A
  • to establish the reason
  • to see if the tenant is still trading
  • assess trading performance
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11
Q

How would you pursue a guarantor?

A

Serve a S17 Notice under L&T Covenants Act 1995 within 6 months.

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12
Q

Can the guarantor take responsibility of the lease if they make payment?

A

They can take and overriding lease meaning they become the direct tenant of the landlord and immediate landlord of the defaulting tenant.

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13
Q

What section in the lease states a guarantor?

A

An AGA.

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14
Q

When did the AGA come into place?

A

The L&T Covenants Act 1995 brought about AGA’s abolishing Privity of Contract.

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15
Q

What is Privity of Contract?

A

The original tenant remained liable for payment of rent no matter how many times the lease had been assigned.

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16
Q

What is Statutory demand?

A

This is the written demand for payment of rent and is often a quick and inexpensive method.

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17
Q

What is CRAR?

A

Commercial Rent Arrears Recovery.

The statutory procedure which allows LL’s of commercial premises to recover rent arrears. This involves enforcement agents recovering goods to the value of debt owed.

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18
Q

How would you commence CRAR?

A

By serving a 7 day notice informing the tenant that enforcement officers will attend in the event of non payment.

19
Q

Does it have to be 7 days?

A

This can be shortened via an application to Court if there is reason to believe the tenant will pack up and leave.

20
Q

What goods can enforcement agents sieze?

A

Goods belonging to the tenant that have a value on their balance sheet.

21
Q

What is forfeiture?

A

Allows the LL to terminate the lease when a tenant is in breach of their obligations.

22
Q

How does forfeiture differ from non payment of rent to other breaches?

A

For example if the breach was for a repairing obligation, then the LL must serve a S146 Notice under the Property Law Act which should give the tenant 6 months to remedy the breach.

For non payment of rent the LL can forfeit on the period within the lease (usually 21 days)

23
Q

What would you assess when considering a payment plan?

A

Good/bad covenant will depend on the length to repay.

Review management and audit accounts. Management being more up to date and accurate.

24
Q

What is the guidance on service charge?

A

Service Charges in Commercial Property UK 1st Edition September 2018 (wef April 2019)

25
Q

What are the 9 mandatory requirements of the new Service Charge PS from older?

A

9 Mandatory requirements:-
1. Expenditure recovered must be in accordance with lease
2.No more than 100% of proper and actual cost of supply of services
3.S/C budgets provided annually
4. S/C accounts provided annually
5. S/c apportionment matrix provided annually
6.S/C monies held in one or more discrete bank accounts
7. Interest earned on s/c credited to s/c account
8. Acting for T - any withheld payment over dispute should reflect only the actual sums in dispute
9. Acting for LL - Following dispute, any s/c raised incorrectly should be adjusted to reflect error without undue delay.

26
Q

How many core principles are there in the s/c statement?

A

24.
RICS acknowledges some may be difficult to comply with in rare circumstances.

Summary:-
- All costs transparent
- Method of apportionment should be fair and reasonable
- Manager issuing accounts should do so in a non partisan spirit
- Managers certificate, annual statements of expenditure should be audited by an expert

27
Q

What is specific guidance on fees in s/c Statement?

A
  • Set on a fixed price rather than %
  • % no longer appropriate and considered to be a disincentive to value for money
  • The PS cannot override the lease
  • Cost of collecting rent should be excluded from s/c management fee
28
Q

Difference between an assignment and subletting?

A

Assignment - take over the lease
Subletting - take a new lease

29
Q

Why would you recommend a T sublets?

A
  • more flexibility
  • profit rent (let for more than passing rent)
30
Q

What is reasonable grounds for LL to refuse consent for assignment?

A
  • weaker covenant strength
  • user (immoral or illegal)
31
Q

What are dilapidations?

A

The cost for a tenant to put the building in repair after breaching its obligations.

32
Q

What is the purpose of dilapidations?

A
  • LL gets property back in same condition
  • T not required to give back in a better condition
33
Q

What are the different types of dilapidations?

A

Interim - at least 3 years left on lease
Terminal - last 3 years of lease
Final - at expiry or after

34
Q

What is the dilapidations value based on?

A

Based on the cost of works or diminution in value as a result of the T’s breach.

S18 LTA 1927 limits the cost to not exceed the amount by which the value of the reversion of the premises is diminished.

35
Q

What is Administration?

A

An administrator is appointed by the company, bank or creditors to sell its assets to pay off the debts.

36
Q

What is a CVA?

A

Company Voluntary Agreement

When a company is insolvent but believes the business can still trade.

Has to be approved by 75% of its creditors.

37
Q

How does s/c, alienation etc impact L&T relations?

A

These clauses have the most chance of disputes arising. If handled appropriately, hopefully agreement can be reached to avoid a dispute.

38
Q

How would you determine responsibility for repair?

A
  1. Demise
  2. repairing obligation
  3. Can works be recharged?
39
Q

Talk me through the process at 110 Wallasey Road.

A
  1. Our property management system notified us of non rental payment for that month. As such we tried to make contact with the tenant to request payment but also find out the reasoning.
  2. I advised to my client we can draw down on the rental deposit. This however would be required to be ‘topped up’ by the tenant.
  3. We were now in a position where the tenant had not paid rent for a second month and had no communication with them.
  4. I discussed matters at length with my client advising the options being pursue the guarantor, CRAR and forfeiture. The agreed option was to commence CRAR.
  5. As a result a 7 day notice was served which prompted a response from the tenant.
  6. Ultimately a payment plan was agreed to repay 2 months arrears back over 6 months i.e. an extra £375 per month.
  7. The tenant kept up their payments.
40
Q

Why did you not pursue a guarantor?

A

Given the lack of engagement from the tenant the client wanted to take strong action.

41
Q

Can you use CRAR and forfeiture?

A

Brar Case 2019
No - once you have tried to make steps for payment or accepted any payment then you waive your right to forfeit.

42
Q

What did you consider when agreeing a payment plan?

A

Covenant strength.

Review management and audited accounts.

43
Q

What are the methods of forfeiture?

A

Peaceable re-entry - bailiff/locksmith change the locks
Apply to court - Eviction for possession order

Can be done within 21 days of failure to pay rent.

APC (16 decks)

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