Property Management Flashcards
What is the professional statement for property management
RICS Professional Statement - Real Estate Management 2016
What is the purpose of RICS Professional Statement - Real Estate Management 2016
Outlines principles that share the culture of fairness and transparency. It is mandatory for commercial and residential
What are the real estate management 2016 principles
be honest, fair, transparent and professional
Carry out work with due diligence, care and skill
fair and clear terms of business including a CHP
avoid COI and where they do arise treat openly and fairly
not to discriminate
communication is timely, fair and transparent
client money held securely and with insurance
have PII
what is the guidance note for property management
RICS Guidance note on Commercial Property Management in England & Wales 2011
What is RICS Guidance note on Commercial Property Management in England & Wales 2011 for
Best practice for commercial property mangers
focuses on how to be efficient, effective and accountable to clients
primary duty of care is to the landlord/client
Key areas include rent collection, service charge, managing building and H&S
model of relevant statute law and model terms of engagement
what is the difference between assignment and sub-letting
Assignment - the new tenant has a direct relationship with the landlord.
Sub-letting, the new tenants relationship is with the original tenant. T2 pays T1 the rent who then pays to LL
types of alienation
Absolute - not allowing
Open - allowing
Qualified - subject to conditions
Reasons to sub-let over assign
requirement of the lease
part not whole
if market rent is higher than passing rent
tenant was to re-occupy in the future
new party is of a lesser covenant
Landlord & tenant act 1988 purpose
Ensures a statutory duty on the LL to deal with consents diligently and not to be unreasonably held or denied
Landlord and Tenant covenants act 1995
The act gave landlords more scope for setting conditions regarding the approval of an assignee
It abolished Privity of Contract on new leases.
Introduced Authorized Guarantee Agreements (AGA) which is a voluntary
Should the new tenant breach their lease then the LL needs to inform the previous tenant within 6 months of breach.
What is prvity of contract
pre 1996, the landlord could seek rent arrears from the original tenant even if the lease has been assigned to several tenants since, providing it is within the original lease term.
What are landlords remedies for illegal alienation
Refer to the lease but this could be forfeiture, damages or an injuction
What is the purpose of licence for alterations
To protect parties at rent review and dilapidations at the end of the lease
What is the guidance note for Licence to Alter
RICS Licence for Alterations Guidance Note 2013
What is RICS Licence for Alterations Guidance Note 2013 do
gives advise and states to be dealt with in a reasonable amount of time.
What do you do when you get a request
Read the lease
understand what works need to be done
request plans and specification RAMS
obtain an undertaking of fees
obtain landlord consent
Request for licence to be documented via solicitors
Landlord and Tenant act 1927
If a lease prevents works without LL consent then section 19 imposes, not to be unreasonably witheld
What is the purpose of dilapidations
To bring the property back to its condition at the start of the lease assuming there is a repairing liability within the lease.
What do you need to check when carrying out dilapidations
Read the lease and review the repairing obligations
Negotiations usually take pace at the lease expiry
Review the schedule of condition and any licences for alteration that have been granted.
Tenant is usually required to return the building to its original state
What are the two options before lease expiry
Tenant can do the agreed works or tenant can pay a sum to the landlord to undertake the works
What is section 146 notice of 1925 Law of Property Act
This is a notice issued by the landlord to the tenant when there is a breach of lease outside of non payment of rent. The intention is for the commencing of forfeiture but it has to
specify the breach complained of,
importantly if the breach is capable of remedy, require the leaseholder to remedy the breach, and
in any case require the leaseholder to make compensation in money for the breach.
What is the dilapidations claim limited to
Under L&T act 1927 section 18. The claim can not be more than the difference between the value of the property in disrepair and the value of the property once repaired.
and cannot claim if the future intention would supersede the works within the claim, i.e if the plan is to demolish the property.
What are the three types of dilaps schedules
Interim - served by LL or tenant during the lease - at least 3 years remaining
Terminal - served in the last 3 years of lease
Final - served at or after the tenant has vacated.
What is within a dilaps schedule
Outline of repairing obligations
state the remedy and cost of the breach
Loss of rent over period to do works (if appropriate)
Fess +VAT for the claim for surveyors and lawyers
negotiations conducted
What is the guidance note for dilapidations
RICS Guidance Note on Dilapidations 2016
What does RICS Guidance Note on Dilapidations 2016 set out
reduce claims between LL and T
guidance on diminuation valuations
Explores supression - the provision LL can claim the amount lost because of the breach of the lease
Relates to interim and final claims in commercial property
What does RICS Guidance Note on Dilapidations 2016 set out
reduce claims between LL and T
guidance on diminuation valuations
Explores supression - the provision LL can claim the amount lost because of the breach of the lease
Relates to interim and final claims in commercial property
What are the reasons a settlement of dilapidations not agreed
When the lease is not full repairing terms
Reinstatement not required by the landlord
If a schedule of condition limits the repairing limitations
If the building is to be demolished or sustainably refurbished after expiry
Tenant has gone into admin
Who is responsible for insurance on a property
Usually LL responsible to arrange and re-charge
What is insurance cover for on a property
Reinstatement of the building in the event of
fire, storm, flood, subsidence, loss of rent & SC, theft, terrorism etc.
What basis of measurement is used for insurance
usually GIA for commercial properties.
What is the key law for insurance
Insurance Act 2016 - more accountability for insurers, responsibilities to policyholders to provide relevant info and an aim to reduce claims
What actions should a property manager take on an empty building
Building insurance - inform insurers it is empty
Maintain fabric of building
Obtain EPC
Remove combustible materials
Undertake and record regular inspections (insurance purposes)
Undertake health and safety and risk assessment of building
Inform local council for empty rates
Isolate power supplies
What are the fundamentals of rent collection
Accuracy of information
Timing
What rent collection should you be careful of
when the tenant is outside the L&T act 54 and lease has expired. Collecting rent could create a protected tenancy
How do you deal with rent arrears
read the lease
check if rent deposit or if lease is granted pre 1/1/1996 = privity of contract or AGA in place
Interest paid on late payments
consider a payment plan
What rent default remedies are available
Court proceedings
Use a ret deposit
Pursue former tenants and guarantors
serve stat demand
Commerical rent arrears recovery scheme
Forfeit lease
Negotiate payment plan
Agree another mutually acceptable arrangement
Rent arrears - explain the court proceedings
LL could obtain court judgement and then secure payment by way of a charge over other property. Proceedings could also be issued to recover arrears following repossession = slow process and more costly
Useful if tenant still solvent as the threat of court could make tenant pay.
Rent arrears - explain the pursuing former tenant / guarantors route
check if AGA in place or lease before 01/01/1996
Remember section 17 of L&T act 95 sets out strict timetable for the recovery of rent arrears within 6 months
Rent arrears - explain the stat demand
Preliminary step to pursuing bankruptcy or winding up proceedings.
Advisable only when no dispute about level of arrears
21 days of arrears
After this LL can present a bankruptcy (for an individual) or winding up (company) petition to court if arrears more than £750
Rent arrears - explain the CRAR
The Tribunals, Courts and Enforcement Act 2007 modified regime called commercial rent arrears recovery
No minimum amount of arrears, only for rent in commercial property
What are the CRAR conditions
7 days unpaid rent
7 days clear warning notice
Enforcement agents visit
2 clear days to follow
re-entry by enforcement agent to seize goods
allow 7 days before sale of goods
fees specified on entry notice
Rent arrears - explain the forfeiture
There must be a forfeiture clause within the lease
Rent must have been properly demanded.
Be careful not to accept rent payments as this could acknowledge continuance of lease
Lease is forfeited when the LL by either physical, peaceable re-entry or by commencing county court proceedings to recover possession
If forfeiture for other reason than recovery of rent then section 146 notice of the Law of property Act 1925
What is section 6 of the Law Distraint Amendment Act 1908
This law enables the landlord to recover a tenants arrears from a sub-tenant. The notice informs the sub tenant that rent needs to be paid directly to the landlord
What is section 17 of the landlord and tenant Act 1995
This requires landlords to issue a section 17 within 6 months of the start of the arrears
What concluded in Scottish & Newcastle PLC and Raguz 2007?
This case decided that Landlords only need to serve S.17 notice once a rent review has been determined even though, technically if undetermind for years it is past the 6 month date
What tatics cant landlords use to re-engineer leases
Granting longer lease for lower rent or rent free
monthly payments
moving/removing of break clauses subject to a payment premium
Ravenseft Properties V Davestone Ltd 1978 determined the meaning of repair as?
Liability cannot arise in the absence of repair
Repair is distinct from renewal - tenant cannot give back a completely different unit
Tenants are responsible for inherent defects
Repair is not an improvement
An effective FRI lease is when the landlord is responsible for repairs & re-charges via SC
What options are available for landlords for breach of repair
Serve a repair notice
Forfeit the lease
Serve an interim schedule of dilaps
Do the works and charge the tenant ( LL right to re-entry)
Explain Notice of repair
Served under section 146 of the Law of Property Act 1925
usually for one specific repairing or decorating breach
Must be in writing and comply with lease terms
Must set out
Details of repair/decorating breach
Timescale allowed to remedy
Course of action if not done
Explain forfeiture in relation to repairs
Must have a clause
Will have to serve section 146
Should state why tenant is in breach of repair covenant and how to remedy
Must be given time to undertake works
explain interim dilaps schedule
Instruct building surveyor to prepare draft to serve
What is the leading case for Landlord’s entry to do works
Jervis vs Harris 1996
Explain leading case for Landlord’s entry to do works
Jervis vs Harris 1996 - gives the LL the right to pursue am effective remedy against defaulting tenants to ensure that the premises are kept in good repair for the duration of the term
When should the Jervis V Harris clause be used when repairs are required
Tenant is solvent
Landlord wants the lease and rent to continue
Landlord wants to retain control to carry out repair works
Where the threat of entry compel the tenant to do the works
What act governs repairs
Leasehold Property (Repairs) Act 1938
What is Leasehold Property (Repairs) Act 1938 for
Must be for leases with a term of 7 years+ and have at least 3 years left.
It protects tenants against onerous interim schedules of dilaps
Requires LL to serve section 146 notice
The LL must prove one of the following to permit enforcement of the repairing covenant. Immediate remedy is necessary:
1. to prevent substantial reduction in the property reversions value
2. to comply with legislation
3. In the interest of another occupier if the tenant does not occupy whole space
4. if at a small cost compared with the consequences of postponement
Planned maintenance programme can have 2 stages
Cyclical, Preventative and Responsive maintenance
What is Cyclical maintenance
regular activities that are carried out irrespective of the condition of the building for example servicing plant, health and safety related maintenance and redecoration
What is preventative maintenance
Dependent on a condition survey prepared by a building surveyor which forecasts future repair needs and plans the timetable for undertaking works. I.e replacing single glaze windows with double glazing, upgrading facilities or services and refurbishment works
What is responsive maintenance
initiated by building occupier i.e repairing leaks, unblocking drains or undertaking remedial works to the building
What is a schedule of condition
This is usually for new lettings where the landlord did not undertake repair works. It is negotiated during lease negotiations and put in the back of the lease, usually with photos. The point of the schedule is to document the state of the premises so at lease end the tenant brings back to that specific condition.
What is service charges
These are estate costs incurred by the landlord to maintain and manage a multi-tenanted property recharge to the tenant
No specific legislation for commercial service charge
Always check the lease and LL’s are liable for voids
What negotiations are being seen with service charge
Caps, fixed increases or RPI/CPI increases to limit future liability
What are the usual service charge arrangements
Service charge budget is agreed with tenants prior to commencement of the service charge year
Quarterly billings based on estimate
Annual accounts are prepared at year end
Balancing payment made at the end of the year upon presentation of audited accounts
Use of sweeping up clause for unexpected costs
Service charge caps becoming more common
Payments usually reserved as rent in the lease
What is the service charge statement
RICS Professional Statement Service Charges in Commercial Property 2018
What is the aim of RICS Professional Statement Service Charges in Commercial Property 2018
Improve general standards and promote best practice, uniformity, fairness and transparency in the management and administration of service charges in commercial property
Ensure timely issue of budgets and year end certs
Reduce the causes of disputes and to provide guidance on resolution
What are the 9 principles of RICS Professional Statement Service Charges in Commercial Property 2018
All expenditure recovered must be in accordance with the terms of the lease
Recover no more than 100% of costs
Budgets with explanatory commentary issued to all tenants annually
Approved actual expenditure issued annually
Service charge monies heled in one or more discrete bank accounts
Interest on accounts are credited to the SC account after deductions made
If being disputed sums being held should only reflect actual dispute
Following a dispute, any errors in raising charges should be rectified without undue delay
What are the four SC methods of apportionment
Floor area
Fixed percentages
Rateable value
Weighted floor area
How many months before should budgets be issued
at least 1 month
How many months after should SC recs be issued
at least 4 months
Service charge cost key facts
All costs transparent
Management fees fixed no hidden mark-ups
obtain more than one quote for out sourcing
Should not profit except with management fee
management fee must reflect actual costs involved
Service charge allocation key facts
costs allocated to relevant expenditure
seperate schedules where reasonable
basis and method of apportionment is fair an reasonable
Service charge communication facts
should consult occupiers to ensure standard and quality
must communicate to ensure services are delivered
Should demonstrate how you comply with professional statement
What should be excluded from the service charge
Initial costs of design, construction, plant or equipment
Setting up costs - fitting out management suites,
Improvement costs above repair and maintenance
future re-developments
costs and fees relating to asset management, rent collection, cost of letting units
costs for void units
Costs for negligence of the manager or owner
