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APC Mock Questions - BDG > Property management > Flashcards

Property management Flashcards

1
Q

Tell me about your responsibilities for occupied areas.

A
  1. Collection of rent, service charge and other sums
  2. Management of occupied areas is dictated by the lease
  3. Maintain regular contact with occupiers
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2
Q

Tell me about your responsibilities for communal areas.

A
  1. Ensure effective operation of the property - monitoring potential problems and seeking to comply with the service charge budget
  2. Understand the landlords responsibilities to repair and maintain communal areas
  3. Ensuring H&S compliance
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3
Q

Tell me about your responsibilities for vacant buildings.

A
  1. Undertake vacant unit inspections
  2. Rates
  3. Ensure building is suitable for viewings
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4
Q

What is the Occupiers Liability Act 1957?

A

Imposes a duty of care on persons occupying or in control of any premises in relation to visitors

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5
Q

What is the Occupiers Liability Act 1984?

A

Confers a duty on the occupier of a premises to any persons other than visitors

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6
Q

How does the Occupiers Liability Act 1957 impact your role?

A
  1. Have a duty to ensure that any visitor is reasonably safe whilst on the property
  2. Won’t be released from liability by merely putting up warning sign, unless sufficiently clear to make safe
  3. If injury has been caused to a visitor, only released from liability if reasonable steps taken to satisfy competence and proper work
  4. Duty of care is relative to the visitor
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7
Q

How does the Occupiers Liability Act 1984 impact your role?

A

Duty owed to any person who is not a visitor if:

  1. Aware of any danger on site
  2. Aware or reasonable to believe any person may be at risk on site
  3. Expected to offer reasonable protection against danger
  4. Simple ‘danger’ signs not sufficient
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8
Q

Tell me about RICS guidance on service charges.

A

RICS Professional Statement: Service Charges in Commercial Property, 1st Edition, September 2018

Supersedes previous 3 edition published as codes of practice on April 2019

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9
Q

Tell me about RICS guidance on commercial property management.

A
  1. RICS Real Estate Management, 3rd Edition, October 2016 (Professional Statement)
  2. RICS Code for Leasing Business Premises, 1st Edition, February 2020 (Professional Statement)
  3. RICS Commercial Property Management in England and Wales, 2nd Edition, October 2011 (Guidance Note)
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10
Q

Tell me about RICS guidance on Real Estate Management.

A

RICS Real Estate Management, 3rd Edition, October 2016 (Professional Statement)

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11
Q

What is the rule of privity of contract?

A

Only the parties to a contract can enforce its terms (a third party cannot)

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12
Q

What is an absolute covenant?

A

A bar/prohibition against doing something

Gives Landlord absolute control

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13
Q

What is a qualified covenant?

A

Requires landlord consent - no statutorily implied provision that landlords consent is not to be unreasonably withheld

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14
Q

What is fully qualified consent?

A

A covenant consent that requires landlord consent, but states it must not be unreasonably withheld

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15
Q

What does it mean for consent to not be unreasonably withheld?

A
  1. Landlord has a duty to consent unless it is reasonable to not do so
  2. Duty of providing reasonableness is with the landlord
  3. Duty to respond within a reasonable period
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16
Q

What is the statutory duty placed on landlords under the Landlord & Tenant Act 1927?

A

Gives tenant who has made improvements to a premises a right to compensation

  1. Some preconditions must be satisfied (providing notice)
  2. Can claim the net addition to the value of the holding as a direct result of the improvement
  3. The reasonable cost of carrying out the improvements at the termination of the tenancy
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17
Q

What is the statutory duty placed on landlords under the Landlord & Tenant Act 1988?

A

This act imposes statutory duties on landlords in connection with covenants to assign and underlet serve notice of decision within a reasonable period.

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18
Q

What remedies are available to landlords for a breach of repairs?

A
  1. Lease may allow landlord to enter property and carry out repairs and recover cost
  2. Section 146 notice
  3. Claim for damages
  4. Court order to compel the tenant to carry out repairs
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19
Q

What are the remedies for default?

A
  1. CRAR
  2. Lease forfeit
  3. Use of Rent Deposit Deed
  4. Statutory demand - written demand for payment which can result/support a winding up petition
  5. Claim on AGA/Guarantor
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20
Q

What are the various forms of corporate insolvency?

A
  1. Compulsory liquidation
  2. Creditors Voluntary liquidation (CVL)
  3. Administration (ADM)
  4. Administrative receivership (ADR)
  5. Company Voluntary Arrangement (CVA)
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21
Q

Tell me about your understanding of the Corporate Manslaughter and Corporate Homicide Act 2007?

A

The Act clarifies criminal liabilities of companies where serious failures in the management of H&S results in fatalities

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22
Q

What are your duties under the Corporate Manslaughter and Corporate Homicide Act 2007?

A

Owe a duty of care to take reasonable care of a persons safety

  1. Duty of care to the systems of work and equipment used by employees
  2. Duty to the conditions of worksites and other premises
  3. Duty of care to products or service supplied to customers
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23
Q

What are the offences and penalties under the Corporate Manslaughter and Homicide Act 2007?

A
  1. Unlimited fines
  2. Remedial orders
  3. Publicity orders
  4. Imprisonment
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24
Q

How would you handover a service charge account upon sale or change in manager?

A

Onus on seller to provide information:

  1. Property financial info (accounting period, pervious recs & budget)
  2. Tenant financial info
  3. Financial transfer
  4. Statements of SC movement
  5. Info on sinking funds
  6. Depreciation charges
  7. Security deposits for utilities
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25
Q

Tell me about RICS guidance you are aware of relating to licenses for alterations.

A

RICS Licence for Alterations in Commercial Property, 2nd Edition, January 2022 (Guidance note)

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26
Q

What is the process of considering a tenants application to alter?

A
  1. Ensure it is submitted in writing
  2. Cost undertaking for handling the application
  3. Review the lease - what is the Tenant entitled to?
  4. Be aware of timings and reasonableness
  5. Consult with client

Tenant applications → factors to consider → Third party input → response → Documenting → final inspection

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27
Q

Why is it important to handle applications properly?

A

To ensure the complete licence protects both parties’ interest and proceeds without unnecessary delay

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28
Q

What protection does an LTA provide?

A

Protection to a landlord, often requiring reinstatement at lease end

Protection to a tenant, preventing the landlord from realising improvements at a future rent review

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29
Q

How should an LTA be submitted?

A

In writing

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30
Q

What is a cost undertaking?

A

Tenant is responsible for fees, whether or not the licence continues to completion (legal fees, agent fees, third party fees)

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31
Q

What factors need to be considered in a LTA?

A
  1. Nature of works
  2. Improvements
  3. Unlicensed works on review and assignment
  4. Impact on building operations
  5. Financial bond
  6. Warranties for major works
  7. Dilapidations/reinstatement provisions
  8. DDA/Equality Act 2010 compliance
  9. H&S
  10. Sustainability
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32
Q

What information should be provided with LTA applications?

A
  1. Scope of works
  2. Relevant insurances
  3. Acceptance of fees
  4. H&S Risk assessment - site specific
  5. Building regulation compliance (if required)
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33
Q

What information would you look for in the lease if you receive an application?

A

Information on what the tenant is entitled to and landlord obligations (type of consent)

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34
Q

What are improvements under the Landlord & Tenant Act 1927

A

Any alterations that render the occupation of the premise more beneficial to a tenant

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35
Q

How does the LTA 1927 impact landlord consent?

A

If works comprise of ‘improvements’ and the lease requires landlord consent, it is implied that landlord consent is not to be unreasonably withheld

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36
Q

What is an improvement?

A

Something that will enhance the use and enjoyment of the premises from a tenants point of view

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37
Q

What does not to be unreasonably withheld and delayed mean?

A

The landlord has a duty to consent unless it is reasonable not to do so

→ Duty of providing reasonableness lie with the landlord

→ Duty to respond within a reasonable period

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38
Q

What happens if superior landlord consent is required?

A
  1. Licence may form a tripartite agreement
  2. Advise tenant that there is potential for increased costs and longer time to process the application
  3. Potential for superior landlord to withhold consent
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39
Q

What are your duties in relation to timings and reasonableness?

A

Landlord has a duty to provide consent within reasonable time period, or provide all reasons as to why it is reasonable not to

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40
Q

Is there any case law relating to consent and delays?

A

Go West Ltd v Spigarolo (2003) → decision should take ‘days not weeks’ and if complex ‘weeks not months’

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41
Q

How would you consider the nature of the works?

A
  1. Re-read lease, ensure works are permitted
  2. Are the works fully or partly within their demise?
  3. Impact of Easement or Wayleave
  4. Assess the complexity → refurbishment / fitout?
  5. Assess your expertise relative to the works → M&E consultant? Building Surveyor input?
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42
Q

What is section 3 of the LTA 1927?

A

Enables a business tenant to carry out improvements which are prohibited by the lease and which improve the letting value of the premises

→ if the tenant uses this procedure, the landlord can do the work itself and increase rent

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43
Q

What would happen if you discovered unlicensed works on review or assignment?

A
  1. May be able to rentalised unlicensed works → depends on precise wording of the lease
  2. May be able to reject assignment based on unlicensed works
  3. Breach of lease covenant → potential to forfeit lease
  4. Retrospective licence
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44
Q

How would you consider the impact of proposed alterations on building operations?

A
  1. Would consider nuisance to tenants if multi-let
  2. Investigate impact on landlords systems, such as A/C and fire alarm systems
  3. Assess impact on EPC / Sustainability
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45
Q

What is a warranty?

A

A written guarantee issued to the purchaser promising repair or replace if necessary within a specified time-period

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46
Q

Why would a warranty be required?

A

To protect the landlords interests

E.g. if the tenant is proposing major structural works, repairs would be covered under warranty if any issues. Ensures work will be completed properly

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47
Q

What are reinstatement provisions?

A

A provision that ensures the repair of the property so that it is in the same condition, or materially equivalent condition, prior to the works taking place

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48
Q

How do dilapidations relate to alterations?

A

LTA is an ‘extension’ of the original lease and so will be considered at lease end → if required to reinstate to original condition, it will be included within delapse works/settlement

Dilapidations notice periods should be agreed, with wording and SoD issues by solicitors

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49
Q

How does the Equality Act 2010 relate to alterations?

A

Alterations may be required to allow occupiers providing a service to fulfill the obligations placed on them by the Equality Act 2010

If works required under legislation, different statutory regime applies

→ Cannot withhold consent irrespective of wording

→ Response given within 42 days

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50
Q

What H&S considerations relate to alterations?

A

The tenants or contractors H&S documents demonstrate that risk assessments and method statements have been produced

Safe working practices should be adhered and permits issued

→ Asbestos register

→ Construction Regulations (2007) apply to refurbishments

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51
Q

How does MEES relate to alterations and your reasoned advice?

A

Where tenant works will (or may) negatively affect the EPC, it is likely to be reasonable for landlords to withhold consent

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52
Q

What levels of approved decision are there in granting alterations?

A
  1. Approved
  2. Approved with modifications
  3. Approved subject to conditions
  4. Rejected
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53
Q

If consent is refused, what remedies does a tenant have?

A
  1. Issue court proceedings for declaration that the landlord is being unreasonable and the works may proceed
  2. Simply carry on with the works regardless
    → pros and cons to both
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54
Q

Can consent be granted retrospectively?

A
  1. Yes, retrospective licence will be on the formal agreement that full plans will be provided on completion for use in licence documents.
  2. Landlord may also rentalised the unauthorised alterations on the next rent review
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55
Q

Following alterations, can you and how would you adjust service charge?

A

No, costs and fees relating to owners investment interests should not be included within service charge

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56
Q

What is TUPE?

A

Transfer of Undertakings (Protection of Employment) Regulations 2006

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57
Q

What is the purpose of TUPE?

A
  1. Protect employees if the business in which they are employed changes hands
  2. Protects rights as an employee when you transfer to a new employee
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58
Q

How might TUPE relate to property management?

A

During a sale, TUPE might be an issue due to on-site staff employed by the PM or Landlord

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59
Q

What are the effects of TUPE?

A
  1. Employment of staff will transfer to the new owners
  2. Protection against dismissal
  3. TUPE requires the transferor to provide prescribed info about the transfer to the transferring employees (can be awarded 13 weeks gross pay per employee if failure to comply)
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60
Q

How might TUPE relate to Property management?

A
  1. Service charge provision change
  2. Grant or assignment of lease where there is a change in ownership
  3. Property sale
  4. termination of a PM agreement and appointment of new agent
  5. sale of business
  6. Change to the contractor providing services to a building
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61
Q

What is a duty of care deed?

A

A document between the property manager and the landlords funder

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61
Q

What is the purpose of a duty of care deed?

A

To create a direct legal relationship between the PM and funder, particularly to payment of rent, but also more generally

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62
Q

Why is a duty of care deed often required?

A

Volatile property process and conservative attitude to risk means lenders want additional security

If landlord defaults or becomes insolvent, the PM diverts rental payments to bank and continues operating to provide lender with comfort

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63
Q

What is included within a duty of care deed?

A
  1. Obligation for PM to comply with PM agreement with landlord
  2. Expressly makes PM liable to the bank
  3. Provides acknowledgement from managing agent that bank has security over the property
  4. Detailed info/obligation on Client accounts and Client money
  5. Express obligation for PM to maintain PII
  6. Detailed obligations on when the landlord becomes insolvent and requirements for PM
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64
Q

What would you do if you were asked to sign a duty of care deed

A
  1. Sign it without seeking to vary it
  2. Ignore it (unlikely to be a real option)
  3. Sign it but seek to vary it - seriously consider given additional risk for PM
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65
Q

What are the 3 key principles in RICS Commercial Property Management in England and Wales?

A
  1. Acting as an agent of the landlord
  2. Managing third party suppliers
  3. Duty of care
  4. Tenant management
  5. Building management
  6. Financial management
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66
Q

What are some of the core duties of a property manager?

A
  1. Liaising and reporting with the landlord
  2. Collection of monies
  3. Client accounts
  4. Defaulting occupiers
  5. Service charge
  6. Deposits
  7. Managing the building
  8. Management policies
  9. Insurance relating to the building
  10. Occupier liaison
  11. Energy management
  12. Buidling management systems
  13. H&S and Fire Safety
  14. Procurement of third party suppliers
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67
Q

What are some of the key obligations associated with collection of monies?

A
  1. Have a thorough understanding of the relationship between landlord and occupiers
  2. Understand all relevant documents, such as leases and licences
  3. Maintain a database to record financial position of occupiers
  4. Put payment processes in place, clear for occupiers
  5. Have a mechanism in place to notify any default in payment or dispute over payment
  6. Have a process to promptly purse defaults
  7. Have a process to forward client money to the landlord
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68
Q

What would you do if an occupier defaulted on payments?

A

Liaise with the landlord on instructing debt collection proceedings

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69
Q

How would you deal with rental deposit deeds?

A

Review RD in first instance → then establish a seperate, interest-bearing account to hold deposit and manage funds in accordance with relevant legal documentation

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70
Q

Tell me about usual insurance requirements for the landlord

A
  1. Required to obtain insurance against damage to the property, including loss of rent
  2. Public liability insurance
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71
Q

How can you pass on costs of insurance to tenants?

A

Usually stated within lease that allows landlords to charge occupiers for insurance premium. Usually as a direct recharge.

→ refer to RICS guidance note: Insurance for Commercial Property Managers, 1st Edition, 2011

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72
Q

What are the issues associated with a lack of insurance?

A
  1. Increased risk if a claim is brought against you
  2. Possible negligence / against the law
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73
Q

How do you ensure that insurance cover is appropriate?

A

Follow RICS guidance → Insurance for Commercial Property Managers, 1st Edition 2011

RICS provide insurance requirements, such as PII and Public Liability Insurance

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74
Q

What is public liability insurance?

A

Covers the cost of claims made by members of the public for incidents that occur in connection with your business activity

75
Q

Why is public liability insurance important?

A

Without it, you may have to pay for the claim yourself or out of your business

76
Q

Why is effective occupier liaison important?

A

Because seeking to create a good relationship with occupiers is essential to good property management

77
Q

Tell me about the role of property managers in relation to energy management.

A
  1. Aware of new regulations
  2. Ensure energy procurement, energy conservation and regulatory compliance
  3. Determine whether or not Client is obliged to provide annual Carbon Reduction (CRC) returns
  4. Ensure clear responsibilities for the info required by the Client
  5. Implement recharging to electricity consumption to occupiers
78
Q

As a property manager, what are your H&S and Fire Safety obligations?

A
  1. Overseeing H&S and fire safety and ensuring it is managed to comply with all legal obligations
  2. Keeping the building safe and ensuring compliance with relevant legislation
79
Q

Tell me about third party supplier procurement in relation to your property management role.

A

PM will enter into arrangeemnts with third party suppliers as agents for landlord

  1. Ensure comprehensive signed contract is in place and states PM is acting on behalf of landlord
  2. Ensure scope is clear and complies with landlord requirements
  3. Terminates on one months notice
80
Q

Under the Occupier Liability Act 1954, what happens if an injury was caused to a visitor due to the faulty work of a third party?

A

The occupier is not to be treated without more as answerable for the danger, if he acted reasonably entrusting the work to a competent contractor, taking the necessary steps to ensure competence and skill, and the work had been done properly

81
Q

How can you satisfy your duty of care to persons other than visitors under the Occupiers Liability Act 1984?

A

Taking reasonable steps to give warning of the danger concerned or to discourage persons from incurring the risk

82
Q

Tell me about a key point of the management of H&S at Work Regulations 1999.

A

To undertake risk assessments to identify potential hazards to employee health and safety and anyone who may be affected by their work activity

83
Q

Tell me about a key point of the control of substances to hazardous health regulations 2002.

A

Finding out what the health hazards are and deciding how to prevent harm (risk assessments / providing control measures to reduce harm to health)

84
Q

Tell me about a key point of the Water Supply Regulations 1999.

A
  1. Prevent waste, misuse, undue consumption, erroneous measurement and consumption of drinking water
  2. Plumbing systems, water fitting and water using appliances must be installed and maintained
85
Q

Tell me a kay point about Electricity at Work Regulations 1989.

A

Ensure electrical equipment is suitable for the work intended

86
Q

Tell me about the Defective Premises Act 1972.

A

Requires those involved with the construction of a dwelling to ensure it is fit for habitation upon completion

87
Q

Tell me about the Regulatory Reform (Fire Safety) Order 2005.

A
  1. Designed to provide minimum fire safety standard in all non domestic premises
  2. Designates the employer the Responsible Person
88
Q

Tell me a key point of the Gas Safety Regulations 1998

A

No person shall install a used gas pipe without verifying that it is safe in condition for further use

89
Q

Tell me a key point of the CDM Regulations.

A

To improve H&S in the construction industry, by defining different duty holders with carrying levels of responsibility

→ allows to manage risks from start to finish

90
Q

What are the two tests for corporate insolvency?

A
  1. Cash flow insolvency test
  2. Balance Sheet insolvency test
90
Q

What are the consequences of insolvency?

A
  1. For limited companies it means the business will go into liquidation and stop trading or go into administration and be sold
  2. For sole traders and partnerships, business owners are liable for debts and their personal assets are at risk
91
Q

Tell me about an insolvency procedure.

A

Administration

Allows a company unable to pay its debts to continue trading for a further period, during which its assets are protected. This allows an improved market price for assets to keep the company fully operational

92
Q

What is CVA?

A

Company Voluntary Arrangement

  1. Occurs when a company is in difficulty financially but is not necessarily insolvent
  2. Make a viable proposal to creditors with the aim to secure an acceptable % due to them
93
Q

What is administrative receivership?

A

When a party breaches the terms of its borrowing

The creditor may appoint a administrative receiver to collect the money owed

94
Q

What is compulsory liquidation?

A

Occurs when the company is unable to pay its debts

→ Winding up of the company, stops trading and liquidator sells off assets

95
Q

What is voluntary liquidation?

A

Can be instigated when the company is still solvent

96
Q

What are 3 of the key principles of RICS Real Estate Management?

A
  1. Conduct business in an honest, fair, transparent and professional manner
  2. Not discriminate unfairly in any dealings
  3. Do the utmost to avoid conflicts of interest, and where they do not arise, deal with them openly, fairly and promptly
  4. Ensure that is made clear to all parties with whom you are dealing, the scope of your obligations to each party
97
Q

What is CSR?

A

Corporate Social Responsibility

  1. Involves adopting an attitude of responsibility taking into account the nature of your relationship with employees, customers, suppliers and wider community.
  2. Going beyond the minimum legal and professional requirements
98
Q

What are the requirements under RICS Real Estate Management for rent demands?

A

You should submit rent demands in a timely manner and ensure they are clear and understandable by tenants

Relevant taxation should be included in the demand

99
Q

What are the requirements under RICS Real Estate Management for rent arrears?

A

You should ensure you have efficient systems to monitor rents collected

  1. Issue standard letters chasing arrears
  2. Keep client informed
100
Q

What is PPM?

A

Planned Preventative Maintenance

101
Q

Why is a PPM beneficial?

A
  1. Ensures any issues are identified and addressed before they develop further
  2. Ensures H&S compliance
  3. Less need for major unplanned repair work
  4. Adds value to preserve and enhance property assets
102
Q

What is the difference between an insured and uninsured risk?

A
  1. Insured risk is the risk or other contingency against which the premises are required to be insured under the lease
  2. Uninsured risk is risk that is not insured against
103
Q

Give an example of insured risk.

A

Depends on lease

Escape of water, terrorism, subsidence

104
Q

Give an example of uninsured risk

A

Depends on lease

Terrorism may also be an uninsured risk

105
Q

What advice would you give close to the end of the lease?

A

I would advise my Client that building surveyors should be instructed to inspect and prepare a schedule of dilapidations, assuming the tenant is not renewing the lease

106
Q

What types of dilapidations claims are there?

A
  1. Interim Claims → made during the course of the lease to ensure tenants keep on top of their obligations
  2. Terminal Claims → made in the run up to the lease ending, giving notice of what landlord is expecting
  3. Final Claim → once lease has expired, when landlord is clear about the nature of the breaches that have occurred and the costs
107
Q

What is an S18 valuation?

A

Section 18 valuation (Landlord & Tenant Act 1927)

→ Limiting or defining the amount of damages that a landlord is able to recover for a breach of the tenants repairing covenant

108
Q

Why would a S18 valuation be used?

A

To limit the landlords claim to loss in value suffered

Applies to repairs only. Reinstatement and redecoration sit outside of this cap

109
Q

How do empty rates affect property managers?

A
  1. Increases void costs
  2. Requirement for rates mitigation → paid on buildings/units empty for 3 months
110
Q

How can you protect the security of Client Money?

A

By ensuring you/your firm are registered with the RICS Client Money Protection Scheme

111
Q

What is the Client Money Protection Scheme?

A

A scheme that reimburses landlords and tenants should an agent misappropriate rent, deposits or other client funds

112
Q

What is an annual return?

A

A form that RICS firms are required to fill out annually, providing information on the firm

Regulatory

113
Q

What is a regulatory review?

A

Compliance review conducted on or off site by regulatory reviewers - allows RICS to monitor, provide feedback and ensure best practice.

Disciplinary action taken where needed

114
Q

What happens if you have surplus money in a client account that is not claimed after 6 years?

A

If effects have been made to trace the Clients or owenrs of the money then:

  1. Donate to a registered charity, holding the receipt.
  2. Receipt can be provided should the owners come forward
  3. Receiving charity should offer indemnity, enabling recovery in the event of a claim
115
Q

What is a reconciliation (client money)?

A

Monthly exercise that formally documents the agreement of the bank statement balance to the total of Client money held

Showing cashbook, ledger, and bank statement balances, with any reconciling items clearly explained

116
Q

What controls should be in place relating to holding Client money?

A
  1. Keep records and accounts that show all dealings with Client money and demonstrate that all Client money held by the firm is held in a Client money account
  2. Complete regular account reconciliations and demonstrate these are reviewed by a principal
  3. Ensure that overdraw balances are prevented by the firms systems and controls, if these do occur, investigate immediately
  4. Publish written procedures for handling Client money → make this available
  5. Have appropriate systems and controls to ensure transfer or withdrawal of Client money, in accordance with instructions from the Client
117
Q

When was RICS service charge guidance last updated?

A

RICS Service Charges in Commercial Property, 1st Edition, 2018 (effective 2019) (professional statement)

RICS Service Charge Residential Management Code, 3rd Edition, 2016 (code of practice)

118
Q

What are the 3 mandatory principles of the RICS Service Charge Professional Statement?

A
  1. All expenditure that the owner and manager seek MUST be in accordance with the terms of the lease
  2. Owners and managers MUST ensure that service charge budget, including explanatory comments, are issued annually to all tenants

3.Owners and managers MUST ensure a SC apportionment matrix for their property is issued annually to all tenants

  1. SC monies must be held in one or more discrete bank accounts
119
Q

When was the RICS Service Charge Professional Statement last updated?

A

September 2018 - effective April 2019

120
Q

What status does RICS Service Charges in Commercial property hold?

A

Professional statement - mandatory requirements

121
Q

What is a service charge?

A

An amount that tenants pay to cover the cost of providing communal services to a building or the surrounding estate

122
Q

Where is the service charge arrangement set out?

A

Guidance and mandatory requirements in RICS Service Charges in Commercial Property, 1st Edition 2018

Otherwise, within lease

123
Q

What does Service Charge usually include/exclude?

A

Exclude:

  1. Improvement costs above the normal cost of maintenance repair or replacement
  2. Future redevelopment cost
  3. Cost attributed to void premises
  4. Costs arising from negligence of manager or owner

Include:

  1. Typical maintenance contracts and repair work to communal areas
  2. Utility charges
  3. Security charges
124
Q

What are the aims of the SC Professional Statement?

A
  1. Ensure timely issue of budget and year-end certificates
  2. Ensure best practice and improve general standards
  3. Transparency
  4. Reduce causes of disputes and provide guidance on resolution
125
Q

What are some of the core principles of the Service Charge Professional Statement?

A
  1. Costs should be transparent
  2. Services procured on a value for money basis
  3. Costs should be allocated and apportioned appropriately
  4. Management fees must be on a fixed basis - based on a reasonable time spent
126
Q

What are some limitations of the Service Charge Professional Statement?

A

Existing lease terms - cannot override lease

Proportionality - extent of following best practice depends on size, nature of property, aggregate total SC costs → should be consistent

Service Charge arrangement

127
Q

Tell me about contract procurement.

A

It is managers responsibility to identify the prcurement strategy most suitable

Procurement of Facility Management, 1st Edition (professional statement)

  1. Must have a clearly defined scope of the services
  2. State clear objectives for procurement
  3. Develop evaluation criteria

Best practice to ensure all contractors and suppliers perform according to written performance standards

128
Q

What do chapters 2, 3 and 4 of the Service Charge Professional statement relate to?

A

2 - Mandatory requirements

3 - Core principles

4 - Best practice

129
Q

What do the appendices of the Service Charge Professional Statement provide?

A
  1. Compliance checklist
  2. Standard Industry Cost Classifications
  3. SC accounting sample report
  4. SC handover procedures
130
Q

What is value for money?

A

Optimal use of resources to achieve intended outcome

131
Q

How can you achieve value for money?

A

procure quality service standards - achieve value for money as opposed to cheapest price

  1. Competitive tenders
  2. Formal re-tendering
132
Q

What is transparency?

A

Being open and honest in all dealings

133
Q

How can transparency be achieved?

A

By being open and honest → prompt notification of changes, updates, explanations and forecasts

134
Q

What are the timescales for reporting within the Service Charge Professional Statement?

A

Issue budgets, including comments and matric, minimum 1 month prior to start of SC year

Issue reconciliation / expenditure certifications, with explanations, within 4 months of SC year-end

135
Q

What is a budget?

A

The expenditure estimated by the landlord or its manager that will be incurred in a given service charge accounting period

136
Q

What is a year-end statement?

A

The account of SC expenditure/costs and related notes

Issued following the end of each SC period, annually

137
Q

What is your duty of care in relation to Service Charge?

A
  1. Duty of care to both owners and occupiers to act with professional care, diligence, integrity and objectivity
  2. Duty to manage the property
  3. Should have clear policies on Service Charge management
138
Q

What is standardised financial reporting?

A

The reporting of budgets and actual expenditure in line with the SC professional statement:

  1. Standardised cost categories used
  2. Seperate schedules are appropriate and used when necessary
  3. Full allocation and apportionment schedules included as standard
139
Q

How should interest be dealt with?

A

Seperate interest-bearing accounts should be operated for each building

  1. Interest income and expenses credited or expensed within SC
  2. Bank statement of interest income and expenses
140
Q

How does ADR relate to SC under the professional statement?

A

ADR is supported and recommended as the basis to resolve service charge disputes

  1. Lease makes provision for ADR
  2. ADR is proactively pursued
141
Q

Tell me about allocation under the service charge Professional Statement

A

The splitting of costs of a service to assign them to a specific schedule or cost category

142
Q

Tell me about apportionment under the service charge professional statement

A

The basis and method of apportionment should be demonstrate fair and reasonable to ensure that individual occupiers bear an appropriate proportion of the total SC expenditure that clearly reflects the benefit and use of services

143
Q

Tell me about communication under the service charge professional statement

A

Managers certificate of service charge expenditure should be supported by an independent review of the service charge account

144
Q

Tell me about communication under the service charge professional statement

A

Managers should communicate with occupiers to ensure services are delivered effectively for the benefit of all

Understand what they are expected to pay and can expect to receive

145
Q

Tell me about consultation under the service charge professional statement

A

Managers should consult with occupiers regarding the standard and quality of service charge provision required

146
Q

Tell me about financial competence in the service charge professional statement

A

When issuing statements of accounts and/or certifying expenditure, managers should do so in a non-partisan spirit, acting as experts

The Industry Standard Cost Classifications should be used in reporting budget and actual expenditure

147
Q

Tell me about occupier responsibilities under the service charge professional statement

A
  1. Should ensure prompt payment of all service charge and balancing service charge
  2. Should recognise the SC provision of any lease has legal effect
  3. Should be proactive in assisting owners in the operation and utilisation of services and service systems
148
Q

Tell me about the right to challenge under the service charge professional statement

A
  1. Leases should have provision for disputes to be resolved through ADR
  2. President of RICS to nominate a suitable person if mediator independent expert cannot determine the dispute
149
Q

What are the options for recovering rent arrears?

A
  1. Rent deposit draw down
  2. CRAR
  3. Payment plan
  4. Statutory demand
  5. Winding up petition
  6. Court order
150
Q

What is a rent deposit draw down?

A

When the arrears are cleared using the rent deposit held

151
Q

What is a payment plan?

A

An agreement outlining an instalment plan to repay sums owed

152
Q

What is forfeiture?

A

When the landlord seeks to end the lease and regain possession of the unit

153
Q

How can you effect forfeiture?

A
  1. Peaceable re-entry (not to be used on residential and mixed use and if someone is in the premises)
  2. Forfeiture by court proceedings
154
Q

When can you forfeit a lease?

A

If rent owed under the lease remains unpaid for 21 days after due (defined in lease)

Through breach of clause and by service Section146 notice

155
Q

What is a waiver?

A

Once the right to forfeit the lease has arisen, if the landlord acts in such a way so as to treat the lease as continuing, it will have waived its right to forfeit the lease

156
Q

What amounts to a waiver?

A

Demanding rent / communicating to the tenant once the right to forfeit for non-payment of rent has arisen

157
Q

What is a section 146 notice?

A

Section 146 of the Law and Property Act 1925

Served by a landlord who wishes to commence forfeiture proceedings against a leaseholder following a breach of a lease

158
Q

What is a remediable breach?

A

A breach that can be remedied

S.146 notice must require the tenant to remedy the breach within a reasonable period, if remediable.

159
Q

What time frames relate to Section 146 notices?

A

Must provide a ‘reasonable period’ - will depend on the nature of the breach

No strict time limit on relief of forfeiture - 6 months as a maximum to respond.

160
Q

What is a continuing breach?

A

A breach is continuing if it re-occurs every day → a fresh right of forfeiture arises each day. If the Landlord waives his right, a fresh right accrues the next day

i.e breach of use covenenant

Breach of covenant to insure

Breach of covenant to keep in repair

161
Q

What is a once and for all breach?

A

Where a breach is once and for all, the right to forfeit is lost upon waiver

i.e. pay rent

Carry out repairs by a specified date

Assign or sublet

Not make alterations

162
Q

What does the Leasehold Property (Repairs) Act 1938 say about breaches of covenant to repair?

A

Significantly limits a landlords right to claim damages or forfeiture for disrepair during the current tenancy (if 3 years unexpired of a term of 7+ years)

163
Q

What should you consider prior to forfeiture?

A
  1. Is there a commercial advantage to forfeiting the lease
  2. Careful not to waive the right
  3. Relief from forfeiture
  4. Evidence to serve a Section146 notice
  5. Time frames
164
Q

What is a Jarvis v Harris Clause?

A

Grants the landlord a right to first serve notice on a tenant, specifying any breaches of covenants relating to the condition of the property

If the tenant fails to diligently remedy the breach, within specified period, the landlord may enter and carry out works itself (and recover costs)

165
Q

How can you avoid recognising the continuance of a lease?

A

Rent stop - do not demand further sums

Do not communicate with the tenant

166
Q

What is peaceable re-entry?

A

Physically re-entering the property, when it is empty, to regain possession of the unit (changing the locks)

167
Q

What is a TORT notice?

A

Legal document alerting the owner of items that have been abandoned/left on private land or property

168
Q

What is a bailiff?

A

Legal office to whom some degree of authority or jurisdiction is given

169
Q

What are court proceedings for seeking possession?

A

Part 55 of the Civil Procedure Rules (CPR 55)

170
Q

When could court proceedings be used for regaining possession?

A
  1. Possession claim following the expiry of a lease
  2. Possession claim based on forfeiture of a lease
  3. Possession claim against trespassers
171
Q

How can you pursue a former guarantor?

A

By serving notice on the former tenant/former guarantor if there is an AGA.

TO be served within 6 months of the debt arising

172
Q

Under what legislation can you pursue a former guarantor?

A

Section 17 of the Landlord & Tenants (Covenants) Act 1995

173
Q

What notices must be served on a former guarantor and what are the relevant timescales?

A

Section 17 notice to recover debt from them within 6 months of the debt rising

174
Q

What is CRAR?

A

Commercial Rent Arrears Recovery

175
Q

When did CRAR come into force?

A

2014

176
Q

What did CRAR replace and how does it differ?

A

Replaced the common law right to ‘levy distress’

  1. CRAR can only be exercised when the land/unit has a lease in place in writing, not oral tenancies or licences
  2. Debt owed must be rent (previously any sum) and has a minimum sum equal to 7days rent
  3. Only available for commercial
  4. CRAR gives 7 days notice, previously no notice needed
  5. Agents can only attend during business hours
177
Q

What are the requirements of CRAR?

A
  1. Minimum sum equivalent to 7days rent outstanding
  2. 7 days notice given before attendance
  3. Details included within notice served
  4. Notice served in a specific way
  5. Time limit for seizing goods from service notice is 12 months
  6. Goods can only be seized between 6am and 9pm
  7. Only certain types of goods can be seized and an inventory must be made
  8. Goods seized must be valued and not sold for 7 days
178
Q

What goods can be seized in CRAR and by whom?

A
  1. Only goods belonging to the Tenant
  2. Cannot recover tools of the trade up to a value of £1,350 aggregate
  3. Cannot recover goods in use at the time of the enforcement
  4. Enforcement Agents can seize
179
Q

Can the tenant appeal CRAR?

A

Yes, the tenant has the right to apply to the court for an order that no further steps may be taken under CRAR without permission of the court

180
Q

What are court proceedings and how can they be used to recover debts?

A

Landlord can issue court proceedings to recover rent

Lengthy and expensive

181
Q

What happens if a tenant is insolvent?

A
  1. Entering insolvency will not alter the lease and landlord can still recover using usual means
  2. Type of insolvency will also dictate options available
182
Q

What is a statutory demand?

A

Written notice/demand from creditor - will state that if debt is not paid, or arrangement made, within 21 days, creditor can apply to make you bankrupt

183
Q

What is a winding-up petition?

A
  1. Next step after statutory demand
  2. Statement of intent by a creditor to shut down business due to unpaid debt
  3. Most serious legal action a creditor can take
  4. 7 days before financial info becomes public
184
Q

What is the difference between a sinking fund and a reserve fund?

A
  1. Sinking fund used to cover specific costs which might only occur once or twice during the lease term length
  2. Reserve fund is formed to meet the anticipated future costs of maintenance and upkeep in order to avoid fluctuations. Helps manage unexpected cost

APC Mock Questions - BDG (18 decks)

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