Property Management Flashcards
What would you do if a tenant breached their lease in one of your properties?
- Seek to understand the exact nature of the breach
- Check the lease
- Lease will guide next steps, e.g. payment, forfeiture, remedial work (depending on nature of breach)
What are the 12 principles from the RICS Professional Statement: Real Estate Management, 2016?
- Act honestly, fairly, transparently, and professionally.
- Perform tasks with skill, care, and diligence, ensuring staff are competent.
- Provide clients with fair, clear terms of business and complaints procedures.
- Avoid and handle conflicts of interest openly and fairly.
- Ensure no unfair discrimination in dealings.
- Communicate with clients in a fair, clear, and timely manner.
- Ensure advertising and marketing are honest and truthful.
- Hold client money separately with adequate insurance.
- Maintain appropriate PII insurance to cover negligence.
- Clarify client identities and your obligations to each party.
- Provide realistic assessments based on market evidence and judgment.
- Conduct meetings, inspections, and viewings in line with client wishes, ensuring safety.
What key areas of property management advice are covered in the RICS Professional Statement: Real Estate Management, 2016?
- Ethics: Duty of care, conflict of interest, corporate social responsibility.
- Securing instructions: Terms of engagement and offering services.
- New lettings/lease renewals: Negotiating lease terms and heads of terms.
- Managing real estate: Rent collection, repairs, insurance, service charges.
- Portfolio/asset management: Performance measurement and capital security.
- Ending instructions: Written confirmation and information handover.
- Safety/security: Confidentiality, data protection, health and safety.
- Business management: Advertising, complaints handling, PII, client money management.
What might be some reasons to sub-let rather than assign a lease?
- A requirement of the lease
- For part of the demise and not the whole
- If the market rent is higher than the passing rent then there is a profit rent
- If the tenant want to re-occupy in the future
- The new party is of a lesser covenant strength
What actions should be taken when dealing with an application for consent to assign or sublet?
- RTL
- Check if the tenant will cover surveyor’s and legal costs
- Confirm if the proposed rent is market rent or matches passing rent.
- Assess the impact on the property’s investment value.
- Determine if there are reasonable grounds to withhold consent under the lease.
- Evaluate the new tenant’s covenant strength, accounts, and references.
- Check for rent deposit and any AGA clause.
- Provide the client with a report and recommendations.
- Obtain client approval to proceed.
If approved, prepare a licence for assignment or subletting. - Note that landlord remedies for illegal alienation may include forfeiture, damages, or an injunction.
Please explain your understanding of the Landlord & Tenant Covenant Act 1995
- Came into force on 1st January 1996.
- Abolished privity of contract for new leases, meaning original tenants are no longer indefinitely liable after assigning a lease.
- Gave landlords more flexibility in setting conditions for approving assignees.
- Introduced Authorised Guarantee Agreements (AGAs), allowing the outgoing tenant to guarantee the immediate assignee’s obligations.
- Only one AGA can be in place at any time.
- A Section 17 notice must be served within 6 months of tenant default to require an AGA guarantor to pay arrears.
- The Code for Leasing Business Premises 2020 advises tenants to avoid AGAs if the new tenant is financially strong, provides an appropriate rent deposit, or offers a suitable guarantor.
Please explain your understanding of the RICS Professional Standard: Code for Leasing Business Premises, 2020 with regard to assignments
- Leases should allow tenants to assign the whole premises with landlord consent, which must not be unreasonably withheld or delayed.
- Landlords can set out reasonable and appropriate grounds for refusal of assignment.
- Any requirement for an Authorised Guarantee Agreement (AGA) must be clearly stated in the lease.
- Tenants should be allowed to sublet the whole premises and, where appropriate, parts of the premises, without security of tenure and with landlord consent.
- Subleases must be at market rent or higher and consistent with the tenant’s own lease terms.
What actions should be undertaken when dealing with an application for consent for alterations?
- Review the lease to determine if landlord approval is needed for the alterations.
- Request full plans and a specification of the proposed works.
- Obtain an undertaking for surveyor’s and legal costs.
- Document all alterations in a License for Alterations.
- Assess the long-term impact on the property, especially if the tenant defaults.
- Determine if reinstatement will be required at lease expiry.
- Verify that the tenant has the necessary planning consent and building regulations approval.
- Ensure compliance with the Equality Act 2010 and CDM 2015. Check for a risk assessment, method statement, and public liability insurance.
- Provide a report to the client and seek instructions.
- Instruct the client’s lawyers to draft the Licence for Alterations.
- Inspect the completed works to ensure they are as agreed.
With regards to empty buildings, what actions may be required of the property manager?
- Inform the insurer the building is empty and follow their requirements.
- Maintain the building fabric.
- Obtain an EPC and consider MEES compliance.
- Clear the building of combustible materials.
- Conduct and record regular inspections for insurance purposes.
- Develop a disposal strategy and marketing plan.
- Maintain the asbestos register.
- Manage landscaping/gardening
- Carry out health and safety and fire risk assessments.
- Notify the local rating authority for empty rates payments.
- Arrange for security, decommission services, and isolate power supplies.
- Seal the letterbox to prevent arson and secure the property.
- Implement a planned maintenance programme, including plant servicing.
- Set frost controls and drain down water systems.
What are the two fundamental principles of rent collection?
- Accuracy of information
- Timing
Other than accuracy of information and timing, what other principles of rent collection can you tell me about?
- Rent is typically paid quarterly in advance, with demands issued in advance.
- Treat this as client money, ensuring compliance with RICS accounting regulations.
- Review the lease terms for payment timing and interest on arrears
- Confirm if VAT should be applied
- The easiest collection method is via direct debit (automatic payment initiated by the creditor)
- Ensure systems are in place to avoid collecting rent in circumstances that could affect forfeiture rights
- Be cautious of accepting rent from a tenant whose lease has expired, especially if the lease was outside the 1954 Act, as this may create a new protected tenancy
- Understand the difference between direct debit (initiated by the creditor) and standing order (initiated by the payer).
What would you do if one of the properties you manage was in arrears in rent?
- Read the lease to understand procedures for recovering arrears
- Recognise warning signs such as bounced cheques and persistent late payments
- Check if there is a rent deposit in place
- Determine if there are previous tenants (for leases pre-1996), guarantors, or an Authorised Guarantee Agreement liable for the arrears
- Assess if repossession is a viable option, considering market rent vs. passing rent, market conditions, and the likelihood of re-letting
- Compare the vacant possession value with the investment value and account for costs of holding a vacant property
- Consider the impact of empty rates and weigh against easy forfeiture of the lease
- Explore action against guarantors, original tenants, and subtenants
- Act promptly to recover outstanding amounts
- Seek legal advice and follow the client’s instructions
- Charge interest on late payments, if allowed in the lease
- Consider negotiating a payment plan with the tenant to keep them in occupation and avoid empty rates.
What are the remedies for rent default?
The appropriate remedy depends on the amount of rent outstanding, payment history, and the tenant’s financial position. If amicable resolution fails, options include:
- Court proceedings
- Use of a rent deposit
- Pursue former tenants and guarantors
- Serve a statutory demand
- Apply the Commercial Rent Arrears Recovery (CRAR) scheme
- Forfeit the lease
- Negotiate a payment plan
- Agree on another mutually acceptable arrangement
Tell me more about court proceedings for rent default
- The landlord can seek a court judgment (typically in county court) to recover arrears, potentially securing payment through a charge over other property
- Proceedings may also be issued to recover arrears after repossession
- Court proceedings can be slow and more costly compared to other debt recovery methods
- This remedy is effective if the tenant is solvent, as the threat of court action may prompt payment
- Even with a court judgment, further legal steps may be needed to enforce the decision
Tell me more about pursuing former tenants and guarantors for rent default
- Former tenants and guarantors can be liable for arrears if the lease was granted before 1 January 1996 or if an Authorised Guarantee Agreement (AGA) is in place
- Under Section 17 of the Landlord and Tenant (Covenants) Act 1995, a landlord must serve notice within 6 months of the arrears accruing to claim from an assignor or guarantor
- If a Section 17 notice is not served within the timeframe, the landlord loses the right to recover arrears from the former tenant or guarantor
In commercial leases, Section 17 provides that where the former tenant has assigned the tenancy, and has entered into an authorised guarantee agreement (AGA) for the benefit of the new tenant, the former tenant remains bound to pay any fixed charges where the new tenant cannot.
For the purposes of Section 17, these fixed charges include rent, service charges and any payment associated with a tenant’s breach of covenant.
This obligation set out by Section 17 also applies to tenancies created pre-1 January 1996, albeit in a slightly different way.
Tell me more about serving a statutory demand for rent arrears
- This is a preliminary step before pursuing bankruptcy or winding up proceedings, and can put pressure on the tenant to pay arrears
- It is advisable only when there is no dispute about the level of arrears
- The tenant has 21 days to pay the arrears
- After this period, the landlord can present a bankruptcy (for an individual) or winding up petition (for a company) to the court if arrears are over £750
- The court has discretion to set aside a statutory demand to avoid injustice
Tell me more about the Commercial Rent Arrears Recovery (CRAR) scheme
- CRAR is a statutory procedure that allows landlords of commercial premises to recover rent arrears by seizing and selling a tenant’s goods. It applies to new and existing leases from 6 April 2014 onwards, regardless of whether it’s referenced in the lease
- CRAR can only be used for basic rent, VAT, and interest—not service charges or other payments
- The process is conducted by Certificated Enforcement Agents, not regular bailiffs, and agents may only enter through an open or unlocked door.
- Conditions and timeline for CRAR:
- Minimum of 7 days’ unpaid rent.
- 7 clear days’ notice of enforcement must be provided.
- After the notice period, enforcement agents may enter the property.
- 2 clear days must pass after the visit before goods can be seized.
- 7 clear days must elapse before the sale of the goods.
- Fees for CRAR must be specified on the entry notice.
Tell me more about forfeiture as a remedy for rent arrears
- A forfeiture clause in the lease allows the landlord to re-enter and take possession of the property for a breach of the lease (via peaceful re-entry or court action), but proper procedures must be followed
- Forfeiture is possible only if the lease contains a forfeiture clause
- Rent must be properly demanded, but accepting rent after a breach can waive the right to forfeit, as it acknowledges the tenancy’s continuation
- Stop-rent safeguards should be built into rent collection to avoid waiving forfeiture rights
- Forfeiture can occur either by peaceable re-entry or by starting court proceedings. The lease is terminated immediately
- The tenant has the right to seek relief from forfeiture from the court within 6 months
- Tenants do not need to be warned before the lease is forfeited
- Many leases include a re-entry clause for unpaid rent after a set period, allowing possession without using formal forfeiture
- For breaches other than non-payment of rent, a Section 146 notice under the Law of Property Act 1925 is required, detailing the breach, remedy, and compensation due
What is Section 6 of the Law of Distress Amendment Act 1908
- Section 6 allows the landlord to serve a notice on sub-tenants to collect rent directly from them to cover arrears owed by the head-tenant
- The notice informs the sub-tenant that the head-tenant is in arrears, specifies the arrears amount, and directs the sub-tenant to pay rent directly to the superior landlord until the arrears are cleared
What is Section 17 of the Landlord and Tenant (Covenants) Act 1995?
- In order to recover rent arrears (and certain other sums) from a former tenant or their guarantor it is necessary to serve a notice under section 17 of the Landlord and Tenant (Covenants) Act 1995
- Section 17 requires landlords to act quickly when tenants fall into arrears
- The landlord must serve a Section 17 notice on any former tenant and their guarantors within 6 months of the arrears starting to claim the outstanding amount.
What are the landlord’s remedies for a breach of repairs?
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Serve a Repair Notice (under Section 146 of the Law of Property Act 1925):
- This notice is usually served for a specific repairing or decorating breach.
- The notice must be in writing and comply with lease terms.
- It must include:
- Details of the repairing or decorating breach.
- The timescale for the tenant to remedy the breach.
- The course of action proposed if the tenant fails to remedy the breach.
- Forfeit the lease
- Serve an interim schedule of dilapidations
- Do the works and charge the tenant for the cost
What are planned maintenance programmes?
Planned maintenance programmes are activities managed by a property manager or building surveyor and typically include three stages:
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Cyclical maintenance:
- Regular activities, regardless of the building’s condition (e.g., plant servicing, health and safety maintenance, redecoration).
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Preventative maintenance:
- Based on a condition survey predicting future repairs and scheduling work (e.g., upgrading windows to double glazing, facility upgrades, refurbishments).
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Responsive maintenance:
- Triggered by the building occupier to address immediate issues (e.g., repairing leaks, unblocking drains, remedial works).
What is a schedule of condition?
- A schedule of condition limits the tenant’s repairing obligations for agreed items of disrepair during the lease term.
- It is negotiated between the landlord and tenant before the lease commences and attached to the lease
- The tenant’s reinstatement obligations at the end of the lease are limited by the terms of the schedule.
- Commonly used in new lettings where the landlord is not willing to undertake repairs
- Must be carefully documented, often with a photographic record and plans to support the schedule
What is a service charge?
- A service charge is a fee paid by tenants of multi-tenanted properties or estates to cover the landlord’s costs for maintaining and managing the property
- Many tenants aim to negotiate service charge caps, fixed increases, or link increases to the Retail Price Index (RPI) or Consumer Price Index (CPI) to limit future liabilities
- It’s important to check the lease provisions, and note that landlords are responsible for service charges on void units
What are the usual arrangements for service charges
- A service charge budget is agreed with the tenant before the service charge year begins
- Quarterly billings are based on the estimated budget
- Annual accounts are prepared at year-end
- Balancing payments are made after presenting audited accounts
- A sweeping-up clause covers unexpected costs
- Service charge caps are increasingly common in leases
- Service charge payments are often reserved as rent in the lease
What can you tell me about the RICS Professional Standard: Service Charges in Commercial Property, 2018?
- Improve standards and promote best practice, uniformity, fairness, and transparency in the management of service charges
- Ensure timely issuance of budgets and year-end certificates
- Reduce disputes and provide guidance on resolution
- Offer guidance to solicitors, clients, and property managers in the negotiation, drafting, interpretation, and operation of leases, in line with best practices
What are the 9 principles of the RICS Professional Standard: Service Charges in Commercial Property, 2018?
Professionals managing service charge accounts must adhere to the following principles:
- All expenditure must be in accordance with the terms of the lease
- Owners and managers should not seek to recover more than 100% of actual costs for services provided
- Service charge budgets with explanatory notes must be issued annually to all tenants
- An approved set of service charge accounts showing actual expenditure must be provided annually
- A service charge apportionment matrix must be supplied to tenants annually
- Service charge funds must be held in discrete or virtual bank accounts
- Interest earned on service charge accounts must be credited to the account, minus appropriate deductions
- When advising tenants, professionals must ensure withheld payments in disputes reflect only the actual sums in dispute
- When advising landlords, professionals must ensure that after resolving a dispute, any incorrect service charges are adjusted without undue delay
What are the four usual methods of service charge apportionment?
- Floor area
- Fixed percentages
- Rateable value (challenging if RVs change or are appealed)
- Weighted floor area (e.g., for a department store in a shopping centre)
What is a sinking fund and a reserve fund?
- A sinking fund is a fund set aside periodically to cover the future replacement of wasting assets (e.g., major items like heating, air conditioning, or lifts) over the asset’s life
- A reserve fund is a fund set up to cover anticipated future maintenance costs and to avoid fluctuations or large one-off increases in the service charge (e.g., regularly recurring costs like external cleaning and redecorations)
What are the key responsibilities of a property manager in commercial property management?
- Ensuring lease compliance
- Managing maintenance
- Handling service charges
- Collecting rent
- Resolving tenant issues
- Maintaining good communication between landlords and tenants
How do key lease terms such as alteration, alienation, service charge, and user impact property management?
These terms dictate what the tenant can do, who is responsible for repairs or maintenance, how service charges are apportioned, and permissible uses.
Understanding these is key to enforcing lease obligations and advising clients effectively.
Can you explain how you apply the principles of the RICS Professional Statement, Real Estate Management (2016) in your property management activities?
I ensure transparency, fairness, and timely communication, keeping both landlords and tenants fully informed.
I also follow best practices to maintain positive relationships and resolve issues efficiently.
How do you maintain transparent and effective communication between landlord, tenants, and managing surveyors?
By providing clear, regular updates, documenting all actions, and being responsive to queries from both sides.
This helps manage expectations and resolve issues quickly.
How did you handle the health and safety risks at the Felmores retail parade, and what was your process for resolving these issues?
I identified the risks, reviewed the lease to confirm the landlord’s responsibilities, and advised on prompt action.
I then coordinated repairs to minimise tenant disruption and ensure compliance.
What steps did you take to ensure minimal disruption to tenants while carrying out repairs at Felmores?
I scheduled repairs outside business hours, communicated plans to tenants in advance, and monitored the work closely to ensure it was done efficiently and within the timeframe
How do you approach ensuring landlord compliance with their obligations under the lease, particularly in regard to common use?
I regularly inspect the property, review the lease terms, and advise the landlord on necessary maintenance. I ensure all work is completed in a timely manner to avoid liability issues.
How do you ensure transparency and fairness in the service charge process?
I provide clear, itemised budgets and explanatory notes to tenants. I also ensure audited accounts are presented annually, and I follow RICS guidelines to maintain fairness.
Can you explain the process you followed when reviewing service charge expenditure at the industrial estate?
I reviewed all costs incurred, checked that they aligned with the lease terms, and prepared explanatory notes to ensure transparency.
This allowed the landlord to negotiate fairly with tenants.
How do you apply the RICS Professional Standard on Service Charges in Commercial Property (2018) when managing service charge accounts?
I ensure all expenditure is lease-compliant, issue budgets and year-end accounts in a timely manner, and maintain transparency by providing tenants with clear, accurate records.
What actions did you take when managing the vacant retail property at Long Riding to ensure compliance and readiness for re-letting?
I secured the building, arranged weekly inspections, removed any combustible materials, maintained the asbestos register, carried out a risk and H&S assessment, and advised the client on MEES and EPC improvements for future lettings.
I also discussed a marketing strategy with my client.
How do you ensure that vacant properties remain compliant with insurance requirements?
By notifying the insurer of the vacancy, following their requirements, arranging regular inspections, and securing the property to prevent vandalism or damage.
Can you explain how you advised the client regarding MEES and its impact on the EPC rating of the vacant retail property?
I reviewed the EPC, advised on necessary improvements to meet MEES requirements, and recommended incorporating these into planned works to improve the rating cost-effectively.
What considerations do you take into account when advising on marketing strategies for vacant properties?
I consider tenant demand, market conditions, potential incentives like rent-free periods, and the property’s condition to attract suitable tenants and achieve a quick letting.
How did you approach the issue of rent arrears at the retail shop unit in Wickford?
I reviewed the lease terms, discussed the situation with the tenant, and proposed a payment plan that balanced their financial position with the landlord’s interests.
Why did you recommend against repossession in the case of the rent arrears at Wickford, and what alternative solution did you propose?
Given the property’s location and low tenant demand, repossession would risk a longer void period.
I advised on a payment plan to secure ongoing income for the landlord and mitigate the risks of an empty property.
Other options I considered was drawing on a rent deposit (there was none), checking for any guarantor or CRAR.
How did you handle negotiations with tenants in arrears while ensuring the landlord’s interests are protected?
I engage with the tenant to understand their position and propose a solution, such as a payment plan, that recovers the arrears while avoiding costly legal action and maintaining occupancy.
Tell me about rent collection?
- English quarter days
- Check if VAT should be applied
- Systems need to be in place to not collect rent when tenant in breach - may waive rights of forfeiture if demand and collect rent
- Interest on arrears - usually 2-4%
