Property Management Flashcards by Adam Fox

What are the core property management duties in the PMA?

The collection of rent, service charge and other sums, owing by the occupiers to the landlord.
The Management of the Property.

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What are the remedies for Non-payment of Rent?

First thing a Property Manager should do is to meet with the tenant on site to discuss. Therein, before a decision for potential remedies is made; the PM should ask to see their accounts.

Negotiate payment plan
Check if has a Guarantor (S.17 of LL & T act allows the LL to claim against guarantor within 6 months if the guarantor settles the arrears, they are entitled to take an overriding lease.
Draw down rent deposit
CRAR
Serve Statutory Demand (preliminary step for bankruptcy)
Forfeiture / Surrender
Court proceedings

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What are the basics surrounding forfeiture?

The lease would be forfeited by the Landlord entering the premises peaceably.
The T has the right to apply to court for relief from forfeiture and this can be delayed by 6 months.

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What is set out in the RICS SC in commercial property?

Mandatory requirements and the core principles

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What are the 9 mandatory requirements in Service Charge Professional Statement?

Recover expenditure in line with lease terms
Recover no more than 100% of costs
Annual provide budgets and explanatory notes
Annually provide service charge accounts (showing actual figures)
Annually provide service charge apportionment schedule
Service charge money to be held in separate bank account
Interest must be credited to SC account
When acting for tenant, advise that if disputing payment then withold the amount in dispute

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Aims of Service Charge Professional Statement?

Improve best practice, fairness and transparency
Ensure timely issue of budgets and YE certificates.
Reduce cause of disputes, and provide guidance on dispute resolution.

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Responsibility of Property Manager when issuing service charges?

Ensure value for money
Ensure quality services that are regularly reviewed
Ensure standard of services are monitored

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What is the difference between an assignment and a sublet?

Assignment - Tenant transfers legal interest in lease to another tenant. Incoming tenant takes over lease obligations.

Subletting - the new sub-tenant has a direct relationship with the tenant and pays them the rent, who then pays the landlord.

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How would you deal with as assignment or sublet?

Read the lease
Get undertaking for your costs from the assignee
What is the covenant strength of the assignee / sub tenant
What is the proposed rent
Are there any reasonable grounds to refuse consent
LL & T Act 1988 - deal with the application PROMPTLY
If agreed, License for assignment / sub let needs to be written.

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Why sub-let rather than assign?

requirement of the lease
-If market rent is higher than passing rent, then tenant could get profit rent.
original tenant may want to re-occupy in future and can temporarily grant a shorter term.

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When did the LL & T (Covenants) Act come into effect ?

Came into force on the 1st January 1996.

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What does the LL & T Act 1995 entail?

Deals with assignments only
Only applies to 1 assignment
Brought in Authorised Guarantee Agreements (AGA) to protect the LL
The code of leasing business premises says that an AGA should not be a condition of as Assignment unless the proposed assignee is of a weaker covenant.

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What are 12 mandatory requirements for members set out in RICS Professional Statement, Real Estate Management 3rd Edition 2016?

Conduct business in honest, fair, transparent manner

Carry out work with skill and due diligence

Ensure clients are provided with clear terms of engagement

Avoid conflict of interest, and when they arise deal with them openly and promptly

Do not discriminate

Ensure communications are fair, clear, timely and transparent

Ensure all advertising and marketing is honest

Ensure client money held in separate accounts

Ensure professional indemnity insurance in place

Ensure scope of obligations of work is provided to all parties

Give realistic assessment of buying/selling/rental price

Ensure all inspections and meetings are carried out in accordance with client wishes

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What is Statutory Demand?

Preliminary step to pursuing winding-up proceedings (AKA bankruptcy)

Can be used to put pressure on tenant to pay arrears

Used on undisputed arrears of £750 + where rent deposit has already been used

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Benefit of Licence for Alterations?

Has two useful functions - protects the parties at rent review and dilapidations at the end of the lease.

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Aim of LL & T Act 1927?

S18 of LL & T Act 1927 limits the amount of damages a LL is able to recover for breach of T repairing covenants

S19 of LL & T Act 1927 states consent must not be unreasonably withheld

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How would you pursue a guarantor?

S.17 of the LL & T 1995 - allows the LL to claim against the guarantor within 6 months of the charge becoming due

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What is a sinking fund?

A fund set up for setting aside money for the replacement of a wasting asset. EG roof repairs / lift works.

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What is a reserve fund?

A fund set aside to meet the needs for future costs of maintenance or other significant items of expenditure.

External cleaning / redecoration

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What is the purpose of Dilapidations?

It entitles the Landlord to get the Property back in the same condition as it was handed over to the Tenant.

What must be included in notice to repair?

This is S146 of Law and Property Act 1925

Must contain details of repairing breach that has occurred

Must state timescale allowed to remedy breach

Must state course of action proposed if T fails to remedy

What is Public Liability Insurance?

Covers cost of legal action and compensation claims made against your business by general public

What is the leading case law for LL right to re-enter property to undertake repairs?

Jervis vs Harris

Gives LL right to pursue remedy against defaulting tenants to ensure premises are kept in good condition.

What was LL & T (Covenants) Act 1995?

Abolished Privity of Contract for all new leases as of 1 January 1996

Introduced Authorised Guarantee Agreements (AGAs) - former tenant guarantees lease compliance of assignee

4 methods of service charge apportionment?

Floor area Fixed percentages Weighted floor area (typical in shopping centre) Rateable Value (RV)

How would you manage a rent deposit?

Comply with Rent Deposit Deed Hold funds in separate bank account which is designated as tenant deposits Need these funds protected in case LL becomes insolvent

What is a planned maintenance programme?

Planned maintenance activity supervises by a property manager or building surveyor; 1. Cyclical maintenance - covers work done to maintain the general condition of the property and some communal fittings 2. Preventative maintenance - proactive programme that ensures buildings and other property assets operate efficiently 3. Responsive maintenance - Initiated by the building occupier, such as repairing a leak.

What is TUPE?

Transfer of undertakings of employment Protects employees if business is changing hands. Moves employee from old employer to new employer.

What is a sweeping up clause?

When the landlord is able to recover costs for additional services or costs that might not have been contemplated when the lease was granted but that the landlord might later wish to recover. May be referred as ‘any other costs and expenses reasonably incurred in connection with the building’ in a lease.

What information has RICS published in related to service charges?

RICS Information Paper – sinking funds, reserve funds and depreciated charges 2014.

What is the legislation governing service charge budgets by the RICS?

RICS Professional Statement – Service Charges in Commercial Property 2018

How do you calculate management fees in the service charge?

Calculated on the time spent on management of the property - fixed fee.

On an assignment part way through the service charge period who is liable to pay any balancing charges on reconciliation?

Assignee

What is the Risk control Hierarchy?

* Eliminate * Substitute * Engineer Control * Administrative Control * PPE

What can the enforcement agents take when they attend site for CRAR?

Items which belong to the tenant that have a value on their balance sheet

Different types of insolvency?

Administration - administrators appointed by creditors (Enterprise Act 2002) to rescue an insolvent company. Company Voluntary Arrangement (CVA) - Voluntary agreement with creditors to see how the debts will be settled: - liquidation - winding up company - bankruptcy Receivership - an administrative receiver appointed by creditors to release assets to repay debts. Prepack administration

What goods cannot be seized under CRAR?

Perishable goods, work tools, and kit belonging to a 3rd party

Why would you benchmark SC Budgets?

The use of benchmarking ensures that performance standards are checked about industry used index to ensure best practice.

What encompasses in the RICS Guidance Note on Commercial Property Management in England & Wales, 2011

- Guide to best practice for commercial property managers - Focuses on how a property manager can be efficient, effective and accountable to their client and comply with statute law - Primary duty of care is with the landlord

What are some H&S measures you would take in Property Management

Asbestos Survey GRA Fire Risk Assessment Legionella Engineering inspection EPC

Can you walk me through a SC reconciliation ?

Reconciliation is the process of balancing what was estimated as a service charge and what was actually spent. Landlords typically estimate these charges at the beginning of the year. At the end of the year, they will reconcile those estimates with actual expenses. If the costs are higher, they may request the difference from tenants. If they are lower, you may receive a refund. Understanding this process is crucial to avoid unexpected payments. For instance, if you pay an estimated £3,000 for the year but the actual expenses come to £2,500, the T could receive a credit of £500.

What is Diminution Value?

It is the difference in which the value of a landlords interest is reduced due to breach of lease covenant. If the landlord proposes to demolish or substantially refurbish, the value could be nil.

RICS Guidance Note, Dilapidations 2016

Aims to reduce claims between LL & T. Key Points are: 1. Guidance on diminution value 2. Explore supersession 3. careful / considerate estimates of loss. 4. Keep to the agreed timescales

Why would a dilapidations claim not be settled?

1. Lease isn't on full repairing terms 2. There is a Schedule of condition and limits the repairing liability 3. Tenant has gone into adminstration

What is included within HOTs?

it is a document to set out the terms of the lease normally conducted by the agent.

why is it important to check the covenant strength of the tenant?

To determine what course of action to take.