Property Management Flashcards
1
Q
what is an assignment
A
Tenant transfers legal interest of the lease to another tenant.
The incoming tenant takes over lease obligations
2
Q
What is a sub-letting
A
Lease property from tenant, original tenant maintains relationship with the landlord and is the legally responsible for the lease obligations
3
Q
Difference between an assignment and sub-letting
A
- assignment original tenant is no longer labile, sub-letting they are.
- Landlord has direct relationship with new tenant under a assignment, sub-let no relationship
4
Q
Why sub-let rather than assign
A
- lease requirements
- tenant may want to re-occupy in future
- New tenant may be of lesser covenant strength
- there is a profit rent (market rent is higher than the passing rent)
5
Q
Typical alienation clause
A
Permitted to assign/sub-let the whole but not part, with LL consent not to be unreasonably withheld or delayed
6
Q
What should PM do when receives application to assign or sub-let
A
- review lease (what are the terms)
- check if proposed market rent is same as passing rent
- check effect on investment value
- provide recommendation to the client
- request undertaking of surveyor and legal costs
7
Q
Aim of LL&T Act 1988
A
S1 of LL&T 1988 states consent must be provided within reasonable timeframe (without delay)
8
Q
Aim of LL&T 1927
A
S19 states consent must not be unreasonably withheld
S18 limits the amount of damages a LL is able to recover for breach of T repairing covenant
9
Q
Benefit of Licence for alterations?
A
- Protection for LL - requires T to reinstate unit at end of lease, ensure works are completed to standard proposed.
- Protection for T - prevents LL from rentalising improvements
10
Q
Key RICS publication in regards to alterations
A
- RICS guidance note: licence for Alterations in Commercial Property 2012
11
Q
Process for completing LTA
A
- receive T application
- review lease
- initial review of plans
- get undertaking
- review with 3rd party eg building surveyors
- Document LTA
- complete final inspection after works completed
12
Q
Different ways that consent to make alterations can be granted
A
- automatically under the lease
- Formal Licence deed (LTA)
- letter licence
13
Q
Why should inspection be carried out after completion of tenant works?
A
- surveyor to be satisfied that works were carried out to specified standards
- check if any snags
14
Q
PM responsibilities when managing vacant building?
A
- ensure security
- inform insurance provider
- maintain building
- inform rating authority
- weekly insurance inspections
- H&S statutory requirements FRA, GRA etc.
- isolated utilities and power supplies
15
Q
Implications of insurance act 2016
A
- Introduced new responsibility to policy holders to provide all relevant information and aim to reduce claims
16
Q
what is the tax on insurance premiums
A
Insurance premium tax (standard @12% high @20%)
17
Q
two fundamental principles of rent collection
A
- Accuracy of information provided
- Timing of when demands are sent out
18
Q
Difference between standing order and direct debit
A
- standing order - regular payments set up by payer
- direct debit - payer authorises the payee to take payments
19
Q
Warning signs of further tenant rent arrears
A
- persistent late payments
20
Q
typical lease terms regarding interest on late rent
A
2-4% above base rate, 14 days after due date
21
Q
First step when seeking to recover rent arrears?
A
- read lease - understand what procedures are in place
- talk to tenant to understand why late payments
22
Q
remedies for rent default
A
- negotiate payment plan
- draw down rent deposit
- peruse guarantor
- CRAR
- serve statutory demand
- forfeiture
- court proceedings
23
Q
what should be considered before drawing down on rent deposit?
A
- Read rent deposit deed (withdrawals clause, notices, top ups)
- tenant covenant strength
- further debt
24
Q
Does LL need to give T notice before drawing down on rent deposit?
A
- depends on what the Rent Deposit deed states
25
Benefit of drawing down on rent deposit
- good if T only struggling short term
- provides relief for tenant so they can focus on recovering business
- tenant can top up deposit when financially stable
26
How can court proceedings be used to recover tenant arrears
- LL can obtain court judgement
27
when can former tenant be perused for arrears
- if the lease started before 1st Jan 1996 yes.
if after no as protected under LL&T act 1995
28
what is statutory demand?
- preliminary step to perusing winding up proceedings (AKA bankruptcy)
29
what is the process of serving a statutory demand?
- notice served and T has 21 days to pay or propose plan
- after this time LL can present winding up petition to court
30
What is CRAR
- Commercial rent arrears recovery
- Introduced in 2014 by 'Tribunals, Courts and Enforcement Act
- no minimum amount of arrears
31
what are CRAR timelines
- 7 days unpaid rent
- 7 days notice
- enforcement agent visits
- 7 days before sale of any seized goods
32
what goods cannot be seized under CRAR
- perishable goods
- work tools
- 3rd party belongings
33
what are tenants rights under CRAR?
- apply to court for order that no further steps can be taken without permission from court
34
what is forfeiture?
- clause in lease that allows landlord to re-gain possession of lease
- either by peaceful re-entry or court action
35
when can forfeiture be used
- when there is a forfeiture clause in the lease
- no notice is required from LL
36
What are tenants rights under forfeiture?
- Tenant has the right to apply for relief from forfeiture
- can only apply to court as they are only one that can grant it
- if they grant it, lease is restored as though forfeiture never happened
37
How can LL right to forfeit be waived?
- LL agrees payment plan with T
- if CRAR is exercised
- if S25 notice is served under LL&T1954
38
what was LL&T act 1995
- abolished privity of contract for all new leases as of 1 Jan 1996
- S16 introduced (Authorised Guarantee Agreements) AGA
- S17 notice must be served on guarantor within 6 months of tenant not complying
39
According to RICS code of Leasing Business Premises when should AGAs be used?
- if assignee is of week covenant strength, has no guarantor and is not paying a rent deposit
40
What is key consideration when reviewing rent arrear recovery methods?
- chance of re-letting
- current passing rent vs market rent
- vacant possession costs
41
Four main options for LL when T not fulfilling their repairing covenants
- serve repair notice S146 of Law and property Act 1925
- Forfeit lease
- serve interim schedule of dilapidations
- do works themselves and recharge tenant
42
what must be included in notice of repair (S146 of the Law and property act 1925)
- contain details of repairing breach
- state timescale for remedy
- course of action if T fails to remedy
43
How can LL forfeit lease for failure to repair
- must be forfeiture clause
- S146 under Law and property act 1925
44
3 possible stages of PPM?
- cyclical maintenance
- preventative maintenance
- responsive maintenance
45
RICS Key publication for Service Charges
RICS Service Charges in Commercial Property 2018
46
Aims of service Charge professional Statement?
- best practice, fairness, transparency
- timely issue of budgets and YE certs
- Reduce cause of disputes + dispute resolution
47
8 mandatory requirements in service charge professional statement
- recover expenditure in line with lease terms
- recover no more than 100% of costs
- Annual budgets and explanatory notes
- Annual reconciliations
- Annual apportionment schedule
- SC money to be held in separate bank account
- interest must be credited to SC account
- if tenant dispute, only disputed payment amount should be withheld
48
responsibility of PM when issuing SC budgets
- ensure value for money
- Ensure quality services that are regularly reviewed
- ensure standard of services are monitored
49
what is a sinking fund?
- a fund set up for paying specific costs that occur occasionally
- roof repairs, paining needed every 5 years
50
what is a reserve fund?
- A fund set aside to cover costs of major works or other significant items of expenditure
- Useful for unexpected expenses
51
what is a depreciation charge
- measure of the wearing out of reduction in life on an asset
- Depreciation distributed across the useful life of the asset.
- eg plant replacement
52
4 methods of SC apportionment
- floor area
- fixed percentages
- weighted floor areas (shopping centres)
- rateable value
53
Different types of insolvency?
- administration
- receivership
- liquidation
- Company Voluntary Administration (CVA)
54
What are implications for landlord when tenant goes into admiration
- company is protected from action being taken eg CRAR
- if rent being paid, equivalent amount can be claimed from administrator
55
What is warranty?
Written guarantee promising to repair/replace item within set time period
56
what is the RICS guidance note relating to Property Management
Commercial Property Management in England and Wales
57
How is forfeiture for non-payment of rent different to forfeiture for non-compliance of repair?
- Repair - Serve S146 of Law of Property Act 1925 - tenant gets 6 months to remedy breach
- Rent - 21 days passes, walk in and change locks
58
What is dilapidation figure based on?
The diminution in value as a result of the wear and tear
59
In a statutory demand what is the minimum for a company, and the minimum for a single person occupier
- £750 for business
- £5,000 for individual
