Property Management Flashcards
Could you tell me about any issues you have had to resolve to ensure you maintain a good landlord and tenant relationship?
Yes - my client recently had a leak from their premises into a residential flat below. The resident was also the landlord and they were on holiday at the time. This issue caused the landlord great distress, and it was imperative that I upheld the working relationship by clearly communicating with them to ensure the issue was quickly resolved.
What are the main roles of a property manager?
- To understand the aims of tenants and landlords
- Deal with conflicts,
- Manage real estate (including collecting rent, repairs & maintenance, insurance, service charges)
- Portfolio and asset management
- New lettings and lease renewals (general principles of negotiating lease terms and agreeing HoTs)
- Safety and security (H&S, confidentiality & data protection
- Business management (complaints handling, advertising services, holding clients money).
Alteration obligations example:
By removing the stairlift, was there any shortfall in the access requirements to the building?
No - access to the building was not compromised. The stairlift was internal as my client occupied two floors. Due to the nature of my clients business and the configuration of their property, they were able to continue to operate without being impacted.
Alteration obligations example:
Why was the stairlift non-compliant? What statute / RICS guidance does this fall under?
My client’s Fire Officer conducted a routine Fire Risk Assessment which highlighted the obsolete stairlift as non-compliant under the Fire Safety Act 2021 and the Fire Safety Regulations 2022.
Alteration obligation example:
What did the lease say about removal? Usually they cover installation but not removal.
The lease stated that the tenant shall not make an external or internal alteration or addition to the Property and shall not make any opening in any boundary structure of the Property.
As the lease did not explicitly refer to removal, I formed the opinion that the alteration clause referred to any change made to the property, whether it involve adding, modifying, or removing something.
Alteration obligation example:
What would you have done if the client went ahead with the works without Listed Building Consent?
I would have consulted my planning colleagues to ask for their professional advice on the matter. Following which, I would have likely recommended that they obtain retrospective LBC to comply with the legislation.
Alteration obligation example:
What part of the property was Grade II Listed?
The Listing concerned a terrace of 5 former residential dwellings, of which my clients premises formed part of. It was first listed in 1949, with the terrace dating from 1825 and lies in a prominent position overlooking the waterfront in Teignmouth.
Determining Repairing Obligations example:
Please list out what statutory checks you completed?
Principally, I checked to see if there was a Tree Preservation Order (TPO) in respect of the subject tree or neighbouring trees.
Other checks included:
- Conservation area
- Listed Building
- Legal Title and tenure - checking the boundaries, ownership, any deeds of covenant, easements, restrictive covenants etc.
- Planning history and compliance for onerous conditions
- Environmental matters - high voltage power lines, electricity sub-stations etc.
Determining Repairing Obligations example:
What about branches and leaves that are overhanging the neighbour? These are outside their demise?
The tree belongs to the person whose land it had originally grown in. Therefore, despite the branches overhanging into the neighbours property, my client was still responsible for the tree.
However, I am aware that the neighbour is still entitled to trim the branches up to the property boundary and no further.
Additionally, my client has strict internal procedures for maintaining trees, meaning they were more astute to the risks and more willing to take responsibility.
Determining Repairing Obligations example:
Can you outline what your client’s health and safety compliancy standards concerning trees are?
Following an incident concerning my client and a fallen tree in their premises, I discussed with their building managers to record and compile a schedule of any trees or hedges located on their property that were above 1.5m in height.
To comply with the Health and Safety at Work Act 1974 (to provide a safe working environment), my client carried out and updated their risk assessments of their sites using my schedule. They put in place proactive strategies for tree management, which included the monitoring and inspecting of trees. They ensured that their gardeners were competent and obtained the required experience and knowledge to identify any defects, and they provided training for staff to upskill them in this area.
Determining Repairing Obligations example:
Did your client need an access licence to go onto the neighbours land? If not, what risks could there have been?
In this scenario, my client did not need access onto the neighbouring property in order to carry out the works. However, I am aware that if they did, a licence could have been put in place to formalise the arrangement, and protect against any potential negligence claims as my firm would be covered under their PII cover. However, my client would still need to take reasonable steps to ensure the safety of the site.
The Occupiers Liability Act outlines the common duty of care imposed to lawful visitors and trespassers. It obliges the occupier to take reasonable steps to see that the visitor is safe in using the premises.
Rights of Access example:
What was the complaint based on? Were they requiring vehicular access which was blocked by the scaffolding?
The complaint was based on workmen carrying building materials and scaffolding through a passageway in an adjoining courtyard to access my client property. The residents did not believe they had a right to walk through this area, and the works were disturbing them.
Rights of Access example:
What are easements?
An easement is a permanent right and receives a capital payment. It is cable of being registered at the Land Registry, and allows a right to be enjoyed by one party over the land of another.
A prescriptive right of way or prescriptive easement can be obtained because of continuous and uninterrupted use being proven over a period of no less than 20 years.
A prescriptive right can be granted by a landowner to allow access over the land. They are not public rights of way and the public don’t have a right to use them.
Rights of Access example:
What is the difference between an easement and a right of way?
Easements encompass various rights of use, and is essentially the right to use another person’s land for a stated purpose. Easements can be ‘Express Grant’ (documented in property deeds), ‘Prescription’ (when someone uses the land in a specific way for over 20 years), and ‘Implied Grant’ (implied by law when the property is sold).
Rights of way specifically focus on granting access across properties. It can be granted for convenient access, or travel routes.
Public Right of Way (right to roam) is usually granted by either the landowner or the local community
Rights of Access example:
How did you use the solicitors advice and information to deal with the residents?
After the solicitors confirmed my advice, I conducted a meeting with my client and the Property Programme Manager who was overseeing the project. I discussed the matter with my client and advised that manager to reassure the residents that they had rights on foot only, and to provide them with the relevant timescales for the works to complete, and suggested that they stick to certain hours of the day to mitigate the nuisance caused. The residents accepted this reasoning and the matter was resolved.
Licence to Occupy example:
Should you have discussed the works with a building surveyor?
I discussed the works with the owner of the site who was also the project manager of the development. In the first instance, I sought to understand and obtain the relevant facts so that I could establish the most suitable strategy to advise my client.
As the proposal caused minimal disruption to my client’s property, I considered a building surveyor was not required to advise, however a scaffolding licence was necessary and should be prepared by my client’s solicitor’s.
Licence to Occupy example:
What would the potential problems be if you did not have a licence in place?
Without a scaffold licence, the contractor will be trespassing if they erect scaffolding on my client’s property. It acts as a framework to protect the interests of both parties, such as when a claim for negligence arises, the relevant PII cover can be actioned and there is a binding contract. The licence outlines the terms, conditions, and responsibilities relating to its installation. It helps prevent disputes, and demonstrates commitment to worker safety and the wellbeing of the general public during the construction process.
Scaffolding licences ensure the proper authorisation, safety, and adherence to legal requirements. Without a licence, it could lead to legal penalties on the developer, disputes, safety hazards as it is without the relevant regulatory oversight, insurance issues as claims could be void, and reflects poorly on both parties.
Licence to Occupy example:
Was your client obliged to act reasonably in this situation? How would you have dealt with this query if they refused access to the car park?
I am aware that there was no legal obligation for my client to grant a scaffold licence or allow the neighbour to erect scaffolding. However, I would have advised my client to approach the situation reasonably and communicate openly with the neighbour so to avoid neighbourly disputes and potential legal processes if the neighbour sought a court order. Additionally, if my client refused access to their car park and in the future my client needed to erect scaffolding on the neighbours property, then the refusal would act against them and would create further challenges and obstacles.
What is the RICS guidance on Property management and what are the principles of this?
RICS Professional Statement - Real Estate Management, 2016
- Act honestly, fairly, transparently, and professionally.
- Carry out work with due skill, care & diligence - ensure staff have the necessary skills
- Ensure clients are provided with terms of business that are fair and clear.
- Do the utmost to avoid conflicts and where they do arise, deal with them openly.
- Don’t discriminate unfairly in any dealings.
- All communications with clients are fair, decent, clear etc.
- All marketing is honest and truthful.
- Any client money is held separately and is covered by adequate insurance.
- Hold appropriate PII cover
- Make the identity of the client clear.
- Give realistic assessments of prices / rents / costs.
- Ensure all meetings, inspections, viewings are carried out in accordance with the client’s wishes.
What specific advice does the RICS Professional Statement - Real Estate Management, 2016 provide?
- Ethics - Duty of care as a property manager
- Securing instructions - Terms of Engagement and offering
- New lettings and lease renewals - general principles of negotiation
- Managing real estate - collection of rent, repairs, service charges
- Portfolio & asset management - performance measurement
- Ending an instruction - written confirmation
- Safety and security - confidentiality and data protection.
- Business management - advertising services, PII, complaints handling
Alienation:
- Difference between subletting and assigning;
- Reasons to sublet rather than assign;
- Actions undertaken when dealing with an application for consent to assign / sublet.
Assigning = The new tenant (T2) has a direct relationship (privity of contract) with the landlord.
Subletting = The new sub-tenant (T2) has a direct relationship with the tenant (T1) and pays them the rent, who then pays the rent to the landlord.
Leases can have an absolute (not allowing alienation), open (allowing alienation) or qualified (subject to some conditions) alienation clause.
Reasons to sub-let:
- Requirement of the lease
- For part of the demise and not the whole
- If Market Rent is higher than passing rent = profit rent
- Tenant wants to re-occupy in the future.
- New party is of a lesser covenant strength.
Actions undertaken:
1. Read the lease - is assignment / subletting allowed and any conditions? Are there reasonable grounds for withholding consent?
2. Will the tenant give an undertaking for the surveyors / legal costs
3. Is proposed rent market or the same as passing?
4. Effect on investment value?
5. Covenant strength of the proposed new tenant?
6. Has a rent deposit been agreed? Is there an AGA?
7. Client provided with surveyors recommendations.
8. Obtain landlords consent - a licence will be required.
9. Landlords remedies for illegal alienation include forfeiture, damages, or an injunction.
What is the Landlord & Tenant (Covenant) Act 1995?
- Relates to the assignment of leases and came into force in January 1996.
- It abolished ‘privity of contract’ for new leases - contractual rights / obligations are limited to the parties who entered into the agreement.
- Gave landlords more scope for setting conditions regarding the approval of an assignee.
- Introduced Authorised Guarantee Agreements (AGAs) - guarantees the lease obligations of the immediate assignee as a voluntary arrangement to be agreed between the LL & tenant.
- Section 17 Notice must be served upon a guarantor within 6 months of tenant defaulting to require former tenant who entered AGA to pay the arrears.
- The Code of Leasing Business Premises 2020 - although AGA’s are common, it is advisable for tenants not to enter an AGA if the new tenant is financially strong enough, pays a rent deposit, or provides a suitable guarantor.
What are the principles of the RICS Professional Standard - Code for Leasing Business Premises, 2020?
- Leases should allow the tenant to assign the whole of the premises with landlord consent not be unreasonably withheld. Landlords may set out suitable grounds for refusal. Requirement for AGA clause should be clearly stated.
- Leases should allow tenants to sublet the whole of the premises and may allow sublease of parts, if appropriate without security of tenure, and landlords consent required. Rents not less than market rent, and terms consistent with tenants lease.
Alterations:
- What are they & general stipulations.
- Licence for Alterations - actions undertaken.
- Landlord and Tenant Act 1927
Alterations can be carried out by a tenant during the lease:
- Usually must have the landlords prior approval in writing.
- Usually subject to reinstatement at the end of the lease.
- Some works e.g., demountable partitioning or other non-structural works may not require landlords formal consent.
Licence for Alterations:
- Completed before works commence.
- Licence can protect parties at the rent review and dilapidations at the end of the lease.
- Most licence require the tenant to reinstate at the end of the lease.
- Licence must clearly document the agreed works.
LoA Actions include:
1. Read the lease - is LL prior consent required
2. Request full plans / specification
3. Obtain an undertaking for surveyor / legal costs
4. All alterations must be documented
5. Check for long term impact on the property
6. Consider if a financial bond is appropriate to be held by the LL.
7. Consider if reinstatement is required
8. Consider planning / building regs.
9. Equality Act & CDM compliance - RAMS & public liability insurance
10. Provide report to client & instruct lawyers to prepare the Licence
11. Inspect completed works to ensure they are as agreed.
LTA, 1927:
- If lease prohibits improvements being made to a property without LL consent, Section 19 imposes a proviso that such consent cannot be unreasonably withheld.
- If Section 19 procedures have been followed, LL may be obliged to pay compensation for alterations that may constitute improvements.
Dilapidations:
- Overview
- Forms of schedules
- Format
- RICS Guidance Note on Dilapidations, 2016
- Reasons why a settlement isn’t agreed.
- Negotiations take place at lease expiry to bring the property back to its condition at the start of the lease, assuming there is a repairing liability.
- Check lease terms for repairing responsibilities, schedule of condition, licence for alteration.
- Two choices - Tenant does the agreed works, or tenant pay a sum to the landlord to undertake the works.
- Section 146 Notice must be served (1925 Law of Property Act)
- Usually draft schedules served first.
- Claim is limited to either the cost of the works, or the diminution in value of the reversionary interest (Section 18 of LTA 1927) - diff. in value of property if repair / decoration wasn’t undertaken.
- If LL proposes to demolish / substantially refurb, the value of the reversion could be nil.
Three Forms of Schedules:
1. Interim - During the lease, with at least 3 years remaining
2. Terminal - In the last 3 years of the lease.
3. Final - Served at/after lease expiry/break when the tenant is out of occupation.
Format:
- Outlines repairing obligations
- States the remedy & cost of breach
- Loss of rent over the period to do the works
- Fees + VAT for the claim for surveyors / lawyers
- Negotiations on a without prejudice basis until agreement
- If agreement not reached, prepare a Scott Schedule for the Court / ADR
RICS Guidance: Aims to reduce claims between LL / T
- Guidance on diminution valuations
- Explores supersession - LL can only claim the amount lost due to Ts breach
- The ‘qualified demand’ is the complete statement of costs sought in damages (construction costs + ancillary)
- Parties to act reasonably and try to settle.
Reasons Why a Settlement isn’t Agreed:
1. When the lease isn’t on FRI terms
2. Reinstatement not required by LL
3. If Schedule of Condition limits the repairing liability
4. If building is to be demolished / refurbished
5. Use of diminution in value cap
6. Tenant gone into administration
7. Agreed between LL / T to roll over claim until next lease granted.
Insurance: Provide an overview and what is the key legislation / RICS guidance?
- Usually the landlord is responsible to arrange and re-charge the tenant.
- Cover for reinstatement of the building for a range of insured risks (fire, flood, storm, subsidence, loss of rent, service charge, theft etc)
- Usual basis of measurement for building reinstatement valuations is GIA for commercial properties, using BCIS.
- Insurance Act 2016 is the key law: introduced more accountability for insurers, responsibilities to policyholders to provide all relevant info and aim to reduce claims.
- RICS became a Designated Professional Body for insurance in Feb-05 in accordance with FSA regulations. Only registered members can deal with insurance.
- Insurance premium tax (IPT) is levied on premiums.
