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APC > Property Management > Flashcards

Property Management Flashcards

1
Q

What is the key legislation for property management?

A

RICS Professional Statement: Real Estate Management (2016).

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2
Q

What are the 12 principles of this statement?

A
  1. honest/fair/transparent/professional manner
  2. carry out work with due diligence/care
  3. TOB - clear
  4. avoid coi
  5. no discrimination
  6. communication- fair, decent, clear
  7. marketing- honest and truthful
  8. client money - separate accounts
  9. PII insurance
  10. identify clients obligations
  11. realistic assessment of pricing - rents and selling
  12. meetings and inspections in accordance with clients wishes
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3
Q

What is covered in the RICS Professional Statement on Service Charges in Commercial Property?

A

improve general standards and promote best practice, fairness and transparency

aims to:
Ensure timely issue of budgets and year end certificates

Reduce causes of disputes and provide guidance on dispute resolution

Provide guidance to solicitors, landlords, managers and tenants on the negotiation, drafting and operation of leases

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4
Q

What are the 9 requirements in PS on service chargers?

A
  1. dispute- only withhold amount disputed
  2. interest earned- accredited back
  3. expenditure in accordance with lease
  4. following dispute resolution- incorrect charges adjusted without delay
  5. service charge budgets/year end certificates should be issued annually to tenants
  6. LL ensure apportionment matrix
  7. SC monies held in 1+ discrete virtual banks
  8. must not seek more than 100% costs (unless fixed percentage apportionment)
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5
Q

For your SC budget in cambridge, did any have a SC cap?

A

Yes- one tenant at £52,000.

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6
Q

What was included within your service charge budget for Cambridge?

A

-Health and Safety(fire drills)
-staff costs
-utility costs
-cleaning
-gardening
-pest control
-security
-lift maintenance and repairs

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7
Q

When was the Cambridge service charge issued?

A

Tenants charged in alignment with Standard English Quarter Days- 25th December, 25th March, 24th June and 29th September.

6 weeks prior to the first quarter day. (quarter days do not need to align with service charge year)

Charged on 25th December. (prior to service charge year start)

1st January-31st December 2024- The surveyor acts on behalf of the landlord – these dates can be changed.

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8
Q

What are the modern service charge days?

A

modern quarter days – 1st Jan, 1st April, 1st June , 1st October

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9
Q

Cambridge – how could S/C be apportioned? Any RICS documents with guidance?

A

Was apportioned on size. RICS Professional Statement on Service Charges in Commercial Property

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10
Q

How else could it be apportioned?

A

Weighted floor area, rateable floor area, fixed %

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11
Q

How did you know what items to include in the service charge?

A

Run through meetings with client, property managers, facility managers to determine previous year costs and upcoming planned works for this year.

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12
Q

Did the budget include a management fee? How did you calculate the fee? Any RICS guidance?

A

Yes it did. Management fee at fixed rate - to include management fee( agents fees for services such as rent collection), accountancy fee (preparation of service charge reconciliation), rates and FM helpdesk fees.

They were calculated by looking at the previous years fees, noting any variance

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13
Q

Did the budget include a sinking/reserve fund? What are these? Can you always implement them?

A

This budget did not include a sinking fund reserve. extra sums of money from occupiers over many years and don’t spend the money, you end up with a bank account of money, which a mixture of past and current occupiers have paid into and for me, it all becomes a bit of a mess.

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14
Q

Difference between service charge and sinking fund?

A

SC- day to day items
SF- once a year maintenance issues

*for Cambridge, everything was incorporated into SC

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15
Q

when setting up SC in Cambridge, what did you have regard to?

A
  • Tenants Leases
  • RICS PS: Service Charges in commercial property
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16
Q

how did you go about setting up a new budget, what items did you account for in your new budget?

A
  • previous budget
    -inspection- weather items should be considered again
    -quotes from contractors (see if price increase)
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17
Q

What are the three ways to budget ahead?

A
  • Actual costs (contracts in place)
    -Estimates/quotes on contracts or jobs
    -comparable evidence from other similar schemes
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18
Q

What items can you not use a SC for?

A

-landlords own interest
-development costs
-any negligence costs

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19
Q

How do you agree what contractors to use? do you have a preferred list?

A

-LSH have approved list - agreed before hand

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20
Q

what is the difference between subletting and assigning a lease

A

assignment - Tenant transfers legal interest to another tenant, and new tenant takes over lease obligations

Sub-letting - Lease property from Tenant rather than Landlord. Original tenant maintains relationship with Landlord and Sub-Tenant has relationship with Tenant”

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21
Q

What is Alienation

A

The right granted in a lease for a tenant to assign, sublet or share occupation of their property

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22
Q

What effect does the Landlord and Tenant (Covenants) Act 1995 say?

A

● Relates to assignment of leases
● Came into effect 1st January 1996
● Abolished privity of contract for all new leases
● Gave landlords more scope regarding approval of assignee
● Introduced AGA’s for the most recent former tenant to guarantee the lease obligations of the immediate assignee
● Section 17 notice - served on the guarantor to pay the rent within 6 months
● Section 19 notice - guarantor can apply for an overriding lease within 12 months”

23
Q

What constitutes an alteration?

A

affecting form and structure

24
Q

What happens if a tenant wants to carry out works outside their demise?

A

The tenant has no right to carry out works outside their demise- they will have to negotiate with owner

25
Q

What happens if a tenant wants to carry out works that do not need consent?

A

many leases permit non-structural alterations, without any requirement to seek consent.

26
Q

You mention that you have read and understand the RICS Professional Statement: Service Charges in Commercial Property (2018), can you tell me a little more about that?

A

-set out to improve general standards and best practice, fairness and transparency in the management and administration of service charges.

aims to:
ensure timely issue of budgets
reduces dispute causes + guidance
provide guidance to solicitors, landlords, managers and tenants on negotiation, drafting and operation of leases.

27
Q

what does quiet enjoyment mean?

A

LL will not disturb tenant and their enjoyment whilst in tenancy term

28
Q

What are the core responsibilities of property managers?

A
  • Help client to meet investment objectives (risk mitigation, occupier care, improving liquidity, maintenance and repair
    -liaising with / reporting to LL and tenants
    -ensure LL and tenant comply with lease obligations
    -ensure LL meets statutory requirements
    -ensure property is adequately insured
29
Q

Why might Legionella be a problem in properties

A
  • bacteria from water
    -water systems maintained - can multiply in great numbers
30
Q

what can LL do to prevent?

A

-risk assessment every 2 years
-make sure hot water supply is above 55 degrees
-if FRI lease- will be responsible for water systems

31
Q

What is Service Charge reconciliation? Have you ever done one?

A
  • I have not been involved. However, I understand the principles

-Comparison of SC income demanded against expenditure for a given period

32
Q

Who is responsible for defects? Landlord or Tenant?

A

-Depends on lease
-usually LL and tenant responsible for disrepair

33
Q

what is the difference between disrepair and a defect?

A

defects could be inherent (ie, there from the start) or latent (impossible to see)
disrepair is about the physical deterioration of something from a previous state.

34
Q

Who is responsible for reviewing contractor and how frequently?

A

FMs- depends on contracts
@ LSH we would looking market no greater than every 3 years

35
Q

How do you handle clients money when it comes to SC costs?

A

-separate account including word client
-service charge is in a separate account to rent
-finance managed

36
Q

What did you do prior to deciding service charge funds for Cambridge?

A

Previous years budgets
FM’s prepare initial and send to surveyor (who will have done procurement with contractors)
contractors- FM-
landlord-FM

37
Q

with your service charge, how did you go about apportioning?

A

looked at floor areas and leases
look for capped lease
work out what is due for each unit dependant on floor area
LL has to pick up capped amount
cap used as incentive (usually don’t give)

38
Q

when you budget, how do you go about any schedules?

A

-compile expenditure list
-work out which tenants derive from a benefit
-work out floor area
-eg lifts (ground floor tenants don’t pay)
-window cleaning (different window)
-roof of a building needs replaced in business park- separate SC

39
Q

how do you ensure split across schedules are accurate?

A
  • going through budgets and see who benefits fro each service
    -determine how many schedules are needed
    -Cambridge CPC4 not charged for CPC2 repairs
40
Q

What do you do if you are missing invoices?

A

chase provider
speak to FM

41
Q

Give me an example of when you have done a SC reconciliation?

A

Have not been involved with one.
comparison of SC income vs actual expenditure
At end of year look at budget against expenditure
spent less- put monies back into budget
spent more- ask for more money

42
Q

How often is fire safety carried out?

A

Annually

43
Q

How often is H and S carried out?

A

Annually (common areas)

44
Q

What strategies if tenant isn’t paying rent/preniums?

A

credit control- initial contact/correspondence
surveyor contacts tenant
flag with client
if client approves- instruct CRAR
speak to solicitor- 7 day notice
statutory demand on tenant as last step

decide what route to take- do you want a continued relationship with tenant?

45
Q

If in the lease, tenants all pay 10% and landlord thinks this is unfair, can they change this?

A

1.) lease is king
2.) LL could change - through consultation / lease variation and agreement from all tenants

46
Q

How can you deal with a tenant who is in rent arrears?

A

check lease
recognise warning signs - ie bounced cheque /late payments
check if rent deposit in place
normal commercial lease (allows rent to be paid 2-4% above bank base rate, 7-14 days following rent payment)
consider property possession in light of passing rent + current market conditions
chances for relet- compare VP with investment value
empty rates levied
LL - action against guarantor , original tenant if sub-let
seek legal advice
charge interest on late payment s
consider payment plan with tenant.

47
Q

What steps would you take if you had an empty building that you managed?

A

Building Insurance
Obtain EPC/consider MEES
clear building and remove rubbish
undertake regular inspections
inform local rating authority for empty rates payment
seal up letter box
secure property
landscaping/gardening
residential squatting- remove trespassers
arrange security
decommission services

48
Q

What happens if tenant is in rent default

A

court proceedings
rent deposit
pursue guarantor
forfeit lease
negotiate payment plan
try agree mutually acceptable agreement

49
Q

Did you take inflation into account for your Service Charge Budget?

A

Yes. FM’s undertook procurement exercise to identify which contractors had increased their pricing. This was adopted into the Service Budget.

50
Q

What is a service charge?

A

charges to tenants for multi-let properties to manage property.
paid quarterly

51
Q

Were there any planned, preventative measured that needed to be considered within the budget?

A

Renovation costs were separate. CCTV.

52
Q

Were there multiple schedules to deal with different element of the site?

A

Yes.
4D monitoring
Lifts
Reception
Lift Lines
Landscaping
Weekend Guard
Roof repairs

53
Q

What asset types are included within the business park?

A

Use Class E
Office (B1)
Residential (C3)
Restaurant
Gym

54
Q
A

APC (12 decks)

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