Property Management

Question 1

What does the RICS GN on Commercial Property Management in England and Wales, 2011 relate to?

Answer 1

-Best practice for commercial pm
-Primary duty of care is to LL, the client.
-Contains and useful summary of all relevant statute law and a model of tofe.

Question 2

In a lease what is the difference between an absolute, open or restrictive (qualified) clause?

Answer 2

Absolute - Not allowing alienation
Open - Allowing alienation without restrictions
Restrictive - Allowing alienation subject to restrictions

Question 3

What is the difference between assignment and sub-letting?

Answer 3

Assignment - New tenant has direct relationship with Landlord.

Sub-letting - Sub-tenant has direct relationship with Tenant who has direct relationship with Landlord.

Question 4

What are some reasons to sub-let instead of assigning?

Answer 4

Requirement of lease
If Market Rent higher than passing rent then there is net profit
If Tenant wants to re-occupy in the fiture
The new party is of lesser covenant strength.

Question 5

What actions needs to be undertaken when dealing with an assignment/underletting?

Answer 5

Read lease to establish what is permitted

Will T give LL undertaking for Surv and legal costs?

Is proposed rent the market rent and/or same as passing rent?

What will be the effect on Investment value

What is the strength of the covenant for the proposed tenant, are their accounts to consider?

Are there reasonable grounds for withholding consent?

Has a deposit been agreed/ is there an AGA clause?

Obtain clients approval and once confirmed obtain licence to assign or sublet.

Question 6

What is the aim of the LTA 1988?

Answer 6

Ensure statutory duty exists on Landlord to deal with consents diligently and not to be unreasonably withheld. Failure to do so can result in successful claim for damages.

Question 7

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

Answer 7

For leases after 1st Jan 1996, it abolishes privity of contract and introduces AGAs.

Question 8

What is privity of contract?

Answer 8

Even after assignment of lease, the Tenant is still obligated to ensure lease covenants enforced.

Question 9

What is an AGA?

Answer 9

Authorised Guarantee Agreement, where most recent former tenant guarantees lease obligations of the immediate assignee as a voluntary agreement to be agreed between LL and T.

Question 10

What are 2 useful functions of a Licence to Alter?

Answer 10

1. Protects the parties at rent review
2. Protects the parties at the end of lease for dilapidations.

Question 11

What does the LTA 1927 do?

Answer 11

S19, prohibits improvements being made to the property without Landlord’s consent and that such consent TBUW. If this section has been followed, LL may be obliged to pay compensation for alterations that constitute improvements.

Question 12

What are the 3 forms of dilapidation schedules?

Answer 12

1. Interim - served by LL or T during least, with at least 3 years remaining.
2. Terminal - Served normally in last 3 years of lease.
3. Final - Served at or after lease expiry/break clause date when T is out of occupation and LL wants to agree claim for damages.

Question 13

What is a typical format for a dilaps schedule?

Answer 13

Outline repairing obligations

State remedy and cost of breach

Loss of rent, if approp, over period to do works.

Fees plus VAT for claim for surveyors and lawyers.

Negotiations conducted on without prejudice basis until agreement reached.

If agreement not reached, LL surveyor may prepare a Scott’s Schedule for the Court/ADR setting out summary of LL and T position.

Question 14

What are some options for when tenants default on their rent?

Answer 14

Court proceedings
Use rent deposit
Pursue former tenants and guarantors
Serve a statutory demand
Commercial rent arrears recovery scheme
Forfeit the lease
Negotiate a payment plan
Agree another mutually acceptable arrangement

Question 15

What does CRAR mean?

Answer 15

Commercial Rental Arrears Recovery Scheme

Question 16

Outline what CRAR does?

Answer 16

Available to LL where minimum level of rent is due under commercial lease.

No minimum amount of arrears

Only available to collect rent not service charge

Question 17

What is the timeline for CRAR?

Answer 17

Min 7 days of unpaid rent
Min of 7 days clear warning notice
Enforcement agent visits
2 clear days to follow
Re-entry by enforcement agents to seize goods
Allow 7 days before sale of goods
Fees must be specified on notice

Question 18

What is a statutory demand and what does it do?

Answer 18

Preliminary step to pursuing bankruptcy or winding-up proceedings. Puts pressure on tenant to pay arrears.

Available when no dispute over level of arrears.

Tenant has 21 days to pay arrears. After this LL can present bankruptcy petition to court if arrears over £750.

Court has no residual discretion to set aside statutory demand in order to avoid any injustice.

Question 19

What is a Section 146 Notice and what does it do?

Answer 19

Notice found within Law of Property Act 1925. Used when LL seeking forfeiture for other reason other than rent. Notice must state how breach is to be remedied and LL compensated.

Question 20

What does Section 6 of the Law of Distraint Amendment Act, 1908 do?

Answer 20

Where arrears for tenant can be recovered via sub-tenant. Notice informs sub-tenant that tenant is in arrears, specifies the amount and requires the sub-tenant to pay LL the amount directly.

Question 21

What does Section 17 of the Landlord and Tenant (Covenants) Act 1995 do?

Answer 21

Requires Landlords to serve notice to former tenant/guarantor when the current tenant falls into arrears. Must serve notice within 6 months from the start of arrears.

Question 22

What are the 4 main options available where Tenant not repairing their property?

Answer 22

1. Serve repair notice.
2. Forfeit the lease.
3. Serve an interim schedule of dilapidations
4. Do the work and charge the tenant.

Question 23

What is a Notice to Repair

Answer 23

Served under S146 of Law of Property Act 1925. Details what repairing/decorating breach has occurred, timescale allowed to remedy and course of action proposed if no action taken.

Question 24

What guides commercial service charge in the uk?

Answer 24

RICS Professional Standard - Service Charges in Commercial Property (1st Edn, Effective April 2019)

Question 25

What are some aims and objectives of the RICS PS - Service Charge in Commercial Property?

Answer 25

Improve general standards and promote best practice.

Ensure timely issue of budgets and year-end certificates

Reduce cases of disputes

Question 26

What are the 9 principles involved in the management of service charge accounts ?

Answer 26

1. All expenditure that is seeked to recover must be in accordance with terms of lease.
2. Recover no more than 100% of the proper and actual costs of the services.
3. Ensure that service charge budgets with explanatory comments issued to tenants annually.
4. Ensure annual approved service charge accounts issued to tenants.
5. Ensure they provide tenants with apportionment matrix.
6. Service charge monies to be held in one or more discrete bank accounts.
7. Interest earned accounts must be credited to service charge accounts.
8. Where tenant disputes payment, they must only withhold disputed amount.
9. Any service charge money raised incorrectly must be adjusted to reflect error without undue delay.

Question 27

What are some types of insolvency arrangements?

Answer 27

Administration

Receivership

Company Voluntary Arrangements

Question 28

What are the timescales for service charge budgets and year end accounts?

Answer 28

As stated in the RICS PS - Service Charge in Commercial Property:

-PM should serve s/c budget, apportionment matrix and explanatory comments at least 1 month before the new s/c year.
-PM should serve audited year end accounts to the tenant within 4 months of the s/c YE, if delay to this individuals should be notified and must not be longer than 12 months (RICS - RE management, 2016)

Question 29

What do you understand by the RICS Professional Statement - Real Estate Management (3rd Edn, Oct 2016)?

Answer 29

-States mandatory core principles
-Provides specific advice for ethical issues, managing real estate, ending instructions, safety and security and business management.

Question 30

What are the 12 principles within RICS Professional Statement - Real Estate Management?

Answer 30

1. Conduct business in honest, fair, transparent and prof manner.
2. Carry out work with due skill and care and ensure employed staff have this skill.
3. Ensure clients provided with clear and fair tofe. Should meet all legal req.
4. Do utmost to avoid conflicts and where they exist treat approp.
5. Don’t discriminate.
6. Ensure all dealings with clients are fair, clear, timely and transparent.
7. Ensure all advertising and marketing material is honest, decent and truthful.
8. Ensure all clients money held separately and covered by adequate insurance.
9. Have approp PII cover in order to manage risk.
10. Ensure your scope of obligations made clear to all parties you deal with.
11. Where provided in service, give realistic assessment of selling, buying price associated with occupancy or financial outcome using best judgement.
12. Ensure all meetings, inspections and viewings carried out with client’s lawful and reasonable wishes.

Question 31

In SJBP, what did the forfeiture clause state?

Answer 31

The Landlord was able to re-enter the property if at any time the following occurs:
-Rent unpaid for 14 days whether demanded or not
-Any breach of condition or tenant covenant within lease.
-In the result of a Tenant going into admin or CVA.

Once LL enters property the lease ends but without prejudice to any right or remedy of the LL in respect of any breach of covenant by Tenant.

Question 32

In SJBP was anything done before following through on forfeiture?

Answer 32

The Tenant had a history of not paying on time and a payment plan was agreed but was not met. I felt that terminating the lease via forfeiture was the best option and believed it was possible that a higher covenant strength tenant would be able to occupy the premises.

Question 33

What is a Company Voluntary Arrangement?

Answer 33

A CVA is a contract between a company and its creditors for when the company is insolvent but directors believe it has a viable future with financial restructuring.

Company nominates insolvency practicioner to oversee implementation of proposed strategy.

Under scheme, company agrees terms for repayment of accrued debts. Arrangement will be binding on all creditors if approved by at least 75% of creditors having regard to their value of debt.

Question 34

What is Administration?

Answer 34

Process commenced either by company or creditors. Purpose is to create period of protection for company for administrator’s to deal with the assets of company in most appropriate way. This period of protection is known as a moratorium and restricts actions taken against company while its in place.

Directors of company still have office but powers cease. Administrator must send proposals to creditors within 8 weeks and then with their agreement will implement a strategy.

While T is in administration, options of LL are limited due to moratorium. If rent is still being paid and equivalent can be claimed from the administrator.

The administrator may ask the LL for consent to assign the lease.