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Property Management Flashcards

1
Q

What guides commercial property management?

A

RICS Guidance note: Commercial Property Management in England Wales. 2nd Edition. Effective Oct 2011

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2
Q

What does Commercial Property Management 2nd Edition Eff October 2011 contain?

A

3 Key principles - acting as agent of the landlord, managing third party suppliers, duty of care
4 Property Managers core duties - liaising and reporting with landlord, collection of moneyed, client accounts, defaulting occupiers, service charges, deposits, managing the building, management policies, insurance, occupier liaison, energy management, building management systems, health and safety, procurement, management fees
5 Additional responsibilities of the property manager
6 Landlord responsibilities to the property manager
7 Employees and employment law
8 Specialist issues - managing a portfolio, mixed use developments, offshore ownership, duty of care deeds, insolvent landlord and LPA receivers
Appendix
1 - Main English legislation relevant to the management of a commercial property
2 - Property management contract

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3
Q

What to do with service charge funds?

A

Keep monies in separate service charge account with transparent record of income and expenditure

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4
Q

What is TUPE?

A

Transfer of Undertakings (Protection of Employment) Regulations 2006

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5
Q

What is the Occupiers Liability Act 1957?

A

Section 7 - Act imposing duty of care on persons occupying or in control of any premises in relation to visitors

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6
Q

What is Occupiers Liability Act 1984?

A

Duty on the occupier of a premises to any persons other than visitors

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7
Q

What is the Electricity at Work Regulations 1989?

A

Regulation imposing duty of employers to carry out PAT testing

Every employer and employee to ensure safety in the workplace regarding electric

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8
Q

What is the Control of Asbestos Regulation 2006?

A

Obligations on duty holder to assess whether or not asbestos is present in the premises

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9
Q

What is Regulatory Reform (Fire Safety) Order 2005?

A

Improve responsibly on employers to create a safety working environment

Responsible person

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10
Q

What is Gas safety (Installation and Use) Regulations 1998?

A

Duty of employer to take reasonable steps to ensure that person undertaking work is approved under HSE

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11
Q

What is the Landlord and Tenant Act 1988?

A

Duties on the landlord regarding assign, underlet, charge or part with possession

Occupier requires landlord consent not unreasonably withheld

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12
Q

What are the requirements of Energy Performance of Buildings (Certificates and Inspections) Regulations 2007?

A

Duty to present occupier with EPC

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13
Q

What is the Disability Discrimination Act 1995 and 2005?

A

Not to discriminate against disabled persons

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14
Q

What are the 4’Ps?

A

Price
Place
Promotion
People

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15
Q

Detail main landlord and tenant function

A

Read lease
Handle lettings
Rent review
Lease renewals
Alienation
Subletting
Dilapidations
Appoint landlord and tenant surveyor
Code of Leasing Business Premises 2007

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16
Q

Outline function of agency?

A

As per leasing and letting
7 chapters of UK Commercial Real Estate Agency 1st edition Oct 2016
1 Scope
2 Standards and ethics
3 Securing Instructions
4 Disposals: marketing the property
5 Implementing the disposal
6 Acquisitions
7 Ending the instruction

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17
Q

Types of maintenance

A

Reactive = repair of a leak

Proactive = planned regular maintenance

Cost reduction = utility switch

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18
Q

How does a tenant arrange improvements?

A

Requires consent

Licence to Alter
- specification
- certification

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19
Q

Types of certification required

A

EPC
Electrical
Gas safety

Health and Safety = fire safety

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20
Q

Why avoid void periods?

A

Empty business rates - relief for 3 months or extended based on criteria
Vandalism
Disrepair
Insurance
Security
Disposal strategy

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21
Q

What are empty rates

A

Shop and offices = 3 months relief
Industrial = 6 months relief

Mitigations
= 42 day rule = occupy before reapplying for exemption
= meanwhile use - pop up, short term
= charity shop

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22
Q

Outline a piece of Case Law around rates?

A

Monk V Newbigin
- property incapable of beneficial occupation on account of building works
- apply RV of £1 removing rate liability

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23
Q

What is the Service Charge in Commercial Property 1st edition 2018?

A
  • landlord recover 100% cost in accordance with the lease
  • based on £m2, Rateable value, % rent
  • clarity, communication and financial competence
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24
Q

What are the aims and objectives of the Service Charge in Commercial Property 1st edition 2018?

A

1 Improve standards to promote best practice, uniformity, fairness and transparency in management and administration of service charge
2 Timely issue of budget and year end
3 Reduce disputes and guidance to resolve
4 Guidance to solicitors, clients, managers of service charge in negotiation, drafting, interpretation, operation of lease

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25
What is the service charge benchmark?
OSCAR (Office Service Charge Analysis Report) - JLL benchmark International Total Occupancy Cost Code 24 Core principles 2018 service charge code Reconciliation - check vs accounts
26
What are the 24 core principles laid out in the Service Charge in Commercial Property 1st edition 2018 PS?
Service cost 1 all costs be transparent 2 services be procured 3 owners not make profit Allocation and apportionments 4 costs to relevant expenditure categories 5 basis and method of apportionment fair and reasonable Communication and consultation 6 consult occupiers regarding standard and quality 7 communicate to ensure service benefits all 8 demonstrate compliance with professional standard Duty of care 9 certifying accounts have duty of care to owner/occupiers 10 owner duty to manage 11 clear policies on managing service charge Financial competence 12 issuing statement in non-partisan spirit 13 statements supported by independent review in line with ICAEW Technical Release 14 use Industry Standard Cost Classification in reports Occupier Responsibilities 15 prompt payment 16 lease has legal effect 17 proactive in assisting owners in operation Right to challenge/alternative dispute resolution 18 all new leases require resolution through ADR 19 not agree mediator/independent expert = President of RICS nominate (on request) Timeliness 20 communication and consultation timely 21 budget with commentary one month before start Transparency 22 in accounts, notes, policies, day to day management Value for money 23 effective value for money rather than lowest price Exclusions 24 not include: - initial costs - set up costs (fit out/equipping management office) - improvement costs above the cost of normal maintenance, repair or replacement. May include enhancement where justified - future redevelopment costs - costs and fees relating to owners investment (letting fees) - costs attributable to void - cost from negligence
27
What type of insurance for property management?
Property manager arrange on landlord behalf Equivalent reinstatement basis All risks covered Shop around
28
How is rent collected?
Requires accurate information Timing Usual quarter days 25 March, 24 June, 29 Sept, 25 Dec
29
What are rent arrears
Behind rent payments Penalties outlined in lease Includes interest Section 17 Landlord and Tenant Act 1997 - request rent from former tenant under AGA within 6 months Interest usually 2-4% above base rate after 14 days Chase guarantor or use deposit Forfeit if continuous
30
What are commercial rent arrears recovery (CRAR)?
Tenant apply to court for relief from forfeiture Landlord provide 7 days notice of enforcement Rent arrears only Landlord seize only certain goods Favours tenant Careful landlord does not waive right to forfeit
31
What is an easement?
Legal right grants over a building or piece of land
32
What governs client money?
Rule 8 of the obligations for firms under Rules of Conduct Client account for service charge and rent payments
33
What is the Insolvency Act 1986?
Legal framework for dealing with financial problems of individuals, partnership and companies Administration - called in by the bank Company Voluntary Agreement - payment from creditors Receivership Voluntary liquidation Bankruptcy
34
Define Equality Act 2010?
9 protected characteristics Access for disabled through reasonable adjustments
35
What is Capital Allowance Act 2001?
Depreciation of qualifying expenditure How capital allowances are deducted from income taxable under Income Tax Act 2007 Specialist area
36
What is data security?
Protection of data Data Protection Act 2018 - UK implementation of EU GDPR
37
What is Corporate Manslaughter Homicide Act 2007?
Covers death caused by negligence Unlimited fine Property managers role to examine Serious failure in heath and safety
38
RICS Surveying Safely 2nd edition 2018
Outlines health and safety precautions for aspects at work
39
How to manage asbestos?
Control of Asbestos Regulation 2012 Property Manager duty to remove landlord liability Refer to specialist Implement register and plans
40
Describe asbestos?
Asbestosis is fatal Caused by disturbing fibres Regulated removal but can be costly Blue = crocidilite White = chrysotile Brown = amosite Remedy by removal or encapsulation
41
What is AC Refridgeration 22?
Banned in AC units since Jan 2015 Affects ozone layer EC Ozone Regulation number 1005/2009
42
What is Construction and Design Management Regulation 2007 updated 2015
CDM Responsibility with duty holder Main health and safety duty - principle contractor - principle designer
43
What is health and safety at work act 1974?
Employers duty to protect employees
44
What is health and safety at work 1999?
Duty to protect employees and PAT testing
45
What are the headings for the 11 core principles under Service Charges in Commercial Property 2018?
1 Service cost 2 Allocation 3 Communication 4 Duty of Care 5 Financial competence 6 Occupiers responsibilities 7 Right to challenge/ADR 8 Timeliness 9 Transparency 10 Value for money 11 Exclusions
46
What are the recognised impacts of Covid 19 on service charges?
Lack of use = lower costs Additional costs to Health and Safety Landlord seek to reduce cost where possible Spread payments Lack of use to reduce cost and pass to tenant by year end Management fee to reflect work Solutions accounts RICS professional statement service charge in commercial property
47
What is the Technical Due Diligence in Commercial Property 1st edition effective 1 April 2020?
Technical due diligence report - balance and professional opinion of the condition of the property Allows purchase, occupier, financier to make an informed decision
48
What does a technical due diligence report include/
Defect need repairs: - deficiencies in design and construction quality - lack of planned and actual maintenance - neglect/misuse - insufficient capacity in services items - deleterious materials - non-compliance with statutory/mandatory requirements
49
What is technical due diligence used for?
- provide basis for optimisation of design - gain understanding of condition and design - establish suitability for intended use - understand need/quantity of future works - level of protection for occupier, owner, founder - provide basis for negotiations - basis for allocation of risk - basis to improve life safety - basis for performance improvement
50
What is RICS Dilapidations?
Professional statement 7th edition, effective 1 Dec 2016 Covers: Role of the surveyor Taking instructions Documentation Inspection Schedule of dilapidations and Scott schedule Dilapidations during lease term Dilapidations at the end of the lease term Dilapidations claims against landlords Diminution valuation Break clauses Settlement of disputes
51
How might forfeiture be waived?
Unequivocally recognising the continuing existence of the lease - demanding rent/accepting rent
52
What does management fees include?
Any profit element for managing the services in the service charge Supervision of site, overseeing contractors, accounts/budgets
53
What is a reserve fund?
Fund to meet anticipated future cost of maintenance and upkeep - external cleaning and redecoration Short term nature - costs reasonably incurred during the term of occupiers lease
54
What is a sinking fund?
Funds set aside for replacement of a wasting asset (heating plant, equipment, lifts) Set out clear policy
55
What is recoverable within the service charge?
Reasonable cost of maintenance, repair, replacement (usually where beyond economic repair) of fabric, plant, equipment and materials necessary for the property’s operation
56
What are the mandatory requirements set out in Service Charges in Commercial Property 2019?
1 expenditure must be in accordance with the lease 2 recover no more than 100% of proper and actual costs 3 budgets issued annually within commentary 4 accounts show true and accurate record of actual expenditure 5 provide apportionment matrix 6 monies held in more or more discrete bank account 7 interest must be creditied to service charge 8 advise client is disputes exists 9 after resolution of dispute, charge raised incorrectly should be adjusted to reflect error
57
What are the timescales for service charges?
Budget - 1 months before with commentary Reconciliation - 4 months after with commentary
58
What is included in the total cost of management?
Reasonable costs and overheads borne in the process of operating and managing the services Exclude: rent collection, asset management Fixed price - fee charged by the manager and related entities for managing and supervising the services - cost of the site specific management staff including accommodation and ancillary office costs
59
How to procure services in a service charge?
In line with RICS Procurement of Facility Management - defined scope of service - clear objectives - evaluation criteria - clear pricing structure - clear timescales for process - clear payment mechanism - comply with relevant data protection rules
60
What is a sweeper clause?
Avoids risk of incurring costs outside the service charge - those listed and other miscellaneous services might be provided in the future
61
What is the right to challenge?
Occupiers reasonable period - four months from issue - to raise queries
62
Recommended ADR for service charge disputes?
Mediation Independent expert determination If not agree, seek assistance from RICS dispute resolution service
63
What are service charge and reserve fund best practice?
Held in separate accounts Reasonably estimate amount of contribute to specific expenditure Explain lifecycle
64
How to manage cost for replacement but modern equivalent?
Additional cost justify with reduction in ongoing maintenance costs
65
What is appendix A of the Services Charges in commercial property
Compliance checklist: Value for money Transparency Timeliness of reporting Approval Management fee Duty of care to occupiers Standardised financial reporting Interest income and expenses Professional standard Support for ADR
66
What is appendix B of service charges in commercial property?
Standard industry cost classification Management -management fees -accounting fees - professional fees Utilities -electric -gas Soft services -security guarding/systems -cleaning and sustainability - landscaping and environment - Marketing and promotions Hard services -mechanical and electrical services - Lifts and escalators - suspended access equipment -fabric repairs and maintenance Income - interest -income - income operating expenses Insurance - engineering insurance - all risk insurance cover - terrorism insurance Exceptional expenditure -major works - forward funding Miscellaneous charges -irrecoverable VAT -external contributions
67
What are appendix C and D in service charges in commercial property?
C - accounting sample report include schedule, report summary, D - handover procedures
68
What is CRAR?
Commercial Rent Arrears Recovery Replaces distressed Debt can only be pure rent arrears. Only rent, VAT and interest. Only applies to commercial property unless overriding lease. Not service charge/insurance - split out if included Debt must be a minimum sum set at 7 days rent arrears
69
What is Sara & Hossein v Blacks Outdoor case law?
Sets a precedent for service charge payment whereby a tenant must ‘pay now, argue later’
70
What are the remedies for non-payment?
Contact tenant (email, letter, call) Meet tenant onsite - sock, occupation (CRAR 7 day notice) Check accounts (turnover, costs) Check rent deposit/guarantor Options: payment plan, AGA, guarantor, deposit CRAR Statutory demand Surrender Forfeiture
71
What is payment plan?
Short term measure to help tenants when in arrears Read accounts first Agree in writing Personal to the tenant
72
How would you use a guarantor?
For non-payment of rent Section17 Landlord and Tenant Act 1995 give 6 months to claim Guarantor settles they entitled to override the lease
73
What is AGA?
Bought in under Landlord and Tenant (Covenants) Act 1995 Authorised Guarantee Agreement Used in assignments of less Applying guarantee to outgoing tenant Not to sub letting - word lease so only assign to similar covenant strength Only applies to one assignment Should not be a condition of an assignment unless proposed assignee is of a weaker covenant
74
How to recover under CRAR?
Certified enforcement officer enter after 7 day notice period. Cease goods to value of the rent arrears Previous experience they are not been there, can obtain a court order to shorten 7 day period Enforcement agent permitted to take: tenant assets not essential to operation. Must belong to the tenant. Not take items for operation or personal use
75
What is statutory demand for rent?
Pursuing bankruptcy/winding up procedures Only when no dispute about level of arrears Aggressive tactic 21 days to pay Debts in excess of £750k
76
When to surrender through non-payment of rent?
Landlord and tenant agree to release the tenant from obligation Does not have to be consideration - nil premium Only when landlord is confident of reletting/wants to redevelop
77
What is forfeiture for non-payment of rent or breach of covenant?
Aggressive tactic Check clause in the lease Rent must have been demanded or properly Otherwise breach requires section 146 notice under Law of Property Act - wait 6 months as tenant has right to apply for relief - cannot do anything until expiry Only by landlord entering the premises peaceably Tenant has right to apply to the Court for relief and can be delayed by 6 months Non-payment of rent, 21 days then change the locks assuming lease permits
78
Why sublet and not assign?
Where their is a profit rent Sublet at market rent, keep profit and pay landlord
79
Considerations for assignment/subletting?
Read the lease Undertaking for costs Covenant strength Proposed rent Reasonable grounds to refuse consent - management/covenant Landlord and Tenant act 1988 - deal promptly Impact on investment value
80
What is the purpose of dilapidations?
Entitles the landlord to get the property back in the same condition as it was handed over to the tenant Review repairing obligation - FRI Schedule of Condition - record condition if poor, written record and photos Schedule of dilapidations - tenant can either do the works or pay agreed amount
81
Types of schedule of dilapidations?
Interim - during the lease with at least 3 years left Terminal - service within last 3 years Final - served on expiry Claim is based on cost of works or diminution in value - whichever is the greatest
82
Types of insolvency?
Administration: - appointed by the company, creditors, bank - deals with asset over an agreed timescale known as moratorium - directors remain in office but no power - company continues to pay rent is can be claimed as a cost of administration Receivership: - Law of Property Act Receiver is appointed to sell of asset to pay off debts
83
What to do if a tenant becomes insolvent?
Check the lease Is there a rent deposit Are there guarantors Contact the administrator and register claim for arrears Secure property Inform insurers Cannot accept keys as this will constitute surrender Can take back to ensure locked and secure as long as confirmed in writing and not constitute surrender
84
What legislation refers to landlord approval for a licence for alterations?
Landlord and Tenant Act 1927 If alterations are an improvements, landlord might need to pay compensation
85
Grounds to refuse consent for alterations
Cause diminution of value Previously failed repair covenant Lease prohibits
86
Commercial sector market trends
JLL report that 60% office staff prefer hybrid RICS Modus states 70% of London office space below B rating
87
Changes to Town and Country Use Classes?
Changes in 2020 with the aim to repurpose towns Shops, food and beverage, business, non-resi become under E
88
Impact of changes to Permitted Development rights
From 21 May 2024 farmers able to develop buildings into commercial uses such as farm shops, sporting facilities, training facilities
89
What is Fitness for Human Habitiation Act?
Around standard of housing If the condition causes harm, tenant can take landlord to court Landlord enforced to repair and compensate

APC Revision (17 decks)

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