Property Management

Question 1

Why are good LL and T relationships important?

Answer 1

Because it helps the landlord and tenant to resolve any issues that may arise

Question 2

How can property managers be efficient and accountable?

Answer 2

The commercial property management guidance note details the best practice for property managers when acting on behalf of the landlord.

Question 3

What the principles of the RICS professional statement - Real Estate Management, 2016?

Answer 3

• Act in an honest, fair and transparent manner
• Carry out work with due diligence
• Ensure clients have the terms of business
• Do the utmost to avoid conflicts of interest
• Do not discriminate
• All advertising and marketing is honest
• All communications with the client are clear, timely and transparent

Question 4

What is the RICS guidance on Service charges?

Answer 4

Service charge in commercial property, 2018
Professional statement (Mandatory)

Question 5

What is the aim of the professional statement

Answer 5

To set out the best practice for service charges

Question 6

How would a LL implement a SC?

Answer 6

• A service charge budget should be agreed with the tenant prior to the start of the SC year
• Quarterly billings based on the estimate
• Annual accounts prepared at the year end
• Balancing payments made at the end of the year upon the presentation of audited accounts
• Payments usually reserved as rents

Question 7

What would be included in a SC budget?

Answer 7

Details of the property
Details of the property manager and accountants
Foretasted spend for the SC year and comparison to previous years
The apportionment matrix
Description of the costs

Question 8

What are the 4 types of apportionment for a SC?

Answer 8

• Floor area
• Weighted floor area
• Ratable value
• Fixed percentage

Question 9

What is a sinking fund?

Answer 9

A fund formed periodically setting aside money for the replacement of a wasting asset

Question 10

How is insurance usually charged?

Answer 10

As a rent

Question 11

What would you do with a vacant property?

Answer 11

Tell the buildings insurers
Planned maintenance programme
Clear the building
Tape up the letter box
Undertake regular inspections
Apply for business rates relief

Question 12

What is an alteration?

Answer 12

An alteration made to the lease premises by the tenant

Question 13

What is a LTA?

Answer 13

A licence that must be signed by the Landlord giving the tenant approval to make alterations to the property

Question 14

Is there any RICS guidance for LTAs?

Answer 14

RICS Licence for Alterations, 2013
Guidance note

Question 15

When acting for a LL, what would you do if you receive an application for a LTA?

Answer 15

• Read the lease to confirm alterations are permitted
• Request full plans and specifications
• Obtain an undertaking for surveyors and solicitors costs
• Check the long term impact on the property
• Confirm the alterations will not negatively impact EPC rating
• Check there are RAMS and PII in place
• Report to client to obtain insturctions
• Instruct solicitors to prepare LTA
• Inspect the completed works to ensure they are as agreed

Question 16

Why is a LTA used?

Answer 16

• To protect from the LL rentalising improvements at the next review
• To protect from dilapidations

Question 17

What were the terms of the sub-lease?

Answer 17

3 year lease
No break or review
Rents paid monthly

Question 18

How did you identify the arrears?

Answer 18

I carry out monthly reviews of the sub-tenant accounts and noticed that the sub-tenant had paid the incorrect amount following renewal.

Question 19

What alternative methods are there for collecting arrears?

Answer 19

Court proceedings
Use a rent deposit
Serve a statutory demand
Commercial rent arrears recovery scheme (CRAR)
Forfeiture

Question 20

Talk me through CRAR

Answer 20

The scheme is only available to commercial landlords and there is no minimum level of arrears required for this scheme.
Can only be used for basic rent demanded plus VAT and interest and NOT service charge or other payments.
I provides set condition to be met before a landlord can exercise CRAR

Question 21

What are the conditions of CRAR?

Answer 21

7 days unpaid rent
7 days warning notice
Enforcement agents visit
2 days follow
Re-entry by enforcement agent to seize goods
7 days before sale of goods

Fees must be specified on the entry notice

Question 22

What was the process of collecting the rental arrears?

Answer 22

I noticed the arrears during my monthly review of the sub-tenant accounts.

I notified the tenant of the error and requested they amended the payment and paid the shortfall.

I gave the tenant a grace period to the next month to settle the account, however this was not completed.

I discussed the arrears with the tenant and they were apologetic for the shortfall and advised they would struggle to pay the arrears in a lump sum.

I reviewed my options and advised my client that I thought a payment plan would be the best method to settle the account, this was agreed and I prepared the payment plan.

I agreed the plan with the tenant, who complied with this payment plan

Question 23

Why did you select the payment plan?

Answer 23

My clients overarching aim was to maintain a good landlord and tenant relationship.

This was not a significant level of arrears and so this approach worked to benefit both parties.

Question 24

What was the level of arrears?

Answer 24

£400-£500

Question 25

What were the terms of the sub-lease?

Answer 25

1 year
monthly rents
no rr
no breaks

Question 26

Where did you identify the process for collecting arrears?

Answer 26

I read the lease to confirm what options were available.

Question 27

Why was it relevant that interest was payable?

Answer 27

The lease stated that interest was payable on a late rent payments 14 days after they become due.

Question 28

What was your advice to the client?

Answer 28

My advice to my client was that I had identified rental arrears for one of the sub-tenants, I advised the level of arrears and my recommendations to bring the account up to date.

Question 29

What was the payment plan?

Answer 29

An additional payment alongside the monthly rental payments for a period of 6 months or 6 installments to bring the account up to date

Question 30

How did you utilise your communication skills to help resolve the arrears?

Answer 30

I had telephone discussions with the sub-tenant and listened to them to understand their position to help me identify the appropriate solution

Question 31

What strategies do you use to ensure your client is satisfied with the outcomes of property management issues?

Answer 31

Monthly and quarterly meetings
Maintaining regular contact with the client
KPIs

Question 32

What steps do you take to maintain a good landlord and tenant relationship?

Answer 32

Good communication
Understanding your clients objectives
Acting with honesty and integrity

Question 33

What is an assignment and what is a sub-let?

Answer 33

Assignment - Creates a new landlord and tenant relationship. The new tenant pays rent directly to the landlord
Sub-let - The original tenant acts as the landlord to the sub-tenant

Question 34

When would an AGA be required?

Answer 34

If it has been confirmed in the lease
It is used when the most recent former tenant acts as a guarantee for the new tennat

Question 35

What would a LL do if the tenant defaults and there is an AGA?

Answer 35

The landlord would serve a section 17 notice to the guarantor within 6 months of the tenant defaulting and the former tenant in the GA must pay the arrears

Question 36

Why was an AGA introduced?

Answer 36

It gives the landlords more scope for setting conditions regarding the approval of an asignee

Question 37

What were the requirements of the break?

Answer 37

Give not less than 6 months notice
All initial rent that had fallen due was paid
Including the payment of service charge and insurance rent
The break penalty was in cleared funds (region of £60,000)

Question 38

What was the critical action plan of the break?

Answer 38

A detailed breakdown of the break conditions
A review of the payment history
Amendments to the management system (mark as a break site and amend payments from monthly to quarterly)
Added to the break tracker to discuss with my clients solicitors and agents

Question 39

What is the notice period? Is time of the essence?

Answer 39

Minimum 6 months to break date
Yes time was of the essence

Question 40

Was the break mutual?

Answer 40

No, this was a tenant only break in the 5th year of a 10 year term

Question 41

What was your advice to the client?

Answer 41

I advised the client of the break conditions and of what was required to ensure this was adhered to
I advised the client that the rent payments should be amended to quarterly and not continue as monthly. The client asked if we could keep it as monthly as they believed the new lease agreement was close to completion. I advised this would not be the best approach as until the deal is signed it could fall through and they would invalidate the break and therefore be stuck paying the higher level of rent.

Question 42

Why did the rent need to be paid quarterly if there was a side letter for monthly rents?

Answer 42

The side letter provides that its terms do not give rise to a variation of the lease. As suchthe Landlord could argue that in constructing a break, it is necessary to consider the sums payable as per the lease not the side letter.