Property Management

Question 1

Name RICS Documents for Property Management

Answer 1

RICS Professional Notes: Commercial Property in England & Wales 2011

RICS Professional Standard: Real Estate Management 2016

RICS Professional Standard: Service charge in commercial property 2018

Question 2

What are the 9 Principles of the RICS Professional Standard: Service Charge in Commercial Property 2018?

Answer 2

1. Must seek to recover costs as set out in the lease
2. Must seek to recover no more than 100% of the costs.
3. Must ensure service charge budgets are issued annually with commentary.
4. Must provide a set of reconciliation of the budget annually.
5. Must ensure an apportionment matrix is issued annually.
6. Must ensure service charge monies are held in one or more discrete account.
7. Must ensure interest earned on service charge accounts are credited to the service charge account.
8. when acting on behalf of the tenant, must advise they can only withhold payment on disputed amount.
9. Must advise Landlord that following dispute, any service charge must be raised correctly.

Question 3

Remedies for Non-Payment.

Answer 3

• Draw down on deposit
• Guarantor / AGA
• Payment plan
• CRAR
• Forfeiture / surrender
• Stat demand

Question 4

How is insurance typically handled?

Answer 4

It depends on the lease, under the insurance clause. However typically on a multi-let building, the landlord arranges cover and recharges to the tenants.

Question 5

Landlord remedies for breach of repair?

Answer 5

1. Serve notice
2. Forfeit
3. Self-Help - carry out works themselves
4. Serve an interim schedule of dilapidations.

Question 6

What does the code of leasing business premises 2020 say about AGA’S?

Answer 6

Whilst requesting for an AGA is common practice, tenant’s should not seek an AGA if the assignee proves strong covenant strength, sufficient deposit and / or guarantor.

Question 7

What are the different types of insolvency?

Answer 7

• Administration
• CVA - Creditors Voluntary Administration
• CVL
• Liquidation

Question 8

What is contained in a service charge budget?

Answer 8

A service charge budget includes anticipated costs to run and maintain a building. These costs include:
- Management costs (i.e. fees, office costs)
- Utility costs (i.e. electricity, gas)
- Soft services (i.e. cleaning, signage)
- Hard services (i.e. M&E repairs, Lift repairs)
- Insurance
- Exceptional expenditure

Question 9

How is a service charge budget apportioned?

Answer 9

• Square foot basis
• fixed percentage
• weighted apportionment

Question 10

How do you benchmark a budget?

Answer 10

Cross reference with benchmark reports which compiles an average of usual costs throughout the industry and different building types.

Question 11

Why might there be a different schedule in a budget?

Answer 11

To ensure costs are only attached / related to tenants that have use / benefit of the service or area.

Question 12

What are the different types of maintenance programs?

Answer 12

• Planned Preventative Maintenance
• Cyclical Maintenance
• Responsive Maintenance

Question 13

What is the difference between a Sinking Fund and Reserve Fund?

Answer 13

A sinking fund is collected and reserved for a specific project. Whereas a reserve fund is a collection of money towards unexpected costs in the future.

Question 14

What legislation refers to landlord approval for tenant alterations?

Answer 14

Landlord & Tenant Act 1927

Question 16

What would happen to the alterations at lease expiry?

Answer 16

The tenant would be required to reinstate in accordance with their lease and licence for alterations.

Unless prior agreement with landlord to keep.

Question 17

When might it be reasonable for the landlord to refuse a licence for alteration?

Answer 17

• if works caused diminution in value of property
• if tenant had failed repair covenant
• if lease prohibits
• if affects structural integrity of building

Question 18

What are the different types of schedule of dilapidations?

Answer 18

• Interim
• Terminal
• Final