Property Management Flashcards
Describe to me the professional standards set out in Property Agency and Management Principles
- Must adhere to the rules of conduct
- Must ensure familiar with: Countering bribery and corruption, money laundering, terrorist financing, Conflicts of interest and conflict of interest UK commercial property.
- Must communicate accurately when working with clients - on fees, terms, commissions, rent - Anything the departs from this must be in writing with the reason and provided to the client
- Members must manage their business and staff effectively - be ethical transparent, take reasonable steps in protecting client money
- Must protect confidential information, ensure staff are trained and keep clear full records
- Must have health and safety process in place
Can you outline some of the guidance you adhere to in relation to the RICS Service Charges in Commercial Property Professional Standards?
In my experience with service charge, I made sure all the costs are set out so it is clear and transparent of what is included with the charge for all parties.
The service charge was apportioned fairly and management fee set at fixed percentage of the costs.
All client money is held in separate client account.
Describe to me how you would obtain adverse possession?
Factual Possession: You must demonstrate actual physical possession of the land. This involves using the land in a way that a typical owner would, such as maintaining it, fencing it off, or making improvements.
Intention to Possess: You must show an intention to possess the land, excluding the true owner and others. This can be evidenced by actions like erecting signs, securing the property, or using it exclusively.
Without Consent: The possession must be without the owner’s consent. Any permission or license from the owner invalidates the claim.
Time Period: For registered land, you need to have been in adverse possession for at least 10 years before you can apply to be registered as the owner. For unregistered land, the period is typically 12 years.
Application: After the required period, you can apply to HM Land Registry to be registered as the owner. The current owner will be notified and given the opportunity to oppose the application.
Opposition: If the application is opposed, it will be rejected unless certain conditions are met, such as the squatter having an equitable right to the land or having occupied land adjacent to their own under a mistaken belief.
What is the purpose of a sinking fund?
It is to set aside money for the replacements of assets/major items - heating/air-con, lifts, communal lighting, roofs.
It is set aside so it is available for significant repairs and spreads the costs fairly, over time for the owners/tenants.
What is a service charge?
A fee paid by the tenant for the services the landlord provides for the property / asset.
Give me some examples of services typically included under the service charge.
Facilities management, security, lift maintenance, cleaning of communal areas, lighting, fire equipment and practice, building insurance, grounds maintenance and a reserve fund.
What are the different methods of apportionment in service charge?
Tenants occupied area (Most Common):
This is the most common method, where service charges are allocated based on the sq ft or area of each tenant’s space relative to the total area of the property. For example, if a tenant occupies 1,000 square feet in a 10,000 square feet building, they’d pay 10% of the service charge.
Flat Rate (Commonly used in car parks):
In some cases, landlords may set a flat rate service charge for each tenant, regardless of the size of their leased space. This method is less common in larger properties but can be used in smaller buildings or specific scenarios.
Usage (comparing ground floor unit to 5th floor unit):
Charges can be allocated based on the specific services used by each tenant. For example, if a tenant uses more electricity or requires additional FM services, their service charge might reflect these additional costs.
E.g. 5th floor unit would pay higher S/C as they pay for the lift maintenance
Fixed:
Service charges may also include fixed costs (e.g., insurance, common area maintenance) and variable costs (e.g., utilities that fluctuate based on usage). The apportionment may reflect these different cost types, with fixed costs divided equally or by area, while variable costs could be apportioned based on usage metrics.
What are some of the Key Principles outlined in the RICS Service charges in commercial property Professional Standard?
- Transparency
Service charge information should be clear and readily accessible to tenants. This includes providing detailed budgets, explanations of costs, and regular updates on actual expenditures versus budgeted amounts. - Fairness
Charges should be apportioned fairly among tenants, ensuring that each tenant pays a proportionate share of the costs associated with services provided. This fairness extends to the nature of the services included and the costs incurred. - Accountability
Landlords and property managers must be accountable for their service charge decisions. This includes maintaining accurate records, justifying costs, and being open to tenant inquiries and concerns. (Explain Royal Mills Scenario) - Cost Control and Efficiency
The guidance encourages landlords to manage costs effectively and seek value for money in the services provided. This can involve competitive tendering for service contracts and regular reviews of service providers. - Communication
Effective communication between landlords and tenants is crucial. Regular updates, feedback mechanisms, and open dialogue help build trust and ensure that tenants feel informed and valued. - Dispute Resolution
The guidance includes provisions for resolving disputes related to service charges, emphasising the importance of having clear processes in place. This may involve mediation or other forms of dispute resolution to address tenant concerns amicably. - Service Charge Audit
Regular audits of service charge accounts are encouraged to ensure accuracy and transparency. This practice helps verify that charges are justified and in line with the budgets provided.
Give me an overview of the RICS Service charges in commercial property?
Provides comprehensive guidance on service charges for commercial properties through its Code of Practice, which aims to promote transparency, fairness, and good management practices in the allocation and administration of service charges.
It outlines best practices for landlords and property managers in managing service charges. It emphasises the importance of providing tenants with clear information about:
* what service charges cover
* how service charge is calculated,
* the processes for budgeting and financial reporting.
What is the difference between a sinking fund and a reserve fund?
Sinking fund is for replacement of plant and equipment such as HVAC, lifts, roofs.
A reserve fund is for future anticipated costs for maintenance and upkeep to avoid fluctuations (eg external cleaning or redecorations).
What are principles of Code of Practice for Service Charge?
There are 9 key principles:
1. Recover expenditure as per lease
2. Recover no more than 100% of actual costs
3. Issue budget and explanatory notes annually
4. Issue apportionment matrix annually
5. Issue approved set of accounts annually
6. Service charge monies to be held in discrete account(s)
7. Interest to be credited to service charge after appropriate deductions
8. Tenant to only withhold sum that reflects dispute
9. If sum raised incorrectly, should be rectified without delay
What is Planned Preventative Maintenance (PPM)?
Scheduled maintenance routine prepared by building surveyor to forecast future repair needs.
E.g. upgrading facilities/services or refurbishment work
What are the wo fundamental rent collection principles?
- Accuracy of information provided
- Timing of when demands are sent/rent is collected
What are some warning signs of future rent arrears?
- persistent late payments
- bounced cheques
- arrival of post dated cheques
What is a rent deposit and its advantages?
a sum of money paid by a tenant to the landlord at the start of a lease. This deposit serves as security for the landlord against potential breaches of the lease terms, such as unpaid rent or property damage.
- usually 6 months worth of rent
- required if weak covenant, new business or overseas with no U.K. assets
- good to draw down if T struggling short term and LL wants T to stay
Explain Jervis V Harris.
Jervis v Harris is a landmark case in landlord and tenant law from 1995. The Court of Appeal established that landlords can serve a notice on tenants to carry out repairs. If the tenant fails to do so, the landlord may enter the property, carry out the repairs, and recover the costs from the tenant as a debt
What are 3 types of Planned Preventative Maintenance?
- cyclical (regular E.g. plant maintenance)
- preventative (timetabled by surveyor)
- responsive (irregular E.g. unblocking drain)
What are the 11 subsections of Services Charges in Commercial Property (2018)?
- Service costs
- Allocation and apportionment
- Communication and consultation
- Duty of care
- Financial competence
- Occupier responsibilities
- Right to challenge
- Alternative dispute resolution
- Timeliness
- Transparency
- Value for money
What are Property Manager responsibilities when issuing service charges?
- ensure value for money
- ensure good quality services
- ensure regular review of services
What is Public Liability Insurance?
Covers cost of legal action and compensation claims made against your business if third party is injured or the property suffers damage.
What are the 12 mandatory requirements in RICS Real Estate Management (2016)?
- Honest, fair, transparent
- Due diligence
- Agreed terms of engagement
- Avoid conflict of interest
- Do not discriminate
- Timely communication
- Honest advertising/marketing
- Client money in separate accounts
- PII in place
- Scope of work given to all parties
- Give realistic selling/rental prices
- Ensure inspections/meetings carried out as per client wishes
What should PM do if Tenant cannot pay rent?
- go to site and check if tenant still trading
- discuss with tenant / find out reason for inability to pay (financial issue or just changing bank?)
- if financial then agree to resolve E.g. payment plan, guarantor, rent deposit, - may lead to forfeiture if cannot pay.
How should management fees be raised?
- depends on Property Management Agreement
- Ideally fixed basis subject to annual review or indexation, as stated in Service Charges in Commercial Property (2019)
Who does the service charge money belong to?
The tenants
What is a Letter before Action?
It is a final letter provided to Tenant giving a timescale to pay arrears and states if not paid by X date then legal action will commence.
What is the RICS Code for Leasing Business Premises?
A professional standard aimed at improving the quality and fairness of lease negotiations.
Key Objectives:
* Fair Negotiations: Ensures that lease terms are negotiated fairly and transparently.
* Comprehensive Heads of Terms: Promotes the issuance of detailed heads of terms to streamline the legal drafting process.
Mandatory Requirements:
* Negotiations and Heads of Terms: RICS members must ensure that negotiations are conducted fairly and that comprehensive heads of terms are issued.
* Lease Negotiation Best Practices: Includes guidelines on premises, length of term, renewal rights, and break rights.
What are the key responsibilities of a property manager in maintaining landlord and tenant relationships?
- Effective Communication: Ensuring clear and consistent communication with tenants to address their needs and concerns promptly.
- Lease Management: Enforcing lease agreements fairly and handling renewals, terminations, and any breaches of the lease terms.
- Maintenance Coordination: Scheduling and overseeing routine maintenance and repairs to keep the property in good condition and ensure tenant satisfaction.
- Rent Collection: Managing timely rent collection and addressing any issues related to late payments or arrears.
- Legal Compliance: Ensuring compliance with landlord-tenant laws, health and safety regulations, and other legal requirements to avoid disputes and liabilities.
- Dispute Resolution: Mediating conflicts between tenants and landlords to maintain a harmonious living environment
How would you handle a situation where a tenant consistently fails to pay rent on time?
- Initial Communication: Start by contacting the tenant to understand the reasons behind the late payments. This can help identify if the issue is temporary or ongoing.
- Formal Notice: If the problem persists, issue a formal notice reminding the tenant of their obligations under the lease agreement. This notice should outline the consequences of continued late payments.
- Payment Plan: Consider negotiating a payment plan that allows the tenant to catch up on arrears over a specified period. This can be beneficial for both parties and may prevent further issues.
- Mediation: If direct negotiations fail, mediation can be a useful tool. A neutral third party can help both sides reach a mutually acceptable solution.
- Legal Action: As a last resort, if the tenant continues to default, you may need to pursue legal action to recover the arrears or terminate the lease. Ensure all actions comply with relevant laws and lease terms.
- Documentation: Keep detailed records of all communications, notices, and agreements related to the issue. This documentation is crucial if legal proceedings become necessary
What steps would you take to ensure compliance with health and safety regulations in a multi-tenant building?
- Risk Assessment: Conduct regular and thorough risk assessments to identify potential hazards. This includes evaluating fire safety, electrical systems, structural integrity, and other critical areas.
- Maintenance and Inspections: Schedule routine maintenance and inspections to ensure all safety systems, such as fire alarms, emergency lighting, and sprinkler systems, are functioning correctly.
- Training and Awareness: Provide training for staff and tenants on health and safety procedures, including fire evacuation plans and the proper use of safety equipment.
- Documentation and Record-Keeping: Maintain detailed records of all safety inspections, maintenance activities, and training sessions. This documentation is crucial for demonstrating compliance and for use in case of an incident. Keep all documents up to date.
How would you approach preparing a service charge budget for a commercial property, and what factors would you consider?
- Review Historical Data: Analyse past service charge budgets and actual costs to identify trends and variances. This provides a baseline for future projections.
- Identify Services: List all services that need to be covered by the service charge, such as cleaning, security, maintenance, utilities, and management fees.
- Estimate Costs: Calculate the estimated costs for each service. This may involve obtaining quotes from service providers and considering inflation and market rates. Comparable properties S/C and BCIS.
- Allocate Costs / Apportionment: Determine how costs will be allocated among tenants. This can be based on factors such as floor area, usage, or a fixed percentage.
