Property Management Flashcards
1
Q
RICS Guidance Note Commerical Property Mgmt 2011
READ FOR MORE NOTES
A
- how pm can be efficient, effective and accountable to client and comply with statute law
- primary duty of care to the client
- specific advice on many key areas to include PMs core duties of rent collection, service charges, managing buildings, H&S and procurement of 3rd party suppliers
2
Q
Alienation
A
- read the lease
- difference between assignment and sub-letting and impact upon investment value and reasons both are used
- upon assignment the new tenant has direct relationship with LL
- when subletting, sub-tenant has direct relationship with tenant and pays them rent who then pays rent to LL
- absolute alienation clause (not allowing alientation)
- open alienation clause (allowing alienation)
- qualified alientation clause (subject to conditions)
- usual clause says LL consent not to be reasonably withheld
- Code for Leasing Premises 2007 states subletting show be allowed at market rent and not passing rent, if market rent is lower
Reasons to sublet not assign: - requirement of lease
- for part of demise not whole
- market rent higher than passing then profit rent
- tenant wants to reoccupy in future
- new party a lesser covenant strength
3
Q
Actions when dealing with application for consent to assign or sublet
A
- read the lease
- will the tenant give undertaking for the surveyors and legal costs
- is proposed rent market and or same as passing rent
- what do terms of lease state regarding grant of consent for assignment and sub-letting? Are there reasonable grounds for withholding consent?
- what is covenant strength of proposed new tenant? are there accounts and references to consider?
- has rent deposit been agreed? is there AGA clause?
- the client will need to be provided with a report setting out surveyors recommendations?
- obtain client approval to proceed (draw simple diagram to explain privy of contract between the L&T)
- if consent is granted, licences for assignment or sub-letting will be required
4
Q
Landlord & Tenant Act 1988
A
- aim of legislation to ensure statutory duty exists on landlord to deal with consents diligently and not be unreasonably withheld or delayed
- failure to do so can result in successful claim for damages
5
Q
Landlord and Tenant (Covenants) Act 1995
A
- relates to assignment of leases
- came into force on 1st january 1996 (called ‘new’ leases)
- act abolished privity of contract for new leases
- gives landlord more scope for setting conditions regarding approval of assignee
- introduced AGAs for most recent former tenant only to guarantee lease obligations of immediate assignee as voluntary arrangement to be agreed between L&T
- section 17 notice must be served upon a guarantor within 6 months of the tenant defaulting to require the former tenant who has entered AGA to pay arrears
- only one AGA can be in place at any time
- code for leasing business premises 2007 states that AGAs should not be required as a condition of assignment, unless at the date of proposed assignment the proposed assignee and any proposed guarantor is of a lower financial standing or is resident or registered overseas
6
Q
Landlord Remedies for illegal alienation
A
- forfeiture
- damages
- injunction
7
Q
Alterations
A
- must be carried out by tenant during the lease
- they must usually be approved in writing by the landlord prior to undertaking the works
- they are usually subject to reinstatement at the end of the lease
- some works such as demountable partitioning or other non-structural works may not require landlord’s formal consent so always read lease
8
Q
Licence to Alterations
A
- to be completed before works commence
- obtain undertaking for costs at commencement of instruction
- license for alterations has 2 useful functions: to protect the parties at rent review and dilapidations at the end of the lease
- most licences require the tenant to reinstate the works as the end of the lease
9
Q
RICS Licence for Alterations Guidance Note 2013
A
- guidance for surveyors dealing with applications from tenants to make alterations to office and industrial properties
- states importance of dealing with matter without unnecessary delay and ensuring that a licence is completed to protect both parties
- licence must clearly document works agreed
10
Q
Actions when dealing with application for consent for alterations
A
- read the lease, is landlords approval needed for changes / improvements to the demis? eg. consent may not be needed for demountable partitioning
- landlord and tenant act 1927 states LL must be reasonable when dealing with requests from tenants for alterations and that landlords consent must not be reasonably witheld
- ask for full set of plans and specification
- obtain undertaking for surveyors and legal costs
- all alterations must be documented in Licence of Alterations
- check long-term impact on property (if tenant defaults)
- consider whether financial bond would appropriate to be held by the landlord
- consider if reinstatement required at the lease expiry
- has tenant got necessary planning consent and building regulations
- check equality act 2010 and CDM 2015 compliance and there is risk assessment and method statement (RAMS) and public liability insurance in place
- provide report to client and obtain instructions
- instruct clients lawyer to prepare licence for alterations
- inspect the completed works to ensure they are to as agreed
11
Q
Landlord and Tenant Act 1927
A
- if lease prohibits improvements being made to property without LLs consent, Section 19 of the Act imposes a provision that such consent cannot be unreasonably withheld
- if section 19 procedures have been followed, landlord may be obliged to pay compensations for alterations that may constitute improvements
12
Q
Dilaps Key Points
A
- read the lease
- negotiations take place at lease expiry to bring property back to its conditions at start of lease assuming there is repairing liability
- check lease terms to understand repairing responsibilities of both parties and whether there is a schedule of condition
- also check to see if any licences for alterations were granted
- tenant usually required to return building to original state, unless otherwise stated in lease
13
Q
Choices at Lease Expiry Date for dilaps
A
- tenants can do agreed works OR tenant can pay sum to landlord to undertake the works
Breach + Loss + Evidence = Recovery
- Section 146 Notice must be served in accordance with 1925 Law of Property Act
- most schedules served on draft basis informally first
- Claim limited to either cost of works or, in accordance with Section 18 of Landlord and Tenant Act 1927, the diminution in value of the reversionary interest i.e. the difference in value of the property upon possession have the covenants to repair and decorate had not been undertaken
- if landlord proposes to demolish or subsequentally refurbish, the value of the reversion could be nil
14
Q
Forms of Dilaps Schedule
A
- interim schedule (served by LL/T during lease with at least 3 yeaers remaining)
- terminal schedule (served usually in last 3 years of lease)
- final schedule (served at or after the lease expiry/break caluse date when tenant is out of occupation and landlord wants to agree claim for damages)
15
Q
Format of Dilaps Schedule
A
- outline repairing obligations
- state the remedy and cost of the breach
- loss of rent, if appropriate, over period to do the works
- fees + VAT for the claim for surveyors and lawyers
- negotiations conducted on a without prejudice basis until agreement reached
- if agreement not reached, landlord’s surveyor may be required to prepare a Scott schedule for the Court/ADR setting out summary of landlord and tenant position
16
Q
RICS Guidance Note of Dilapidations, 2016
A
- aim to reduce claims between LLs & Ts
key points: - substanial guidance on diminution valuations
- explores supersession - the provision that the landlord can only claim the amount lost because of the tenants breach of the lease
- endorses the Dilapidations Protocol 2012
- relates to interim and final claims in commercial property
- emphasises the importance of careful and considered estimate of loss
- both parties are to keep to agreed timescales
- parties in a dispute are expected to act resonably and make genuine endeavours to settle
- seperates the role of the surveyor as aan advisor prior to litigation and then as an expert witness in any litigation
- the quantified demand is the complete statement of costs that are sought in damages - to include construction costs and other ancillary and consequential costs
17
Q
Reasons why a settlement is not agreed
A
- when the lease is not on full repairing terms
- reinstatement not required by landlord
- if schedule of conditions limits repairing liability
- if building is to be demolished or subsequently refurbished after lease expiry, if the value of reversion is nil
- use of the diminution in value cap
- tenant has gone into administration
- when it is agreed between landlord and tenant to roll over the claim until the end of next lease granted
18
Q
Insurance
A
- usually the responsibility of the landlord is to arrange and re-charge to tenant
- cover for reinstatement of the building for a range of insurance perils (eg fire, storm, flood, subsidence, loss of rent & s/c, terrorism, public liability etc) plus VAT and fees, site clearance/fencing/demolition and inflation and loss of rent cover
- usual basis of msmt for building reinstatement valuations is to use gross internal areas for commercial properties, by reference to RICS Building Cost Information Service (BCIS)
- insrance act 2016 a key law which introduced more accountability for insureres, new responsibilitiesto policyholders to provide all relevant information and to aim to reduce claims
- RICS became a designated professional body for insurance matters in feb 2005 in accordance with current FSA regulations, only registered members can now deal with insurance
- insurance premium tax is levied on premiums
- comprehensive advice is contained in the RICS Guidance Note on Insurance for Commercial Property Managers 2011
19
Q
Empty Buildings
A
- building insurance (tell insurers it is empty and note their requirements)
- maintain fabric of building
- obtain EPC
- clear building to remove any combustible material
- undertake and record regular inspections for insurance purposes
- inform local rating authority for payment of empty rates
- arrange security and decommission services and isolate power supplies
- seal up letterbox to prevent arson and secure property
- planned maintenance programme to include servicing of plant
- set frost controls and drain down the water
- agreement of disposal strategy and marketing initiatives
- maintain asbestos register
- landscaping / gardening
Legal Aid, Sentencing and Punishment of Offenders Act 2012 made residential squatting a criminal office which can be subject to police action, commercial landlords must rely on common law power to use reasonable force to remove trespassers form land usually with the use of certified balliff or use civil legal proceedings in County Court
20
Q
Rent Collections
A
2 fundamental principles: acucracy of information, timing
- rent usually paid on english quarter days with demand sent out in advance
- it is the cleints money
- check terms of lease for timing of payments and interest on arrears (usually ageed % over Bank base rate)
- check whether VAT is to be levied
- these points also relate to service charge monies which are usually reserved as rents in the lease
- the easiest collection method is bank direct debit where any amount of money can be taken from the account. a standing order arrangement which can only take out a previously agreed amount of money
- client accounting procedures must comply with RICS regulations
check system in place to avoid circumstances when rent should not be collected so as to avoid waiving rights to forfeiture
- be careful about accepting rent from tenant whose lease has expired and lease was granted outside Act as this may create new protected tenancy
