Property Management (L3)

Question 1

What is the responsibilities of a residential property manager?
(submission L1)

Answer 1

This is defined by the Property Management Agreement (“PMA”) and usually includes items such as:

• Tenant communication and management;
• Procure and manage soft and hard service contracts;
• Ensuring H&S and Fire Safety compliance;
• To hold and manage client money (held in trust); and
• To manage service charge demands and accounts.

Question 2

What does the Landlord and Tenant Act 1985 do?
(submission L1)

Answer 2

It sets minimum standards in tenants’ rights against their landlords.

Question 3

What are the main provisions of Landlord and Tenant Act 1985?
(submission L1)

Answer 3

1. Information – Landlords are obligated to disclose their identity
2. Provision of rent books
3. Fitness of human habitation
4. Repairing obligations (leases less than 7 years)
5. Service charges

Question 4

What were the amendments in the Commonhold and Leasehold Reform Act 2002?
(submission L1)

Answer 4

o amended provisions of previous Acts
o Inserted the Summary of Rights and Obligations into S21B of 1985 Act

Question 5

Who is ARMA?
(submission L1)

Answer 5

Association of Residential Managing Agents
ARMA and IRPM have become The Property Institute

They are the leading professional body for residential managing agents.

Question 6

Talk me through the audit St Albans Road.
(submission L2)

Answer 6

I reviewed end of year accounts and checked each cost for reasonableness.
I ensured the managing agent had been compliant with regards to legislation, the lease, the PMA and best practice standards.

Question 7

Talk me through a mobilisation workstream and some key deliverables.
(submission L2)

Answer 7

Mobilisation is ensuring the scheme is properly set up for occupation of residents.
Some of the key deliverables is working through:
- Procuring resident app
- Benchmarking service charge costs
- Staff recruitment
- Move-in plan
- Snagging and defect strategy
- Lease reviews

Question 8

How is a landlord and tenant relationship is appropriately managed?
(submission L3)

Answer 8

• Issuing the accounts in accordance with the lease and best practice
  
  • Procure contracts in accordance with Section 20
  • Ensuring summary of rights and obligations accompany the demands
  • Ensuring managing agent is providing services set out in the lease
• Through my experience leaseholder and tenant frustration is usually built up around poor communication, therefore I recommend regular updates are issued especially around cost increases in the service charge etc

Question 9

What are the varying management roles?
(submission L1)

Answer 9

They vary based on scheme complexity and size.
Eg a large mixed site you would expect to see a estate manager supported by property manger, concierge manager, assistant manager (look after contracts)

Question 10

At Kings Cross what recommendations did you give to enhance the agent, tenant and freeholder relationship?
(submission L3)

Answer 10

Structured reporting and regular updates as only the year end position was known.
If meetings are had with leaseholders they should be documented and minutes and actions sent out to all.

Question 11

You’re a residential property management firm, taking over an existing scheme. What are the key documents you would request?

Answer 11

1. Copy of the Lease(s);
2. A copy of the Service Charge Budget;
3. Proof of demands/invoices;
4. Asset Registers (O&Ms);
5. All Risk Assessments (e.g., General, Fire, Asbestos Register etc.)
6. Planned Preventative Maintenance plan(s) / Lifecycle Costing plan(s); and
7. All Contracts (especially Long-term Qualifying Agreements).

Question 12

What is the first thing you would do before serving a service charge demand?

Answer 12

Refer to the LEASE.

Service charge demands must be sent via post, unless written confirmation from leaseholders.

Question 13

What needs to be included service charge demand?

Answer 13

1. Address of the property;
2. Name of leaseholder;
3. Demand date (as per the Lease);
4. Balance brought forward (if applicable);
5. The leaseholders apportionment of service charge;
6. The balance owed;
7. The landlord’s registered name and address (as per Section 47 & 48 of LTA 1987); and
8. Options to pay.

ATTACHED WITH Summary of Tenants’ Right and Obligations.

Question 14

How do you confirm service charge demands have been issued correctly?

Answer 14

1. Check the Lease to understand the service charge regime;
2. Confirm service charge demands have been issued in accordance with the Lease; and
3. Confirm Summary of Tenants’ Rights and Obligations were provided.

Question 15

How do you ensure all expenditure is accounted for?

Answer 15

1. Refer to the provided invoices and cross reference with the expenditure report; Ensure all figures from the expenditure report match up with the draft service charge accounts; then
2. (if applicable) Request further information from the property manager regarding costs that are not aligned.

Question 16

What are non-recoverable items?

Answer 16

A cost that cannot be charged to a leaseholder or tenant, usually not included in the lease.
* Developer costs and set-up costs
* Cost that were incurred more than 18 months ago
* A service charge is a variable cost Ground rent (any other fixed costs)
* Cladding remediation costs

Question 17

What is the point of managing agent tender?

Answer 17

1. There is a legislative requirement (if applicable);
2. Demonstrate cost is fair and reasonable;
3. Encourage transparency.

Question 18

What are potential issues of contracts lasting for less than 365 days?

Answer 18

No security of contract – Managing agents may feel provide a lesser level of service, as they will typically favour/prioritise longer term contracts.

Price volatility – Frequent renewals may lead to undesirable increases to management fees etc. Longer term contracts can negotiate better value?

Risk of renewal – There is a requirement to constantly renew; the PMA has a higher chance of expiring.

Question 19

What is a service charge?

Answer 19

The landlord has an obligation to provide services to leaseholders as defined in the lease. The landlord recovers the cost of the services through a service charge.

Question 20

What is a Planned Preventative Maintenance strategy?

Answer 20

Schedules maintenance tasks ahead of time; substantially reducing reactive maintenance tasks and retains buildings and assets in the desired or needed quality.

Question 21

What is a Lifecycle Costing plan?

Answer 21

Assesses the costs that occur throughout a buildings lifespan, from construction through use and maintenance, to end-of-life.

Question 22

What is a Sinking Fund?

Answer 22

An amount of money set aside to cover specific costs for major works (e.g., painting, roof repairs etc.) which are needed on a property in the future (can be based on the Planned Preventive strategy[ies] Maintenance and Lifecycle Costing plan[s]).

Question 23

What is a Reserve Fund?

Answer 23

Used to cover unexpected shortfall – does not generally need to be a large amount and acts as a top up of service charge contribution as and when needed (but must be based on a fair and reasonable assumption).

Question 24

How should a Sinking Fund and Reserve Fund be held?

Answer 24

In trust – the Case of Caribax v Hinde [2015] reminds landlords of the importance of complying with Section 42 of the LTA 1987; that reserve/sinking funds should be held in a separate bank account to service charge monies.

Question 25

What section of the Landlord and Tenant Act 1985 defines service charges?

Answer 25

Section 18

Question 26

What section of the Landlord and Tenant Act 1985 speaks about relevant costs?

Answer 26

Section 19

Question 27

What is a Section 20b Notice?

Answer 27

A Landlord has 18-months in which to notify a Leaseholder of service charge costs being incurred or to demand payment from you.

Question 28

What are the Summary of Tenant’s Rights and Obligations under Section 21b?

Answer 28

1. Rights for determinations through the FTT
2. Rights to request breakdown of costs
3. Rights to inspect accounts within 6 months
4. Right to have an audit
5. Landlord’s right to forfeiture

Question 29

Which section of the Landlord and Tenant Act 1985 speaks about the Summary of Tenant’s Rights and Obligations?

Answer 29

Section 21b
(As inserted by Section 153 of Commonhold & Leasehold Reform Act 2002)

Question 30

What does section 21 of the Landlord and Tenant Act 1985 talk about?

Answer 30

Summary of Costs.

Question 31

What does section 22 of the Landlord and Tenant Act 1985 talk about?

Answer 31

Right to inspect documents.

Question 32

What does section 20 of the Landlord and Tenant Act 1985 talk about?

Answer 32

Protects leaseholders from paying large sums.

There is a requirement to consult for major works (of above £250 per leaseholder) or long-term qualifying agreements (of above £100 per leaseholder).

Question 33

Describe the stages and timings of section 20?

Answer 33

1. Pre-tender (Notice of Intent) - 30 days
2. Tender stage (Notice of Estimate) - 30 days
3. Award of Contract - 21 days

Question 34

What are the usual quarter days?

Answer 34

25 March, 24 June, 29 September and 25 December

Question 35

Which section of the 1985 Act speaks about the Building Safety Act?

Answer 35

Section 30(d) speak about the schedule of recoverable service charge costs regarding the Building Safety Act.

Question 36

What happens if the Summary of Rights and Obligations are not served with the demands?

Answer 36

The tenant can “withhold payment” (the demand is still valid and due however it is not payable).
And you cannot use credit control to chase down this payment.
The demand should be re-issued with the Summary of Rights and Obligations.

Question 37

If the Freeholder had not agreed with your advice to remove staff costs what would have happened?

Answer 37

I would advise my client they could receive complaints from leaseholders which is going to waste management time.
There will be reputation risk especially with leaseholders on social media.
There is risk that leaseholders will go to the tribunal.