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Technical Competencies (KB) > Property Management (Level 3) > Flashcards

Property Management (Level 3) Flashcards

1
Q

What are the 12 principles of the Real Estate Management 2016 Professional Statement?

A
  1. Conduct in an honest, fair, transparent and professional manner.
  2. Carry out work with due skill, care and diligence.
  3. Ensure that clients are provided with terms of engagement which are fair and clear.
  4. Do the utmost to avoid conflicts of interest.
  5. Not discriminate unfairly in any dealings.
  6. Ensure that all communications are fair, clear, timely and transparent.
  7. Ensure that all advertising and marketing material is honest, decent and truthful.
  8. Ensure that all client money is held separately from other monies in appropriately designated accounts and is covered by adequate insurance.
  9. Have adequate and appropriate PII.
  10. Ensure that it is made clear to all parties with whom you are dealing the scope of your obligations to each party.
  11. Give a realistic assessment of the likely selling, buying or rental price, associated cost of occupancy, using best professional judgment.
  12. Ensure that all meetings, inspections and viewings are carried out in accordance with the client’s lawful and reasonable wishes, having due regard for the security and personal safety of all parties.
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2
Q

What does the Commercial Property Management Guidance Note (2011) do?

A
  • Sets out best practice of how a property manager can be efficient, effective and accountable to their client and comply with statute law.
  • Duty of care to the landlord (client).
  • Key areas: Rent collection, service charge, managing budgets, H&S, procurement of third party suppliers.
  • Relevant Statute and model terms of engagement.
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3
Q

Landlord and Tenant Act 1988

A
  • To ensure that a statutory duty exists on the landlord to deal with consents diligently and not be unreasonably withheld or delayed.
  • Failure to do so can result in claim for damages.
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4
Q

Landlord and Tenant (Covenants) Act 1995

A
  1. Relates to Assignment of Leases
  2. Abolished Privity of Contract for new leases.
  3. More scope for setting conditions regarding approval of an assignee.
  4. Authorised Guarantee Agreements (AGA) introduced.
  5. A Section 17 must be served on a guarantor within 6 months of the tenant defaulting to require the former tenant (on AGA) to pay the arears.
  6. One AGA in place at any time.
  7. Code for Leasing Business Premises 2020 states AGAs commonplace for landlords, tenant should seek not to enter an AGA.
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5
Q

What does the Code for Leasing Business Premises 2020 (Professional Statement) say regarding alienation?

A
  1. Leases should allow assignment of whole (landlord consent, not to be unreasonably withheld).
  2. Leases should allow subletting of whole (may allow part if appropriate without Security). At rents not less than market rent. Subleases should be required to be on terms consistent with the tenants own lease.
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6
Q

Key factors regarding alterations

A
  1. Read the Lease
  2. Usually approved in writing prior to alterations.
  3. May be subject to reinstatement at the end of the lease.
  4. Licence for Alterations
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7
Q

What is a licence for Alterations?

A
  1. Two functions: to protect the parties at rent review and dilapidations at the end of the lease.
  2. Most licences require the tenant to reinstate the works at the end of the lease.
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8
Q

What does the Landlord and Tenant Act 1927 say about alterations?

A
  • Section 19 imposes a proviso that Landlord consent cannot be unreasonably withheld.
  • If S.19 followed, the Landlord may be obliged to pay compensation for alterations that may constitute improvements.
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9
Q

Terminal/Final Dilapidations procedure in CPM

A
  • Read the Lease
  • Check repairing responsibility for both parties
  • Schedule of Condition, Licence for Alteration?
  • Instruct Building Surveyor (beyond my competence)
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10
Q

What are the three types of schedule of dilapidations?

A
  • Interim - 7 year + leases only with 3 or more years of the term unexpired (Leasehold Property (Repairs) Act 1938)
  • Terminal - issued during the last three years to 18 months of the lease (RTL).
  • Final - issued after expiry of the lease.

(Dilapidations in England and Wales 7th edition, September 2016)

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11
Q

First steps in dealing with breaches of repairing obligation?

A
  • Meet with the tenant. Highlight issues and try to resolve.
  • Serve a S.146 Notice. Law of Property Act 1925. Giving 6 months to remedy the breach.
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12
Q

How are dilapidations usually settled before expiry?

A

Terminal dilaps served in draft informally first then:
1. The Tenant can do the agreed works.
2. Tenant can pay a sum to the landlord to undertake the works (Breach + Loss + Evidence = Recovery)

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13
Q

What is a dilapidations claim limited to?

A
  • Claim is limited to either the cost of the works or the diminution in value of the reversionary interest (S.18 of the Landlord and Tenant Act 1927).
  • If the landlord proposes to demolish or substantially refurbish, the value of the reversion could be nil.
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14
Q

Reasons why a dilapidations settlement is not agreed?

A
  1. When the lease is not on full repairing terms
  2. Reinstatement not required by the Landlord
  3. If a schedule of condition limits the repairing liability
  4. If the building is to be demolished or substantially refurbished after the lease expiry (if the value of the reversion is nil)
  5. Use of the diminution in value cap
  6. Tenant has gone into administration
  7. Agreed between landlord and tenant to roll over the claim until end of next lease granted.
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15
Q

What actions are required for Empty Buildings?

A
  • Notify Insurer
  • EPC for re-letting
  • Clear combustible material
  • Regular inspections (insurance purposes)
  • H&S + FRA for Building
  • Empty rates, rates relief
  • Drain down the water
  • Maintain asbestos register
  • Planned maintenance programme.
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16
Q

What are the principles of rent collection?

A
  • Accuracy and Timing
  • (normally quarter days)
  • Check lease for timing and interest on arears
  • Implement a check system to avoid circumstances where rent should not be collected.
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17
Q

What is the difference between a direct debit and a standing order?

A
  • A standing order is a regular payment that you can set up (can amend or cancel the standing order as and when you like)
  • A Direct Debit can only be set up by the organisation to which you’re making the payment.
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18
Q

What would you do if a Tenant is in Arrears?

A
  • Read the Lease
  • Establish procedure from lease
  • Check for Rent Deposit Deed
  • Privity of contract or AGA check (Prior to Jan 1996)
  • Consider if you want possession of the property (MR > PR)
  • Re-letting chances
  • Seek legal advice on options
  • If in lease, charge interest on all late payments
  • Consider a payment plan.
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19
Q

Remedies for Rent Default?

A
  • Court proceedings
  • Use a rent deposit
  • Pursue former tenant or Guarantor
  • Serve a statutory demand
  • Commercial Rent Arrears Recovery Scheme (CRAR)
  • Forfeit lease
  • Negotiate a payment plan
  • Agree anther mutually acceptable arrangement.
20
Q

Explain court proceedings regarding rent arrears?

A
  • LL can obtain court judgement
  • Slow and costly
  • Useful if tenant is still solvent
21
Q

How would you pursue a guarantor for rent arrears?

A
  • Check for AGA (or privity of contract prior to Jan 1996)
  • Serve S17 Notice (95 Act) , within 6 months
22
Q

How would you use a statutory demand in regards to rent arrears?

A
  • Prelim step to pursuing bankruptcy or winding up proceedings.
  • Advisable when there is no dispute on the level of arrears
  • Tenant has to pay arrears within 21 days,
  • After 21 days, Landlord can present a bankruptcy or winding up petition to the court if the arrears are over £750.
  • Court can set aside if injustice.
23
Q

Explain what CRAR is.

A

Commercial Rent Arrears Recovery
- (Tribunals, Courts and Enforcement Act 2007, CRAR from 2014).
- Can only be used for rent, not SC or insurance
- Timeline:
Min of 7 days unpaid rent
Min 7 days clear days warning notice
Enforcement agent visits
2 clear days to follow
Re-entry to seize goods
Allow 7 clear days before sale of goods
Fees must be specified on the entry notice

24
Q

Explain Forfeiture in regards to non payment of rent.

A
  • RTL - Forfeiture Clause
  • Rent must have been properly demanded
  • Forfeited by landlord peaceful re-entry or County Court proceedings.
  • Lease then terminated.
  • Tenant can apply for relief from forfeiture within 6 months.
  • Re-entry clause can be used instead of forfeiture
  • Other breaches - S146 Notice.
25
Q

What is Section 17 of the Landlord and Tenant Covenants Act 1995?

A
  • Can serve a S17 notice on Guarantors of Tenant within 6 months of the start of the arrears.
26
Q

What are the remedies for Breach of Repair?

A
  • Serve a repair notice
  • Forfeit the lease
  • Serve an interim schedule of dilapidations
  • Do the works and charge the tenant
27
Q

What is the definition of Repair?

A
  • Liability cannot arise in the absence of repair
  • Repair is distinct from renewal - a tenant cannot be expected to hand back wholly different premises
  • Tenant may be responsible for inherent defects
  • Repair is not an improvement
  • An effective FRI lease is when the landlord is responsible for repairs and re-charges via the service charge.
28
Q

Can you explain the Landlords right to enter a property to do works?

A
  • Jervis v Harris (1996) clause must be stated within the lease.
  • In the event of breach of repairing obligation, Landlord can re-enter to undertake repairs.
  • Tenant then to reimburse Landlord
  • Ensures premises are kept in repair.

Used when: Tenant is solvent and when Landlord wants the lease to continue. Threat of entry may prompt tenant to do the works.

29
Q

When does the Leasehold Property (Repairs) Act 1938 apply?

A
  • Applies to leases granted for 7 years or more and have at least 3 years until the lease expiry (length to protect tenants from onerous interim claims).
  • Court is only to permit enforcement of the repairing covenant if the Landlord can prove one of the following:
    1. Remedy is necessary to prevent substantial diminution in value.
    2. Remedy needed to comply with legislation.
    3. If the tenant does not occupy the whole property, remedy in the interest of another occupier.
    4. Immediate remedy capable at small cost compared to consequences of postponement.
30
Q

What do you know about Planned Maintenance Programme?

A
  • Supervised by a Property Manager or Building Surveyor
  • Three Stages
  • Cyclical Maintenance - regular activity, serving, repair and decoration.
  • Preventative Maintenance - Building surveyor creates condition survey. Forecasts future repairs and timetable for undertaking work.
  • Responsive Maintenance - initiated by the building occupier (Leaks, drain unblocking etc).
31
Q

What RICS document relates to Service Charges?

A

Service Charges in Commercial Property 2018 (Professional Statement).

32
Q

What legislation covers commercial service charges?

A
  • There is no specific legislation.
33
Q

What are the aims and objectives of the Professional Statement - Service Charges in Commercial Property 2018?

A

To:
- Improve standards and promote best practice, uniformity, fairness and transparency in the management of service charges.
- Timing issuing of budgets and year-end certificates.
- Reduce the causes of disputes, guidance for resolution.
- Guidance on negotiations, drafting, interpretation and operation of leases in accordance with best practice.

34
Q

What are the 9 principles of the Professional Statement - Service Charges in Commercial Property 2018?

A
  1. Expenditure recovery must be in accordance with the terms of the leases.
  2. Seek to recover no more than 100% of the proper and actual costs of services.
  3. Budgets are issued annually to all tenants.
  4. Actual expenditure is issued annually to all tenants.
  5. Apportionment matrix is provided annually to all tenants.
  6. Monies must be held in one or more discrete bank accounts.
  7. Interest earned on service charge accounts must be credited to the service charge account after appropriate deductions.
  8. When acting for tenant in SC dispute, advise tenant that payment withheld should reflect only the actual sums in dispute.
  9. When acting for Landlord, advise client that following resolution of dispute, any SC raised incorrectly should be adjusted to reflect the error without undue delay.
35
Q

What are the 4 apportionment methods for Service Charges?

A
  1. Floor Area
  2. Fixed Percentages
  3. Rateable Value - Difficult if RVs change or appealed
  4. Weighted Floor Area - Department Stores in Shopping Centres.
36
Q

What RICS Document covers handovers of commercial estates?

A

Information Paper on Commercial Property Handover Procedures 2015

37
Q

Explain Benchmarking of Service Charges.

A
  • Benchmarking ensures that operational performance are checked against an industry-used index, to ensure best practice.
  • Real Service - publishes annual results of Service Charge Compliance Index.
  • Benchmarking reports: Office Service Charge Analysis Report (JLL)
    • Global Estate Measurement Code for Occupiers (MSCI)
38
Q

What is a Sinking Fund?

A

Formed by periodically setting aside money for replacing wasting assets (plant and equipment, air con etc). Usually collected over the whole life of the wasting asset.

39
Q

What is a Reserve Fund?

A

A fund formed to meet anticipated future costs of maintenance and upkeep in order to avoid fluctuations in the amount of service charge
payable each year (for example, for external cleaning and redecorations).

40
Q

What RICS document covers sinking and reserve funds?

A

RICS Information Paper - Sinking Funds, Reserve Funds and Depreciation Charges 2014.

41
Q

Can you explain the process of a service charge budget?

A

For new estates:
- Check Leases (SC Clause, Repairing Obligations)
- What can you recover? and How?
- Check handover for existing budget.
- Review contracts in place, planned works, and completed works.
- Expenditure report to check to see if these have been allocated correctly.
- Review the tenancy schedule and check apportionment.
- Input SC onto designated template.
- Review anticipated contract costs, H&S and management costs.
- Send the draft SC budget to accounts to sent up SC account.
- Ensure compliance with RICS Guidance, Service Charges in Commercial Property. (Professional Standard)
- Send to client for review and approval.

42
Q

How often should a tree survey be carried out?

A

3 - 5 years.

However, as part of the landscaping contract, a visual review is carried out annually.

43
Q

When should a SC Budget be sent to the tenants?

A

At least 1 month before the start of the new SCY start.

44
Q

When are health and safety audits carried out?

A

Annually.
Considered best practice.
Limits liability.

45
Q

When are manual and electric gate inspections carried out?

A

Manual - Annually
Electric - Inspected and serviced twice a year.

46
Q

What is LOLER? and how often should lifts be inspected?

A

Lifting Operations and Lifting Equipment Regulations 1998

Lifts inspected before use.
Then twice annually inspections.

47
Q

When should service charge accounts be reconciled?

A

Within 4 months of the SC year end.

Technical Competencies (KB) (12 decks)

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