Property Management (Level 3) Flashcards
What guidance and standards have the RICS published in respect of Property Management?
- Real Estate Management (2016) - Professional Statement
- Service Charge in Commercial Property (2018) - Professional Srandard
- Commercial Property Management in England and Wales (2011) - Guidance Note
Tell me about RICS Guidance Note on Commercial Property Management in England & Wales, 2011
Best practice for commercial property managers containing a lot of useful information.
Provides specific advice on property manager core duties, including rent collection, service charges, managing buildings, H&S, and procurement of third-party suppliers.
It also contains a useful summary of all relevant statute law and a model term of engagement.
What type of document is Real Estate Management, 3rd Edition?
RICS Professional Statement - mandatory requirements
What does the Real Estate Management, 3rd Edition do? What are the core principles?
Sets out core principles for managing both residential and commercial property across the globe.
12 core principles, including:
Act honestly, fairly and transparently
Act with due skill, care and diligence
Clear communications
Make it clear who you are dealing with
Give realistic financial assessments
Do not discriminate
Ensure client money is held seperately
Appropriate PII cover
Talk me through the structure of Real Estate Management, 2016?
Ethics
Securing Instructions
Leasing
Managing Real Estate
Portfolio/Asset Management
Ending Instructions
Safety
Business Management
How are vulnerable customers defined in the context of Real Estate Management (2016)?
Vulnerability = anything that may have an impact on a person’s ability to make a sound and reasoned decision.
Vulnerable customers =people who require special treatment for physical, mental, emotional or any other reasons.
You must not discriminate based on vulnerability.
Appropriate training and procedures must be in place for staff to deal with vulnerable customers and vulnerability should be taken into account in any information or guidance provided to them.
What conditions will affect the appropriate level of rent?
Real Estate Management, 2016 cites:
- market evidence
- state of the wider market
- location
- type of property
- age
- character
- size
- condition
- lease terms
Prior to accepting a management instruction, what should members do?
Real Estate Management, 2016
- Clarify for who you will be working for and how will you be paid
- Undertake a conflict of interest check
- Confirm the identity of client in accordance with RICS guidance on Bribery, Corruption,
Money Laundering and Terrorist Financing 2019
Upon receiving a management instruction, what should members do?
1.Before confirming terms, communicate with the client and discuss requirements in detail
- Agree level of feedback and reporting
- Agree terms of engagement (PMA) with the scope, fees, additional costs/fees, duration, business terms, exclusions and jurisdiction details
How should fees and expenses be dealt with upon instruction?
Full clear written details of fees and expenses should be provided to clients at the outset, including:
- when a fee is paid
- amount
- fees payable for additional services
- inclusive or exclusive of taxes
What should be included when drafting lease offers according to (Real Estate Management, 2016)?
Real Estate Management, 2016 sets out Heads of Terms:
- Rent
- Service charge
- Length of term and break rights
- Security of tenure
- Agreed use
- Rent review
- Rights to assign, sublet, share
- Repairing obligations
- Any guarantees
- Insurance
What should managers have regard for when managing repairs?
In accordance with Real Estate Management, 3rd Edition:
- Tenant and Landlord’s repairing obligations in the lease
- Manager’s scope in terms of engagement
- Ensure PPM and adequate service contracts are in place
- Keep tenants informed
- Undertake in a reasonable time with minimal disruption to tenants
- Carry out to a reasonable standard
What should managers do before instructing contractors for repairs?
In accordance with Real Estate Management, 3rd Edition:
- Work within client’s instructions
- Have regard to efficiency, speed and economy
- Get a detailed breakdown and multiple quotes
- Ensure you have sufficient funds
- Liaise with tenants where appropriate
How should management instructions be ended?
- Written confirmation
- Handover of documentation
- Handover to new manager in accordance with TOE
- Handing over of service charge and client monies
- The handover of service charge funds should be in two stages - firstly all monies that have not been committed, then the balance
Under what legislation should managers not discriminate against leaseholders, client and other stakeholders?
Equality Act 2010
Under what legislation should managers ensure that staff are sufficiently trained and act appropriately towards stakeholders.
Equality Act 2010
Employment Acts 2002 and 2008
What are the manager’s obligations for dealing with applications for permissions and consents?
- Deal expeditiously and within the scope of your authority
- Give reasons for refusal if relevant
- Do not withhold consent unreasonably
- Respond in a reasonable timeframe
- Landlord and Tenant Act 1988 applies to the unreasonable consent and response times points
What personal safety measures should be put in place for property management companies?
Safety at Work Act 1974:
- Ensure safety of staff at all times
- Agree set procedures and follow them
- Monitor staff leaving for offsite activities and safe return
- Ensure adequate training to guard personal safety
What health and safety requirements should managers consider?
In accordance with Health and Safety at Work Act 1974 and Management of Health and Safety at Work Regulations 1999:
- Maintain efficient building records for the statutory limitation period of action
- Comply with all H&S requirements
- Devise and maintain a H&S policy
- Arrange regular H&S, fire, general risk assessments
What is the best information available to inform service charge estimates?
Actual costs where contracts have been agreed
Estimates based on current or previous year’s actual expenditure
Comparable evidence from similar schemes
Is it prudent to underestimate or overestimate service charge contributions?
Not to underestimate, the manager must not purposely underestimate or mislead leaseholders.
Sometimes it may be prudent to slightly over-estimate however it should always be as close to the subsequent final accounts as possible. Contingency sums should be explained.
Under what circumstances do leaseholders have the right to withhold service charge payments?
Failure to Consult on Major Works (Section 20 Consultation)
Lack of Demands or Notices (No landlord name and address)
Service Charges Not Reasonably Incurred or Payable
Should managers collect a reserve fund if not permitted by the lease?
There is no entitlement for the creation or holding of a reserve fund where the lease does not permit this. No attempts should be made to collect where the lease does not permit this.
Tenants should be encouraged to make long-term savings provisions and clients should be recommended to consider the benefits of lease variation.
What do you do if lease contributions do not add up to 100%?
Note this to your client and recommend further advice is taken regarding an FTT application for lease variations
What should service charge demands include?
Clear and easily understood
Relate to estimates or accounts
Landlord name and address
Summary of rights and obligations
What should be included in the annual statement (service charge reconciliation) issued to leaseholders?
Should be issued at the end of the service charge year
Summary of costs and expenditure
Statement of balance due to either Landlord or Tenants
Auditing/certification if required by the lease
Tell me about your responsibilities for occupied areas
Collection of rent, service charge and other sums
Management of occupied areas is dictated by the lease
Maintain regular contact with occupiers
Tell me about your responsibilities for communal areas?
Ensure effective operation of the property - monitoring potential problems and seeking to comply with the service charge budget
Understand the landlords responsibilities to repair and maintain communal areas
Ensuring H&S compliance
Tell me about your responsibilities for vacant buildings
Undertake vacant unit inspections
Rates
Ensure building is suitable for viewings
What is the Occupiers Liability Act 1957
Imposes a duty of care on persons occupying or in control of any premises in relation to visitors
What is the Occupiers Liability Act 1984?
Confers a duty on the occupier of a premises to any persons other than visitors
How does the Occupiers Liability Act 1957 impact your role?
Have a duty to ensure that any visitor is reasonably safe whilst on the property
Won’t be released from liability by merely putting up warning sign, unless sufficiently clear to make safe
If injury has been caused to a visitor, only released from liability if reasonable steps taken to satisfy competence and proper work
Duty of care is relative to the visitor
How does the Occupiers Liability Act 1984 impact your role?
Tenant typically the occupier, however, property manager has responsibility for communal areas.
Duty owed to any person who is not a visitor if:
aware of any danger on site
Aware or reasonable to believe any person may be at risk on site
Expected to offer reasonable protection against danger
Simple ‘danger’ signs not sufficient
Tell me about RICS guidance on service charges
RICS Professional Statement: Service Charges in Commercial Property, 1st Edition, September 2018
Tell me about RICS guidance on commercial property management
RICS Real Estate Management, 3rd Edition, October 2016 (Professional Statement)
RICS Code for Leasing Business Premises, 1st Edition, February 2020 (Professional Statement)
RICS Commercial Property Management in England and Wales, 2nd Edition, October 2011 (Guidance Note)
What does Code for Leasing Business Premises, 2020 say about subletting?
States that subletting should be allowed at market rent and not passing rent, regardless of if lower or higher.
Tell me about RICS guidance on Real Estate Management
RICS Real Estate Management, 3rd Edition, October 2016 (Professional Statement)
What is the rule of privity of contract?
Only the parties to a contract can enforce its terms (a third party cannot)
What is an absolute covenant?
A bar/prohibition against doing something
Gives Landlord absolute control
What is a qualified covenant?
Requires landlord consent - no statutorily implied provision that landlords consent is not to be unreasonably withheld
What is fully qualified consent?
A covenant consent that requires landlord consent, but states it must not be unreasonably withheld
What does it mean for consent to not be unreasonably withheld
Landlord has a duty to consent unless it is reasonable to not do so
Duty of providing reasonableness is with the landlord
Duty to respond within a reasonable period
What is the statutory duty placed on landlords under the Landlord & Tenant Act 1927 regarding improvements
Gives tenant who has made improvements to a premises a right to compensation
Some preconditions must be satisfied (providing notice)
Can claim the net addition to the value of the holding as a direct result of the improvement
The reasonable cost of carrying out the improvements at the termination of the tenancy
What is the statutory duty placed on landlords under the Landlord & Tenant Act 1988 regarding covenants to assign and sublet?
This act imposes statutory duties on landlords in connection with covenants to assign and underlet serve notice of decision within a reasonable period.
What remedies are available to landlords for a breach of repairs?
Lease may allow landlord to enter property and carry out repairs and recover cost
S.146 notice
Claim for damages
Court order to compel the tenant to carry out repairs
What are the remedies for default?
CRAR
Lease forfeit
Use of Rent Deposit Deed
Statutory demand - written demand for payment which can result/support a winding up petition
Claim on AGA/Guarantor
What are the various forms of corporate insolvency?
Compulsory liquidation (CL)
Creditors Voluntary liquidation (CVL)
Administration (ADM)
Administrative receivership (ADR)
Company Voluntary Arrangement (CVA)
Define:
Compulsory Liquidation
Creditors Voluntary Liquidation (CVL)
Administration (ADM):
Administrative Receivership (ADR):
Company Voluntary Arrangement (CVA):
Compulsory Liquidation:
Court-ordered closure of a company initiated by creditors, leading to the sale of assets and dissolution of the company.
Creditors Voluntary Liquidation (CVL):
Directors initiate liquidation for an insolvent company, with creditors appointing a liquidator to sell assets and dissolve the business.
Administration (ADM):
Insolvency process where an administrator takes control to rescue the company or achieve better returns for creditors than liquidation.
Administrative Receivership (ADR):
A secured creditor appoints a receiver to recover their debt by selling company assets; usually occurs before administration or liquidation.
Company Voluntary Arrangement (CVA):
A formal agreement between a company and its creditors to repay debts over time, allowing the company to continue operating.
Tell me about your understanding of the Corporate Manslaughter and Corporate Homicide Act 2007?
The Act clarifies criminal liabilities of companies where serious failures in the management of H&S results in fatalities
What are your duties under the Corporate Manslaughter and Corporate Homicide Act 2007?
Owe a duty of care to take reasonable care of a persons safety
Duty of care to the systems of work and equipment used by employees
Duty to the conditions of worksites and other premises
Duty of care to products or service supplied to customers
What are the offences and penalties under the Corporate Manslaughter and Homicide Act 2007?
Unlimited fines
Remedial orders
Publicity orders
Imprisonment
How would you handover a service charge account upon sale or change in manager?
Onus on seller to provide information:
Property financial info (accounting period, pervious recs & budget)
Tenant financial info
Financial transfer
Statements of SC movement
Info on sinking funds
Depreciation charges
Security deposits for utilities
Tell me about RICS guidance you are aware of relating to licenses for alterations
RICS Licence for Alterations in Commercial Property, 2nd Edition, January 2022 (Guidance note)
What is the process of considering a tenants application to alter?
Ensure it is submitted in writing
Cost undertaking for handling the application
Review the lease - what is the Tenant entitled to?
Be aware of timings and reasonableness
Consult with client
Tenant applications → factors to consider → Third party input → response → Documenting → final inspection
Why is it important to handle applications properly?
To ensure the complete licence protects both parties’ interest and proceeds without unnecessary delay
What protection does an LTA provide?
Protection to a landlord, often requiring reinstatement at lease end
Protection to a tenant, preventing the landlord from rentalising improvements at a future rent review
How should an LTA be submitted?
In writing
What is a cost undertaking?
tenant is responsible for fees, whether or not the licence continues to completion (legal fees, agent fees, third party fees)
What factors need to be considered in a LTA?
Nature of works
Improvements
Unlicenced works on review and assignment
Impact on building operations
financial bond
warranties for major works
Dilaps/reinstatement provisions
DDA/Equality Act 2010 compliance
H&S
Sustainability
What information should be provided with LTA applications?
Scope of works
Relevant insurances
Acceptance of fees
H&S Risk assessment - site specific
Building regulation compliance (if required)
What information would you look for in the lease if you receive an application?
Information on what the tenant is entitled to and landlord obligations (type of consent)
What are improvements under the Landlord & Tenant Act 1927
Any alterations that render the occupation of the premise more beneficial to a tenant
How does the LTA 1927 impact landlord consent?
If works comprise of ‘improvements’ and the lease requires landlord consent, it is implied that landlord consent is not to be unreasonably withheld
What is an improvement?
Something that will enhance the use and enjoyment of the premises from a tenants point of view
What does not to be unreasonably withheld and delayed mean?
the landlord has a duty to consent unless it is reasonable not to do so
→ Duty of providing reasonableness lie with the landlord
→ Duty to respond within a reasonable period
In preparing a licence to alter. What happens if superior landlord consent is required?
Licence may form a tripartite agreement
Advise tenant that there is potential for increased costs and longer time to process the application
Potential for superior landlord to withhold consent
What are your duties in relation to timings and reasonableness?
Landlord has a duty to provide consent within reasonable time period, or provide all reasons as to why it is reasonable not to
When reviewing a tenant alteration application, how would you consider the nature of the works?
Re-read lease, ensure works are permitted
Are the works fully or partly within their demise?
Impact of Easement or Wayleave
Assess the complexity → refurbishment / fitout?
Assess your expertise relative to the works → M&E consultant? Building Surveyor input?
What is section 3 of the LTA 1927?
Enables a business tenant to carry out improvements which are prohibited by the lease and which improve the letting value of the premises
→ if the tenant uses this procedure, the landlord can do the work itself and increase rent
What would happen if you discovered unlicenced works on review or assignment?
May be able to rentalise unlicenced works → depends on precise wording of the lease
may be able to reject assignment based on unlicenced works
Breach of lease covenant → potential to forfeit lease
Retrospective licence
How would you consider the impact of proposed alterations on building operations?
Would consider nuisance to tenants if multi-let
Investigate impact on landlords systems, such as A/C and fire alarm systems
Assess impact on EPC / Sustainability
Why would a warranty be required?
To protect the landlords interests
E.g if the tenant is proposing major structural works, repairs would be covered under warranty if any issues. Ensures work will be completed properly
What are reinstatement provisions?
A provision that ensures the repair of the property so that it is in the same condition, or materially equivalent condition, prior to the works taking place
How do dilapidations relate to alterations?
LTA is an ‘extension’ of the original lease and so will be considered at lease end → if required to reinstate to original condition, it will be included within dilaps works/settlement
Dilaps notice periods should be agreed, with wording and SoD issues by solicitors
How does the Equality Act 2010 relate to alterations?
Alterations may be required to allow occupiers providing a service to fulfill the obligations placed on them by the Equality Act 2010
→ Cannot withhold consent irrespective of wording
What H&S considerations relate to alterations?
The tenants or contractors H&S documents demonstrate that risk assessments and method statements have been produced
Safe working practices should be adhered and permits issued
→ asbestos register
How does MEES relate to alterations and your reasoned advice?
Where tenant works will (or may) negatively affect the EPC, it is likely to be reasonable for landlords to withhold consent
What levels of approved decision are there in granting alterations?
Approved
Approved with modifications
Approved subject to conditions
Rejected
If consent is refused, what remedies does a tenant have?
Issue court proceedings for declaration that the landlord is being unreasonable and the works may proceed
Simply carry on with the works regardless
→ pros and cons to both
Can consent be granted retrospectively?
Yes, retrospective licenec will be on the formal agreement that full plans will be provided on completion for use in licence documents.
Landlord may also rentalise the unauthorised alterations on the next rent review
Following alterations, can you and how would you adjust service charge?
No, costs and fees relating to owners investment interests should not be included within service charge
What is TUPE?
Transfer of Undertakings (Protection of Employment) Regulations 2006
What is the purpose of TUPE?
Protect employees if the business in which they are employed changes hands
Protects rights as an employee when you transfer to a new employee
How might TUPE relate to property management?
During a sale, TUPE might be an issue due to on-site staff employed by the PM or Landlord
What are the effects of TUPE?
Employment of staff will trasfer to the new owners
Protection against dismissal
TUPE requires the transferor to provide prescribed info about the transfer to the transferring employees (can be awareded 13 weeks gross pay per employee if filure to comply)
How might TUPE relate to Property management?
Service charge provision change
Grant or assignment of lease where there is a change in ownership property sale termination of a PM agreement and appointment of new agent sale of business change to the contractor providing services to a building
What is a duty of care deed?
a document between the property manager and the landlords funder
The Duty of Care Deed is commonly used in construction, development, and real estate finance to give third parties reassurance that they can take legal action in case of negligence or breach of duty by the professionals involved in the project.
i.e. bank may commonly take this out alongside PMA as they are risk adverse
What is the prupose of a duty of care deed?
To create a direct legal relationship between the PM and funder, particularly to payment of rent, but also more generally
Why is a duty of care deed often required?
If landlord defaults or becomes insolvent, the PM diverts rental payments to bank and continues operating to provide lender with comfort
What is included within a duty of care deed?
Obligation for PM to comply with PM agreement with landlord
Expressly makes PM liable to the bank
Provides acknowledgement from managing agent that bank has security over the property
Detailed info/obligation on Client accounts and Client money
Express obligation for PM to maintain PII
Detailed obligations on when the landlord becomes insolvent and requriements for PM
What would you do if you were asked to sign a duty of care deed
Sign it without seeking to vary it
Ignore it (unlikely to be a real option)
Sign it but seek to vary it - seriously consider given additional risk for PM
How would you deal with rental deposit deeds?
Review RD in first instance → then establish a seperate, interest-bearing account to hold deposit and manage funds in accordance with relevant legal documentation
Tell me about usual insurance requirements for the landlord
Loss of rent insurance
Terrorism (levied onto service charge)
PII
Building Insurance (levied on service charge)
Business interruption
Public liability insurance
Engineering Insurance (levied onto service charge)
How can you pass on costs of insurance to tenants?
Usually stated within lease that allows landlords to charge occupiers for insurance premium. Usually as a direct recharge.
→ refer to RICS guidance note: Insurance for Commcercial Property Managers, 1st Edition, 2011
What are the issues associated with a lack of insurance?
Increased risk if a claim is brought against you
Possible negligence / against the law
How do you ensure that insurance cover is appropriate?
Follow RICS guidance → Insurance for Commercial Property Managers, 1st Edition 2011
RICS provide insurance requirements, such as PII and Public Liability Insurance
What is public liability insurance?
Covers the cost of claims made by members of the public for incidents that occur in connection with your business activity
Why is public liability insurance important?
Without it, you may have to pay for the claim yourself or out of your business
Why is effective occupier liason important?
because seeking to create a good relationship with occupiers is essential to good property manaement
What is a BMS?
Building Management System → an IT system to operate/monitor the building
As a property manager, what are your H&S and Fire Safety obligations?
H&S risk assessments, periodically, or when there is change, e.g. new tenancy
Safe Working enviornment, Health and Safety at Work Act 1974 e.g. ensure premises are free of hazards
Control of Substances Hazardous to Health (COSHH) regulations e.g. ensure hazardous substances are dealt with safely
Property managers are responsible for managing risks related to Legionella bacteria in water systems, especially in larger buildings.
Fire Safety Risk Assessments - under Regulatory Reform (Fire Safety) Order 2005
Tell me about third party supplier procurement in relation to your property management role
PM will enter into arrangeemnts with third party suppliers as agents for landlord
Ensure comprehensive signed contract is in place and states PM is acting on behalf of landlord
Ensure scope is clear and complies with landlord requirements
Terminates on one months notice
Under the Occupier Liability Act 1957, what happens if an injury was caused to a visitor due to the faulty work of a third party?
If an injury to a visitor is caused by faulty work done by a third-party contractor, the occupier can avoid liability if:
The work was entrusted to a competent, qualified contractor.
The occupier took reasonable care in selecting the contractor.
The nature of the work was such that the occupier could not reasonably be expected to check it for faults or dangers.
How can you staisfy your duty of care to persons other than visitors under the Occupiers Liability Act 1984?
Taking reasonable steps to give warning of the danger concerned or to discourage persons from incurring the risk
Tell me about a key point of the Control of Substances Hazardous to Health (COSHH) regulations 2002
Finding out what the health hazards are and deciding how to prevent harm (risk assessments / providing control measures to reduce harm to health)
Tell me about the Defective Premises Act 1972
The Defective Premises Act 1972 is a piece of UK legislation designed to impose legal duties on those involved in the construction, maintenance, and repair of buildings to ensure that the premises are safe for occupation and free from defects. Its primary goal is to protect occupants and users of buildings from harm caused by defective work or poor-quality construction.
Tell me about the Regulatory Reform (Fire Safety) Order 2005
Designed to provide minimum fire safety standard in all non domestic premises
Deignates the employer the Responsible Person
Tell me a key point of the CDM Regulations (2015)
To improve H&S in the construction industry, by defining different duty holders with carying levels of responsibility
→ allows to manage risks from start to finish
Roles:
Client
Principal Designer
Principal Contractor
Designer
Contractor
Workers
Key Documents
Construction Phase Plan
H&S file
What are the two tests for corporate insolvency?
Cash flow insolvency test:
This test assesses whether the company can pay its debts as they fall due. If a company is unable to meet its payment obligations (such as invoices, loans, or rent) when they become due, it is considered insolvent under this test.
Balance Sheet insolvency test:
This test considers whether the company’s liabilities exceed its assets. If the total liabilities (debts and obligations) of the company exceed the total value of its assets, the company is considered insolvent under this test.
What are the consequences of insolvency?
For limited companies it means the business will go into liquidation and stop trading or go into administration and be sold
For sole traders and partnerships, business owners are liable for debts and their personal assets are at risk
Tell me about administration as an insolvency procedure
Administration is a process used when a company is in financial trouble and can’t pay its debts. The main goal is to help the company survive or, if that’s not possible, to get the best outcome for its creditors (those it owes money to).
Here’s a simple breakdown:
Administrator Appointed
Take Control: They review the company’s situation to see if it can continue or needs to close.
Create a Plan: The administrator makes a plan to save the company, sell its assets, or close it down. This could involve selling parts of the business or negotiating with creditors.
Carry Out the Plan: The administrator implements the plan, whether that’s selling assets, paying off debts, or winding down the business.
End of Administration: Once the plan is completed, the administration process ends. If the company is saved, it continues under new management or ownership. If not, it moves into liquidation, where its remaining assets are sold to pay off creditors.
