Property Management (Level 3) - SOE Specific Flashcards
What are some key Property Management RICS documents?
RICS Commercial Property Management in England and Wales, 2nd edition Guidance note (2011)
RICS Professional Standard: Service Charges in Commercial property (1st Edition, 2018)
RICS Real Estate Management, 3rd Edition, October 2016 (Professional Statement)
RICS Code for Leasing Business Premises, 1st Edition, February 2020 (Professional Standard)
What are some of the core duties of a property manager?
-Liaising and reporting with the landlord
-Collection of monies
-Client accounts
-Defaulting occupiers
-Service charge
-Deposits
-Managing the building
-Management policies
-Insurance relating to the building
-Occupier liaison
-Energy management
-Building management systems
-H&S and Fire Safety
-Procurement of third party suppliers
What are the key principles of the RICS Professional Statement on service charges?
Introduced 9 mandatory principles, including recovery as per lease terms and no more than 100% expenditure to be recovered.
What are the 9 principles included in RICS professional statement: Service Charges in Commercial Property (2018)?
RICS Service Charge Principles (2018)
Professionals involved in the management of service charge accounts must act in accordance with the following 9 principles:
1) All expenditure that the owner and manager seek to recover must be in accordance with the terms of the lease.
2) Owners and managers must seek to recover no more than 100% of the proper and actual costs of the provision or supply of the services.
3) Owners and managers must ensure that service charge budgets, including appropriate explanatory commentary, are issued annually to all tenants.
4) Owners and managers must ensure that an approved set of service charge accounts showing a true and accurate record of the actual expenditure constituting the service charge are provided annually to all tenants.
5) Owners and managers must ensure that a service charge apportionment matrix for their property is provided annually to all tenants.
6) Service charge monies (including reserve and sinking funds) must be held in one or more discrete (or virtual) bank accounts.
7) Interest earned on service charge accounts – or where separate accounts per property are not operated, a proper and reasonable amount of interest calculated on normal commercial rates – must be credited to the service charge account after appropriate deductions have been made.
8) Where acting on behalf of a tenant, practitioners must advise their clients that if a dispute exists, any service charge payment withheld by the tenant should reflect only the actual sums in dispute.
9) When acting on behalf of a landlord, practitioners must advise their clients that following resolution of a dispute, any service charge that has been raised incorrectly should be adjusted to reflect the error without undue delay (RICS, 2018).
What are some typical lease clasues?
- Term
- Rent
- Rent Review
- Break Clause
- 1954 Act
- Alienation
- Alterations
- Tenants Covenants
- Landlord Covenants
Aims of Service Charge Professional Statement?
Improve best practice, uniformity, fairness and transparency in management and administrations of service charges
Ensure timely issue of budgets and YE certificates
Reduce cause of disputes, and provide guidance on dispute resolution
What are the timescales for reporting within the Service Charge Professional Statement?
Issue budgets, including comments and matric, minimum 1 month prior to start of SC year
Issue reconciliation / expenditure certifications, with explanations, within 4 months of SC year-end
What is a budget?
The expenditure estimated that will be incurred in a given service charge accounting period
Responsibility of Property Manager when issuing service charges?
Ensure value for money
Ensure quality services that are regularly reviewed
Ensure standard of services are monitored
How can you achieve value for money?
procure quality service standards - achieve value for money as opposed to cheapest price
Competitive tenders
Formal re-tendering
4 methods of service charge apportionment?
Floor area
Fixed percentages
Weighted floor area (typical in shopping centre)
RV
How are management fees calculated?
Fees are set on a fixed price basis rather than being calculated as a percentage of expenditure - usually a fixed fee subject to annual review or indexation
A % is not appropriate as it is considered to be a disincentive to the delivery of value for money
Code states that the cost of collecting rent should be excluded from the service charge management fee
What is your companies procurement policy?
Contractor needs to be on approved supplier list (Workman document)
Must tender works - at least x3 contractors
Contractor must be Safe Contractor Accredited
Accreditation scheme that recognizes an organizations capabilities for health and safety
When can former tenant be pursued for arrears?
If the Lease is an OLD LEASE and started before 1 January 1996
Privity of Contract was abolished by LL & T (Covenants) Act 1995
Before this, any tenant who was original tenant under lease was responsible for rent and other covenants throughout the term (even if lease had transferred to new tenant).
Or if there is an AGA in place.
What Act governs CRAR procedures?
Tribunals, Courts and Enforcement Act 2007
Talk me through the process of a tenant not paying rent and how you would remedy this?
- If a tenant has not paid rent or is persistently late in the payment of rent the first thing to do is contact the tenant to discuss or meet tenant on site to discuss and find out why they have not paid, is there a reason?
- Before making a decision on remedies for non-payment of rent - request to see ACCOUNTS (audited and management)
- The recommended remedy will be dependent on each scenario
- Payment plan
- Guarantor/AGA
- Draw down on rent deposit
- CRAR
- Statutory Demand
- Surrender/forfeiture
What is the process of CRAR?
Timeline for Rent Default Remedies:
- Minimum of 7 days unpaid rent
- Minimum of 7 clear days warning notice
- Enforcement agents visit
- 2 clear days to follow
- Re-entry by enforcement agent to seize goods
- Allow 7 clear days before the sale of goods
- Fees must be specified on the entry notice
What is CRAR?
Commercial Rent Arrears Recovery
Replaced ancient law of distress for rent
Introduced in 2014
Available to commercial Landlords to recover rent (plus VAT and interest)
No minimum amount of arrears required
What goods cannot be seized under CRAR?
Perishable goods
Tools of the trade below the value of £1,350
Any goods proved to belong to a third party
What are tenants’ rights under CRAR?
A commercial tenant does have the right to delay the enforcement action once they receive this notice. They can do this by asking a court to either:
- grant a delay of execution; or
- set aside the enforcement notice.
Where a commercial tenant faces the CRAR process, they have the right to enter into a controlled goods agreement. This allows them to pay the rent arrears over a period of time. If they negotiate this, their goods must remain on their commercial premises.
Talk me through how you dealt with recovering the arrears at Launton Road Retail Park?
Identified the Issue – A tenant at Launton Road Retail Park had a history of missed payments and failed to pay their rent and service charge for the June 2023 quarter.
Attempted Direct Engagement – Before taking formal action, I tried to contact the tenant via email and phone to understand their situation. However, I received no response.
Advised on Next Steps – Given the lack of communication, I recommended to my client that a 7-day letter be issued. This letter warned the tenant that failure to settle the arrears within the timeframe could lead to further action through Commercial Rent Arrears Recovery (CRAR).
Issued the Letter – With my client’s approval, I sent the 7-day letter, clearly outlining the consequences of non-payment.
Tenant Response & Resolution – The letter prompted the tenant to pay the outstanding rent and service charges in full within the 7-day period, avoiding the need for CRAR enforcement.
Kept the Client Informed – Throughout the process, I kept my client updated and provided confirmation once the arrears were successfully recovered
Talk me through how you dealt with the Car Park Dispute at Colet Court?
Received the Complaint – I was informed that a new tenant had installed signage directing customers to parking spaces, but one sign was mistakenly placed in another tenant’s designated spot.
Reviewed Lease Agreements – To determine the rightful ownership of the parking space, I carefully reviewed both tenants’ leases.
Inspected the Property – I visited the site, inspected the parking area, and took photographs of the signage in question to document the issue.
Identified a Lease Breach – My review confirmed that the tenant had marked spaces that were not assigned to them, breaching their lease.
Engaged with the Tenant – I contacted the tenant to inform them of the issue and requested that they remove the incorrect signage.
Tenant Agreed to Take Action – The tenant acknowledged the mistake and confirmed they had already planned to remove the sign.
Ensured Compliance – To make sure the issue was fully resolved, I asked the Facilities Manager to check the signage during their next inspection.
Confirmed Resolution – The Facilities Manager later reported back, confirming the sign had been removed and provided photographic evidence of the completed alterations.
What are the Two fundamental principles of rent collection?
Accuracy of information provided
Timing of when demands are sent out / rent is collected by
What is the difference between an assignment and a subletting?
Assignment means that the tenant no longer has any obligation under the lease (unless there is an AGA) and has no direct communication with the landlord - Tenant transfers legal interest in lease to another tenant. Incoming tenant takes over lease obligations.
Subletting is when the tenant creates another lease below theirs. They will receive income from the sub-tenant but will still be responsible for paying the landlord. - Lease property from tenant, rather than Landlord. Original tenant maintains relationship with Landlord, and sub-tenant has relationship with original tenant.
Difference: With assignment, original tenant is no longer liable under the lease. With sub-letting, original tenant remains liable but creates new relationship with sub-tenant. Landlord and sub-tenant have no direct relationship.
What is key consideration when reviewing rent arrear recovery methods?
Chance of re-letting the property
Current passing rent vs market rent (market conditions)
Vacant possession value and void cost, vs value as let
Why would a tenant would rather a Sub-let rather than assign?
If market rent is higher than passing rent, then tenant could get profit rent
If they wish to reoccupy in the future
What is the process for dealing with assignments/subletting’s?
Check the lease
Get an undertaking for Landlord costs from the assignee
What is the covenant strength of the proposed assignee/subtenant?
What is the proposed rent, more than, same, less than?
Are there reasonable grounds to refuse consent? (could be for covenant strength, tenant mix reasons)
L&T Act 1988 means approval cannot be unreasonably withheld and you need to deal with the application PROMPTLY
Subject to agreement a Licence for Assignment/Subletting will need to be drawn up
Consider what is the impact on the investment value of the property?
Talk me through the process of assignment at Southampton Trade Park?
Tenant Request & Lease Review – A tenant at Southampton Trade Park informed me of their intention to assign their lease to another company. I reviewed the lease’s alienation clause and confirmed that a full assignment was permitted, subject to landlord consent and tenant covenant strength checks.
Advising on Fees & Process – I advised my client that before considering the request, we should obtain a solicitor’s undertaking from the tenant to cover my associated fees for handling the assignment.
Advising on Arrears Before Proceeding – During my review, I identified that the tenant had outstanding service charge arrears from the previous quarter. I advised my client that approving the assignment before these arrears were cleared could result in complications, as the liability could become more difficult to recover once the lease was transferred. To mitigate this risk, I recommended that my client delay consideration of the assignment until full payment was received.
Securing Payment & Client Approval – Acting on my advice, my client withheld consent for the assignment until the tenant settled their arrears. Once payment was received in full, I updated my client, who then confirmed their approval to proceed.
Legal Documentation & Completion – With my client’s approval, solicitors were instructed to draft the necessary assignment documentation, ensuring all legal and financial aspects were properly addressed before completion.
Talk me through the process of sorting a Licence to Alter at The Moorewood Centre?
Tenant Request & Lease Review – A tenant occupying an industrial unit requested permission to install two EV charging points in their car park. I reviewed their lease agreement to determine if there was a clause allowing such alterations.
Advising on Fees & Process – Before progressing further, I advised my client that a solicitor’s undertaking should be obtained from the tenant to cover my firm’s management fees for overseeing the process. This ensured my client did not incur any unnecessary costs.
Assessing the Proposal – I requested detailed construction plans, along with the contractor’s Risk Assessment and Method Statement (RAMS), to ensure the works would be carried out safely and in line with best practice.
Client Consultation & Professional Input – I presented the proposal to my client to gauge their position. Once they indicated they were open to considering the request, I advised that we should seek input from a Building Surveyor within my firm and consult the property’s insurers to review the feasibility and potential risks associated with the installation.
Recommending Approval – After receiving confirmation that the proposal was structurally and operationally suitable, I advised my client to proceed with granting consent. Based on my recommendation, my client approved the works.
Drafting the Licence to Alter (LTA) – I then instructed my client’s solicitor to draft the Licence to Alter, ensuring all legal, surveying, and management fees were fully recovered from the tenant as part of the agreement.
Ensuring Compliance & Completion – Once the LTA was signed by all parties, the tenant proceeded with the installation. After completion, I requested photographic evidence and later conducted an on-site inspection with the Building Surveyor to verify that the works complied with the agreed plans.
What is the Benefit of Licence for Alterations?
Protection for LL - requires T to reinstate unit at end of lease, back to how it was originally let
Protection for T - prevents LL from rentalising alterations/improvements at rent review
Process for completing LTA application?
Receive T application - needs to be in writing, surveyor to check lease provisions and request undertaking
Be aware if timings are reasonableness
Review and consult with client
Get third party input (Insurers) - recommend building surveyor review if outside of my technical competence
Consider nature of works, whether rental value would be improved as result, the impact on building operations, consider getting warranty, LL to confirm if they require reinstatement at lease expiry
Liaise with the solicitors to Document the LTA
Prior to works PM will request and review any permits/ RAMS etc.
Complete final inspection to ensure works were done accordingly as per agreement
Note: if T believes LL being unreasonable at any stage, can go to Court
What factors need to be considered in a LTA?
Nature of works
Improvements
DDA/Equality Act 2010 compliance
H&S
Sustainability
Unlicenced works on review and assignment
Impact on building operations
financial bond
warranties for major works
Dilaps/reinstatement provisions
Why is it important to handle applications properly?
To ensure the complete licence protects both parties’ interest and proceeds without unnecessary delay
Different ways that consent to make alterations can be granted?
Automatically by lease terms (no consent required)
Formal Licence Deed - more complete works/ major works
Simple Letter Licence - for minor alterations i.e. repainting
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)
Why should inspection be carried out after completion of tenant works?
Surveyor needs to be satisfied that works were carried out to required standards, in line with plans and specifications
Need to check if snagging is required
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 would happen if you discovered unlicenced works on review or assignment?
What are reinstatement provisions?
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
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
If works required under legislation, different statutory regime applies
→ Cannot withhold consent irrespective of wording
→ Response given within 42 days
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
→ Construction Regulations (2007) apply to refurbishments
