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APC 2023 > Summary of Experience - Technicals > Flashcards

Summary of Experience - Technicals Flashcards

1
Q

What are the different purposes for inspection?

A

Valuation
Agency
Property Management

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2
Q

Re the Inspection of Unit 19, Schooner Park - what were the circumstances around the tenant vacating?

A

The tenant was vacating upon the natural expiry of their lease - they were outside the act

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3
Q

Re the inspection of Unit 19 Schooner, what did you review as part of your desktop survey?

A

I reviewed the lease, looked at floor plans, acquired the EPC rating and looked the unit within the context of the local market

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4
Q

Re the inspection of Unit 19 Schooner, what did you note?

A
  • Condition (well maintained and tenant had undertaken repair obligations so presented well)
  • Specification and configuration (noted spec for marketing purposes)
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5
Q

Re your inspection of Wye Industrial Estate, what condition were the units in? What management issues were present?

A
  • A mix of conditions - some units had undergone refurbishment recently so presented well.
  • Parking issues were present - it seemed some tenant were parking in non-demised spaces or using public areas as parking.
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6
Q

Re your inspection of Headley Park, why had the tenant vacated?

A
  • Tenant had gone into liquidation and absconded
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7
Q

Talk me through the RICS Code of Measuring Practice 2015

A

Best practice document for all measurement exercises except for offices and resi

Provides precise definitions to ensure a common and consistent approach to measurement

Introduced core definitions of:
- GEA (the area of a building measured externally at each floor level)
- GIA (the area of a building measured to the internal face of the perimeter walls at each floor level)
- NIA (the usable area within a building measured to the internal face of the perimeter walls at each floor level)

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8
Q

Tell me about the RICS Professional Statement Property Measurement 2018

A

Introduced to avoid inconsistencies in definitions of measurement and provide greater global transparency

Adopted on a global basis

Introduced IPMS 1-3:

  • IPMS1 (GEA) - used for measuring the area of a building including external walls on a floor-by-floor basis
  • IMPS2 (GIA) - used for measuring the interior of an office to include all areas available for direct use, measured to the IDF on a floor-by-floor basis in component areas
  • IPMS3 (NIA) - used for measuring the occupation of floor areas in exclusive use
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9
Q

What is IPMS?

A

International Property Measurement Standards

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10
Q

How does IPMS3 differ from NIA?

A
  • Perimeter measurements are taken to the IDF
  • No exclusions for restricted height of less than 1.5m
  • All columns are included
  • On floors of multiple occupiers, the area is taken to the midpoint of the partition wall between tenancies
  • Covered galleries and balconies for the exclusive use of one tenant are included and stated separately
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11
Q

How would you calibrate your disto laser?

A
  • Measurement of a known distance
  • Sending to manufacturer annually to calibrate
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12
Q

What is Promap? How do you use Promap to assist with the measurement of land?

A
  • Digital mapping and data software
    Use of the measuring tool to ascertain total area on a map or plan
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13
Q

Re your measurement of Central Point, why did you measure on an NIA basis?

A

It was as per my clients request but I did report on a dual basis as per the RICS Property Measurement 2018

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14
Q

Re the measurement of Central Point, why would your client want to use NIA?

A

I can’t speak on behalf of my client’s intentions but I informed them of the benefits of using IPMS3

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15
Q

How do you measure eaves height?

A

Measure the height between the floor surface and the lowest point of the underside of the roof covering, at the eaves on the internal wall face

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16
Q

What is the Red Book?

A
  • The Red Book is issued by RICS to ensure valuation delivery worldwide.
  • Latest edition was 2021
  • The publication details mandatory practices for RICS members undertaking valuation service
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17
Q

What were the main changes from the previous versionof the Red Book?

A
  • The need for compliance with the RBG and the terms of reference (must be clear and unambiguous)
  • Valuation for financial reporting purposes (emphasis on the need to provide reasonable possible fair value measurements)
  • Reference to the use of profit method for non-trade related properties:
    o A list of properties includes self-storage, flexible workspace and PBSA
  • Sustainability and ESG factors, including:
    o Definitions
    o Inspections and reporting
    o Impact of sustainability of valuation
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18
Q

What is the structure of the Red Book?

A
  • Part 1: Introduction
  • Part 2: Glossary
  • Part 3: Professional standards (PS)
  • Part 4: Valuation technical and performance standards (VPS)
  • Part 5: Valuation applications (VPGA)
  • Part 6: The Internal Valuation Standards (IVS)
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19
Q

What are the Professional Standards (PS)?

A

Mandatory

PS1 - Compliance with standards and practice statement where a written valuation is provided

PS2 - Ethics, competency, objectivity and disclosures

  • Act in accordance with Rules of Conduct
  • Apply Professional scepticism with regard to independence, objectivity and management of conflicts of interest
  • Terms of engagement - understand and comply
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20
Q

How can VPS 1-5 be ‘excepted’? (ALIES)

A
  1. Advice is provided in preparation for negotiations or litigation
  2. Valuer is performing a statutory function (except for in statutory return to a tax authority)
  3. Valuation is for internal purposes only
  4. Valuation is part of agency or brokerage work (expect when a purchase report is required)
  5. In anticipation of being an expert witness
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21
Q

What are the VPGAs?

A

Valuation Applications (10)

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22
Q

What is market rent?

A

‘Market rent’: The estimated amount for which an interest in real property should be leased
- On the valuation date
- Between a willing buyer and seller
- In an arms length transaction
- After proper marketing
- Where each party acted knowledgeably, prudently and without compulsion

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23
Q

What is market value?

A

‘Market value’: The estimated amount for which an asset should exchange
- On the valuation date
- Between a willing buyer and seller
- In an arms length transaction
- After proper marketing
- Where each party acted knowledgeably, prudently and without compulsion

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24
Q

What is an assumption? How does this vary from a special assumption?

A
  • Assumptions are made when it is reasonable for a valuer to accept something that is true without the need for specific investigation
  • Special assumptions is a supposition that is taken to be true and accepted as a fact, even though it is not true
  • Must be agreed with the client in writing on commencement of instruction.
25
Q

Talk me through the comparable method

A
  1. Search and select comparables
  2. Confirm and verify details. Analyse for NER.
  3. Assemble comps in schedule
  4. Adjust comps using HoE
  5. Analyse comps to form opinion of value
  6. Report on value
26
Q

Talk me through the investment method

A
  • Used when income stream to value to produce cap val
  • Conventional method = rent x YP = market value
  • T&R (under-rented) or L/H (over-rented)
  • Yields = income / price x 100 (%) – impacted by risk
27
Q

Talk me through the profits method

A
  • Used for valuation on trade related property
  • EBITDA is capitalised at an appropriate yield
  • Annual turnover (income received) – Costs/Purchases = Gross Profit
  • Less reasonable working expenses = Unadjusted net profit
  • Less operators renumeration = Adjusted net profit (FMOP)
28
Q

Talk me through the residual land method

A

gross development value (GDV) - total development costs (including profit) = residual
land value

29
Q

Talk me through the contractors method

A
  • Also known as contractors method
  • Used when direct evidence is limited for specialised properties (lighthouses, oil refineries and schools)
  • Used for owner-occupied properties

Methodology

  • Value of land in its existing use + current cost of replacing the building (less a discounted for depreciation and obsolescence)
30
Q

What is the Hierarchy of Evidence?

A

As per RICS GN ‘Comparable evidence within RE vals’ 2019:
Hierarchy of evidence:
- Category A – direct comps
- Category B – general market data
- Category C – Other sources

31
Q

Re your valuation of Unit 8 Wye, what is the straight line method?

A
32
Q

Talk me through your valuation of Fitzwilliam House, Bracknell

A

Undertook indicative residual valuation by employing development appraisals to determine viability / profitability of each option (industrial, office re-dev, resi)

33
Q

Talk me through Sections 24 to 28 of the LTA 1954

A

Section 24 - relates to the security of tenure provisions
Section 25 - LL notice to the tenant
Section 26 - Tenant notice to the LL
Section 27 - notice from tenant to end lease
Section 28 - Renewal of tenancy by agreement

34
Q

What is an interim rent?

A

Section 14a - agreed figure between end of notice and commencement of new lease

35
Q

What are standard assumptions and disregards within a rent review?

A

Assumptions:
- Available on the open market between a willing landlord and tenant
- Available and fit for immediate occupation
- Used for use stated in lease
- All lease obligations observed

Disregards:
- Tenant goodwill
- Goodwill on the building
- Tenant improvements if documented

36
Q

What is a Calderbank offer? How does it differ from a Part 36 offer?

A

(Calderbank v Calderbank 1975)
A calderbank offer relates to rent reviews
- Is a genuine offer to settle
- Used to achieve early resolution and prevent costs escalating
- Letter served without prejudice and save as to costs’

A part 36 is for lease renewals
- Similar concept
- Must be in writing and remain open to accept for 21 days

37
Q

What does Section 18 of the 1927 LTA refer to?

A

Relates to the limitation of a dilapidations claim to the diminution of value of the reversionary interest i.e the difference in value of the property upon possession had the tenant not undertaken covenants to repair

38
Q

What does Section 19 of the 1927 LTA refer to?

A

If a lease prohibits improvements being made without LL consent, section 19 states this cannot be reasonably withheld

39
Q

What is the Landlords and Tenants covenant Act 1995?

A
  • Relates to the assignment of leases
  • Act abolished privity of contract
  • Introduced AGAs
40
Q

Talk me through RICS UK Commercial Real Estate Agency 2016

A
  • Mandatory statement providing set of mandatory standards for members, supported by detailed guidance
  • 12 core principles:
    o Act in honest and fair manner
    o Carry out work with care and diligence and ensure necessary skills
    o Ensure terms of business are issued with complaints handling procedure
    o Avoid conflicts of interest
    o Do not discriminate unfairly in dealings
    o Transparent communications
    o Client money is held separately and covered by insurance
    o Hold appropriate PI
    o Identify your client and ensure all parties are clear of obligations to each party
    o Give realistic assessments / valuations using professional judgement
    o Ensure everything is carried out in accordance with the client’s wishes, having regard to safety and security
  • The statement also provides advice on:
    o Acting ethically
    o Securing instructions
    o Marketing the property
    o Implementing the disposal
    o Acquisition of the property
41
Q

What is the RICS Code for Leasing Business Premises 2020?

A

Mandatory statement introduced in 2020
- Aims to improve the quality and fairness of negotiations
- Promotes the use of HOTs to make lease drafting more efficient

42
Q

What is the structure of the Code for Leasing Business Premises?

A

Part 1 - Introduction
Part 2 - Mandatory requirements
Part 3 - Lease negotiation best practice
Part 4 - Appendices

43
Q

What are the mandatory requirements of the Code for Leasing Business Premises 2020?

A
  • Negotiations must be handled in a constructive and collaborative manner
  • Unrepresented parties must be advice on the code
  • HOTs marked STC
  • On renewal, HOTs subject to reasonable modernisation
  • Negotiations should aim to produce a letting that achieves a fair balance
44
Q

What is included within the standardised template for Heads of Terms?

A

 Extent of premises
 Special rights
 Length of term and 1954 act position
 Break / RR
 Rent free period
 Service charge
 Rights to assign etc
 Repairing obligations
 Use
 VAT

45
Q

Talk me through the Estate Agents Act 1979

(CHA.O.LAK)

A

Relates to:
o Disposal or acquisition of an interest in land
o Freehold property
o Leasehold property with capital value
o Land, as well as buildings

Introduced to promote 7 principles:
1. Clarity as to the terms of the agency
2. Honesty and accuracy
3. Agreement and liability of costs
4. Openness regarding personal interest
5. Absence of discrimination
6. Legal obligation to tell client about offers received
7. Keep client’s money separate

46
Q

What is Section 18 of the Estate Agency Act?

A

Refers to the requirement to specify all cost / fees in advance in writing within terms of business

47
Q

What is Section 21 of the Estate Agency Act?

A

The requirement to disclose any personal interests connected to the sale/letting

48
Q

What is the Misrepresentations Act 1967?

A

-Applies when false statements are made during the pre-contractual enquiries by the vendor and their agent (leasehold and freehold)
- Civil offence actionable by Tort. Action can be limited by an effective disclaimer (exclusion clause)
- Penalties – can be sued for financial damages or contract rescinded

49
Q

Tell me about the Consumer and Business Protection Regulations 2008

A

o Applies during the entire agency sales and letting process
o Criminal offence. Not treating customers fairly or providing misleading marketing information.
o Punishable by an unlimited fine, prohibition order and prison up to 2 years

50
Q

What considerations did you take when installing marketing boards?

A
  • Town and Country Planning Regulations 2007
  • Planning consent required for non-residential boards over 2sq. m (flat) and 2.5 Sq. m (V) – only one board per building
  • Must have owners approval
51
Q

What is the RICS Commercial Property Management for England and Wales 2011?

A
  • Guidance note on best practice for commercial property managers
  • Focuses on how PMs can be efficient, effective and accountable
  • Primary duty of care is to the client
  • Gives specific advice on rent collection, service charges, managing buildings, H&S and procurement of suppliers
  • Includes summary of all relevant statute law and model ToEs
52
Q

What is stated within the RICS Professional Statement Real Estate Management 2016?

A
  • Mandatory guidance aimed at property managers
  • Outlines the principles that share a culture of fairness and transparency’

Introduces 12 principles:
1. Act in an honest, fair and transparent manner
2. Carry out work with due skill, care and diligence
3. Ensure client is provided with Terms of Business that are clear, including CHP details
4. Avoid COIs and deal with any openly and fairly
5. Do not discriminate
6. All communications are fair and clear
7. All advertising / marketing is honest and truthful
8. Client money is held separately
9. Appropriate PII is held
10. Identify client and ensure obligations are clear to each party
11. Give realistic assessments
12. Ensure all meetings etc are undertaken with regard to H&S

53
Q

What is a service charge?

A

Charges to tenants of multi-let assets of costs incurred by a LL to maintain and manage the property

54
Q

What are the usual arrangements for a service charge?

A

S/c budgets should be agreed with the tenant prior to commencement of the s/c year
Annual accounts prepared at year end
Balancing payment made at year end upon presentation of audited accounts

55
Q

What RICS documents relate to Service Charges?

A

RICS Professional Statement – Service Charges in Commercial Property 2018

56
Q

What are the aims of the RICS Professional Statement – Service Charges in Commercial Property 2018?

A
  • Improve general standards and promote best practice, fairness and transparency in the management of s/c
  • Ensure timely issue of budgets and certs
  • Reduce cases of disputes and provides guidance on resolution
57
Q

What principles must a professional involved in the management of a service charge account must act in accordance with?

RICSPS - Service Charges in Commerical Property 2019

(ERBAAMDE)

A
  • Expenditure recovered must be in accordance with terms of the lease
  • Recover no more than 100% of the cost
  • Annual issue of s/c budgets annually with commentary
  • Ensure approved accounts showing accurate record of expenditure is circulated annually
  • Ensure an s/c apportionment matrix is provided annually
  • Monies must be held in one or more discrete account (Interest earned must be credited to the account)
  • If a dispute arises, must ensure payment withheld should reflect only the sums in the dispute
  • Any error in s/c billing should be adjusted without undue delay
58
Q

What is in a service charge budget?

A

Management (fees, H&S fees)
Utilities
Soft services (landscaping, gritting)
Hard services (plumbing, drainage)
Exceptional expenditure

59
Q

How is a service charge apportioned?

A

Floor area
Fixed percentage
Rateable value
Weighted floor area

APC 2023 (23 decks)

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