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APC > Property Management L3 > Flashcards

Property Management L3 Flashcards

1
Q

What is an assignment?

A

Tenant transfers legal interest in lease to another tenant. Incoming tenant takes over lease obligations.

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2
Q

What is sub-letting?

A

Lease property from tenant, rather than Landlord. Original tenant maintains relationship with Landlord, and sub-tenant has relationship with original tenant.

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3
Q

Difference between assignment and sub-letting?

A

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.

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4
Q

Why sub-let rather than assign?

A

Lease requirement

Tenant may want to re-occupy in future

New party may be of lesser covenant strength

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5
Q

Typical alienation clause?

A

Permitted to assign/sub-let whole but not part, with LL consent not to be unreasonable withheld or delayed

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6
Q

What should PM do when receives application to assign or sub-let?

A

Review lease - what are the terms? Are there reasonable grounds for witholding conset? Is there AGA clause?

Request undertaking of surveyor and legal costs

Check if proposed market rent is same as passing rent

Check effect on investment value of property

Check if incoming tenant will pay a rent deposit

Surveyor to provide recommendation to client and obtain client approval

Licence for Assignment or Licence for Sub-Letting required

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7
Q

Aim of LL & T Act 1988?

A

S1 of LL & T Act 1988 states consent must be provided within reasonable timeframe (no delays)

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8
Q

Aim of LL & T Act 1927?

A

S19 of LL & T Act 1927 states consent must not be unreasonably withheld

S18 of LL & T Act 1927 limits the amount of damages a LL is able to recover for breach of T repairing covenants

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9
Q

Benefit of Licence for Alterations?

A

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

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10
Q

Key RICS publication in regard to alterations?

A

RICS Guidance Note: Licence for Alterations in Commercial Property, 2nd Edition 2013

Provides advice for surveyor

Notes importance of avoiding delays

Ensures licence is complete to protect parties

Licence must clearly document works agreed

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11
Q

Process for completing LtA application?

A

Receive T application - needs to be in writing, surveyor to check lease provisions and request undertaking

Review it and get third party input (Building Manager / Building Surveyor / Planners / Insurers)

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

Respond and obtain undertaking for costs from T

Document the LtA

Complete final inspection to ensure works were done accordingly.

Note: if T believes LL being unreasonable at any stage, can go to Court

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12
Q

Different ways that consent to make alterations can be granted?

A

Automatically by lease terms (no consent required)

Formal Licence Deed - used for projects where there are internal changes being made

Simple Letter Licence - less complex project, no solicitor necessarily required

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13
Q

Why should inspection be carried out after completion of tenant works?

A

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

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14
Q

PM responsibility when managing vacant building?

A

Building Insurance - inform them it is vacant and comply with the

Repairs - maintain fabric of building

EPC - obtain one

Inspections - regularly for insurance purposes

Health & Safety and Fire Risk Assessments to be carried out

Inform Council - Empty Rates

Isolate utilities and power supplies

Arrange for security

Maintain landscaping and asbestos register

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15
Q

Implication of Insurance Act 2016?

A

Key law which introduced more accoutnability for insurers

Introduced new responsibility to policy holders to provide all relevant information and aim to reduce claims

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16
Q

What is the tax on insurance premiums?

A

Insurance Premium Tax

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17
Q

Two fundamental principles of rent collection?

A

Accuracy of information provided

Timing of when demands are sent out / rent is collected by

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18
Q

Difference between standing order and direct debit?

A

Standing order = regular payment set up by payer, and payer has control

Direct debit = payer authorises the payee to take payments

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19
Q

Warning signs of future tenant rent arrears?

A

Persistent late payments and bounced cheques

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20
Q

Typical lease terms regarding interest on late rent?

A

2-4% above base rate 14 days after due date

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21
Q

First step when seeking to recover rent arrears?

A

Read lease - need to establish what procedures are in place

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22
Q

Remedies for rent default?

A

Negotiate payment plan

Draw down rent deposit

Pursue guarantor

CRAR

Serve Statutory Demand

Forfeiture

Court proceedings

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23
Q

What should be considered before drawing down on rent deposit?

A

Tenant covenant strength - will they be able to top it back up?

Future debt - if tenant struggling, may be wise to keep deposit for future debt EG dilapidations

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24
Q

Does LL need to give T notice before drawing down on rent deposit?

A

Depends what it says in rent deposit deed

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25
Q

Does LL have to use rent deposit for arrears?

A

No, can use deposit at LL discretion

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26
Q

Benefit of drawing down on rent deposit?

A

Good if tenant only struggling short-term and LL wants to keep tenant in occupation

Provides relief for tenant so they can focus on recovering business

Tenant can top up deposit when more financially stable

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27
Q

How can Court proceedings be used to recover tenant arrears?

A

LL can obtain court judgement

High Court Enforcement Officer may then enforce this but need to pay court fees

Similar to CRAR

Can be useful if tenant is still solvent as threat of going to Court may prompt payment!

However - slower process, more expensive etc

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28
Q

When can former tenant be pursued for arrears?

A

If Lease 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)

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29
Q

What is Statutory Demand?

A

Preliminary step to pursuing winding-up proceedings (AKA bankruptcy)

Can be used to put pressure on tenant to pay arrears

Used on undisputed arrears of £750 + where rent deposit has already been used

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30
Q

What is the process of serving a Statutory Demand?

A

Notice served and T has 21 days to pay or propose plan

After this time, LL can present winding up petition to Court

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31
Q

What is CRAR?

A

Commercial Rent Arrears Recovery

Replaced ancient law of distress for rent

Introduced in 2014 by Tribunals, Courts and Enforcement Act

Available to commercial Landlords to recover rent (plus VAT and interest)

No minimum amount of arrears required

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32
Q

What are CRAR timelines?

A

7 days unpaid rent

7 days notice

Enforcement Agent visits

7 days before sale of any seized goods

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33
Q

What goods cannot be seized under CRAR?

A

Perishable goods, work tools, and kit belonging to a 3rd party

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34
Q

What are tenants rights under CRAR?

A

Can apply to Court for order that no further steps can be taken without permission from Court

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35
Q

What is forfeiture?

A

Clause in lease that allows landlord to re-gain possession of lease

Either by peaceful re-entry or Court action

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36
Q

When can forfeiture be used?

A

When there is a forfeiture clause in the lease

No notice is required from LL

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37
Q

What are tenants rights under forfeiture?

A

Tenant has the right to apply for relief from forfeiture

Can only apply to Court as they are only one that can grant it

If they grant it, lease is restored as though forfeiture never happened

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38
Q

How can LL right to forfeit be waived?

A

If LL agrees payment plan with T

If CRAR is exercised

If S25 notice is served under LL & T Act 1954

39
Q

How can lease be terminated by forfeiture?

A

Landlord can peacefully re-enter and change locks

Court proceedings can commence to recover possession

40
Q

What was LL & T (Covenants) Act 1995?

A

Abolished Privity of Contract for all new leases as of 1 January 1996

Introduced Authorised Guarantee Agreements (AGAs) - former tenant guarantees lease compliance of assignee

S17 notice must be served on guarantor within 6 months of tenant not complying, and former tenant then required to pay the arrears

41
Q

According to RICS Code of Leasing Business Premises, when should AGAs be used?

A

If assignee is of weak covenant strength, has no guarantor and is not paying a rent deposit

42
Q

What is key consideration when reviewing rent arrear recovery methods?

A

Chance of re-letting the property

Current passing rent vs market rent (market conditions)

Vacant possession value and void cost, vs value as let

43
Q

What was impact of Legal Aid, Sentencing and Punishment of Offenders Act 2012?

A

Made residential squatting a criminal offence

Commercial landlords must rely on Bailiff or Court to remove squatters/trespassers

44
Q

Four main options for LL when T not fulfilling their repairing obligations?

A

Serve repair notice (S146 of Law and Property Act 1925)

Forfeit lease

Serve interim schedule of dilapidations

Do works themselves and charge tenant

45
Q

What must be included in notice to repair?

A

This is S146 of Law and Property Act 1925

Must contain details of repairing breach that has occurred

Must state timescale allowed to remedy breach

Must state course of action proposed if T fails to remedy

46
Q

How can LL forfeit lease for failure to repair?

A

Must be forfeiture clause in lease

LL must serve S146 notice on tenant (stating details, timescale and proposed course of action)

47
Q

What is the leading case law for LL right to re-enter property to undertake repairs?

A

Jervis vs Harris

Gives LL right to pursue remedy against defaulting tenants to ensure premises are kept in good condition

48
Q

In what circumstances can Jervis and Harris clause be used?

A

When tenant is solvent

When LL wants lease to continue

When LL wants to carry out repair themselves

Where threat of entry may compel tenant to do work themselves

49
Q

3 possible stages of PPM?

A

Cyclical maintenance - regularly carried out activities EG plant servicing

Preventative maintenance - timetable provided by building surveyor for undertaking works

Responsive maintenance - repairing leak or unblocking drain etc

50
Q

RICS key publication for service charges?

A

RICS Service Charges in Commercial Property, 2018

Effective from April 2019

51
Q

Aims of Service Charge Professional Statement?

A

Improve best practice, fairness and transparency

Ensure timely issue of budgets and YE certificates

Reduce cause of disputes, and provide guidance on dispute resolution

52
Q

What are the 9 mandatory requirements in Service Charge Professional Statement?

A

Recover expenditure in line with lease terms

Recover no more than 100% of costs

Annual provide budgets and explanatory notes

Annually provide service charge accounts (showing actual figures)

Annually provide service charge apportionment schedule

Service charge money to be held in separate bank account

Interest must be credited to SC account

When acting for tenant, advise that if disputing payment then withhold the amount in dispute

53
Q

11 sub sections of Service Charge Professional Statement?

A

Service costs

Allocation and apportionment

Communication and consultation

Duty of care

Financial competence

Occupier responsibilities

Right to challenge

Alternative dispute resolution (ADR)

Timeliness

Transparency

Value for money

Exclusions

54
Q

Responsibility of Property Manager when issuing service charges?

A

Ensure value for money

Ensure quality services that are regularly reviewed

Ensure standard of services are monitored

55
Q

What is a sinking fund?

A

A fund set up for paying specific costs that occur occasionally EG roof repairs or painting needed every 5 years

56
Q

What is a reserve fund?

A

A fund set aside to cover cost of major works or other significant items of expenditure

Useful for unexpected expenses

57
Q

What is a depreciation charge?

A

Measure of the wearing out or reduction in life of an asset

Depreciation distributed across the useful life of the property (rather than taking one larger deduction the year you buy or improve the property)

58
Q

4 methods of service charge apportionment?

A

Floor area

Fixed percentages

Weighted floor area (typical in shopping centre)

RV

59
Q

Different types of insolvency?

A

Administration

Company Voluntary Arrangement (CVA)

Receivership

Liquidation

60
Q

What are implications for Landlord when tenant goes into administration?

A

Company is protected from action being taken by moratorium so options to LL are limited

If rent being paid, equivalent amount can be claimed from administrator

Administrator may seek LL consent to assign lease

61
Q

What are implications for Landlord when tenant goes into liquidation?

A

Landlord can deduct funds from rent deposit

Landlord can seek Court order for termination of lease

Landlord can forfeit lease

Landlord can consent to assignment of lease to new tenant

62
Q

What was impact of Coronavirus Act 2020 for Landlord rent recovery?

A

Protected businesses during pandemic

Prevented Landlords from forfeiture or CRAR

Measures expired 25 March 2022

63
Q

What was Commercial Coronavirus Rent Act 2022?

A

Came into effect 25 March 2022

Introduced arbitration process to resolve disputes regarding Covid rent arrears

Legally binding arbitration process

64
Q

What is Occupiers Liability Act 1957?

A

Regulates duty of care

Occupier must ensure visitors will be safe in using premises

65
Q

What is Occupiers Liability Act 1984?

A

Regulates duty of care

Occupier must ensure duty of care even to UNLAWFUL visitors EG trespassers

66
Q

Difference between covenant being absolute/qualified/fully qualified?

A

Absolute = cannot do anything

Qualified = can do something with LL consent

Fully Qualified = can do something with LL consent, not to be unreasonably withheld or delayed

67
Q

What is statutory duty placed on LL in LL&T Act 1927 and 1988?

A

Consent must not be unreasonably withheld (1927) or delayed (1988)

68
Q

What is Corporate Manslaughter and Corporate Homicide Act 2007?

A

Companies can be found guilty as result of serious management failure / gross breach of duty of care

Fine can be unlimited

69
Q

How do you hand over SC account upon sale or change of manager?

A

Complete interim service charge reconciliation

70
Q

What is a cost undertaking?

A

Undertaking by one person to pay costs of another

71
Q

What is warranty?

A

Written guarantee promising to repair/replace item within set time period

72
Q

What is TUPE?

A

Transfer of undertakings of employment

Protects employees if business they are in changes hand

Moves employee from old employer to new employer

EG applies to people who provide service at property - cleaners, security etc

73
Q

What is a duty of care deed?

A

Provides lenders with greater protection for their loans when lending in relation to property that is rented out and managed by an agent

74
Q

RICS guidance note relating to Property Management?

A

Commercial Property Management in England and Wales

PM to act as agent for LL and manage LL responsibilities under leases

Collect rent, SC and other sums owed

Manage the property

75
Q

What is Public Liability Insurance?

A

Covers cost of legal action and compensation claims made against your business by general public

76
Q

Why is effective occupier liaison important?

A

Good relationship, make sure occupiers know who PM is and how to contact them

77
Q

What are health and safety / fire obligations as PM?

A

Ensure there is GRA and FRA carried out annually

78
Q

What insurance is a LL typically required to have under leases?

A

Insurance against damages to the property EG loss of rent and Public Liability Insurance

79
Q

What is involved in third party procurement?

A

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 recognises an organisations capabilities for health and safety

80
Q

What is death by negligence?

A

Person is liable for death of another due to negligent conduct

81
Q

Why is rateable value not viewed as appropriate method of service charge apportionment?

A

Does not reflect reasonable assessment of benefit of using common services

82
Q

Benefit of a PPM?

A

Performed to preserve a propoerty’s condition

Proactive approach - aims to avoid failures, unplanned disturbances and sudden maintenance costs

83
Q

How would you manage a rent deposit?

A

Comply with Rent Deposit Deed

Hold funds in separate bank account which is designated as tenant deposits

Need these funds protected incase LL becomes insolvent

84
Q

Two key RICS publications in relation to PM?

A

RICS Professional Statement - Real Estate Management, 3rd Edition 2016

RICS Guidance Note - Commercial Property Management, 2nd Edition 2011

85
Q

What are 12 mandatory requirements for members set out in RICS Professional Statement, Real Estate Management 3rd Edition 2016?

A

Conduct business in honest, fair, transparent manner

Carry out work with skill and due diligence

Ensure clients are provided with clear terms of engagement

Avoid conflict of interest, and when they arise deal with them openly and promptly

Do not discriminate

Ensure communications are fair, clear, timely and transparent

Ensure all advertising and marketing is honest

Ensure client money held in separate accounts

Ensure professional indemnity insurance in place

Ensure scope of obligations of work is provided to all parties

Give realistic assessment of buying/selling/rental price

Ensure all inspections and meetings are carried out in accordance with client wishes

86
Q

Tenant can’t pay rent so what do you do?

A

Go to site and see if they are still trading or if all is boarded up

Find out reason for inability to pay EG if changing bank account, might just take 6 weeks until new one set up for them to pay from. If struggling financially, could suggest:

Payment Plan

Drawing Down on Rent Deposit (if rent deposit deed in place and there is a separate rent deposit account)

Check lease to see if there is guarantor - serve S17 Notice of LL&T (Covenants) Act 1995 - can persue within 6 months of falling into arrears, and if they pay then guarantor is entitled to take an overriding lease

CRAR - enforcement agents sent to recover goods to cover the value of the debt. A letter is sent to the tenant which says the enforcement agents are coming in 7 days. If PM worried tenant will move or hide goods, then can apply to Court and get a Court Order to reduce timeframe

Enforcement agent takes item that belong to the tenant that have a value

Can take stock but can’t take perishable goods (these won’t have value once perished!)

Cannot take items that are leased to the business EG items on purchase agreement

Forfeiture - check lease for forfeiture clause EG ‘LL is permitted to forfeit the lease via walk in possession if rent remains outstanding for 21 days’

87
Q

How is forfeiture for non-payment of rent different to forfeiture for non-compliance of repair?

A

Repair - Serve S146 of Law of Property Act 1925 - tenant gets 6 months to remedy breach

Rent - 21 days passes, walk in and change locks

88
Q

What is a Statutory Demand?

A

It is the first step of a winding up procedure

89
Q

Why is important to check tenant covenant strength before providing client with recommendation for non-payment of rent?

A

If tenant has limited stock, account shows that turnover is down, and they’ve used all government help that they can, then it might be too far gone for a payment plan!

90
Q

Why is it important to look at management accounts as well as audited accounts?

A

The audited accounts might be a year or so out of date, because you submit these 9 months after year end

Audited accounts may not even take into consideration Covid-19!

Management account shows how business is doing on monthly or quarterly basis

91
Q

Why would tenant sub-let rather than assign?

A

Flexibility to get unit back

If market rent is higher than passing rent, then tenant could get profit rent

92
Q

What is a reasonable time to respond to application to assign?

A

Maybe 1 week but completely up to each managing agent

93
Q

What is dilapidation figure based on?

A

The diminution in value as a result of the wear and tear

APC (15 decks)

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