Propery Management - Summary Of Experience

Question 1

Tell me what you know about the RICS Guidance Note on Commercial Property Management in England & Wales, 2011

Answer 1

This guidance note is a guide to best practice for commercial property managers containing a lot of useful information.

It focuses on how a property manager can be efficient, effective and accountable to their client and comply with statue law.

It states that primary duty of care is to the landlord, the client and gives specific advice including property manager’s core duties on rent collection, service charges, managing properties and health & safety.

Question 2

What is the RICS document on Management and what does it state?

Answer 2

The RICS produced a Professional Statement Real Estate Management, 2016.

This document outlines the principles that share the culture of fairness and transparency that underpin the activities by real estate managers.

It is a mandatory statement and is aimed at both commercial and residential property managers.

Question 3

What are the 12 principles of the RICS Professional Statement - Real Estate Management, 2016

Answer 3

1) Act in an honest, fair, transparent and professional manner.
2) Carry out work with due skill, care and diligence.
3) Ensure Clients are provided with terms of business that are fair and clear.
4) Do your utmost to avoid conflicts of interests.
5) Not to discriminate
6) Communications with clients are fair,decent, clear and transparent.
7) All advertising and marketing material is honest and truthful.
8) Any client money is held separately and covered by appropriate insurance
9) Hold appropriate PII insurance.
10) Make it clear that identity of your client.
11) Give realistic assessments of prices/rents/financial costs.
12) Ensure all meetings and inspections are carried out in accordance with clients wishes, with regard for personal safety.

Question 4

Are the RICS doing anything to amend this Professional Statement / Guidance Note?

Answer 4

Yes, the RICS is currently working on a new practical professional standard in both property management and property agency for members and firms in the UK.

Question 5

What are some of the key factors that drive good landlord and tenant relationships?

Answer 5

Honesty and professionalism
Good and clear communication from the outset.
Good payment of monies due under the terms of the lease.
Quiet enjoyment from landlord.

Question 6

What are some of the legal requirements for a multi-occupied property?

Answer 6

Both landlord and tenants have statutory obligations which need following and may vary depending on the terms of the lease.

Some of the legal obligations / requirements could include:
- Fire Risk Assessment
- Workplace Risk Assessment
- Fire Evacuation Plan
- Fire Drills
- Electrical Installation Certificate Reports
- Energy Performance Certificates.
- Gas Safety Certificates if applicable

Question 7

Tell me what you know about Alienation?

Answer 7

In the first instance, it is always appropriate to read the lease before tackling any queries regarding Alienation.

Leases can have an absolute, open or restrictive (qualified) alienation clause:

• Either allowing alienation (open)
• Subject to some conditions (qualified)
• Not allowing a sub-letting or assignment (absolute)

Usual clauses state that the landlords consent is not to be reasonably withheld or delayed.

Question 8

What are some of the reasons to sub-let, rather than assign the lease?

Answer 8

• Depends on the requirements of the lease.
• Sub-let may relate to part of the demise and not the whole.
• If the market rent is higher than the passing rent (face rent) then there is a profit rent.
• If the tenant wants to re-occupy in the future
• The new party is of a lesser covenant.

Question 9

What actions are needed to be undertaken when dealing with an application for consent to assign or sub-let?

Answer 9

It again is prudent to read the lease beforehand.

As a surveyor, I would ask myself some of the following questions:

• Will the T give an undertaking for the surveyor’s fees & legal costs.
• Is the proposed rent the market rent and same as the passing rent?
• What is the strength of covenant of the proposed new tenant?
• Has a rent deposit been agreed?
• Is there an AGA clause?

Question 10

How did you ensure temporary safety of the building (East Ham Example)?

Answer 10

I actually attended site myself as soon as I heard about the break in and was in attendance until the contractors turned up which was approximately 1.5 hours. I ensured the CCTV was working (which is was,) occupiers were aware.

Question 11

How often do Flue Cleaning Certificates (TR19) need to be produced?

Answer 11

Flue Cleaning Certificates are mandatory and can be a very severe risk if not treated properly.

The advice is that if you are a busy kitchen then cleaning should be undertaken every 3 months, less busy establishments need to be cleaned every 6 months.

Question 12

Tell me what you know about the Landlord & Tenant (Covenants) Act 1995?

Answer 12

• This act relates to the assignment of leases.
• Came into force on 1st January 1996
• The Act abolished privity of contract for new leases.
• It gave landlords more scope for setting conditions regarding the approval of an assignee.
• It introduced Authorised Guarantee Agreements (AGA’s) for the most recent former tenant to guarantee the lease obligations of the immediate assignee as a voluntary arrangement to be agreed.

Question 13

What do you know about Licence for Alterations?

Answer 13

• A Licence To Alter needs to be completed before the works commence.
• Has two useful functions: to protect the parties at rent review and dilaps at the end of the lease.
• The Licence must clearly document the works agreed.

Question 14

Why did you advise for the tenants to send you their flue certificates?

Answer 14

I advised this so we had document records and evidence that tenants had their certificates. This led us to be able to manage this more effectively by creating a schedule of when specific tenants certificates were due to expire. This led us to be able to stay on top of the situation.

Question 15

Tell me what you know about dilapidations?

Answer 15

In the first instance, a surveyor should always read the lease.

The negotiations take place at the lease expiry to bring the property back to its condition at the start of the lease assuming there is a repairing liability.

There are THREE forms of Dilaps Schedules.

Question 16

What are the THREE forms of dilaps schedules?

Answer 16

1) Interim Schedule - served by the landlord or tenant during the lease, with at least 3 years remaining.

2) Terminal Schedule - served normally in last 3 years of the lease.

3) Final Schedule - served at or after the lease expiry / break clause date when the tenant is out of occupation and the landlord wants to agree a claim for damages.

Question 17

What is typical format of a schedule of dilaps?

Answer 17

• Outline repairing obligations
• State the remedy and cost of the breach
• Loss of rent, if appropriate over period to do the works.
• Fees + VAT for the claim for surveyors and lawyers.
• Negotiations conducted on a without prejudice basis until agreement reached.
• If agreement not reached, landlords surveyors may be required to prepare a Scott Schedule for the Court, setting out a summary of the landlords and tenant’s position.

Question 18

What does the RICS Guidance Note on Dilapidations, 2016 aim to do?

Answer 18

This document aims to reduce claims between landlord and tenants. Some key points include:

• Substantial guidance on diminution valuations.
• Relates to interim and final claims in commercial property.
• Emphasises the importance of a careful and considered estimate of loss.
• Both parties are kept to the agreed timescales.

Question 19

What are the reasons why a Dilaps Settlement is not agreed?

Answer 19

1. When the lease is not on full repairing terms.
2. Reinstatement is not required by the landlord.
3. If a Schedule Of Condition limits the repairing liability.
4. If the building is to be demolished.
5. Tenant may have gone into administration.
6. Agreement between L & T to roll over the claim.

Question 20

Tell me what you know about Insurance in relation to Property Management?

Answer 20

• Insurance is usually the responsibility of the landlord to arrange and then re-charge the tenant based on a percentage in accordance with the lease.
• Covers fire, storm, flood, subsidence, loss of rent and service charge, theft, terrorism, public liability etc)
• Insurance Act 2016 is the key law.
• The RICS became a Designated Professional Body for insurance matters in February 2005.

Question 21

What actions may you need to take in respect to an Empty Property?

Answer 21

• Notify Insurers.
• Obtain an EPC
• Clear the building of any combustible material.
• Undertake and record regular inspections.
• Seal up letterbox.
• Arrange security and decommission services.

Question 22

What are the TWO fundamental principles of rent collection ?

Answer 22

1) Accuracy of information

2) Timing

Question 23

What are the appropriate options to consider in the event you are unable to secure payment?

Answer 23

1) Court proceedings
2) Use of rent deposit
3) Pursue former tenants and guarantors.
4) Serve a statutory demand.
5) Commercial rent arrears recovery scheme
6) Forfeit the lease
7) Negotiate a payment plan
8) Agree another acceptable arrangement.

Question 24

Explain the court proceedings in respect to rent default?

Answer 24

Landlord could obtain a court judgement (usually County Court) and then secure payment of arrears.

Slow process and can be more costly.

Question 25

Explain the using a rent deposit in respect to rent default?

Answer 25

If available, the landlord could withdraw money owed from a rent deposit to settle the arrears.

Question 26

Explain pursuing former tenants and guarantors in respect to rent default?

Answer 26

Check to see if there is an AGA in place or any former tenant if the lease was granted before 1 January 1996.

Section 17 of the Landlord and Tenant (Covenants) Act 1995 sets out a strict timetable for the recovery of rent arrears from an assignor within 6 months.

Question 27

Explain serving a statutory demand in respect to rent default?

Answer 27

This is a preliminary step to pursuing bankruptcy or winding-up proceedings. This can put pressure on a tenant to pay arrears.

Advisable only when there is no dispute about the level of arrears.

The tenant has 21 days to pay the arrears.

Question 28

Explain the main points of the CRAR Scheme?

Answer 28

• The scheme is available only to commercial property landlords where a minimum level of rent is due under a commercial lease.
• There is no minimum amount of arrears
• Purely for commercial premises.
• Can only be used for basic rent demanded plus VAT and interest payable.

Question 29

What is the timeline in relation to CRAR?

Answer 29

• 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 sale of goods.
• Fees must be specified on the entry notice.

Question 30

What do you know about Forfeiture?

Answer 30

• Clause in the lease allows the landlord to re-enter the property and gain possession for a breach of lease.
• There must be a forfeiture clause in the lease.
• Rent must have been demanded properly.
• The lease is forfeited by the landlord re-entering the property.

Question 31

Explain Section 6 of the Law of Distraint Amendment Act, 1908?

Answer 31

• This allows the landlord to serve a notice to ensure that any sub-tenant’s rent paid for any arrears due from the tenant can be received by the superior landlord.
• The notice informs the sub tenant that the head tenant is in arrears.

Question 32

Explain Section 17 of the Landlord and Tenant (Covenants) Act 1995?

Answer 32

This requires the Landlord to act quickly when tenants fall into arrears.

They must serve a Section 17 Notice on any former tenant and their guarantors within 6 months of the start of the arrears.

Scottish & Newcastle plc v Raguz (2017) outcome means landlords have to serve s.17 notices in respect of an undetermined uplift.

Question 33

Talk to me what you know on Restructuring Leases / Lease Engineering?

Answer 33

Many landlords consider lease ‘engineering’ to maintain value in their investment or retain a tenant.

Examples may include:

• Granting a longer lease in return for a lower rent or RFP.
• Arranging a Company Voluntary Arrangement (CVA) with a tenant.
• Agree to a monthly payment of rent.
• Insertion or removal of break clauses.

Seek advice from solicitor

Question 34

What is a CVA?

Answer 34

A CVA is a Company Voluntary Arrangement and is a legally binding agreement between a company and its creditors for the company to pay off its debts and liabilities.

CVAs allow the business to continue trading whilst repaying its debt.

Question 35

What is the definition of repair?

Answer 35

‘The meaning of repair is found in case law”

Key principles which have emerged from cases such as Ravenseft Properties v Davstone (Holdings) Ltd (1978) are:

• Liability cannot arise in the absence of repair.
• Repair is distinct from renewal - a tenant cannot be expected to hand back a wholly different premises.
• Tenants may not be responsible for inherent defects.
• Repair is not an improvement (P. Robert’s, E.G. 2007)
• An effective FRI lease is when the landlord is responsible for the repairs & re-charges via the service charge.

Question 36

What are the FOUR main options open to a landlord to deal with a tenant not repairing their property?

Answer 36

1) Serve a repair notice

2) Forfeit the lease

3) Serve an interim Schedule of Dilapidations

4) Do the works and charge the tenant.

Question 37

Explain what a Notice to Repair is?

Answer 37

Served under Section 146 of the Law of Property Act 1925

The notice sets out the following information:

• Details of the repairing or decorating breach which has occurred.
• The timescale allowed to remedy the breach.
• A course of action proposed if the tenant fails to remedy the breach.

Question 38

Explain what you know about Forfeiture?

Answer 38

There must be a forfeiture clause in the lease.

A landlord wishing to forfeit the lease for disrepair will have to serve a Section 146 notice on the tenant.

The Section 146 notice should state why the tenant is in breach of the repair covenant.

The tenant must be given a reasonable time to undertake the works.

Question 39

Does the Landlord have a right to enter the tenants premises and carry out the works?

Answer 39

Each case would be dependent on what the lease says.

The leading case is Jervis v Harris (1996).

This case gives the landlord a right to pursue an effective remedy against defaulting tenants, to ensure that the premises are kept in good repair for the duration of the lease.

Question 40

When should a Jervis v Harris clause be used when repairs are required?

Answer 40

• When a tenant is insolvent?
• Where the landlord wants the lease and rent to continue.
• The landlord wants to retain control to carry out repair works.
• Where the threat of entry may compel the tenant to do the work.

Question 41

Tell me what you know about the Leasehold Property (Repairs) Act 1938?

Answer 41

• This Act applies to leases granted for a term of 7 years or more, and has at least 3 years until the lease expiry.
• It aims to protect tenants against onerous schedules of dilapidations.
• The Act requires landlords to serve a Section 146 notice on the tenant.

Question 42

When can the Court permit enforcement of the repairing covenant in line with the Leasehold Property (Repairs) Act 1938?

Answer 42

Only if the landlord can prove one of the FOUR following points:

1) Immediate remedy is necessary to prevent substantial diminution in the property reversion value.
2) Immediate remedy is necessary to comply with current legislation.
3) If the tenant does not occupy the whole property, immediate remedy is required in the interests of another occupier.
4) The breach is capable of immediate remedy at a small cost compared with the consequences of postponement.

Question 43

What is a Planned Maintenance Programme?

Answer 43

Maintanence activity supervised by a property manager or building surveyor.

Question 44

What THREE stages may a PMP include?

Answer 44

1) Cyclical Maintenance - regular activities that are carried out irrespective of the condition of the building e.g. servicing plant, health and safety maintenance and redecoration.

2) Preventative Maintenance - dependant on a condition survey prepared by a building surveyor which forecasts future repair needs and plans the timetable for undertaking work.

3) Responsive Maintenance - this is initiated by the building occupier, such as repairing a leak unblocking drains or undertaking some remedial works to the building.

Question 45

What is the aim of RICS Professional Standard - Service Charges in Commercial Property, 2018?

Answer 45

This professional standard aims to :

• Improve general standards and promote best practice, uniformity, fairness and transparency in the management and administration of service charges in commercial property.
• Ensure timely issue of budgets and year-end certificates.
• Reduce causes of disputes and to provide guidance on resolution

NOTE - RICS plan to publish a new Professional Standard on Service Charges shortly following a consultation process.

Question 46

What are the FOUR usual methods of apportionment in respect to Service Charges?

Answer 46

1) Floor area

2) Fixed percentages outlined in the leases.

3) Rateable value - difficult if RVs change or are appealed.

4) Weighted floor area e.g. department store.

Question 47

What are the various types of insolvency ?

Answer 47

Administration - administrator appointed by creditors (Enterprise Act 2002) to rescue an insolvent company. (Most common ‘rescue’ option.

Receivership - Receiver appointed by Law of Property Act by creditors to realise assets to repay debts.

Company Voluntary Arrangements (CVA) - Voluntary arrangement with creditors as to how the debts will be settled.

Voluntary liquidation

Bankruptcy

Question 48

What would you do if a tenant becomes insolvent?

Answer 48

• Inform client
• Consider taking legal action
• Read the lease - see if there is a rent deposit held or guarantor in place.
• Make early contact with the administrator / receiver.
• Check the amount of monies owed in rent, SC & insurance.
• Ensure the property is insured and inform insurers that the units is vacant.
• Submit a claim for arrears.
• Consider preparing a schedule of dilaps.
• Consider the position regarding empty rates.
• Consider reletting the premises.

Question 49

What are the 4P’s (Holistic)?

Answer 49

People

Place

Price

Promotion

Question 50

What are the different types of maintenance?

Answer 50

Reactive - repair emergencies e.g. leaks, storm damage

Planned - regular condition checks

Cost reduction - utilities switching e.g.

Question 51

Can you can interest on rent arrears?

Answer 51

I need to check the lease in the first instance.

If so, the normal charge is 2-4% of the base rate after 14 days of non payment.

Question 52

What is a Section 17 notice of the L&T Covenants Act 1995?

Answer 52

Section 17 releases a former tenant and their guarantor from liability unless the Landlord has served a s.17 notice which specifies the amounts due within 6 months of the tenant defaulting.

Question 53

What is a Section 146 notice of the Law and Property Act 1925?

Answer 53

A notice served by the landlord who wishes to commence forfeiture proceedings against a leaseholder following a breach of lease.

Question 54

What two choices are there before the lease expiry date in respect to dilapidations?

Answer 54

1. Tenant can do the agreed works or
2. Tenant can pay a sum to the landlord to undertake the works. Breach + Loss + Evidence = Recovery.

Question 55

What does Section 18 of the Landlord and Tenant Act 1927 state?

Answer 55

States that the dilapidations claim is limited to either the cost of the works or the difference in value of the property upon possession had the covenants to repair & decorate not been undertaken.

Question 56

What does Section 19 of the Landlord and Tenant Act 1927 state?

Answer 56

If a lease prohibits improvements being made to a property without Landlord’s consent, Section 19 of the Act imposes a proviso that such consent cannot be unreasonably withheld.

If s.19 procedures have been followed, the landlord may be obliged to pay compensation for alterations that may constitute improvements.

Question 57

What is a Statutory Demand (Remedies for Rent Default)

Answer 57

A request for payment where a debt is undisputed.

Question 58

What is a Sinking Fund ?

Answer 58

A fund to cover costs that occur infrequently.

Question 59

What do you know about the Leasehold Property (Repairs) Act 1938?

Answer 59

This act applies to leases granted for a term of 7 years or more and has at least 3 years until lease expiry.

It aims to protect tenants against onerous interim schedules of dilapidations.

The Act requires landlords to serve a Section 146 notice on the tenant.