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APC > Property Management > Flashcards

Property Management Flashcards

1
Q

What does CRAR stand for?

A

Commercial Rent Arrears Recovery

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2
Q

What is CRAR? What can it be used for?

A

Available to commercial LL’s with a minimum level of rent due under lease.
No minimum amount of arrears.

Can only be used for basic rent demanded + VAT and interest. Can’t be used for SC etc.

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3
Q

What is an AGA?

A

Authorised Guarantee Agreement

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4
Q

Are there any timelines for how quickly rent arrears must be recovered and why?

A

Rent arrears must be recovered from an assignor within 6 months.

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

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5
Q

How do court proceedings work in recovering arrears, and what are the pros/cons of this?

A
  1. LL obtains a court judgement (usually CCJ)
  • Slower and more expensive than other forms of debt recovery
    + Useful if tenant is solvent, threat of court action can prompt payment
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6
Q

How has recovering rent arrears changed with the new leases (post 1 Jan 1996)?

A

Leases prior to 1 Jan 1996 the former tenant can pay. After 1996 can look for AGA agreement in lease.

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7
Q

Which law enforces CRAR?

A

The Tribunals, Courts and Enforcement Act 2007

CRAR replaced the ancient law of distress in April 2014.

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8
Q

What is the timeline of events for CRAR, and conditions to be met?

A
  1. Minimum of 7 days unpaid rent.
  2. Minimum 7 clear days warning notice.
  3. Enforcement agents visit.
  4. 2 clear days to follow.
  5. Re-entry by enforcement agent to seize goods.
  6. Allow 7 clear days before sale of goods.
  7. Fees must be specified on the entry notice.
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9
Q

What is the procedure for forfeiture upon rental arrears?

A

Must be forfeiture clause in lease.

Rent must have been properly demanded.

Stop-rent safeguards prevent accidentally accepting rent and waiving the forfeiture. Accepting rent is acknowledgement of continuation of the tenancy.

If not for the non-continuation of rent (any other breaches) payment a s.146 notice is to be issued.

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10
Q

What is an effective FRI lease?

A

Where the LL is responsible for repairs and recharges via the service charge.

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11
Q

What are LL remedies for breach of repairs?

A
  1. Serve a repair notice.
  2. Forfeit the lease.
  3. Serve an interim schedule of dilapidations.
  4. Do the works and charge the tenant.
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12
Q

What is a Notice to Repair?

A

Served under s.146 of the Law of Property Act 1925.

Subject to repair terms in the lease.

Served to remedy one specific repairing/decorating breach.

Must be in writing and comply with lease terms.

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13
Q

What does a Notice to Repair contain?

A
  • Details of the repairing/decorating breach
  • The timescale allowed to remedy the breach
  • Course of action proposed if the tenant fails to remedy the breach
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14
Q

How does forfeiture work for a breach of repairs?

A

Must be forfeiture clause in the lease.

LL wishing to forfeit lease for disrepair will have to serve s.146 notice on tenant.

s.146 notice should state why tenant is in breach of repair covenant and what must be done to remedy breach. Reasonable time should be given to undertake works.

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15
Q

How do you serve an interim schedule of dilapidations on a tenant in breach of repairs?

A

Instruct building surveyor to prepare draft or formal schedule to serve upon tenant.

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16
Q

What is a Jervis v Harris clause?

A

Landlord’s right to re-enter property to undertake repair works if tenant is in breach. Then recover cost from tenant as a debt.

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17
Q

When is a Jervis v Harris clause used?

A
  • When tenant is solvent
  • Where LL wants the lease and rent to continue
  • LL wants to retain control to carry out repair works
  • Where threat of entry may compel tenant to do the work
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18
Q

What act protects tenants against onerous interim schedules of dilapidations?

A

The Leasehold Property (Repairs) Act 1938.

If a lease granted for a term of 7 years +, and has at least 3 years to expiry.

LL must serve s.146 notice on tenant instead.

LL must prove one of 4 points:
1. Immediate remedy is necessary to prevent substantial diminution of property reversionary value.
2. Immediate remedy is necessary to comply with current legislation.
3. If occupied by more than 1 tenant, immediate remedy is required in interests of other occupier.
4. Breach is capable of immediate remedy at small cost compared with consequences of postponement.

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19
Q

What is a planned maintenance schedule? What three stages can it include?

A
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20
Q

What is a schedule of condition?

A
21
Q

What are the usual service charge arrangements?

A
22
Q

Is there any legislation related to service charges?

A

No - hence a mandatory Professional Statement from the RICS.

23
Q

Which RICS documents are there on service charges?

A

RICS Professional Statement - Service Charges in Commercial Property, 2018.

24
Q

What does the RICS Professional Statement on service charges aim to do?

A
  1. Improve standards and best practice, uniformity, fairness and transparency.
  2. Ensure timely issue of budgets and year-end certificates.
  3. Provide guidance to solicitors, their clients, and managers of service charges.
25
Q

What are the 9 service charge principles?

A
  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.
26
Q

What is the acronym for the 9 principles of service charges?

A

WIRE BEAMD

1- Withhold only the monies in dispute
2 - Interest must be credited to the service charge account
3 - Recovery of no more than 100% of the costs
4 - Expenditure within terms of the Lease
5 - Budgets must be issues annually to tenants
6 - Errors from a dispute found against the LL must be resolved without delay
7 - Accounts must be provided to tenants
8 - Matrix of service charge apportionment must be issued to all tenants
9 - Discrete bank accounts must be used for service charge monies.

27
Q

What are the 4 usual methods of apportioning service charge?

A
  1. Floor area
  2. Fixed percentages
  3. Rateable Value (difficult if RV’s change or are appealed)
  4. Weighted floor area (e.g. department store in shopping centre)
28
Q

How are service charges benchmarked?

A
29
Q

What is the RICS guidance published on sinking funds etc.?

A

RICS Information Paper - Sinking funds, reserve funds, and depreciation charges, 2014

Provides advice on administration of these funds, and application of depreciation charges including:
- taking legal advice and achieving full transparency.
- maintaining full communication w/ LL and tenant with clear accounting
- ensuring lease terms are clear

30
Q

What is the RICS definition of sinking fund?

A

A sinking fund is a fund formed by periodically setting aside money for the replacement of a wasting asset (e.g. major items of P&M such as lifts, air-con, heating).

It is usually intended that a sinking fund will be set up and collected over the whole life of the wasting asset.

31
Q

What is the RICS definition of reserve fund?

A

A reserve fund is a fund formed to meet the anticipated future costs of maintenance and upkeep in order to avoid fluctuations, or an anticipated large, one-off increase in the amount of service charge payable each year (e.g. recurring items like cleaning and redecorations)

32
Q

What are the two types of user clauses?

A

Referring to planning uses and specific uses.

Restrictive user clauses can depress market rent. For example, restriction on hours of working for offices.

33
Q

What are the three types of insolvency?

A
  1. Administration
  2. Receivership
  3. Company Voluntary Agreements
34
Q

What does it mean when a company goes into administration?

A
35
Q

What does it mean when a company goes into receivership?

A
36
Q

What is a Company Voluntary Agreement?

A
37
Q

What to do if your client’s tenant becomes insolvent?

A
38
Q

What is the main law surrounding Property Management?

A

Landlord and Tenant Act 1954.

39
Q

What is a s.25, 26 and 27 notice?

A

25 = LL notice to end or seek new lease (hostile or non)
26 = Tenant notice to seek new lease
27 = Tenant notice to end lease.

40
Q

What are the two fundamental principles of rent collection?

A

Accuracy of information and timing

41
Q

What are the 12 principles of Property Management?

A

DEAD CAMO VIPP

  1. Carry out work with due skill, care and diligence, and ensure that any staff employed have the necessary skills to carry out their tasks.
  2. Ensure that clients are provided with terms of engagement which are fair and clear. These should meet all legal requirements and relevant codes of practice including reference to complaints-handling procedures and, where it exists, an appropriate redress scheme.
  3. Ensure that all advertising and marketing material is honest, decent and truthful.
  4. Not discriminate unfairly in any dealings.
    5.In all dealings with clients, ensure that all communications (both financial and non-financial subject matters) are fair, clear, timely and transparent.
  5. Where provided as part of the service, give a realistic assessment of the likely selling, buying or rental price, associated cost of occupancy or of the likely financial outcome of any issues, using best professional judgment.
  6. Ensure that all client money is held separately from other monies in appropriately designated accounts and is covered by adequate insurance.
  7. Ensure that it is made clear to all parties with whom you are dealing the scope of your obligations to each party.
  8. Ensure that all meetings, inspections and viewings are carried out in accordance with the client’s lawful and reasonable wishes, having due regard for the security and personal safety of all parties.
  9. Do the utmost to avoid conflicts of interest and, where they do arise, deal with them openly, fairly and promptly.
  10. Conduct business in an honest, fair, transparent and professional manner.
  11. Have adequate and appropriate professional indemnity insurance or equivalent in place that complies with the RICS Rules of Conduct. Having proper cover is a key part of managing your risk.
42
Q

What are the 8 remedies for rent default?

A
  1. Court Proceedings
  2. Rent deposit
  3. Pursue former tenants/guarantors
  4. Serve a statutory demand
  5. CRAR
  6. Forfeit the lease
  7. Negotiate payment plan
  8. Agree another mutually acceptable agreement
43
Q

What goes into a deeds packet?

A
44
Q

What are the main points of CRAR?

A

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.
* CRAR can only be used for basic rent demanded plus VAT and interest payable, and not service charge or other payments
* Purely for commercial premises
* it provides set of conditions which will need to be met before a landlord can exercise CRAR

45
Q

What are the timelines for CRAR?

A
  • minimum of seven days unpaid rent
  • minimum of seven clear days warning notice from LL
  • enforcement agents visit
  • two clear days to follow
  • re-entry by enforcement agent to seize goods
  • allow seven clear days before sale of goods
  • fees must be specified on the entry notice
46
Q

Where do you find RPI clause?

A

In the RR schedule. PRINCIPAL RENT + RPI FIGURE.

47
Q

What type of alterations clauses are there?

A

Absolute – cannot do anything
Qualified – can do something with landlord consent
Fully qualified – can do something, with landlord consent, not to be unreasonably withheld

48
Q

What is a Jervis v Harris clause?

A

A clause in a lease or tenancy agreement which allows the landlord to serve a notice on a tenant to carry out repairs. Where a tenant fails to do so, the landlord may enter, carry out the works itself and recover the costs from the tenant as a debt.

APC (7 decks)

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