Property Man

Question 1

What is the Professional Standard that relates to Property Management?

Answer 1

RICS Professional Standard: Property Agency and Management Principles 2024.

Question 2

What does Property Agency and Management Pricniples 2024 set out?

Answer 2

Two principles: working with clients and managing a business/team

Clients: Agents must not seek out work in deceitful ways. They must communicate acurately about their services. They must show clearly how their fees are calculated.

Business: Agents must advertise their services accurately, they must hold client’s information confidentially, and have correct cybersecurity in place.

Question 3

What is the guidance note on Proeprty Management?

Answer 3

RICS Guidance Note on Commercial Property Management in England and Wales 2011.

Question 4

What does Commercial Property Management in England and Wales 2011 set out?

Answer 4

Sets out how a property manager can be efficient, effective, and accountable to their client and comply with statute law.
Primary duty of care is towards the client.
Gives guidance on key areas such as the collection of rent, service charges, and procurement of third party contractors.
Contains a model terms of engagement and summary of all relevant statue law.

Question 5

What should you do if a tenant wants to make alterations to the property?

Answer 5

You should read the lease if alterations are to be allowed or what the restrictions of the alterations are.

Question 6

Why might a tenant assign a lease?

Answer 6

When they have no more use for the property and there are no breaks coming up. Gives them a way to dispose of the lease early.

Question 7

Why might a tenant sublet?

Answer 7

It gives the tenant financial flexibility, especially if they do not need the extra space.
Requirement of the lease
If the market rent is higher than the passing rent there is a profit rent to be made.

Question 8

What is the relationship of an assignment and sublet?

Answer 8

Assignment: New tenant has direct relationships with the landlord.
Sublet: New tenant pays the rent to the old tenant and they pay that to the landlord.

Question 9

What do you need to do when dealing with an application to assign or sublet?

Answer 9

Read the lease. - Workout if there are any restrictions in the lease.
Workout if the tenant will give an undertaking of the surveyor/legal costs.
Is the proposed rent the same as the market rent or passing rent.
What is the strength of the covenant of new tenant?
Is there an AGA clause?
Obtain client approval

Question 10

What is the Act that relates to the assignment of leases?

Answer 10

Landlord and Tenant (Covenants) Act 1995

Question 11

What is set out in the Landlord and Tenant (Covenants) Act 1995?

Answer 11

Relates to assignment of leases.
Introduced Authorised Guarantee Agreements (AGA) for the original tenant to guarantee the obligations of the lease.
Section 17 notice can be served on the old tenant if the new tenant defaults.
There can only be one AGA in place at any time.

Question 12

What is the RICS Standard on assignment of a lease?

Answer 12

RICS Professional Standard: Code for leasing business premises 2020.

Question 13

What is set out in the Code for leasing business premises 2020?

Answer 13

Leases should allow for tenants to assign the whole of the premises with landlord consent, which is not to be unreasonably witheld.
Landlords can put in restrictions for an assignment but must be fair.
Requirement for an AGA should be stated in the lease.
Leases should also allow for a tenant to sublease the whole of the property or part and sublet should be in line with original lease.

Question 14

What are alterations?

Answer 14

Works carried out by the tenant during the lease.
They must usually be approved by the landlord in writing.
They are subject to reinstatement at the end of the lease.
Some non structural works may not require approval.

Question 15

What is a licence for alterations?

Answer 15

Document to be completed before works commence.
Obtain an undertaking of costs at the commencement of the instruction.
Licence for alterations protect the tenant at rent review and dilapidations at the end of the lease.
Most licences require for the tenant to reinstate the works once the lease ends.

Question 16

What do you need to do when dealing with an application for alteration?

Answer 16

Read the lease before advising client. There may be some restrictions in the lease.
Workout who is undertaking the costs for surveyor and solicitors fee.
Ask for plans and specifications.
All documents need to be included in the licence.
Check how the alterations will impact the investment value of the property.
Consider if reinstatement is required at the end of the lease.
Has the tenant got the necessary planning consent.
Instruct solictior to prepare a licence for alteration.
Inspect the completed works.

Question 17

What Act relates to alterations?

Answer 17

Landlord and Tenant Act 1927.

Question 18

What does the Landlord and Tenant Act 1927 state.

Answer 18

That a landlord cannot unreasonably withold consent for improvements. Section 19 states that a landlord may pay compensation to the tenant if the works are considered improvements.

Question 19

What are dilapidations?

Answer 19

Remediation works done at the expiry of the lease to the property to bring it back to good condition.

Question 20

What should you do when dealing with dilapidations?

Answer 20

Read the lease.
Check who is responsible for repairs.
Check if there were any schedule of conditions or licence for alterations granted.
Tenant is usually required to bring the property back to it’s original state.

Question 21

What options are there before the lease expiry regarding dilapidations?

Answer 21

Tenant can undertake the works themselves.
Tenant can pay the landlord a sum of money to do the works.

Question 22

What are the three forms of dilapidation schedules?

Answer 22

Interim schedule - served with at least 3 years remaining.
Terminal schedule - served in last 3 years of lease.
Final schedule - served after the lease expiry.

Question 23

What is a dilapidation schedule?

Answer 23

A document prepared by the landlord that lists all the items of repair and breaches of maintenance. It includes works that the tenant is required to do to bring the property back to good condition.

Question 24

What is the format of a dilapidation schedule?

Answer 24

Outlining repairing obligations.
State the remedy and cost of breach.
Fees plus VAT for solicitors and surveyors
If agreement not reach landlord can prepare a Scott Schedule for the Court/ADR setting out the landlord and tenant position.

Question 25

What is the RICS Standard on dilapidations?

Answer 25

RICS Professional Standard: Dilapidations 2016.

Question 26

What does the RICS Professional Standard: Dilapidations 2016 set out?

Answer 26

Aims to reduce claims between landlords and tenants. States the landlord can only claim the amount lost because of the tenants breach of lease Parties in dispute must act reasonably and make the effort to come to an understanding.

Question 27

Why might a dilapidation claim not be agreed?

Answer 27

The tenant falls into adminstrations. Lease is not on a fully repairing terms. Reinstatement not required by the landlord. The property is to be demolished.

Question 28

Tell me about insurance in Property Management?

Answer 28

The duty of landlord to arrange for insurance. Insurance must cover for things like flooding, storm, and fire. Insurance Act 2016 introduced more accountability for insurers.

Question 29

What must be done if a property is empty?

Answer 29

Let the insurers know it is vacant and note their requirements. Obtain an EPC and consider MEES Clear the building of any combustible material Seal letterbox to prevent arson Maintain asbestos register

Question 30

What are two main fundamentals regarding rent collection?

Answer 30

Timing and accuracy.

Question 31

Rent is usally paid quarterly, what are the English quarter days?

Answer 31

25 March, 24 June, 29 September, 25 December

Question 32

What do you have to do in regards to rent collection?

Answer 32

Read the lease to work out rent days, check if VAT is to be applied on arrears, how much rent should be charged.

Question 33

How should you handle client's money?

Answer 33

In regards to RICS Professional Standard: Client Money Handling 2019. Having a separate bank account for the client's money, having it be named client on it, client having on demand access to the account, the bank account being for the sole purpose of that rent collection.

Question 34

What is the difference between a standing order and direct debit?

Answer 34

Direct debit can change in the amount owed, wheras standing order stays the same. Direct debit is controlled by business you owe money too, whereas standing order is instructed by you.

Question 35

What should you do if a tenant is in arrears?

Answer 35

Read the lease to see any clauses on rent arrears. Check if there are any interest to be applied on the arrears. Look for any signs of potential defaulting of rent, bad trading, lack of footfall. Check if there is a rent deposit that can be applied. Consider the chance for reletting the property. Compare the vacant possession value of the property compared to investment value. Consider action against guarantors or subtenants, Seek legal advice Consider a payment plan

Question 36

What are some options for rent arrears?

Answer 36

Court proceedings to make the tenant bankrupt Use a rent deposit Commercial Rent Arrears Recovery Forfeit the lease Negotiate a payment plan Pursue former tenants or guarantors

Question 37

What is court proceedings?

Answer 37

Involves the landlord obtain a court judgement from county court and then secure payment of the arrears by way of a charge over the property.

Question 38

What is pursuing former tenants and guarantors?

Answer 38

If the lease is pre January 1996 the landlord can go after the original tenant. Section 17 of the Landlord and Tenant (Covenants) Act 1995 sets out a timetable for the recovery of arrears from assignor within 6 months.

Question 39

What is a statutory demand?

Answer 39

Preliminary step in pursuing bankruptcy or winding-up proceedings. Puts pressure on tenants to pay arrears. Advisable only when there is an agreement on the number of arrears. Tenant has 21 days to pay arrears. After this period the landlord can present a bankruptcy or winding up petition to the court if the arrears are over £750. Court has the discretion to set aside any statutory demand in order to avoid any injustice.

Question 40

What is CRAR?

Answer 40

Commercial rent arrears recovery replaced the ancient law of distress for rent. Modified version came into place by the Tribunals, Courts and Enforcement Act, 2007. Scheme is available for commercial properties where there is a minimum level of rent outstanding under a commercial lease. Can only be used for rent.

Question 41

What is the timeline of CRAR?

Answer 41

7 days unpaid rent, 7 clear days warning notice, Enforcement agents visit, 2 clear days to follow, re-entry of enforcement agents to seize good, 7 clear days before selling of goods

Question 42

What is forfeiture?

Answer 42

Peaceful re-entry of the property by the landlord to gain possession due to a breach of covenant. There must be a forfeiture clause in the lease. Rent must have been demanded. Tenant has right of relief from forfeiture from the court. Tenant does not have to be warned that the lease has been forfeited. S146 Notice of the Law of Property Act 1925 allows for forfeiture by breach of other covenants other than rent.

Question 43

What act allows for a landlord to be paid directly by the subtenant?

Answer 43

Section 6 of the Law of Distraint Amendment Act 1908.

Question 44

What is section 6 of the Law of Distraint Amendment Act 1908?

Answer 44

Allows for the landlord to be paid directly by the subtenant if the main tenant is in arrears.

Question 45

What act allows for a landlord to go after any guarantors or original tenants?

Answer 45

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

Question 46

What is section 17 of the Landlord Tenant (Covenants) Act 1995?

Answer 46

Notice on any former gurantors or original tenants to settle arrears within 6 months. Scottish & Newcastle plc V Raguz 2007 set this out.

Question 47

What is lease restructuring/engineering?

Answer 47

When the landlord changes the provisions of the lease to maintain value or retain a tenant. Includes things like lowering the rent and extending the term, agreeing a new rent.

Question 48

What is a repair?

Answer 48

Where a liability cannot arise from the absence of repair. Repair is distinct from renewal - tenant cannot be expected to hand back a different property. Tenants may be responsible for inherent defects. Repair is not an improvement Effective FRI is where the landlord is responsible for repairs and re-charges via the service charge.

Question 49

What are some remedies for a breach of repair?

Answer 49

Serve a repair notice. Forfeit the lease. Serve an interim schedule of dilapidations. Do the works and charge the tenant.

Question 50

What is repair notice?

Answer 50

Served under S146 of the Law of Property Act 1925 Written notice that complies with lease that set outs: 1) Details of the breach that has occurred. 2) Timescale allowed to bring property back in to good condition. 3) Course of action proposed if tenant fails to remedy breach.

Question 51

What is an interim schedule of dilapidations?

Answer 51

Served where there is at least 3 years of the lease remaining. Reminds the tenant of their legal obligations of repair.

Question 52

What case allows for the landlord to re-enter the premises and make the necessary repair?

Answer 52

Jervis v Harris

Question 53

When Jervis Harris be used?

Answer 53

When the threat of entry compels the tenant to make the repairs. When the tenant is solvent. Where the landlord wants the lease and rent to continue

Question 54

What is the Leasehold Property (Repairs) Act 1938?

Answer 54

Protects the tenant agains onerous schedules of dilapidations. Applies to leases that are granted for more than 7 years and has at least 3 years remaining. Act requires the landlord to serve a section 146. Court only permits enforcement of the repairing covenant if the landlord can prove one of the following points: 1) Immediate remedy is needed to prevent substantial impact on the reversionary value. 2) Immediate remedy is needed to comply with current legislation. 3) If tenant doesn't occupy whole property, repairs is needed for the interest of another party. 4) The breach can be remedied quickly with a small cost.

Question 55

What is a Planned Maintenance Programme?

Answer 55

Planned maintenance activity that is supervised by a property manager or building surveyor. It can include three stages: Cyclical Maintenance: Regular activities that are carried out such as servicing plant or redecorating. Preventative Maintenance: Depends on a condition survey and produced by a building surveyor, includes things such as future repair needs. For example replacing single glazed windows with double glazed windows. Responsive Maintenance: Initiated by a building occupier, such as repairing a leak, unblocking drains, and undertaking remedial works.

Question 56

What is a schedule of condition?

Answer 56

A document that describes the property's condition at a certain point in time. It limits the tenants repairing obligations. It is agreed through negotiations by the landlord and tenant before lease start. Reinstatement of the property will be limited by the schedule of condition. Must be carefully documented with lots of photos.

Question 57

What is a service charge?

Answer 57

Charges to tenants of multi tenanted properties for the cost incurred by the landlord for the maintenance and management of the property.

Question 58

Are there any specific legislations regarding commercial service charges?

Answer 58

No only for residential.

Question 59

How do tenants aim to minimise service charge liability?

Answer 59

By negotiating: caps, fixed increases, linked to RPI.

Question 60

What is the usual arrangements of a service charge?

Answer 60

Service charge budget should be agreed with the tenants prior to commencement. Quarterly billings are based on this estimate. Annual accounts are prepared at the year end. Balancing payment made at the end of the year upon presentation of audited accounts. Use of sweeping up clause for unexpected costs. Service charge caps are common in leases. Payments usually reserved as rent in the lease.

Question 61

What is a balancing payment?

Answer 61

Payment made by tenant to cover the cost of an overspend in the service charge.

Question 62

What is a sweeping clause?

Answer 62

A provision in the lease that allows the landlord to cover costs that are not mentioned but are considered reasonable.

Question 63

What is the professional standard on service charges?

Answer 63

RICS Professional Standard: Service Charges in Commercial Property 2018.

Question 64

What does the RICS Professional Standard: Service Charges in Commercial Property 2018 aim to do?

Answer 64

It aims to: Improve best practice, fairness, and transparency in the management and administration of service charges. Ensure timely issue of budgets and year end certificates. Reduce the causes of disputes and to provide guidance on resolution. Provide guidance to solicitors, managers, and clients in the negotiation, drafting, interpretation, operation of leases, in accordance with best practice.

Question 65

What are the 9 principles set out in RICS Professional Standard: Service Charges in Commercial Property 2018?

Answer 65

1) Costs collected must in line with the lease. 2) No more than 100% of the proper and actual costs of managing the property may be collected. 3) Monies held must be in a separate bank account. 4) Interest is credited to that account 5) Apportionment matrix to be issued annually 6) Budget and explanatory note must be issued annualy 7) Accredited year end certificate to be issued annualy 8) Where acting for a tenant only the disputed sums can be withheld 9) Where acting for a landlord and the SC has been raised incorrectly, it must be corrected as soon as possible.

Question 66

How are service apportioned?

Answer 66

Floor area Fixed percentages Rateable value Weighted floor area

Question 67

How can service charge be benchmarked?

Answer 67

Benchmarking ensures best practice against industry used index. Example is the Office Service Charge Analysis Report (OSCAR) JLL for offices, shopping centres, and retail parks. There is also real service bench mark.

Question 68

What is a sinking fund?

Answer 68

Where money is collected annually to recover the cost of a wasting asset (e.g. lifts or expensive plant)

Question 69

What is a reserve fund?

Answer 69

Formed to meet the anticipated future costs of maintenance and upkeep of a piece of M&E or redecoration to avoid fluctuations in the budget.

Question 70

What are the different types of insolvency?

Answer 70

Adminstration Receivership Company Voluntary Agreement

Question 71

What is Administration?

Answer 71

Most common rescue route. The process is either commenced by the company itself, lenders, or its creditors. The purpose is to create a period of protection for the company for the Administrator to deal with the assets in an appropriate way. The period is known as the 'moratorium' and it restricts action being taken against the company while it is in place. Directors of company still in place but hold no power. The administrators must send proposals to the creditors within 8 weeks and then with their agreement will implement a strategy - Most common strategies include a prepack sale of the business, Adminstration trading, Close down and wind up.

Question 72

Can an administrator seek assignment of the lease from a Landlord?

Answer 72

Yes they can seek consent.

Question 74

What can a landlord due if a tenant goes into administration?

Answer 74

While a tenant is under adminstration the moratorium period limits what the landlord can do. If rent is still being paid the landlord can request an equivalent amount to be paid by the administrators.

Question 75

What is receivership?

Answer 75

Used when a company defaults on a payment by a creditor who is secured by a fixed charge. Usually only available where the floating charge pre-dates 15 September 2003. Administrative Receiver or Law of Property Act Receiver is appointed by creditors to realise assets to repay debts. Receiver takes control of the company selling the business as a going concern with a view to repay lenders. Law of Property Act 1925 Receiver is appointed when the company defaults in a payment that is secured by a lender who is secured by a property mortgage.

Question 76

What is a floating charge?

Answer 76

A charge held over assets that may not be fixed and may be changeable.

Question 77

What is Company Voluntary Arrangement (CVA)?

Answer 77

This is a contract between a company and its creditors appropriate for when a company is insolvent but the directors believe it has a viable future, with financial restructuring. The company appoints an insolvency practitioner to supervise and oversee the implementation of the strategy. Under this statutory scheme, the company agrees terms for the repayment of accured debts. The arrangement will be binding on all creditors if it is approved by 75% of creditors having regard to their value of debt.

Question 78

What is prepack adminstration?

Answer 78

This allows directors of a company to buy out and retain elements of the company which are trading well and then placing the remainder of the company into administration.

Question 79

What do you do if a tenant becomes insolvent?

Answer 79

Let your client know. Consider taking legal action before a temporary or permanent moratorium is in place. Read the lease to see if there is any rent deposit in place or a previous tenant or guarantor. Make early contact with the receiver/administrator. Check the amount of monies owed - rent, service charge, insurance etc. Ensure the property is insured and let the insurers know it is vacant. Submit a claim for arrears and if still ocupied make an application for rent. Consider preparing a schedule of dilapidations. Consider business rates. Think about the prospect of reletting.