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Property Management Flashcards

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1
Q

What is the professional statement for property management

A

RICS Professional Statement - Real Estate Management 2016

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2
Q

What is the purpose of RICS Professional Statement - Real Estate Management 2016

A

Outlines principles that share the culture of fairness and transparency. It is mandatory for commercial and residential

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3
Q

What are the real estate management 2016 principles

A

be honest, fair, transparent and professional
Carry out work with due diligence, care and skill
fair and clear terms of business including a CHP
avoid COI and where they do arise treat openly and fairly
not to discriminate
communication is timely, fair and transparent
client money held securely and with insurance
have PII

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4
Q

what is the guidance note for property management

A

RICS Guidance note on Commercial Property Management in England & Wales 2011

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5
Q

What is RICS Guidance note on Commercial Property Management in England & Wales 2011 for

A

Best practice for commercial property mangers
focuses on how to be efficient, effective and accountable to clients
primary duty of care is to the landlord/client
Key areas include rent collection, service charge, managing building and H&S
model of relevant statute law and model terms of engagement

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6
Q

what is the difference between assignment and sub-letting

A

Assignment - the new tenant has a direct relationship with the landlord.
Sub-letting, the new tenants relationship is with the original tenant. T2 pays T1 the rent who then pays to LL

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7
Q

types of alienation

A

Absolute - not allowing
Open - allowing
Qualified - subject to conditions

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8
Q

Reasons to sub-let over assign

A

requirement of the lease
part not whole
if market rent is higher than passing rent
tenant was to re-occupy in the future
new party is of a lesser covenant

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9
Q

Landlord & tenant act 1988 purpose

A

Ensures a statutory duty on the LL to deal with consents diligently and not to be unreasonably held or denied

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10
Q

Landlord and Tenant covenants act 1995

A

The act gave landlords more scope for setting conditions regarding the approval of an assignee
It abolished Privity of Contract on new leases.
Introduced Authorized Guarantee Agreements (AGA) which is a voluntary
Should the new tenant breach their lease then the LL needs to inform the previous tenant within 6 months of breach.

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11
Q

What is prvity of contract

A

pre 1996, the landlord could seek rent arrears from the original tenant even if the lease has been assigned to several tenants since, providing it is within the original lease term.

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12
Q

What are landlords remedies for illegal alienation

A

Refer to the lease but this could be forfeiture, damages or an injuction

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13
Q

What is the purpose of licence for alterations

A

To protect parties at rent review and dilapidations at the end of the lease

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14
Q

What is the guidance note for Licence to Alter

A

RICS Licence for Alterations Guidance Note 2013

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15
Q

What is RICS Licence for Alterations Guidance Note 2013 do

A

gives advise and states to be dealt with in a reasonable amount of time.

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16
Q

What do you do when you get a request

A

Read the lease
understand what works need to be done
request plans and specification RAMS
obtain an undertaking of fees
obtain landlord consent
Request for licence to be documented via solicitors

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17
Q

Landlord and Tenant act 1927

A

If a lease prevents works without LL consent then section 19 imposes, not to be unreasonably witheld

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18
Q

What is the purpose of dilapidations

A

To bring the property back to its condition at the start of the lease assuming there is a repairing liability within the lease.

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19
Q

What do you need to check when carrying out dilapidations

A

Read the lease and review the repairing obligations
Negotiations usually take pace at the lease expiry
Review the schedule of condition and any licences for alteration that have been granted.
Tenant is usually required to return the building to its original state

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20
Q

What are the two options before lease expiry

A

Tenant can do the agreed works or tenant can pay a sum to the landlord to undertake the works

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21
Q

What is section 146 notice of 1925 Law of Property Act

A

This is a notice issued by the landlord to the tenant when there is a breach of lease outside of non payment of rent. The intention is for the commencing of forfeiture but it has to
specify the breach complained of,
importantly if the breach is capable of remedy, require the leaseholder to remedy the breach, and
in any case require the leaseholder to make compensation in money for the breach.

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22
Q

What is the dilapidations claim limited to

A

Under L&T act 1927 section 18. The claim can not be more than the difference between the value of the property in disrepair and the value of the property once repaired.
and cannot claim if the future intention would supersede the works within the claim, i.e if the plan is to demolish the property.

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23
Q

What are the three types of dilaps schedules

A

Interim - served by LL or tenant during the lease - at least 3 years remaining
Terminal - served in the last 3 years of lease
Final - served at or after the tenant has vacated.

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24
Q

What is within a dilaps schedule

A

Outline of repairing obligations
state the remedy and cost of the breach
Loss of rent over period to do works (if appropriate)
Fess +VAT for the claim for surveyors and lawyers
negotiations conducted

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25
What is the guidance note for dilapidations
RICS Guidance Note on Dilapidations 2016
26
What does RICS Guidance Note on Dilapidations 2016 set out
reduce claims between LL and T guidance on diminuation valuations Explores supression - the provision LL can claim the amount lost because of the breach of the lease Relates to interim and final claims in commercial property
27
What does RICS Guidance Note on Dilapidations 2016 set out
reduce claims between LL and T guidance on diminuation valuations Explores supression - the provision LL can claim the amount lost because of the breach of the lease Relates to interim and final claims in commercial property
28
What are the reasons a settlement of dilapidations not agreed
When the lease is not full repairing terms Reinstatement not required by the landlord If a schedule of condition limits the repairing limitations If the building is to be demolished or sustainably refurbished after expiry Tenant has gone into admin
29
Who is responsible for insurance on a property
Usually LL responsible to arrange and re-charge
30
What is insurance cover for on a property
Reinstatement of the building in the event of fire, storm, flood, subsidence, loss of rent & SC, theft, terrorism etc.
31
What basis of measurement is used for insurance
usually GIA for commercial properties.
32
What is the key law for insurance
Insurance Act 2016 - more accountability for insurers, responsibilities to policyholders to provide relevant info and an aim to reduce claims
33
What actions should a property manager take on an empty building
Building insurance - inform insurers it is empty Maintain fabric of building Obtain EPC Remove combustible materials Undertake and record regular inspections (insurance purposes) Undertake health and safety and risk assessment of building Inform local council for empty rates Isolate power supplies
34
What are the fundamentals of rent collection
Accuracy of information Timing
35
What rent collection should you be careful of
when the tenant is outside the L&T act 54 and lease has expired. Collecting rent could create a protected tenancy
36
How do you deal with rent arrears
read the lease check if rent deposit or if lease is granted pre 1/1/1996 = privity of contract or AGA in place Interest paid on late payments consider a payment plan
37
What rent default remedies are available
Court proceedings Use a ret deposit Pursue former tenants and guarantors serve stat demand Commerical rent arrears recovery scheme Forfeit lease Negotiate payment plan Agree another mutually acceptable arrangement
38
Rent arrears - explain the court proceedings
LL could obtain court judgement and then secure payment by way of a charge over other property. Proceedings could also be issued to recover arrears following repossession = slow process and more costly Useful if tenant still solvent as the threat of court could make tenant pay.
39
Rent arrears - explain the pursuing former tenant / guarantors route
check if AGA in place or lease before 01/01/1996 Remember section 17 of L&T act 95 sets out strict timetable for the recovery of rent arrears within 6 months
40
Rent arrears - explain the stat demand
Preliminary step to pursuing bankruptcy or winding up proceedings. Advisable only when no dispute about level of arrears 21 days of arrears After this LL can present a bankruptcy (for an individual) or winding up (company) petition to court if arrears more than £750
41
Rent arrears - explain the CRAR
The Tribunals, Courts and Enforcement Act 2007 modified regime called commercial rent arrears recovery No minimum amount of arrears, only for rent in commercial property
42
What are the CRAR conditions
7 days unpaid rent 7 days clear warning notice Enforcement agents visit 2 clear days to follow re-entry by enforcement agent to seize goods allow 7 days before sale of goods fees specified on entry notice
43
Rent arrears - explain the forfeiture
There must be a forfeiture clause within the lease Rent must have been properly demanded. Be careful not to accept rent payments as this could acknowledge continuance of lease Lease is forfeited when the LL by either physical, peaceable re-entry or by commencing county court proceedings to recover possession If forfeiture for other reason than recovery of rent then section 146 notice of the Law of property Act 1925
44
What is section 6 of the Law Distraint Amendment Act 1908
This law enables the landlord to recover a tenants arrears from a sub-tenant. The notice informs the sub tenant that rent needs to be paid directly to the landlord
45
What is section 17 of the landlord and tenant Act 1995
This requires landlords to issue a section 17 within 6 months of the start of the arrears
46
What concluded in Scottish & Newcastle PLC and Raguz 2007?
This case decided that Landlords only need to serve S.17 notice once a rent review has been determined even though, technically if undetermind for years it is past the 6 month date
47
What tatics cant landlords use to re-engineer leases
Granting longer lease for lower rent or rent free monthly payments moving/removing of break clauses subject to a payment premium
48
Ravenseft Properties V Davestone Ltd 1978 determined the meaning of repair as?
Liability cannot arise in the absence of repair Repair is distinct from renewal - tenant cannot give back a completely different unit Tenants are responsible for inherent defects Repair is not an improvement An effective FRI lease is when the landlord is responsible for repairs & re-charges via SC
49
What options are available for landlords for breach of repair
Serve a repair notice Forfeit the lease Serve an interim schedule of dilaps Do the works and charge the tenant ( LL right to re-entry)
50
Explain Notice of repair
Served under section 146 of the Law of Property Act 1925 usually for one specific repairing or decorating breach Must be in writing and comply with lease terms Must set out Details of repair/decorating breach Timescale allowed to remedy Course of action if not done
51
Explain forfeiture in relation to repairs
Must have a clause Will have to serve section 146 Should state why tenant is in breach of repair covenant and how to remedy Must be given time to undertake works
52
explain interim dilaps schedule
Instruct building surveyor to prepare draft to serve
53
What is the leading case for Landlord's entry to do works
Jervis vs Harris 1996
54
Explain leading case for Landlord's entry to do works
Jervis vs Harris 1996 - gives the LL the right to pursue am effective remedy against defaulting tenants to ensure that the premises are kept in good repair for the duration of the term
55
When should the Jervis V Harris clause be used when repairs are required
Tenant is solvent Landlord wants the lease and rent to continue Landlord wants to retain control to carry out repair works Where the threat of entry compel the tenant to do the works
56
What act governs repairs
Leasehold Property (Repairs) Act 1938
57
What is Leasehold Property (Repairs) Act 1938 for
Must be for leases with a term of 7 years+ and have at least 3 years left. It protects tenants against onerous interim schedules of dilaps Requires LL to serve section 146 notice The LL must prove one of the following to permit enforcement of the repairing covenant. Immediate remedy is necessary: 1. to prevent substantial reduction in the property reversions value 2. to comply with legislation 3. In the interest of another occupier if the tenant does not occupy whole space 4. if at a small cost compared with the consequences of postponement
58
Planned maintenance programme can have 2 stages
Cyclical, Preventative and Responsive maintenance
59
What is Cyclical maintenance
regular activities that are carried out irrespective of the condition of the building for example servicing plant, health and safety related maintenance and redecoration
60
What is preventative maintenance
Dependent on a condition survey prepared by a building surveyor which forecasts future repair needs and plans the timetable for undertaking works. I.e replacing single glaze windows with double glazing, upgrading facilities or services and refurbishment works
61
What is responsive maintenance
initiated by building occupier i.e repairing leaks, unblocking drains or undertaking remedial works to the building
62
What is a schedule of condition
This is usually for new lettings where the landlord did not undertake repair works. It is negotiated during lease negotiations and put in the back of the lease, usually with photos. The point of the schedule is to document the state of the premises so at lease end the tenant brings back to that specific condition.
63
What is service charges
These are estate costs incurred by the landlord to maintain and manage a multi-tenanted property recharge to the tenant No specific legislation for commercial service charge Always check the lease and LL's are liable for voids
64
What negotiations are being seen with service charge
Caps, fixed increases or RPI/CPI increases to limit future liability
65
What are the usual service charge arrangements
Service charge budget is agreed with tenants prior to commencement of the service charge year Quarterly billings based on estimate Annual accounts are prepared at 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 becoming more common Payments usually reserved as rent in the lease
66
What is the service charge statement
RICS Professional Statement Service Charges in Commercial Property 2018
67
What is the aim of RICS Professional Statement Service Charges in Commercial Property 2018
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 certs Reduce the causes of disputes and to provide guidance on resolution
68
What are the 9 principles of RICS Professional Statement Service Charges in Commercial Property 2018
All expenditure recovered must be in accordance with the terms of the lease Recover no more than 100% of costs Budgets with explanatory commentary issued to all tenants annually Approved actual expenditure issued annually Service charge monies heled in one or more discrete bank accounts Interest on accounts are credited to the SC account after deductions made If being disputed sums being held should only reflect actual dispute Following a dispute, any errors in raising charges should be rectified without undue delay
69
What are the four SC methods of apportionment
Floor area Fixed percentages Rateable value Weighted floor area
70
How many months before should budgets be issued
at least 1 month
71
How many months after should SC recs be issued
at least 4 months
72
Service charge cost key facts
All costs transparent Management fees fixed no hidden mark-ups obtain more than one quote for out sourcing Should not profit except with management fee management fee must reflect actual costs involved
73
Service charge allocation key facts
costs allocated to relevant expenditure seperate schedules where reasonable basis and method of apportionment is fair an reasonable
74
Service charge communication facts
should consult occupiers to ensure standard and quality must communicate to ensure services are delivered Should demonstrate how you comply with professional statement
75
What should be excluded from the service charge
Initial costs of design, construction, plant or equipment Setting up costs - fitting out management suites, Improvement costs above repair and maintenance future re-developments costs and fees relating to asset management, rent collection, cost of letting units costs for void units Costs for negligence of the manager or owner

APC (18 decks)

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