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Property Management L3 Flashcards

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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
Does LL have to use rent deposit for arrears?
No, can use deposit at LL discretion
26
Benefit of drawing down on rent deposit?
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
27
How can Court proceedings be used to recover tenant arrears?
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
28
When can former tenant be pursued for arrears?
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)
29
What is Statutory Demand?
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
30
What is the process of serving a Statutory Demand?
Notice served and T has 21 days to pay or propose plan After this time, LL can present winding up petition to Court
31
What is CRAR?
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
32
What are CRAR timelines?
7 days unpaid rent 7 days notice Enforcement Agent visits 7 days before sale of any seized goods
33
What goods cannot be seized under CRAR?
Perishable goods, work tools, and kit belonging to a 3rd party
34
What are tenants rights under CRAR?
Can apply to Court for order that no further steps can be taken without permission from Court
35
What is forfeiture?
Clause in lease that allows landlord to re-gain possession of lease Either by peaceful re-entry or Court action
36
When can forfeiture be used?
When there is a forfeiture clause in the lease No notice is required from LL
37
What are tenants rights under forfeiture?
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
38
How can LL right to forfeit be waived?
If LL agrees payment plan with T If CRAR is exercised If S25 notice is served under LL & T Act 1954
39
How can lease be terminated by forfeiture?
Landlord can peacefully re-enter and change locks Court proceedings can commence to recover possession
40
What was LL & T (Covenants) Act 1995?
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
According to RICS Code of Leasing Business Premises, when should AGAs be used?
If assignee is of weak covenant strength, has no guarantor and is not paying a rent deposit
42
What is key consideration when reviewing rent arrear recovery methods?
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
What was impact of Legal Aid, Sentencing and Punishment of Offenders Act 2012?
Made residential squatting a criminal offence Commercial landlords must rely on Bailiff or Court to remove squatters/trespassers
44
Four main options for LL when T not fulfilling their repairing obligations?
Serve repair notice (S146 of Law and Property Act 1925) Forfeit lease Serve interim schedule of dilapidations Do works themselves and charge tenant
45
What must be included in notice to repair?
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
How can LL forfeit lease for failure to repair?
Must be forfeiture clause in lease LL must serve S146 notice on tenant (stating details, timescale and proposed course of action)
47
What is the leading case law for LL right to re-enter property to undertake repairs?
Jervis vs Harris Gives LL right to pursue remedy against defaulting tenants to ensure premises are kept in good condition
48
In what circumstances can Jervis and Harris clause be used?
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
3 possible stages of PPM?
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
RICS key publication for service charges?
RICS Service Charges in Commercial Property, 2018 Effective from April 2019
51
Aims of Service Charge Professional Statement?
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
What are the 9 mandatory requirements in Service Charge Professional Statement?
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
11 sub sections of Service Charge Professional Statement?
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
Responsibility of Property Manager when issuing service charges?
Ensure value for money Ensure quality services that are regularly reviewed Ensure standard of services are monitored
55
What is a sinking fund?
A fund set up for paying specific costs that occur occasionally EG roof repairs or painting needed every 5 years
56
What is a reserve fund?
A fund set aside to cover cost of major works or other significant items of expenditure Useful for unexpected expenses
57
What is a depreciation charge?
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
4 methods of service charge apportionment?
Floor area Fixed percentages Weighted floor area (typical in shopping centre) RV
59
Different types of insolvency?
Administration Company Voluntary Arrangement (CVA) Receivership Liquidation
60
What are implications for Landlord when tenant goes into administration?
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
What are implications for Landlord when tenant goes into liquidation?
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
What was impact of Coronavirus Act 2020 for Landlord rent recovery?
Protected businesses during pandemic Prevented Landlords from forfeiture or CRAR Measures expired 25 March 2022
63
What was Commercial Coronavirus Rent Act 2022?
Came into effect 25 March 2022 Introduced arbitration process to resolve disputes regarding Covid rent arrears Legally binding arbitration process
64
What is Occupiers Liability Act 1957?
Regulates duty of care Occupier must ensure visitors will be safe in using premises
65
What is Occupiers Liability Act 1984?
Regulates duty of care Occupier must ensure duty of care even to UNLAWFUL visitors EG trespassers
66
Difference between covenant being absolute/qualified/fully qualified?
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
What is statutory duty placed on LL in LL&T Act 1927 and 1988?
Consent must not be unreasonably withheld (1927) or delayed (1988)
68
What is Corporate Manslaughter and Corporate Homicide Act 2007?
Companies can be found guilty as result of serious management failure / gross breach of duty of care Fine can be unlimited
69
How do you hand over SC account upon sale or change of manager?
Complete interim service charge reconciliation
70
What is a cost undertaking?
Undertaking by one person to pay costs of another
71
What is warranty?
Written guarantee promising to repair/replace item within set time period
72
What is TUPE?
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
What is a duty of care deed?
Provides lenders with greater protection for their loans when lending in relation to property that is rented out and managed by an agent
74
RICS guidance note relating to Property Management?
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
What is Public Liability Insurance?
Covers cost of legal action and compensation claims made against your business by general public
76
Why is effective occupier liaison important?
Good relationship, make sure occupiers know who PM is and how to contact them
77
What are health and safety / fire obligations as PM?
Ensure there is GRA and FRA carried out annually
78
What insurance is a LL typically required to have under leases?
Insurance against damages to the property EG loss of rent and Public Liability Insurance
79
What is involved in third party procurement?
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
What is death by negligence?
Person is liable for death of another due to negligent conduct
81
Why is rateable value not viewed as appropriate method of service charge apportionment?
Does not reflect reasonable assessment of benefit of using common services
82
Benefit of a PPM?
Performed to preserve a propoerty's condition Proactive approach - aims to avoid failures, unplanned disturbances and sudden maintenance costs
83
How would you manage a rent deposit?
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
Two key RICS publications in relation to PM?
RICS Professional Statement - Real Estate Management, 3rd Edition 2016 RICS Guidance Note - Commercial Property Management, 2nd Edition 2011
85
What are 12 mandatory requirements for members set out in RICS Professional Statement, Real Estate Management 3rd Edition 2016?
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
Tenant can't pay rent so what do you do?
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
How is forfeiture for non-payment of rent different to forfeiture for non-compliance of repair?
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
What is a Statutory Demand?
It is the first step of a winding up procedure
89
Why is important to check tenant covenant strength before providing client with recommendation for non-payment of rent?
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
Why is it important to look at management accounts as well as audited accounts?
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
Why would tenant sub-let rather than assign?
Flexibility to get unit back If market rent is higher than passing rent, then tenant could get profit rent
92
What is a reasonable time to respond to application to assign?
Maybe 1 week but completely up to each managing agent
93
What is dilapidation figure based on?
The diminution in value as a result of the wear and tear

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