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First National Commercial Operation Manual Volume 2
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C O M M E R C I A L O P E R A T I O N S M A N U A L
volume 2
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
DISTRIBUTION
P r i n c i p a l
C o m m e r c i a l M a n a g e r
P r o p e r t y M a n a g e r
A d m i n i s t r a t i o n
C o m m e r c i a l S a l e s P e o p l e
CONTACTNational Commercial ManagerDirect : 03 9418 9137 Phone : 03 9418 9111 Fax : 1800 653 666
89 Hoddle Street Richmond VIC 3121enquir [email protected]
www.firstnationalcommercial .com.au
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
volume 2
C O M M E R C I A L O P E R A T I O N S M A N U A L
COPYRIGHTAll rights reserved: these materials are copyright. Apart from any fair dealing for the purpose of private study, research or as permitted under the Copyright Act, no part may be reproduced or copied in any form or by any means without prior permission. First National Commercial believes that all information, in this Manual is accurate and reliable. However, no warranty of accuracy or reliability as to such information is given and no responsibility for loss arising in any way from or in connection with errors or omissions in any information provided (including responsibility to any person by reason of negligence) is accepted by First National Commercial or by any of its agents or employees or by any person. DISCLAIMEREvery effort has been made to ensure that this manual is free from any error or omission. However, you should conduct your own enquiries and seek professional legal, financial or other advice before relying on any fact, statement or matter contained in the manual.
INTROdUCTION 3
LEASINg SECTION 1 5The Leasing Manager 6Understanding Leasing 10Managing the Lease Enquiry 18Disclosure Statements 24Tools to Assist With a Lease Enquiry 25Identi fy ing a Tenancy or Business Locat ion 26Structuring Incentives 28Lease Assignments 32Legislat ion 34Commercial Property Leasing Form 36Estimating Yields and Rents 37Leasing Area Act iv i ty Report 40
PROPERTy MANAgEMENT SECTION 2 43What is Property Management? 44Property Management Budget 45Understanding Rent and Lease Reviews 51Property List ing Form 56Property Information Form 57Council Rates and Outgoing Charges 58Property Characterist ics 59Property Inspect ion and Condit ion Report 60Off ice Building Inspect ions 61Essential Services and Safety Measures 62Property Maintenance and Contracts 65Retai l Propert ies 67Property Management Handover 69Property Management Submission 70
gLOSSARy OF TERMS 87
INTRoDuCTIoN
leASING
INTRoDuCTIoN
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 22
INTRoDuCTIoNINTRoDuCTIoN
leASING
This volume, the second in the series of Commercial Operations manuals will enable principals, sales people and property managers to become familiar with leasing and managing commercial property. The manual is designed to assist in the day to day operations of the commercial property portfolio within their real estate office.
Leasing commercial property can be extremely complex, however very rewarding for the real estate agents that embrace this segment of the property market. The leasing section aims to increase the level of understanding of the responsibilities of the Leasing Manager and covers all aspects of the lease process, from the initial enquiry through to the use of forms and templates. Templates provided on the accompanying disk will assist personnel in the preparation of reports, letters and documents.
The property management section provides information and resources required once a tenant has been secured and the property then comes under the management of the real estate office. The management of commercial property involves attention to detail and the ability to recognise and comply with all aspects of a commercial lease agreement.
The property management section includes listing forms, checklists and detailed condition reports, all in template form and available on the disk enclosed with the manual.
As part of the groups commitment to continuous improvement we encourage feedback and ideas for improving the manual and these may be directed to the National Commercial Manager.
INTRoDuCTIoN
3C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 24
SeCTIoN 1
LEASINg
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2 5
INTRoDuCTIoN
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INTRoDuCTIoN
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 26
1. Objective
The objective of a leasing manager is to develop and foster a strong relationship between a building owner and prospective lessee. In essence, the Leasing Manager could also be regarded as an account relationship manager.
The Leasing Manager has three major functions:
i. Servicing the bank of listed stock
Through its market presence, property management and other services, the agency attracts building owners to seek the company’s assistance in leasing their properties.
ii. Marketing Specific Properties
The Leasing Manager will draw up and implement a full marketing program to lease properties and / or floor space.
iii. Awareness of Creating Further Opportunities for the Agency
The Leasing Manager needs to be aware of and promote the further services the agency can offer clients in terms of sale, valuation, property management, etc.
2. Appearance, dress and Manner
As most commercial negotiations are carried out at a Senior Management level, it is important that managers are professional in both appearance and manner. Emphasis should be placed on keeping owners informed of progress in the leasing of their premises by way of emails, letters and telephone conversation. During negotiations managers must know all of the details about the property in question and must have inspected it prior to the initial meeting. All important matters in negotiations must be fully documented in accordance with the respective State Legislation and sound business practice.
3. Education
It is helpful for managers to consider working towards a recognised tertiary qualification relative to the real estate industry. These qualifications may be obtained through TAFE and REI in each State University.
Having formal qualifications gives a greater depth of knowledge and improves your credibility in the market.
Qualifications available include: Bachelor of Applied Science (Property or Urban Planning)
Bachelor of Planning and Design (Property and Construction)
Bachelor of Urban Planning and Development
Bachelor of Business (Real Estate Valuation)
Diploma of Property
THe leASING mANAGeR
INTRoDuCTIoNINTRoDuCTIoN
leASING
4. Commission - Leasing Property
The standard fees for the leasing of commercial space vary around the country. Examples are:
It is also possible to negotiate further fees in situations where an owner wishes to give an added incentive.
Commission is usually billed when either:
1. (a) The letter of agreement to lease (letter of intent) has been executed,
(b) Occupation of premises has taken place,
(c) First month’s rental payment is held in Trust Account and,
(d) Rent is being regularly paid to the Lessor,
2. Upon execution of the lease by the Lessee,
3. Or, if both parties agree, it can be billed earlier when some of the above criteria are satisfied.
THe leASING mANAGeR
Prime term between 1 year and 3 years 8% of first years net annual rentPrime term of 4 years 10% of first years net annual rentPrime term of 5 years 12% of first years net annual rentPrime term of 6 years 15% of first years net annual rentPrime term of 8 years 18% of first years net annual rentPrime term of 10 years 18% of first years net annual rent plus
CHECK yOUR OFFICE POLICy IN THIS REgARd. WHATEVER THE FEE CRITERIA IS, IT MUST BE WRITTEN INTO ‘THE APPOINTMENT TO ACT’.
NOTE:
7C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
leASING
THe leASING mANAGeR
5. Commission – Selling Property
There will be occasions where the property owner instructs the agency to sell their property. Whilst this is covered in Sales, the Property Manager should be aware of the typical commission rates. Upon selling the property, Commercial real estate agents typically charge between 2.0 to 3.0 percent (plus GST) of the actual price that appears on the contract. However a flat fee arrangement like this is always negotiated to ensure that the needs of the property owner are met. Remember that they may be considering other agents, so offering incentives (also covered in this volume) is often a way to move the negotiations forward.
An incentive based fee scale may be appropriate and an example is shown below:
Example - Incentive Based Fee Scale
Proposed Rate Applicable Price Range Calculating Overall Fee By Range
Progress Total Percentage of Price
1% Up to $499,000 $4,990 $4,990 1.0%
2% $499,000 to $699,000 $4,000 $8,990 1.3%4% $700,000 to $899,000 $8,000 $16,990 1.9%10% Over $900,000
The property owner will no doubt consider these fees along with the agency’s overall marketing proposal.
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 28
leASING
6. Understanding the property owners
It is important to develop a good rapport with property owners; the Leasing Manager should use the following checklist to assist them to maintain a good relationship.
CALL and MEET FREQUENTLy
• Developaregularcallplanwhichsuitsthepropertyowner
UNdERSTANd THEIR PROBLEMS
• Listen
• Beconsiderate
• Showempathy
• Treatconfidentially–Usediscretion
FINd OUT:
• Periodofownership
• Howacquired?
• Longtermplan?Strategy?
• Otherpropertiestheymayown
• Aretheyentrepreneurial,conservative,cautious?
• Marketknowledge
• Latestinformation
• Financialarrangements
OWNERS ARE CONCERNEd WITH:
• Returnoninvestment
• Periodoflease
• Renewalandoptions
• Frequencyandmethodofrentreviews
• Covenantoftenant
• Suitabilityoftenant
• Obligationforcapitalexpenditure
• Paymentsthatcannotbe‘passedon’tothetenant
• Liabilityforstructuralrepairs
THe leASING mANAGeR
9C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
leASING
This section covers the vital elements of a lease agreement. The owner of freehold property may, at their discretion,choosetouseitfortheirownpurposes(an‘owner-occupier’)ortheymayuseittoproduceincomeby‘sellingitsuse’toanotherpersonforasetperiodoftime.
OVERVIEW
The agreement between the owner and this second person may be by way of a Tenancy Agreement or a Commercial Property Lease. State Laws affect these documents.
Prior to entering into a lease agreement the prospective tenant must provide to the Leasing Manager a Letter of Intent or Offer, or Agreement to Lease. This is covered in detail in the section on Lease Enquiry, however there are various elements which must be contained in this letter.
The following is a check list of items that should be covered in all lease proposals:
uNDeRSTANDING leASING
• Correctlyidentifytheproposedtenant
• Ensurethattheiraddressiscorrect
• Identifyiftheproposedtenantisanindividual or a corporation
• Carefullyidentifytheaddress/locationofthetenancy including suite No./shop No. and where possible, include a plan with the Letter of Intent
• Providetheareaofpremisesinsquaremetres
• Termoflease
• Commencementdateofthelease
• Options-ifany
• Initialannualrent
• Rentreviewbasis
• Percentagerentifapplicable
• Clearlydefinedoutgoingsbasis
• Cleaningcharges
• Carparking(BayNoandcharge)
• Otherstandingcharges
• Usage(permitted)
• Anyotherpointspeculiartothelease
• Ifparcelmortgaged-subjecttomortgagee’s consent
• Securitydeposit/bond
• Personalguaranteeswherecorporatetenant
• Caveatableinterestbytenantonpropertytitle
• Repairandmaintenance
• Tenantobligationsatexpirationoflease
• Obligationtoinsure
• Owner’sworks
• Tenant’sworks
• Optiontopurchase/rightoffirstrefusal
• Rentfreeperiod
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 210
leASING
TENANCy AgREEMENT
A Tenancy Agreement is a document (often in standard format) signed by both the building owner and the tenant setting out the rights and obligations of both parties, the rental and the period of tenancy (typically short term, e.g. monthly, quarterly, half-yearly or yearly). A Tenancy Agreement is not normally registrable on the owner’s Certificate of Title and used where a lease is not entered into. As it is a simple document, it is not recommended for properties with a higher degree of complexity.
WHAT IS A LEASE?
A lease is a legal grant of the possession of real property to last for a fixed period of time. It generally contains:
• Apredeterminedrentalperiod
• Rentaladjustmentsandconditions
• Obligationsuponboththelessor(i.e.buildingowner)andthelessee(theoccupier)
The basic obligation upon the lessor is to give to the lessee the quiet enjoyment of the leased area for the agreed period of time. The basic obligation upon the lessee is to pay the rent (and other payments, e.g. outgoings, as prescribed by the lease), keep the property in good order (again as set out in the individual lease) and, upon termination, give vacant possession back to the lessor.
Leases (in most States) should be in registrable form (i.e. stamped and acceptable to the Registrar of Titles). In some States, leases of over three years must be registered on a Title Deed: this is optional for documents with a term of three years and under.
AS EACH STATE ANd TERRITORy MAy HAVE dIFFERINg LEgAL POSITIONS ON LEASES. ENQUIRE WITH yOUR SOLICITOR BEFORE yOU ACT.
Both leases and tenancies may be for the whole or part of a freehold property. Where part only (i.e. building only or multiple tenancies) are involved, the occupied area must be clearly identified (in the case of a lease using a plan prepared in a format acceptable to a Valuer or Licensed Quantity Surveyor). Any access arrangements and restrictions must also be stipulated.
Leases rather than tenancies are used in commercial and industrial property. Whilst they are much more expensive to establish (such costs normally being met by the lessor), leases offer significant advantages to both parties.
uNDeRSTANDING leASING
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 212
AdVANTAgES OF A LEASE
FOR THE LESSOR
• Protectfutureincome(andthereforeenhance/reinforcecapitalvalue)
• Physicallyprotecttheleasedpropertyaslaiddowninthelease
• Enablethelessortotakespecificlegalactionsagainstthelesseeintheeventofadefault
FOR THE LESSEE
• Providesaplaceofbusinesswithoutthelargeoutlaysofafreeholdpurchase
• Providessecurityoftenure(includingprotectionofgoodwill,fit-outetc)
• Protectsfromarbitraryactionsbythelessor
• Providesmediumtolongtermflexibility
• Freesupcapital
• Oftensetsuptaxadvantages
• Improvesbalancesheetswhilstmaintainingasaleableitem(e.g.thebusinesswithlease).
uNDeRSTANDING leASING
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13C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
ELEMENTS OF A gOOd LEASE dOCUMENT
Lease documents are often long and may be very complex. It is essential for the Leasing Manager to become familiar with existing and proposed lease documents. The process is simplified by the use of headings and subheadings in contemporary leases.
Elements which need to be contained in a Commercial Property Lease are:
• Leasedefinitions
• Nameoflessor
• Nameoflessee
• Definitionofareasubjecttoleaseinsquaremetres(sqmtrs)
• Plansofthepremises
• Dateofcommencement
• Termoflease(duration)
• Expirydate
• Initialrental(ensuringthatGSTisclearlynoted)
• Otherfixedandvariablecharges
• Optionsand
o Option period
o Conditions pertaining to the ability to take up options
o Mechanisms and timing for the taking up of options
• Rentalreview
o Timing
o Mechanism (inc. any minimum increases)
o Arbitration/determination
o Date and effect of last review
• Subleasingandassignment
o Provisions for
o Mechanism (lessor’s consent)
uNDeRSTANDING leASING
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 214
uNDeRSTANDING leASING
ELEMENTS OF A gOOd LEASE dOCUMENT (CONT.)
• Outgoings
o Defined (include insurances, Land Tax etc)
o Responsibility for outgoings
o Mechanism for payment
o % of charge or increase over a BASE year of charge
• Restrictionsonuseandindemnitiestolessor
• Lessee’sabilitytoalter,modify,fit-out,affixsignsetc.(includingownershipoffixturesetc.)
• Miscellaneouscovenants
• Insurancerequirements
• Periodicmaintenanceandactionsatendoflease(e.g.cleaning,re-paint,re-carpet)
• Servicesprovidedwithinthebuilding
• Levelofsecurityavailable
• Rightsofaccess,egressanduseofjointfacilities(incaseofmultipletenancies)
• Carparking
o Exclusive use
o Visitor parking
• Provisionsforlatepaymentofrental/defaultprovisions/interestcharges
• Holdingoverprovisions
• Guaranteesonpaymentofrental(plusAssignableatSale)
• Demolitionclause
• Buildingrules
• Whetherleaseisregisteredorinregistrableform;(Ifnotregistered,doesaclauseexisttofullyprotectthelessee’s interests in the event of a change of freehold ownership?)
• Hasstampdutybeenpaid?
• Optionstopurchase/firstrightofrefusal
• RighttoStrataTitle
• Afterhoursexpenses
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15C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
uNDeRSTANDING leASING
SETTLEMENT
Upon settlement of a sale or finalisation of a lease, the Property Manager must obtain a letter from the vendor or lessor’s solicitor advising that the transaction has settled and request the agency account either to their trust account or direct to the vendor or lessor.
If a vendor or lessor is self acting and advises the agency that settlement has been effected and requests the agency to account, the agency should obtain confirmation from the purchaser or lessee or their solicitor that the matter has been finalised before the agency can account to the vendor or lessor.
Once the appropriate letters have been received, it is then necessary to advise the respective solicitors in writing of the disbursement of funds. Be sure that the tax invoices are accurate and account for GST correctly.
REFUNdS
In the event of a lease not proceeding due to lack of finance, a letter from the purchaser or their solicitor requesting a refund of deposit is required, together with a copy of the letter from the Lending Authority addressed to the purchaser, advising that finance is not available.
If the purchaser is unable to produce such letter from the Lending Authority, a letter from the vendor or his solicitor authorising the refund to the purchaser, must be obtained.
In the event that an Offer to Lease is withdrawn and the Letter of Intent was signed by either the lessor or lessee, the agency must require a written authority from both parties to release the deposit held in the Agency Trust Account.
In many instances, the deposit held in trust is equal to the commission. Often in the event of settlement, the vendor, lessor or their solicitor, overlook the requirement to notify the agency of settlement before the agency are entitled to disburse monies from the agency’s Trust Account to the General Account to facilitate the payment of commission to the Salesperson.
SUPPORTINg dOCUMENTS
The following letters to and from the lessor are examples which may be used by Leasing Managers. To assist you further the Commercial Resource Centre contains a comprehensive selection of letters to assist the Leasing Manager.
Leasing property is not difficult, and when followed in a systematic manner, will be very rewarding for those who choose this as part of their real estate career.
leASING
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uNDeRSTANDING leASING
First National Group of Independent Real Estate Agents LimitedACN 005 942 192
AddressYour StreetTownPO BoxVIC 3196
ContactT (03) 9418 9111F (03) 9418 9122E [email protected] firstnationalcommercial.com.au30th June 2010
Mr and Mrs Bill W BloggsUnit 799 Harmony RoadHarmony Ville NSW 9999
Dear Mr and Mrs Bloggs
80 GERALDINE STREET, NORTH SYDNEY - LEASE TO ABC CORPORATIONWe would like to take this opportunity to thank you for selecting our First National Commercial to act as
your agent in this particular transaction and we trust that you found your dealings with us satisfactory.Would you kindly confirm that the Lessee, ABC Corporation, has taken up occupation of the above
premises and that the lease document is being executed. If all is in order, would you kindly authorise the
release of deposit monies from our trust account, by signing and dating the attached.
Yours sincerely,
Margaret JonesLEASING MANAGER
EXAMPLE LETTER TO LESSOR
leASING
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uNDeRSTANDING leASING
ABCCORPORATION1st July 2007Mrs Margaret Jones Leasing ManagerCOMMERCIALFN.COM
Dear Margaret,
80 GERALDINE STREET, NORTH SYDNEY - LEASE TO ABC CORPORATIONI, the Lessor of the abovementioned premises confirm that:• ABCCorporationhastakenuptenancyoftheabovepremises• Allleasedocumentsarebeingexecuted• Weauthorisethereleaseofdepositmoniesfromyourtrustaccountinaccordancewithyour
Appointment to Act.
We thank First National Commercial for negotiating and managing the lease process.
Yours sincerely
_______________________ ________________Mr and Mrs Bill W Bloggs Date
EXAMPLE LETTER FROM LESSEE
leASING
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 218
mANAGING THe leASe eNQuIRY
Enquiries to your office will be generated by press advertisements, signs, the internet and email; now you have an understanding of leases you’ll be able to manage these enquiries with confidence.
Following introductions, the first task is to qualify the prospect’s requirements. The Lessee Enquiry Form sets out a series of questions that should be asked. Refer to this form on page 19. This list is not exhaustive, however it should be taken as a minimum, with the Manager using their initiative to determine further questions. This worksheet should be completed as it is a useful tool, providing a record of discussions with the prospect throughout negotiations.
After qualifying the prospect’s requirements the Manager will present the properties that most closely fit the criteria. It should always be stated to the prospect that the Manager will either ring back or make an appointment to present this information; don’t attempt to relay this information over the phone as it is possible that a property may be overlooked. It is very important with larger properties to put all this information in writing (submissions) and personally present it as soon as possible. This has the dual effect of having the presentation documented and also having the opportunity to create a rapport with the prospect that may not have developed over the phone.
Submissions will comprise a covering letter with index of properties submitted with individual property detail.
Thetimelinefromenquirytopresentation,ofwritteninformation,shouldbenottakelongerthan24hours–timely action is the essence of professionalism.
THE NOMINATION
After inspecting the property, or before if necessary, it is important to nominate in writing the lessee to the building owner. An email with an accompanying letter should be used for the nomination (evidence everything in writing).
THE INSPECTION
After presenting the written information on all properties that most closely fit the property criteria, the prospect should be asked to choose a few properties which they wish to inspect.
It is important to have been through all of the properties chosen by the prospective lessee prior to the inspection.
Prior to the inspection, the Manager should ensure the property is presented in its best light i.e. lights on, doors open etc. During the inspection the Manager should subtly take the prospect through the property’s best points. Be sure to answer all questions honestly, but never over emphasise any point. Always look to overcome any barriers or objections which the prospective lessee may have. For example, if parking is an issue, provide acceptable solutions for the client. There are many instances in commercial property where the client has specific requirements in terms of office or warehouse space. If the Manager has not listened carefully to the client in the first instance, showing a property which does not meet or exceed the criteria is wasting everyone’s time.
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Reference No:
Rating: A B C
Date: ___________________
CONTACT NAME: ______________________________________________________________________________
COMPANY NAME: ______________________________________________________________________________
COMPANY ADDRESS: ____________________________________________________________________________
PHONE No: _______________________________________________ A/H: ________________________________
TYPE OF BUSINESS: ______________________________________________________________________________
BUILDING DESCRIPTION: ________________________________________________________________________
FLOOR AREA
TOTAL: _____________ WAREHOUSE: _____________ OFFICES: _____________ OTHER: _____________
LOCATIONS: ___________________________________________________________________________________
_______________________________________________________________________________________________
_______________________________________________________________________________________________
RENTAL BUDGET: _______________________________________________________________________________
HOW SOON: __________________________________________________________________________________
CURRENT LEASE EXPIRY DATE: ____________________________________________________________________
WHY RELOCATING: _____________________________________________________________________________
CURRENT RENTAL P.A.: __________________________________________________________________________
ZONING REQUIRED: ____________________________________________________________________________
OTHER INFORMATION: __________________________________________________________________________
PROPERTY SUBMISSIONS
DATE ADDRESS M2 RENT PA $ REMARKS
LESSEE ENQUIRY FORM
leASING
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mANAGING THe leASe eNQuIRY
At the conclusion of the inspections try to narrow the preference down to one or two properties. It is important then to send the prospective lessee a letter of Agreement to Lease on the most preferred property, whether or not it is requested. This should have the effect of formalising the prospective tenant’s intentions towards the property and set the scene for final negotiations.
In this section, is a copy of the Lease Negotiation Work Sheet. This is used to record the negotiations in terms of commencement dates, lease term, rent per annum, adjustments and outgoings. If negotiating many transactions at the same time it is hard to commit everything to memory: this worksheet enables the Manager to record all offers and compromises agreed during the lease negotiation process.
THE LETTER OF INTENT OR AgREEMENT TO LEASE
A standard Letter of Intent, or Offer or Agreement to Lease should be provided to all prospective lessees for their signature. Two copies should be sent, one for the prospect’s records the other to be signed and returned with the relevant information completed.
It is most important that Letters of Intent to Lease detail the proposed terms as comprehensively as possible. The proposed tenant’s Letter of Intent should be accepted in entirety so that certainty, one of the most important elements of a valid contract exists. The Leasing Manager may assist prospective tenants prepare this letter however in most cases, the tenant’s solicitor will be engaged. Costs for such preparation will be to the tenant. Some Leasing Managers choose to hand deliver the letter and return the signed copies.
A copy of a Letter of Intent, or Offer or Agreement to Lease is contained in this Section.
Note: In some States of Australia, the Retail Tenancies Act has impact on the content and serving of the Letters of Offer. If you are not familiar with those issues in your State, FINd OUT BEFORE yOU ACT.
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mANAGING THe leASe eNQuIRY mANAGING THe leASe eNQuIRY
LEASE NEgOTIATION WORK SHEET
ITEM LISTED OFFER IMPROVED OFFER LINE OF COMPROMISELESSEE LESSOR
Date of CommencementLease TermRental Per AnnumRental AdjustmentsOutgoings1.2.3.4.SPECIAL CONDITIONS
leASING
14.In consideration of the Lessor reserving the premises for our use and further in consideration of the sum of
$....................................being <<'X'>> calendar month's rental, we hereby agree to lease the abovementioned
premises and to execute a Lease on the basis set out above and within a reasonable time after submission of
the Lease documentation by the Lessor’s solicitors. In the event that the Lease shall not have been executed prior to the commencement date referred to
above, and provided that the premises are available for occupation, the deposit now paid may be applied as
rental for the first month of a monthly tenancy from the commencement date quoted.15.The Lease documents shall be prepared by the Lessor’s solicitors and the Lessee shall be responsible for the
registration and stamping thereof. The Lease shall contain all the normal terms and conditions applying to
leases of similar buildings in the area and subject to the approval of the Lessor and Lessee and their respec-
tive legal advisers failing to reach agreement, as to the terms and conditions of the Lease, then the matters
in dispute shall be referred to the President for the time being of the Real Estate Institute for arbitration and
their decision shall be final and binding on the parties hereto.Dated this………………………………….day of……………………………20…….Lessee: ……………………………………………… The signatory warrants his authority
to sign for and on behalf of the
Lessee Company.Lessor: ………………………………………………We hereby acknowledge ……………………..First National Commercial (The Agent) as the Lessors Author-
ised Agent in respect of this Lease and agree to pay them commission in accordance with the 'Appointment to
Act'. It is further agreed that the said Agent may account for the deposit monies so paid as against commission
on the date which the Lessee enters into possession of the subject premises or upon the date of execution of
the Lease whichever date shall be the earlier.Dated this………………………………….day of……………………………20..….LESSOR:
COMMISSION AGREED:
Lessee's solicitors:
Address: ……………………………………………………………… Ph…………………….Lessor's solicitors:
Address: …………………………………………………………………….. Ph ………………
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 222
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EXAMPLE: LETTER OF INTENT OR OFFER OR AgREEMENT TO LEASE
The Manager
First National Commercial
Dear Sir/Madam,
LETTER OF INTENT OR OFFER OR AGREEMENT TO LEASE
We agree to lease the premises situated at ____________________________________________________
on the terms and conditions set out hereunder.
1.
of ________________________________________________________________________________
2. Lessee: ____________________________________________________________________________
of ________________________________________________________________________________
3. Address of Premises: _________________________________________________________________
4. R.P.D. of Premises: ___________________________________________________________________
5. Floor Area: _______________sq mtr
6. Proposed Use: ______________________________________________________________________
7. Date of commencement of Lease: _______________________________________________________
8. Lease Term: ________________________________________________________________________
9.
payable calendar monthly in advance by payment of _________________________________________
10. Rent Reviews: ______________________________________________________________________
11. Outgoings payable by Lessee: (Including GST) ______________________________________________
12. Option: ___________________________________________________________________________
13. Special Conditions: ___________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
Rental per annum (including GST)
Lessor: ____________________________________________________________________________
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mANAGING THe leASe eNQuIRY mANAGING THe leASe eNQuIRY
INFORMINg THE OWNER
The owner should be kept informed of progress in negotiations, at all times, however once the signed letter of Agreement to Lease is received and the references and balance sheet checked, a copy should be forwarded for their formal approval. It is the owner’s decision as to whether or not the tenant should be accepted.
LEASE dOCUMENTATION
The signed letter of Agreement to Lease to the owner recommending that solicitors be instructed to prepare lease documentation. Unless the owner instructs the agency in writing to instruct solicitors, this should be adhered to. This negates the possibility of the agency being liable for solicitor’s fees if the tenant decides not to proceed.
SETTLEMENT OF COMMISSION
In normal situations, commission is deducted from the month’s rent contained in the agency trust account when the lease is signed. Settlement may occur earlier if the owner agrees. The owner must agree in writing to release monies from the trust account and the agency’s actions MUST be supported by State Law and the agency’s Appointment to Act.
FOLLOW UP
As part of a commitment to customer service and identifying new lease prospects (as many relocate), it is important to follow up all new tenants quarterly or every six months. Likewise, regular contact with the building owners will ensure the agency receives instructions to lease, sell, etc. when necessary.
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 224
DISCloSuRe STATemeNTS
In retail tenancies, there is a requirement for the landlord to provide a disclosure statement relating to the property. In addition, the landlord is to provide an information brochure from the respective State legislators in Victoria, for example, this is provided by the Office of the Small Business Commissioner.
If the tenant has exercised or is entitled to exercise his or her option to renew the lease agreement, the landlord is to provide a disclosure document the required number of days before the tenancy agreement expires (may vary in different states).
Where all of the parties to a retail premises lease enter into an agreement to renew the lease, the landlord is required to provide this statement to the tenant at least 14 days after the lease has been entered into. Failure to do this means the tenant is able to withhold the rent or even rescind the tenancy agreement.
A well written disclosure statement should contain all of the following:
• Landlorddetails
• Tenantdetails
• Premisesinformation
• Informationontheshoppingcentre
• Theleaseterms
• Rentpayable
• Permitteduseofpremises
• Outgoings
• Leaseassignments
• Fitoutorrefurbishmentstobeperformed
• Relocationordemolition
• Generalcomments
• Declarationsbythelandlordandthetenant
For further information refer to your respective State legislators which are listed in the “Legislation” section of this manual.
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ToolS To ASSIST WITH A leASe eNQuIRY
Even before the initial lease enquiry the Leasing Manager must have a tool kit which will assist in their day to dayoperations.Knownaffectionatelyasa‘LeasingKit’itcontainstoolssuchashammers,signs,laddersandstreet directories. Today, there are companies who will erect signs for the agency, however in many rural and regional areas these may not be available and the manager may have to make the arrangements themselves.
Thisiswhatthe‘LeasingKit’maycontain.
FORMS
Below is a selection of forms which the Leasing Manager must have available at the time of a leasing enquiry:
• AppointmenttoAct(SaleandLease)
• LeasingEnquiryForm
• ListingSheet(SaleandLease)
• Nominationoflesseetolessor
• Negotiatingworksheet
• LetterofAgreementtoLease
• MarketingSchedule
• LocatingaNewBusinessAddress
• VacancySummary
Template forms and letters are available from the disk enclosed with the manual and if required, Real Estate Institute forms are available from the respective State REI offices.
1. Diary 2. Mobile phone 3. Digital camera 4. Listing forms 5. Corflute signs 6. Name stickers 7. Nails8. Hammer, claw
9. Wire10. Pliers11. 3 step ladder12. Cleaning rags13. Umbrella/raincoat14. Street directory15. Flood map/local map16. Writing paper
17. Pens18. Rubber19. Gum boots20. 5mm retractable tape21. Micro tape recorder22. Calculator23. Business cards
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IDeNTIFYING A TeNANCY oR BuSINeSS loCATIoN
There will be occasions when a client will be looking for a particular type of property to lease. Let’s assume that the person making the enquiry to your office is already one of your clients and they have asked you to find a property to lease, which is suitable for operating their business.
You may want to complete the Locating a New Business Address Form. This will assist in identifying the client’s specific requirements and will assist you to match suitable properties for their inspection.
When a property is matched, the client is to be contacted and a property inspection organised.
When completing the details be sure to complete the ‘Vacancy DetailsForm’ if the property is not on file. This opens up the opportunity to list the premises being vacated, particularly if arrangements have not been made with an agent.
BUSINESS NAME: ________________________________________________________________________________BUSINESS ADDRESS: _____________________________________________________________________________CONTACT: ___________________ ______________________________ TELEPHONE NO:_____________________REQUIREMENTS
SIZE OF OFFICE: __________m2 _______________________________ TOTAL NUMBER OF STAFF: ________QUALITY OF ACCOMMODATION (Please tick)
Older, air conditioned, carpeted. Approx $ _____________ m2 p.a.Modern, air conditioned, carpeted. Approx $ _____________ m2 p.a.New, air conditioned, carpeted. Approx $ _____________ m2 p.a.
We would like to be located in _______________________________ Street/Anywhere in the Central Business District.CAR PARKING
Number of car parks required? __________________Is it necessary to have car parks in the building you occupy? Yes NoIs parking close by in a parking station/area suitable? Yes No
NAMING RIGHTS
Would you like naming rights of the building you occupy? Yes No Possibly _____________MOVE IN DATE
Month __________________________________________________ Year _________________________________OTHER (Please list any other requirements)____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
LOCATING A NEW BUSINESS ADDRESS
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27C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
vACANCY SummARY FoRm
VACANCY SUMMARYADDRESS ______________________________________________________________________________FLOOR AREAS __________________________________________________________________________RENTAL _______________________________________________________________________________LEASE TERM ___________________________________________________________________________OUTGOINGS ___________________________________________________________________________RENT REVIEWS _________________________________________________________________________SECURITY DEPOSIT ______________________________________________________________________CLEANING _____________________________________________________________________________FACILITIES ______________________________________________________________________________PARKING _______________________________________________________________________________NAMING RIGHTS _______________________________________________________________________CURRENT LANDLORD/OWNER __________________________________________________________CURRENT MANAGING AGENTS ___________________________________________________________REMARKS ___________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Use ths section for details of the property being vacated.
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 228
STRuCTuRING INCeNTIveS
INTROdUCTION
In periods of accommodation oversupply and/or difficult economic conditions, competition for prospective lessees creates a situation whereby various incentives are offered in the market place. The underlying objective of those incentives is to relocate a tenant that would not otherwise consider a move.
When structuring a package, the primary decision to be made is the dollar value of the total package. Once this budget is established, there are a number of ways the incentive may be channelled to the prospective tenant. The model used is determined by the particular tenant’s situation and needs.
Detailed below are a number of alternatives. We have used for a working example, a building for lease with floors of 1440 square metres and a net rental of $200.00 per square metre per annum. (GST has not been included in examples).
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29C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
1. RENT FREE
A rental holiday is the most common form of incentive offered. An incentive of $144,000 equates to a six month rental holiday in the building used as an example. The rental holiday may be analysed in terms of its effect on the rate per square metre per annum as follows:
One year Time Frame
Total Net Annual Rent $288,000
Net Rental Payable $144,000
Less Total Rent Free $144,000
Issues
•Rentonly
•Netoutgoings
Two year Time Frame
Total Net Rental $576,000
Less Total Rent Free $144,000
Net Rental Payable $432,000
Equated Annually $216,000
Divided by Area (1440 m2) $ 150
The effective rental over a two year time frame is $150 per square metre per annum.
The effective rental thereafter is usually dependent upon the effect of rent review provisions in the lease.
Ensure that any incentives do not include outgoings or GST. GST is still payable and you need to ensure the tenant is aware of this when negotiating.
STRuCTuRING INCeNTIveS
INTRoDuCTIoN
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 23030
2. LEASE NEgOTIATION ANd SUBSIdy
This incentive is applicable to large office buildings because of the long construction periods involved.
An approach which can be helpful in certain circumstances involves the offer of professional assistance (presumably gratis) plus a rent subsidy. This approach would normally be used in association with one or more of the techniques described above.
Assume the following:
• Aprospective2,000squaremetretenantwithcurrentspaceof1300squaremetres
• Arentalof$150persquaremetre
• Itsleasetermexpiresinlate2008atwhichtimeathreeyearoptionisavailable
• Thebuildingisnotavailableuntil2009
• Theprospectwantstorelocateandhasattractiveoffersnowtorelocatetoarecentlycompletedbuilding
The problem is to give the tenant a chance to come to the building. If the tenant waits the rent may be more than the client or the tenant wishes to pay.
One approach that can be used in this situation is to offer to act for the prospective tenant immediately in renegotiating its existing lease so that the present term is extended to coincide with the building’s completion date. It may also be possible to offer to pay any increase in rental occasioned by the renegotiation. On top of this, you lump an incentive package on more traditional lines. The rent subsidy involved is not ordinarily large in proportion to the value of the deal, and the tenant must now decide whether to go to the building based on its merits rather than a timing problem.
3. BUILdINg FIT-OUT
Many prospective tenants require a fit-out of the leased premises. Besides the possibility of a cash contribution from the lessor as an inducement, which is unusual, the fit-out may be undertaken by the lessor or the lessee. If the lessor fits out the premises on behalf of the lessee, the lessor usually requires this capital expense to be amortised over the term of the lease.
If a loan or interest bearing debt (e.g. when Lessor provides office fit-out) is discharged by equal payments, thenitissaidtobeamortised.(ThewordamortisationcomesfromtheFrenchword‘amort’meaningatthepoint of death that is killing off a loan by paying it off).
STRuCTuRING INCeNTIveS
INTRoDuCTIoNINTRoDuCTIoN
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PAyINg FOR FIT-OUTS
When considering fit-outs there are several factors that need to be taken into account, particularly for the Lessor, the Lessee and the Real Estate Agent.
AdVANTAgES ANd dISAdVANTAgES FOR THE LESSOR
AdVANTAgES ANd dISAdVANTAgES FOR THE LESSEE
AdVANTAgES ANd dISAdVANTAgES FOR THE REAL ESTATE AgENT
ADVANTAGES
• TheLessorwillownthefixturesattheendofthelease
• Thelesseewillmaintaintheassetsforthelessor
• TheLessorcanclaimataxdeduction (accelerated depreciation over five years)
• Increasedrental
• TherentreviewsbasedonCPIwillincreasetherentandtherefore increase the return
• SecuresLesseeusuallyoveralongerterm
• Increaseincapitalvaluethroughlowercapitalisationrate
• Increasedcapitaloutlay
DISADVANTAGES
• Increasedcapitalrisk
• Possibilityofcreatingaspecialisedbuilding
• Someextrawork
ADVANTAGES
• Thelesseewillhaveaspecificdesignfortheirneeds
• Thehigherrentisataxdeduction
• Thefit-outisnotacapitaloutlaythereforemorecapitalavailable for the tenant which can be invested into their business
DISADVANTAGES
• Thepartitionsbelongtosomeoneelse
• ThetenanthastomaintaintheLessor’sasset
• Higherrent
• HighincreasethroughrentreviewsbyCPI
ADVANTAGES
• Longtermlease
• Higherleasingcommissionthroughhigherrental
• Flexibilityinofferingpackageswillmakeiteasiertoclinchthe deal
• Highersalescommissionthroughhigherrentalandmaybe better capitalisation (could make it easier to sell property)
DISADVANTAGES
• Moreworkload(mayhavetosupplyadditionalinformation)
• Needtoimproveknowledgeoftheprocess (this is really no disadvantage as long as one retains the interest and the desire to learn)
STRuCTuRING INCeNTIveS
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1. LEASE ASSIgNMENTS - WHAT ARE THEy?
Lease assignments come about as a result of an existing lessee wishing to vacate the premises. Where a period of time still remains on their lease, a lessee must assign this remaining portion to a new occupant. In effect, this means the incoming tenant takes over all the terms and conditions applicable to the previous lessee. Lessees and Real Estate Agents must be mindful that if the new lessee defaults on any of the terms and conditions, the previous lessee is responsible. However, in some States the obligations of the old lessee’s guarantor are released on the assignment pursuant to retail tenancies legislation.
2. ASSIgNMENT PROCESS - HOW dOES IT HAPPEN?
The present lessee will notify the Agent requesting help to re-lease their space. At this stage, it is important to establish the reason for re-leasing which may be:
i. Business is contracting
ii. Business is expanding
iii. Change in operation mode e.g. location or space requirements
iv. The lessee receives an offer to purchase their business
It is obvious that if the business is contracting, care must be taken with all negotiations. However, if the business is expanding, the company may not yet have finalised new premises and there may be an opportunity to relocate the company.
Regardless of the reasons for wanting to assign the lease, the Leasing Manager should point out to the current lessee that it is their responsibility to pay commission (where the assignment is to a new lessee located by the leasing manager). The current lessee must confirm in writing the following:
i. Relevant details of the tenancy, especially the remaining lease term and any price they are seeking for fixtures and fittings,
ii. Appointment to Act as their Agent in this matter and thereby,
iii. Agree to pay commission for the successful assignment of the Lease.
leASe ASSIGNmeNTS
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33C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
leASe ASSIGNmeNTS
3. COMMON MISTAKES
Real Estate Agents should ensure that they follow sound business principles when negotiating the assignment of a lease to a new tenant. Some common mistakes to avoid include;
i. Failure to receive an Appointment to Act (legally binding).
ii. Failure to ensure that the appointment comes from the legal lessee and not just the company in occupation. (In the majority of situations they are one and the same).
iii. Failure to get the first month rental and a replacement Security Deposit. This is particularly relevant if the present lessee has assigned due to financial difficulty.
4. ALTERNATIVE TO ASSIgNMENT - NEW LEASES
It is often to the advantage of all parties concerned to re-negotiate a new lease. Often the incoming lessee can offer a better covenant to an owner than the previous lessee. From the previous tenant’s point of view, a new lease frees them from any obligations under the old lease (which in some States is guaranteed by retail tenancies legislation). Ensure that the landlord accepts this outcome. An important factor when considering the possibility of re-negotiating a new lease is what the new market rental could be. Before offering such an alternative to a new lessee, changes to rental and any other terms and conditions should be discussed, approved and finalised with the lessor.
5. CONSIdERATION OF OPTION PERIOdS
It is important to remember that the present lessee’s option period(s) are not part of the actual lease term. Before a lessee can offer an option as part of the lease term that lessee must exercise (i.e. take up) the option. Therefore, if a lessee has been in occupation for two years of a three plus three year lease, only one year remains and not four years (except of course if the option is exercised). In most States, the owner is required to give the lessee as at the last date, the opportunity to exercise any option for renewal.
IF THE LEASE IS A RETAIL SHOPS LEASE OR A RETAIL TENANCy LEASE, IT IS ESSENTIAL THAT THE AgENCy SOURCE OUT THE STATUTORy dOCUMENTATION ANd dECLARATIONS THAT SUPPORT THE ASSIgNMENT PROCESS. THE PENALTIES FOR NON-COMPLIANCE ARE SEVERE.
CAUTION:
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 234
leGISlATIoN
There is State and Federal legislation which needs to be adhered to when undertaking retail leases or commercial property leases.
One should familiarise themselves with the relative Acts in each State:
STATE RETAIL LEASESQueensland www.legislation.qld.gov.au
NSW www.legislation.nsw.gov.au
ACT www.legislation.act.gov.au
Victoria www.sbc.vic.gov.au
Tasmania www.consumer.tas.gov.au
South Australia www.legislation.sa.gov.au
Western Australia www.commerce.wa.gov.au
Northern Territory www.nt.gov.au
Many commercial agentswill come across ‘Retail Leases’which are suitable for smaller retail properties.These leases generally protect people who establish shops or small businesses, such as newsagents, clothing stores, cafes and the like.
If you are managing an industrial property, where for instance, a manufacturing process occurs and the tenant is generally not dealing with the public, then a Commercial Lease would apply.
All the following Acts of Parliament have an influence on leasing property and provisions therein may override a lease or come into play, if a Commercial Lease agreement is silent on a particular matter.
Other State or Commonwealth Acts and Regulations that may bear on a Lease transaction include, but are not limited to: The Franchise Code of Conduct, Hotel and Liquor Licensing, The Corporations Act and The Fair Trading Act 1999.
• StrataTitlesAct1985(asamended)
• CommercialTenancy(RetailShops)Agreements Act 1985
• SmallBusinessCommissioner(Victoria)
• TransferofLandAct1893–1972
• LandAct1933
• LandAmendmentActNo14of1986
• PropertyLawAct1969
• TradePracticesAct1999
• PrivacyAct1988
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leGISlATIoN leASe SYNoPSIS FoRm
This form provides a summary overview of the lease on a property. The form provides a guide to determining lease reviews and options.
LEASE SYNOPSIS FORMPROPERTY: _____________________________________________________________________________DATE: _________________________________________________________________________________TENANCY NUMBER: ____________________________________________________________________TENANT: ______________________________________________________________________________ADDRESS: _____________________________________________________________________________CONTACT PERSON: _____________________________________________________________________AREA OF PREMISES: _____________________________________________________________________USE: __________________________________________________________________________________COMMENCEMENT DATE: ________________________________________________________________TERM: _________________________________________________________________________________FURTHER TERM (OPTION): ________________________________________________________________RENT: ___________________________________________________ DUE: _________________________RENT REVIEWS: _________________________________________________________________________LAST REVIEW: __________________________________________________________________________NEXT REVIEW: _________________________________________________________________________TENANTS RESPONSIBILITY FOR OUTGOINGS: ______________________________________________TENANTS INSURANCE: __________________________________________________________________SECURITY DEPOSIT: _____________________________________________________________________CAR PARKING: __________________________________________________________________________GUARANTOR: __________________________________________________________________________COMMENTS: ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 236
The Commercial Property Leasing Form is similar to the forms used in property management, however is not as reliant on the physical features of the property. It provides the Leasing Manager with a template for the description of the property and relevant lease negotiations. Whilst it is important to gather as much information about the property as possible, agents should be concerned primarily with the financial and administrative aspects of the lease.
leASING FoRm
PROPERTY FOR LEASE: ____________________________________________________________________________________
OFFICE RETAIL INDUSTRIAL
LISTING AGENT ______________________________________________ LISTING DATE: _____________________________
TYPE OF AGENCY ____________________________________________ APPOINTMENT TO ACT: _____________________
LOCATION
Building Name: ____________________________________________________________________________________________
Address: _________________________________________________________________________________________________
Address: _________________________________________________________________________________________________
Postcode: _________________________ State ______________________ Map ref: ____________________________________
OWNER
Owner’s Name: ___________________________________________________________________________________________
Contact’s Name: ___________________________________________________________________________________________
Address: _________________________________________________________________________________________________
Address: _____________________________________________________ Postcode: ___________________________________
Office No: ___________________________________________________ Mobile No: __________________________________
LEASE PRICE AND TERMS SUB-LEASE DIRECT LEASE ASSIGNMENT
Rental (P.A.): __________________________________________________ ($___________________________ Per Sq Mtr)
Term of Lease required: _____________________________________________________________________________________
Rent review provisions: _____________________________________________________________________________________
Further Terms: ____________________________________________________________________________________________
Further Term Rent: _____________________________________________ Year 1: ______________________________________
Outgoings payable: _________________________________________________________________________________________
Operating costs payable: ____________________________________________________________________________________
Insurance: ________________________________________________________________________________________________
Security Deposit: __________________________________________________________________________________________
DESCRIPTION
Land area (sq m): ______________________________________________ Land dimensions: _____________________________
Office area (sq m): _____________________________________________ No. of floors: ________________________________
Average floor size: _____________________________________________ No. of rises: __________________________________
Class of buildings: ______________________________________________ Suitability: ___________________________________
Appearance: __________________________________________________ Natural light: _________________________________
Views/outlook: ____________________________________________________________________________________________
Major tenants: _____________________________________________________________________________________________
Other space available: _______________________________________________________________________________________
Airconditioning: _______________________________________________ Kitchen/tea room: _____________________________
Floor construction: _____________________________________________ Window furnishings: ___________________________
Floor coverings: _______________________________________________ Ceiling treatment: _____________________________
Lifts: ________________________________________________________ Normal building hrs: ___________________________
Hours of access: _______________________________________________ Loading facilities: ______________________________
Partitions: ____________________________________________________ Parking: _____________________________________
Resident Caretaker : ________________________________________________________________________________________
Building Manager: __________________________________________________________________________________________
Plans available: ________________________________________________ Date of possession: ____________________________
Inspection Arrangements: ____________________________________ Fee arrangements: _________________________
Comments: _______________________________________________________________________________________________
________________________________________________________________________________________________________
COMMERCIAL PROPERTY LEASING FORM
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37C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
eSTImATING YIelDS AND ReNTS
Yield is deemed to be the profit that one makes on a particular venture. In the case of commercial property, it is said to be the money derived by way of income or profit from a property deal.
The simple formula for calculating yield is:
yield = Annual Rental / Amount Paid for the property
Eg: 45,000 / 750,000 = 6%
Whilst this is mathematically correct, it does not take into account the expenses incurred to maintain a property. Hence, when calculating property performance, it is wiser to calculate an internal rate of return, rather than just yield. This is covered separately.
So, whilst yield is easy to calculate, the property manager and, in particular, the property owner, must consider many factors associated with the property.
Factors to consider before estimating appropriate yield:
• Allcomponentsoflandandimprovementsaspersummationapproach
• Relativityofrentlevelstoothersinlocality
• LengthofLease(s)
• StrengthofLease(s)
• Securityofincomestreami.e.Guarantees
• Locationi.e.Locationsalesreflectdifferentyields
• Prevailinginterestrates
• Prevailingmarketconditions
• Pricelevelorrange
• Taxationallowancesparticularlyconstructioncostwrite-offs
• Allowabletaxdeductions
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 238
eSTImATING YIelDS AND ReNTS
SUMMATION CALCULATIONS
The Agency may be asked to determine the sale price on a property; several factors need to be considered in order to complete this calculation. When completing a summation calculation both the income derived from the property, as well as the expenses incurred, need to be taken into account; in so doing, the dollar value per square metre per annum will then be calculated. In completing this calculation, add up all of the incomes and all the expenses against the property. Then next calculate the per square metre rate and subtract the expenses from the income.
It is necessary to consider the following:Property, Location, date
Income
• Rentalincome• Percentagerent(andbasedetails)• Licences(alltypes)• Electricity• Cleaning • Signage• Miscellaneous • Outgoingsrecoveriesandbaseyears• Outgoingsbycategoriesandtenantscharges
Total Income Per Sq Mtr Per Annum
$________________ (A)
Net amount Per Sq Mtr is then (A) minus (B)
When this has been calculated, and in view of the owner’s required return, determine the rent to charge.
Expenses
• Statutories • Insurance• Liftmaintenance • Security• RepairsandMaintenance • Cleaning• Landscaping• Staff• Carpark• Airconditioning• CapitalExpenditure• Sinkingfund• LegalExpenses
Total Expenses Per Sq Mtr Per Annum
$________________ (B)
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39C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
eSTImATING YIelDS AND ReNTS
Expenses
• Statutories • Insurance• Liftmaintenance • Security• RepairsandMaintenance • Cleaning• Landscaping• Staff• Carpark• Airconditioning• CapitalExpenditure• Sinkingfund• LegalExpenses
Total Expenses Per Sq Mtr Per Annum
$________________ (B)
Many methods are used to evaluate and compare investment projects and / or properties. Net Present Value and Internal Rate of Return are two of the more commonly used financial models used and these are all based on projected cashflows which are discounted to reflect the time value of money. Consequently, these are known as discounted cashflow (DCF) methods.
The net present value (NPV) is equal to the difference between the present value of the net cashflows generated by a project and the initial cash outlay.
In terms of the property, these terms would be:
• Purchasepriceoftheproperty• Netongoingrentperannumreceivedbytheowner• Netoutgoingsfromtheproperty• Life(orlengthoftime)thattheownerwillholdtheproperty• Requiredrateofreturn
NPV = - Co
This may be written as:
NPV = - Co
The Internal Rate of Return (IRR) is the rate of return that equates the present value of the net cashflows generated by a project with its initial cash outlay.
IRR = - Co
Thus IRR may be written as:
NPV = - Co = 0
Ct__________
t(1+ k)
∑
∑Ct
__________t
(1+ r)
C1__________
(1+ k)
C2__________
2(1+ k)
Cn__________
n(1+ k)
+ +
C1__________
(1+ r)
C2__________
2(1+ r)
Cn__________
n(1+ r)
+ +
Whilst the formulae provide useful background information, the calculations may be done easily using Microsoft Excel.
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 240
leASING AReA ACTIvITY RePoRT
The leasing area activity report is to be used to assess the market place and the potential for growth in property leasing. The report assists the Leasing Manager by providing a snapshot of the available space currently in the market.
FOR MARKET SEGMENTS - CBD, INDUSTRIAL, RETAIL MONTH: ____________________________
LEASING AREA ACTIVITY REPORT
1 - 5000 5001 - 10000 10001 - 20000 20001 - 30000 30001 & OVER TOTAL M21. Total area available at
start of monthCOMMENT
2. Areas leased during month
COMMENT3. Sub total
COMMENT4. Additional area available
COMMENT5. Total area available at
end of monthCOMMENT
1. Total area available at start of monthCOMMENT
2. Areas leased during month
COMMENT3. Sub Total
COMMENT4. Additional area available
COMMENT5. Total area available at
end of monthCOMMENT
1. Total area available at start of monthCOMMENT
2. Areas leased during monthCOMMENT
3. Sub Total
COMMENT4. Additional area available
COMMENT5. Total area available at
end of monthCOMMENT
TOTALS:
CB
DIN
DU
STR
IAL
RET
AIL
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leASING AReA ACTIvITY RePoRT
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C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2 43
SeCTIoN 2
PROPERTY MANAgEMENT
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 244
PRoPeRTY mANAGemeNT
WHAT IS PRoPeRTY mANAGemeNT?
Many sales people start their real estate career in property management as it forms the basis for understanding properties and what is involved in the ownership and leasing of a property. A property under management may be owned by a corporation as part of a wider portfolio or by investors who may own one, two or three properties.
Property management may be defined as the activity involving the lease and management of property on behalf of the property owner. There is more to managing a property than just finding a suitable tenant, leasing and then collecting rent. Property management is about ensuring that the owner’s asset is looked after and that the owner achieves the returns that they are expecting.
In managing this asset on behalf of the owner, the agent will become involved in repairs and maintenance, undertaking inspections and completing condition reports and, in some cases, even locking a defaulting tenant out of the premises.
The activities that you could expect to undertake as a property manager include:
• Prospectingforpropertiesandorlandlords• Listingproperties• Communicatingwithlandlords• Promotingandmarketingaproperty• Processingtenancyapplications• Preparinginformationmemorandums• Preparingandprocessingtenancydocuments• Undertakingregularpropertyinspections• Propertymaintenance• Undertakingrentreviews• Renewingleases• Assistingtenantswithexercisingoptions• Assigningleases• Terminatingleases• Resolvingdisputes• Carryingoutevictions,ifnecessary
Commercial, industrial and retail leasing differs from residential property leasing, however, the principles are identical when it comes to conducting oneself and undertaking the actual tasks involved on a day to day basis.
The property manager needs to be mindful of the relative legislation (refer to Section 1 Leasing) and all activities need to be conducted in an ethical manner.
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PRoPeRTY mANAGemeNT BuDGeT
In all businesses, it is important to develop and maintain a strict budget. Once a budget has been developed, it must be reviewed for accuracy and adhered to during the reporting period. This section covers essential elements of the Property Management budget process.
The objective of this section is to:
• Outlinethebudgetprocess• Establishabudget• Explaincashflowandincome• Outlineexpenses
There is no mystery to budgeting and accounting. In fact, it encourages one to analyse the implications of tenancy and building management in advance. Budgeting is not an exact science. It is an estimate based on current information backed by professional judgement.
Although budgeting and accounting can be time consuming, it is one aspect of property management which is very thought provoking, if not satisfying, and provides a welcome change from some of the more routine daily tasks carried out by Property Managers such as organising repairs and maintenance etc.
Many Property Managers cringe when it comes to budget time. But for the astute Property Managers who work with good accounting records of previous years’ income and expenditure, budgeting isn’t difficult.
Before getting into the actual budget preparation, let’s look at why Property Managers prepare budgets.
Property investments are measured against one another and need to:
• Provideincome• Providecapitalgrowth• Provideareturnoninvestment
Budgets are developed to:
• Provideanestimateofcosts,revenuesandresources• Reflectmanagementsreadingofthefuturefinancialposition• Provideaplanofactionforachievingquantifiableobjects• Determineastandardformeasuringfinancialperformance• Determinecorrectiveactionwheretherealityfallsshortofthebudget• Assistandguideexpenditureandinvestmentdecisions
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BUdgET PREPARATION
It is much easier to prepare budgets where you have past records available for the property.
The exercise is more difficult and time consuming when preparing a budget for a new development as you are dealing with many unknowns and assumptions.
The following is required:
1. Up to date and accurate tenancy schedule
2. Alert date Report or Property diary
Containing details of property and tenancy events in the forthcoming year e.g. rent review and lease expiry dates, car parking review dates, contract review dates, insurance renewal etc.
3. Statement of Income and Expenditure Accounts for the past year
Your accounting system will provide you with detailed reports of property transactions for the previous 12 months. Particularly useful is a detailed expense report which separates all items of expenditure under their respective codes.
4. details of any income or expenditure which may not be recorded
There may be some expenses paid by the owner directly and not recorded on the property account. These need to be identified and determined if they are required in your budget.
5. Rental Information
Investigate likely rental and car parking increases which will be achievable on review during the forthcoming year. Obtain rental information on comparable properties, and results of recent reviews.
6. Statutory Outgoings
Make enquiries of rating and taxation authorities concerning likely assessments for the forthcoming year. Be aware of when rates and taxes revaluations are due or carried out.
7. Operating Expenses
Investigate likely increases for operating expenses, for example. • Newmaintenancefeespayableuponcontractrenewal. • CPIadjustmentsoverprevious12months. • Changestoelectricityandgastariffrates. • Changesincleaningawards. • Previewanylikelycapitalormajorbuildingrepairandmaintenanceexpenditure.
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EXPENdITURE BUdgET
a. Variable Outgoings
On a monthly basis estimate expenditure, including rates and taxes, under the PCA Chart of Accounts headings. Keep working notes on each category of expenditure which record your assumptions.
It is helpful to have an expenditure record of the previous year in order to assess the likely costs and timing of when the expenditure will be incurred e.g. month in which insurance premium is payable, items paid annually, quarterly, monthly etc. You may not be able to calculate management fees at this stage unless it is a fixed fee.
b. Owner’s Costs
Estimate owner’s costs such as rent review fees, leasing fees, capital expenditure, structural and owner’s repairs and maintenance. Show these items for the months in which they are expected to be incurred.
PRoPeRTY mANAGemeNT BuDGeT
When preparing a budget prior to the end of the outgoings year, use as many months actual expenditure for the current year and estimate the expenditure to be incurred for the balance of the year. Don’t use the current year’s budget as the basis for next year’s budget. You should also review last year’s actual income and expenditure against budget projections to ensure that no significant variations have occurred which might affect your budget e.g. rent review not completed at year end.
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INCOME BUdgET
a. Rental
Assess the anticipated rental and car parking income on a monthly basis having regard for the applicable rent review dates. Naming rights, signage rights etc. should also be assessed if applicable.
b. Recoverable Outgoings
Calculate the recoverable outgoings for each tenant using the expenditure budget and having regard for those leases where outgoings are not fully recoverable (e.g. increases in outgoings only payable) or not at all recoverable.
Apportion the recoveries on a monthly basis.
Management Fees
Where management fees are on the basis of a percentage of gross receipts, in the case of net leases, the following procedure may be followed to calculate management fees for the year:
1. Calculate gross income (including variable outgoings, rates and taxes etc.) but excluding management fees and apply the applicable management fee percentage to the resulting figure,
2. Then calculate the management fee recoverable on management fees (refer 1 above) and add to the original management fee calculated,
3. Apportion the total management fee on a monthly basis to the variable outgoings expenditure schedule.
4. Complete the variable outgoings and income budgets.
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NET INCOME
The final calculation of the budget will appear as follows:
gross Income
Less Variable Outgoings
Less Owners Costs
__________________
= Net Income
Generally, the budget is forwarded to the building owner for approval so that you may proceed to charge the tenants the revised outgoings from the commencement of the outgoings year. Always get the building owner’s approval of the budget in writing.
Accounting systems are able to produce monthly property performance reports which are submitted to the owner and compare actual income and expenditure each month relative to budget figures. This report is very useful, particularly for expenditure, as you are able to carefully monitor expenses and take corrective action where necessary.
At the end of the outgoings year, the actual expenditure may then be calculated and the tenant’s charges adjusted accordingly.
It should be noted that the Retail Tenancies Act provides that for such premises, the owner must provide actual expenditure statements to the tenants within three months of the end of the outgoings year and these are to be audited by an accountant.
Make sure you know the requirements of this Act in your State.
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NET INCOME
Whilst budgets may differ from office to office, the principles are the same. Once you prepare a budget, it may look like this:
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL 12 MONTHS
LEASE (PCM) 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
SIGNAGE RIGHTS 500 500 500 500 500 500 500 500 500 500 500 500 6000
OUTGOINGS
RECOVERED150 150 150 150 150 150 150 150 150 150 150 150 1800
BODY CORPORATE FEES 100 100 100 100 100 100 100 100 100 100 100 100 1200
GROSS INCOME 3750 3750 3750 3750 3750 3750 3750 3750 3750 3750 3750 3750 45000
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC TOTAL 12 MONTHS
MAINTENANCE 200 150 100 50 0 0 140 140 125 120 140 120 1285
REPAIRS 120 0 100 0 0 0 150 150 300 300 0 0 1120
MANAGEMENT FEE 4%
OF LEASE AMOUNT120 120 120 120 120 120 120 120 120 120 120 120 1440
OUTGOINGS 150 150 150 150 150 150 150 150 150 150 150 150 1800
BODY CORPORATE FEES 100 100 100 100 100 100 100 100 100 100 100 100 1200
LOAN REPAYMENTS 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 30000
GROSS EXPENSES 3190 3020 3070 2920 2870 2870 3160 3160 3295 3290 3010 2990 36845
NET INCOME $560 $730 $680 $830 $880 $880 $590 $590 $455 $460 $740 $760 $8,155
INCOME
EXPENSES
BuDGeT - PRoPeRTY mANAGemeNT
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The terms and conditions of a lease will always vary and Property Managers need to be mindful of the need to undertake regular reviews of the tenanted property and the lease agreement that relates to that property. The following section will guide you through the various aspects of undertaking a rent review and the implications that this will have for yourself and the landlord of the property.
OBJECTIVE OF THE RENT REVIEW PROCESS
• Maximiseprofitabilityofleasing
• Undertakethereviewinaprofessionalmanner
• Avoidmistakesormisunderstandings
• Marketrentreviewsneedtoensurefairnesstobothparties
• Recognisetheproperty’svalue
• Ensurerentalisfairandreasonable
IS THE LEVEL OF RENT IN LINE WITH THE MARKET?
• Thismayforcethetenanttoburdenadditionalcosts,ultimately,resultinginthelossofthetenant
• Couldencouragethetenanttoseekanalternativepropertytolease
• Beawareofthevaluationmethodologyapplicabletomarketrentalreviews
If the rents are too low:
• ThePropertyManagermayfeelthattheydonotneedtostrivehardertoincreasesaleswhichcouldlead them to lose their competitive edge
• Itmaybeunfairtothelandlord
• Thetenantmaynotvaluethepropertyandtheleaseagreementinthesamewayasiftheywerepayinga higher rent
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STEP 1 – THE LEASE AgREEMENT
Read and understand the lease. It is the essential element of the agreement
• Ensurethatyouhavereceivedthecorrectdocument(s)• Checkthatitissigned,datedandstamped(whereapplicable)• Preparealeasesummaryofcommercialtermsand,inparticular,anyspecialconditions• Ensurethatyouhaveathoroughunderstandingoftheleaseagreementandanyrelateddocumentation
Pre-determined rent reviews
• RequiresthePropertyManagertowritetothelesseeremindingthemthattherentistobeincreased
In undertaking a rent review on behalf of an owner:
• Obtainacopyoftheleaseandanyvariationsoflease,assignmentsofleaseorotherleaserelateddocumentation
• Readalltheleasedocumentationbeforeyouproceed
• ObtainacopyofthePropertyInformationForm
• Obtainacopyoftheletteranddocumentation-copytothelessee-confirmingyourappointmenttoact
• Obtaincopiesofallcorrespondenceinrelationtothismatter
• Obtainascheduleofoutgoingsfortheproperty
• Obtainplansforthetenancy
• Obtainapointofcontactwiththelessee
• Ascertainifallrelevantnoticesrelatingtotherentalreviewand/ortheexerciseoftheoptionforafurther term have been given to the tenant
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Read the lease documents closely to accurately determine the rent review cycle, and the method of review
• Specialattentionmustbegiventotherecoveryofoutgoings• Determinetheresponsibilitiesofthetenant,andthenoticesrequiredtobegiven• Theoutgoingsprovisionneedstocoverthefollowingitems:
1. All user charges such as gas, electricity, phone and excess water2. Rates and Taxes and Body Corporate Charges and Special Levies (if any)3. Airconditioning - operating and maintenance charges4. Insurance premiums for
• Fullreplacementvalue• PublicRisk• PlateGlass• UsualBusinessRisks
5. All charges connected with the lessee’s business6. Repairs, maintenance and cleaning apart from repairs of a structural nature7. Compliance with any statutory requirements for the premises
There are three separate occasions in landlord tenant relationships when the question of establishing market rental generally arises.
These are:
a. The granting of lease to a new tenantb. A scheduled rent reviewc. A lease renewal to an existing tenant
Market rent is the best rent that might reasonably be expected assuming:
• Awillinglessorandlessee(withneitherpartyactingunderduress)• Areasonableperiodinwhichtonegotiatetheletting• Valuesremainstaticduringthelettingperiod• Thepropertyisfreelyexposedtothemarket• Noaccountistakenofanyhigherpriceorrentthatmightbepaidbyapartywithaspecialintereste.g.an
adjacent occupier• Rentalforcomparablepremises• Industryratioofrentalbasedonarea
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STEP 2 – INSPECTION
A property inspection is to be conducted annually. Refer to the Property Condition Report, noting;
• Thestandardofaccommodation
• Thestructureoftheproperty
• Areaofpremises
• Useofthepremises
STEP 3 – COLLATION OF COMPARABLE EVIdENCE
It is always useful to gather information from the market on comparable properties. This information may be gathered from;
• Otheradvertisedpropertieswithsimilarfeatures
• Theinternet
• Newspaperadvertising
• Commercialrealestateagents
• Propertiesinyourportfolio
• Historicaldata
• Rental/Arearatios
STEP 4 – REPORT TO THE LANdLORd
Report your findings and recommendation to the landlord or client for their consideration and instructions. You need to be mindful to provide information that is relevant to the property. If you provide information, which has no bearing or relation to the existing property, this could mislead or confuse your landlord and hinder negotiations and the determination of a market rental.
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RENTAL dETERMINATION
If the landlord and tenant are unable to agree on a rent then there must be a mechanism to resolve the difference. Subject to the terms of the lease, options for dispute resolution include:
• Appointingavaluer,beingmindfulthatthevaluershouldhaveregardtothetermsandconditionsofthelease agreement
• Askingthevaluertoactasanexpert,notasanarbitrator
• Seekingindependentadvice
CASE STUdy
An example of a standard lease for AMP for office premises in Australia was that the landlord advises the tenant in writing of its opinion of market value.
• Thetenantthenhas14dayswithinwhichtoobjecttotheproposedrental.Ifhedoesn’tobjectthenthe proposed rental becomes the rent
• Ifthelandlordreceivesthelessee’snoticeoftheirobjection,thelandlordandtenantthenhaveafurther14 days to appoint their own valuers
• Thetwovaluersthenhave21daysfromtheexpirationofthesecond14dayperiodtoreachagreement
• If the twovaluers fail toagreea third valuer,who iseithermutuallyappointedby the twovaluersor appointed by the President of The Institute of Valuers, then has a further 21 days within which to deliver their determination with reasons
Many companies would find it especially difficult to obtain expert advice within a 14 day period on whether the asking rent was market value or otherwise. So, if you see a clause with a very tight time frame (eg: 14 days), consider advising your client to allow at least a 21 day period for the tenant to satisfy themself on market reviews and to reach an agreement.
Rent and lease reviews, if handled correctly, will benefit all parties. The benefits include:
• Thelandlordwillachieveahigherreturn
• Theagenthasanincreaseinmanagementfees
• Thetenantwillhavealandlordmorewillingtoimprovetheproperty
• Thetenantwillhavecomfortthatthetermsoftheagreementarefixedandnotsubjecttounexpectedchanges during the lease period
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PRoPeRTY l IST ING FoRm
Once you have a signed authority to manage your client’s property, you should complete a property listing form. When listing commercial property for lease, it is important to gather as much information as possible about the property and the proposed lease. There are two forms which may be used to gather, collate and enter the information into your office’s property management system.
The two forms which may be used are:
• SummaryPropertyListingForm
• DetailedPropertyInformationForm
Both forms will be extremely useful and will assist the property manager and even the office’s sales people to identify key features of a property and the lease that will be on offer.
The summary form may be used in conjunction with the Authority / Appointment to Act and if there is insufficient room, attachments may be used and kept on file.
The Detailed Property Information Form is to be used where the property manager requires detailed information on the property under management.
PROPERTY FOR LEASE: ____________________________________________________________________________________
OFFICE RETAIL INDUSTRIALLISTING AGENT ______________________________________________ LISTING DATE: _____________________________
TYPE OF AGENCY ____________________________________________ APPOINTMENT TO ACT: _____________________
LOCATIONBuilding Name: ____________________________________________________________________________________________
Address: _________________________________________________________________________________________________
Address: _________________________________________________________________________________________________
Region/Geograpic Code: _________________________________________State _________________ Map ref: ______________
Title Particulars: ___________________________________________________________________________________________
OWNEROwner’s Name: _______________________________________________ Contact’s Name: ______________________________
Address: _________________________________________________________________________________________________
Address: _____________________________________________________ Postcode: ___________________________________
Business Ph: __________________________________________________ Private Ph: __________________________________
Email: ___________________________________________________________________________________________________
LEASE PRICE AND TERMS SUB-LEASE DIRECT LEASE ASSIGNMENT
Rental (P.A.): __________________________________________________ ($___________________________ Per Sq Mtr)
Term of Lease required: _____________________________________________________________________________________
Rent review provisions: _____________________________________________________________________________________
Further terms: ____________________________________________________________________________________________
Further term rent: _____________________________________________ Year 1: ______________________________________
Outgoing costs payable: _________________________________________ Operating costs payable: ________________________
Insurance: ____________________________________________________ Security Deposit:______________________________
DESCRIPTIONLand area (sq m): ______________________________________________ Land dimensions: _____________________________
Office area (sq m): _____________________________________________ No. of floors: ________________________________
Average floor size: _____________________________________________ No. of rises: __________________________________
Class of buildings: ______________________________________________ Suitability: ___________________________________
Appearance: __________________________________________________ Natural light: _________________________________
Views/outlook: ________________________________________________ Age of building: _______________________________
Major tenants: _________________________________________________ Car parking available: __________________________
Other space available: ___________________________________________ Security arrangements: ________________________
Airconditioning: _______________________________________________ Common areas: ______________________________
Floor construction: _____________________________________________ Kitchen/Tea Room: ____________________________
Floor coverings: _______________________________________________ Window furnishings: ___________________________
Lifts: ________________________________________________________ Ceiling treatment: _____________________________
Hours of access: _______________________________________________ Normal building hrs: ___________________________
Partitions: ____________________________________________________ Loading facilities: ______________________________
Normal building hrs: ____________________________________________ Sanitary Conveniences: _________________________
Resident Caretaker : ________________________________________________________________________________________
Building Manager: __________________________________________________________________________________________
Plans available: ________________________________________________ Date of possession: ____________________________
Inspection Arrangements: ____________________________________ Fee arrangements: _________________________
Comments: _______________________________________________________________________________________________
________________________________________________________________________________________________________
SUMMARY COMMERCIAL LISTING FORM
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PRoPeRTY l IST ING FoRm PRoPeRTY INFoRmATIoN FoRm
When considering the physical attributes of a property, it is often very difficult to remember every aspect of that property. Features such as area, the number of delivery or loading docks, meeting rooms and general fit out can easily be lost when you have many properties under management or being listed in your office.
A ‘DetailedProperty InformationForm’has been designed to enable sales and administrative personnel to list the substantive features of the property. This form, once completed, may be used by the office administrative staff whereby the information can be uploaded into the property management files (Platform) and maintained for future reference.
PROPERTY INFORMATION FORM - DETAILEDPROPERTY ADDRESS: ____________________________________________________________________
DIMENSIONS / AREA:_____________________________________________________________________
TITLE PARTICULARS: _____________________________________________________________________
OWNERGST REGISTERED Yes No
ABN Yes No
POSTAL ADDRESS: _______________________________________________________________________
SUBURB: _________________________________________________ STATE: ______ P/CODE: ________
PHONE: _________________________________________________ FAX:_________________________
EMAIL: _________________________________________________________________________________
MANAGEMENT FEE: _______________________________________ AUTHORITY DATE:_____________
BUILDER / INSURERMAINTENANCE Plumber: _______________________ Electrician: _____________________________
SOLICITOR:___________________________________________________________________________
PHONE: ________________________________ eMAIL: ________________________________________
LESSEE: _______________________________________________________________________________
TRADING AS: ___________________________________________________________________________
POSTAL ADDRESS: _______________________________________________________________________
SUBURB: _________________________________ ________________ STATE: ______ P/CODE: ________
OFFICE PH: ______________________________ FAX: ________________________________________
MOBILE: _________________________________ eMAIL: _______________________________________
USE OF PREMISES: _______________________________________________________________________
COMMENCEMENT DATE: _________________________________________________________________
COMMENCING RENTAL: $_________________ pa payable $ ______________________ p.c.m
LEASE TERM: _____________________________ OPTIONS: _____________________________________
REVIEW METHOD: _______________________________________________________________________
OUTGOINGS
Council Rates Paid by Owner / TenantWater Rates Paid by Owner / TenantB/Corp Fees Paid by Owner / TenantPlate Glass Ins. Paid by Owner / TenantPublic Liability Ins. Paid by Owner / TenantBuilding Ins. Paid by Owner / TenantWaste Removal Paid by Owner / Tenant
Landscaping Paid by Owner / TenantSecurity Costs Paid by Owner / TenantBuilding Management Paid by Owner / TenantBuilding Promotion Paid by Owner / TenantAdministration & Management Paid by Owner / Tenant
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CouNCIl RATeS AND ouTGoING CHARGeS
Property Managers should be well aware of the rates and outgoing charges applicable to a particular property. Utilising a Council Rates Information Checklist enables the Property Manager to clearly identify and list all of the statutory charges applicable. It is also useful during discussions with the tenant or the landlord where they may be reviewing the returns and financial performance of a property.
REG. PROPRIETOR ________________________________________________________________________________________
PROP. ADDRESS __________________________________________________________________________________________
______________________________________________________________________
LAND AREA: _____________________________________________________________________________________________
CURRENT ______________________________________________________________________
PREVIOUS
RATEABLE VALUE ________________________________________________________________________________________
ASSESS NO. ______________________________________________________________________________________________
GEN. RATE ______________________________________________________________________________________________
WATER RATE ____________________________________________________________________________________________
INSURANCE _____________________________________________________________________________________________
CURRENT COVER ________________________________________________________________________________________
POLICY NO. _____________________________________________________________________________________________
BROKER ________________________________________________________________________________________________
PERIOD OF INSURANCE __________________________________________________________________________________
CLEAN OR REFUSE RATE __________________________________________________________________________________
SEWERAGE RATE ________________________________________________________________________________________
PEDESTAL RATE __________________________________________________________________________________________
TOTAL PER QUARTER _____________________________________________________________________________________
NOTES: _________________________________________________________________________________________________
________________________________________________________________________________________________________
________________________________________________________________________________________________________
________________________________________________________________________________________________________
SEARCH REQUESTED BY: __________________________________________________________________________________
COUNCIL RATES INFORMATION - Checklist
REGISTERED PROPERTY DESCRIPTION
VALUER GENERAL / DATE
VALUER GENERAL / DATE ______________________________________________________________________
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CHARACTERISTICS OF A COMMERCIAL PROPERTY - CHECKLIST
PROPERTY ADDRESS: ____________________________________________________________________
TENANT: _________________________________________________ DATE: _______________________
PROPERTY CLASSIFICATION
COMMERCIAL OFFICE Yes No RETAIL Yes No
INDUSTRIAL Yes No WAREHOUSE Yes No
OTHER Yes No
PROPERTY CLASSIFICATION
CAR PARKING OPEN
UNDERCOVER
BASEMENT
SUBURBAN CENTRAL CITY
HIGH RISE LOW RISE
FLOOR SURFACE CARPETS
MULTIPLE TENANTS SINGLE TENANT
AIRCONDITIONING HEATING
LIGHTS
ELECTRICAL
HYDRAULICS STRUCTURAL - FLOOR LOADINGS
TOILETS - TEA ROOM ROOF AREA
WINDOW CLEANING AWNINGS
FOYERS
DIRECTORY BOARDS
CEILING HEIGHTS - TYPE ATRIUMS
STANDBY POWER SECURITY - CARD KEY
WINDOWS - GLAZING EXTERNAL CLADDING
COLUMNS PLANT ROOMS
WASTE COLLECTION STAFF STORAGE
CouNCIl RATeS AND ouTGoING CHARGeS PRoPeRTY CHARACTeRIST ICS
Property Managers need to have a full understanding of the characteristics of commercial, retail and industrial properties. The Commercial Resource Centre Disk contains several property checklists which may be used by those new to property management. They will assist to get a good understanding of a particular building and its features.
Whilst the checklists may appear similar to each other, they actually focus on the physical and structural elements of the building rather than the condition of the building.
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PRoPeRTY INSPeCTIoN AND CoNDITIoN RePoRT
A Condition Report is completed by the property management department and it provides a record of the condition of a property at the time that an inspection is carried out. The Condition Report is useful in identifying and recording defects or damage in buildings.
The‘ConditionReport’istobeused:
• Whenenteringanewleaseagreement,
• Whennewtenantstakeupthelease,
• Onanannualbasis(recommended)
If there are any defects in the property these are to be noted and acknowledged by the tenant and the landlord.
Key aspects of a property noted in the Inspection and Condition Report are:
• Externalwalls
• Mechanical,dataandelectricalservices
• Internalwallsandtheirfinishes
• Landscapingandexternalworks
• Roofs
• Staircasesandescapes
• Superstructure
• Substructure
• Floors
• Ceilings
• Fitments
Use the last page of the Condition Report to acknowledge the date the inspection was carried out. Be sure that you and the tenant sign the form before presenting the report to the landlord. Once completed ensure that the tenant receives a copy and that a copy of the Condition Report goes on the Property File.
Above is an extract of a condition report; a copy of the full report may be accessed on the disk included in this manual.
BUILDING: _____________________________________________________________________________________
LOCATION: ____________________________________________________________________________________
OWNER: ___________________________________________________________ DATE:_____________________
EXTERNAL WALLS
CONCRETE ______________________________________________________________________________
MASONRY
BRICK _____________________________________________________________________________
BLOCK _____________________________________________________________________________
PRECAST CONCRETE
STRUCTURAL
CLADDING
TILT-UP SLABS ____________________________________________________________________________
METAL CLADDING ON GIRTS ______________________________________________________________
PRECAST GRC ___________________________________________________________________________
MARBLE/GRANITE CLADDING ______________________________________________________________
CURTAIN WALLS _________________________________________________________________________
FRAMELESS GLAZING _____________________________________________________________________
SHOPFRONTS ___________________________________________________________________________
WINDOWS
FIXED _____________________________________________________________________________
SLIDING ___________________________________________________________________________
PIVOTED ___________________________________________________________________________
DOUBLE GLAZED ___________________________________________________________________
INTERNAL BLINDS ___________________________________________________________________
SOLAR CONTROL ___________________________________________________________________
HOODS ___________________________________________________________________________
BLINDS ____________________________________________________________________________
CURTAINS _________________________________________________________________________
FILM _______________________________________________________________________________
PROPERTY INSPECTION AND CONDITION REPORT
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PRoPeRTY INSPeCTIoN AND CoNDITIoN RePoRT oFFICe BuIlDING INSPeCTIoNS
Office buildings differ from industrial warehouses and retail shops and include common areas such as foyers and tenant areas used by all persons entering or using the office building. Service areas and plant rooms are areas of a building, not normally accessed by most in the building, however they still require regular maintenance and upkeep.
The Office Building Inspection Form will be very useful for Property Managers and tenants to undertake regular inspections of a commercial office building. As with the Property Inspection and Condition Report, Office Building Inspections are to be carried out:
• Whenenteringanewleaseagreement
• Whennewtenantstakeupthelease
• Onanannualbasis
An Office Building Inspection Form may be used when undertaking and completing inspections and condition reports of office buildings.
PUBLIC FLOOR AREAS
OK NOT OK REMARKS/COMMENTS
LIGHT FIXTURES/ALL ASPECTS OF LIGHTING ___________________________________________________________________LIGHT DIFFUSERS ___________________________________________________________________CEILING TILES ___________________________________________________________________WATER FOUNTAIN/PRESSURE ___________________________________________________________________
THE ELEVATOR PENTHOUSE
OK NOT OK REMARKS/COMMENTS
NUMBERING ON MOTOR CONTROL DISCONNECTS ___________________________________________________________________AMPLE LIGHTING ___________________________________________________________________FIRE EXTINGUISHERS ___________________________________________________________________
ENGINEERS’ SHOP
OK NOT OK REMARKS/COMMENTS
EMPLOYEES’ TIME CLOCK AREA FOR OSHA AND ACCIDENT REPORT FORMS ___________________________________________________________________FIRST AID SUPPLIES ___________________________________________________________________DAILY WORK PROGRAM ___________________________________________________________________
OFFICE BUILDING INSPECTION FORM
PROPERTY: _____________________________________________________________________________________________
OWNER: ___________________________________________________________ DATE: _______________________________
MECHANICAL PLANT
OK NOT OK REMARKS/COMMENTS
WATER INSIDE FAN CHAMBER ___________________________________________________________________
LEAKS - SPRAY PUMP ASSEMBLY ___________________________________________________________________
CAR PARK
OK NOT OK REMARKS/COMMENTS
FIRE LANES/PAINTING OF CURBS POSTED ___________________________________________________________________
‘NO PARKING’ SIGNS ___________________________________________________________________
STAIRWELLS
OK NOT OK REMARKS/COMMENTS
DOOR CLOSING _______________________________________________________________________
FIRE STANDPIPE VALVES _______________________________________________________________________
MISSING VALVE CAPS _______________________________________________________________________
TEST BUTTONS ON EMERGENCY LIGHTS _______________________________________________________________________
TENANT’S SUITE
OK NOT OK REMARKS/COMMENTS
WALL FINISH _______________________________________________________________________
LIGHTING/CEILING TILE, CARPET _______________________________________________________________________
OFFICE BUILDING INSPECTION FORM
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To ensure that occupants, in a building, work and operate in a healthy and safe environment, the maintenance of essential services and safety measures in a building is of utmost importance. Property managers need to be aware of, and understand the need for, essential and safety services in a building.
This section aims to improve the understanding of:
• Essentialservices
• Thetypeofbuildingswhereessentialservicesapply
• Identifyingbuildingservicesthatareincludedinessentialservices
The Building Control Commission defines essential services as:
• thefireandsafetyitemsinstalledorconstructedinabuildingtoensuretheadequatelevelsoffiresafetyover the life of the building
Essential services include all traditional building fire services such as sprinklers, mechanical services, passive fire safety doors, fire rated structures and other building infrastructure items such as paths of travel to exits.
Essential services only apply to buildings constructed on or after 1 July 1994.
The regulations that cover essential services are contained in Part 11 of the Building regulation 1994.
You may assist the property owner by advising that they:
• Arerequiredtodisplayanoccupancypermitincludinganyconditionsassociatedwiththepermit,
• Arerequiredtoprepareanessentialservicesreportinaccordancewiththeregulationsbeforeeachanniversary of the date of occupancy of the permit
• Arerequiredtokeepallessentialservicesreportsandrecordsofmaintenance,repairsandservicechecks
• Arerequiredtodisplayacopyoftheessentialservicesreport
KEy ESSENTIAL SERVICES INCLUdE:
Egress and Access
• EmergencyLifts
• ExitDoors
• FireDoors
• FireIsolatedPassageways,RampsandStairs
• SmokeDoors
• PathsOfTraveltoExits
• VehicularAccessAroundLargeIsolatedBuildings
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Electrical Services
• EmergencyLighting
• EmergencyPowerSupply
• EmergencyWarningandIntercommunicationSystem
• ExitSigns
Fire detection and Suppression Equipment
• FireControlCentre
• FireDetectionandAlarmSystem,FireBrigadeConnections,FireControlPanels
• FireExtinguishers–Portable
• FireHoseReels,FireMains
• FireHydrantSystem,FireMains
• SmokeAlarms
• SprinklerSystem,FireMains
• StaticWaterSupply
• Pumpsets
Fire Resistance
• FireCurtains
• FireIndicesForMaterials
• FireIsolatedLiftShafts
• FireProtectiveCovering,FireRatedControlJoints,FireRatedMaterialsAppliedtoBuildingElements
• FireRatedAccessPanels
• FireResistingShafts
• FireResistingStructures
• FireShutter,FireWindows
• Lifts,WarningSystems
• LightweightConstruction
• PenetrationsinFireRatesStructures
Mechanical Services
• AirconditioningSystems,MechanicalVentilationSystems
• SmokeControlMeasures,StairwellPressurisationSystems,FireDampers
• SmokeVents
eSSeNTIAl SeRvICeS AND SAFeTY meASuReS
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64
Asbestos
On 1st February 2003, the revised Occupational Health and Safety (Asbestos) Regulations came into play. Landlords and tenants now have defined duties relating to exposure to asbestos that could pose a risk to health.
It is the duty of the landlord and of the tenant to:
• Identifyifasbestosispresentandtoconductariskassessment
• Controlrisksbyremovingthematerials
• Reviewandrevisetheriskassessmentatleasteveryfiveyears
• Provideacopyoftheriskassessmenttoanynewtenant
• Adjacentoccupiersmustbenotifiedofasbestosremovalactivities
During audits, if the presence of asbestos is uncertain or there are inaccessible areas that are likely to contain asbestos, it must be assumed that asbestos is present.
Asbestos records are to be kept indefinitely and the removal of asbestos must be conducted by licensed asbestos contractors.
For more information regarding essential services refer to your State Building Commission Office.
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65
The previous section focused on essential services; taking this one step further is the maintenance side of property management. Regular maintenance and the review of service contracts are required on all buildings and property managers should be proactive in establishing a maintenance program in conjunction with tenants and landlords.
A property maintenance and contracts checklist is to be used in the review of maintenance contracts of a managed commercial or industrial property. The checklist covers off items such as the building, gardens, kitchens, water services, fire services, airconditioning, electrical services and building communications.
This is what the Property Maintenance and Contacts Checklist contains, a copy of which can be accessed on the disk included in this manual.
PRoPeRTY mAINTeNANCe AND CoNTRACTS
eSSeNTIAl SeRvICeS AND SAFeTY meASuReS
PROPERTY MAINTENANCE
AND CONTRACTS CHECKLIST
File Ref: _______________
Property: _______________________________________________________________________________
Owner: ________________________________________________________________________________
Property Address: ________________________________________________________________________
Property Manager: _________________________________________________ Date: _________________
1. Req Y/N BUILDING AND GENERALContract in place Y/N
a. Alteration procedures for tenancies and base building
b. Key register
c. Building facade and structural inspection
d. Emergency and evacuation procedures
e. Essential services inspection
f. Plant registration conformance
g. Central Vacuum System
2.CLEANING
a. Tenancy cleaning
b. Base building cleaning
c. Common areas
d Toilet requisite
3.WINDOW CLEANING
a. External and façade
b. Common areas
4.SECURITY
a. Staffing
b. General security
c. Patrols
d Alarms
5.PEST CONTROL
6.DANGEROUS GOODS
a. Storage
b. Labelling
c. Register
SUPPLEMENTARY NOTES:
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PHySICAL FEATURES OF RETAIL PROPERTIES
When listing retail properties within a larger retail shopping centre, the type of centre needs to be noted as well as its location, size, state, type of shops, number of carparks and other features such as appearance that would attract buyers. Demographic factors should be explored, for example, how is the population distributed in relation to the centre? What is the growth rate and the spending power of the target community?
Records of turnover, number of customers through the centre, rate of growth in outgoings and rate of growth in rental income should also be noted. Buyers will also be vitally interested in management methodology. The nature of existing building quality and future refurbishment potential should not be overlooked when listing.
When listing individual shops that are part of a strip development, the same information needs to be noted for, while a buyer is only obtaining one shop, the type and number of other shops in the area, as well as the availability of car parking, are all factors that must be taken into account by prospective purchasers looking for sound long term investments.
RENTAL VALUE, LEASE PERIOd, ANd LEASE CONdITIONS
LEASE TERMS PECULIAR TO RETAIL PROPERTyWhereas most investors in commercial and industrial areas desire the security of a long term lease, investors in the retail market may prefer short leases with no option of renewal as they can gain better tenants if, and when, possible.
TENANTS’ OUTgOINgS ANd RENTAL VALUEMost retail leases assume that tenants will be responsible for all statutory outgoings. These include municipal rates and water rates. In addition, tenants are responsible for the operating costs of shopping centres which include public lighting, cleaning, heating and airconditioning. All these costs are in addition to the rent paid by the tenant. The rental terms for retail property are markedly different to those that apply in the commercial and industrial sectors. For example, rental, which is an agreed percentage of sales turnover - once it exceeds a budgeted amount - is paid as overage. It is not unusual for rents to reflect 10% to 15% of a tenant’s retail turnover.This%isproductrelativewith‘food’outletsbeingabletosustaina%atthehigherendofthescale.There may also be a restriction on the products that any particular tenant is permitted to sell.
Rents paid by large tenants, who have bargaining power, differ markedly from those paid by small specialty shops in the same shopping centre. For example, the rent of large anchor tenants such as Woolworths or Coles may be 25% lower than those being paid by small speciality traders in the same buildings. Such tenancies are often referred to as “key” or “anchor” tenancies.
ReTAIl PRoPeRTIeS
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OWNERS ANd OCCUPIERS OF RETAIL PROPERTy
OWNERSSmall Investors - The traditional strip shopping centres tend to be owned by a variety of small investors who receive comparatively low yields on their investment. Such well located retail real estate is regarded as a safe investment. Factors that contribute to their safety are probably to do with capital growth and the ability to lease the premises quickly, if they fall vacant. A well located retail property increases in value as the supply of such property is limited. Tenants who have developed a great deal of goodwill are not anxious to move to a new area in case that goodwill is lost. This gives the owner a strong position in rent negotiations, and lease expiry.
Institutions - Institutions like superannuation groups, insurance companies and property trusts generally own larger retail property. Some institutions acquire their investments through active development. Others, particularly property trusts, are passive and simply acquire the completed property from developers or current owners.
Retail real estate investment appears to be attractive to institutions because of the size of the acquisition, as well as the return. Well located regional shopping centres, for example, have proven to be the best form of real estate investment available in Australia. This may be because some institutions have recognised that particular expertise is required to effectively manage and promote shopping centres and have ensured they acquire that knowledge.
TENANTSTenancy Mix and Suitability - The grouping of shopping centre tenants is a science. If properly handled, it can add to the success of a shopping centre. When it is incorrectly addressed, it may mean business failure for individual tenants and loss of income for the owner. The anchor tenants, who are usually the major retailers (supermarket, department store or discount store), are the tenants who attract the pedestrian traffic. Around these should be grouped the high trading and therefore high rent paying tenants such as butchers, hot bread shops, fruit shops etc. Tenants that do not generate pedestrian traffic (finance companies, banks, building societies) are located elsewhere. Particular care should be taken with bank tenancies as they are a volatile and high risk tenant. Any lease of such space needs to protect the landlord’s position and cashflow stability.
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PROPERTY TYPE: COMMERCIAL
INDUSTRIAL
RETAIL
PROPERTY: ______________________________________________________________________________________________
LOCATION: _____________________________________________________________________________________________
OWNER: __________________________________________________________________ DATE: _______________________
ESTATE MANAGEMENTNotify relevant contractors/suppliers of Management Appointment and request
Insurance / Workcare cover details and Quality Assurance status for Register
if not presently on register. Request statutory authorities to carry out final reading from settlement or
handover date in the following circumstances: •
Where client has recently purchased property ________________________________________________
• Where property has recently been built _____________________________________________________
Notify all statutory authorities of change of billing address
(unless owner instructs otherwise)• Gas __________________________________________________________________________________
• Electricity _____________________________________________________________________________
• Telephone ____________________________________________________________________________
• Council _______________________________________________________________________________
• Land Tax ______________________________________________________________________________
• Water / Sewerage ______________________________________________________________________
• Others _______________________________________________________________________________
DETAILED - PROPERTY MANAGEMENT
HANDOVER CHECKLIST
When an office has been appointed, the Property Manager of a commercial property, it is essential to obtain and complete the necessary administrative information relative to that property. The New Property Management Handover Checklist is to be used to gather and keep track of that information.
Two checklists have been developed to assist the property manager. Depending upon the complexity of the handover, the property manager may opt for a summary or a detailed form. These forms are available on the disk included with this manual.
ReTAIl PRoPeRTIeS PRoPeRTY mANAGemeNT HANDoveR
PROPERTY TYPE: COMMERCIAL INDUSTRIAL RETAIL
PROPERTY: ______________________________________________________________________________________________
LOCATION: _____________________________________________________________________________________________
OWNER: __________________________________________________________________ DATE: _______________________
INCOME
• Rental income _________________________________________________________________________
• Percentage rent increase (and base details) __________________________________________________
• Signage (income from advertising property) __________________________________________________
• Telecommunication aerials and communication equipment _______________________________________
• Outgoings recoveries and base years ________________________________________________________
• Outgoings by categories and tenants charges _________________________________________________
• Miscellaneous __________________________________________________________________________
EXPENSES
• Statutories ____________________________________________________________________________
• Licences (all types) ______________________________________________________________________
• Insurance _____________________________________________________________________________
• Utilities _______________________________________________________________________________
o
_________________________________________________________________________
o
o _________________________________________________________________________
• Lifts _________________________________________________________________________________
• Security ______________________________________________________________________________
• Repair and Maintenance __________________________________________________________________
• Cleaning ______________________________________________________________________________
• Building administration ___________________________________________________________________
• Waste disposal _________________________________________________________________________
• Landscaping ___________________________________________________________________________
• Car park ______________________________________________________________________________
• Airconditioning _________________________________________________________________________
• Capital expenditure _____________________________________________________________________
• Sinking fund ___________________________________________________________________________
SUMMARY - PROPERTY MANAGEMENT
HANDOVER CHECKLIST
Electricity
Gas
Telephone
_________________________________________________________________________
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PRoPeRTY mANAGemeNT
It is important for commercial offices to be able to present their skills and experience in a format which will be seen favourably by any prospective client. The following sample submission may be used as a template for submissions by your office. Whilst it gives the structure for the submission, you may feel that you need to add specific detail relative to your office. This will strengthen your submission and add to your credibility when making that all important presentation.
PRoPeRTY mANAGemeNT SuBmISSIoNS CommeRCIAl PRoPeRTY
71C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
PRoPeRTY mANAGemeNT SuBmISSIoNS CommeRCIAl PRoPeRTY
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
1 SMITH STREETNORTH MELBOURNE, VIC 3051
First National CommercialLicensed Estate Agents
89 Hoddle StreetRichmond VIC 3121
Tel: (03) 9418 9111Fax: (03) 9418 9122
PRoPeRTY mANAGemeNT SuBmISSIoN
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 272
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
Introduction
Executive Summary
First National Commercial
Property Management department
Properties Currently Managed
Complementary Real Estate Services
Reporting
Funds
Lease Options and Renewals
Assignment of Leases
Budgeting
Annual Report
Tenants
Tenancy Schedules
Contract Services
Asset Management Plan
Agency Appointment
Agency Fees
Management Services
Ancillary Services
Leasing
Appointment
TABle oF CoNTeNTS
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PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
APPENdIX
Sample Tenancy Schedule - Rental details A
Sample Tenancy Schedule - Lease details B
Sample Arrears Listing C
Income and Expenditure Budget D
Variable Outgoing Expenditure Budget E
Emergency Procedures F
Tenants Fitout Guide G
Cleaning Tender Document H
Property Management Services I
Schedule of Real Estate and Business Agents Fee J
Exclusive Authority to Act as Managing Agent K
TABle oF CoNTeNTS APPeNDICeS
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 274
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
First National Commercial _____________________________________ is an accredited office
of First National Commercial, the commercial division of the First National Real Estate Group.
We have pleasure in presenting our proposal to seek appointment as the Managing Agents of
________________________________________________________________________________
In our introductory submission, we provide a brief outline of our experience in property
management, which includes leasing, selling and managing properties in since ______________
With ________________ square metres of property currently under management, our success
has been built around long term practical experience, skilled staff, continuing staff development,
training and specialised computer property management systems.
We emphasise that our financial reporting systems are designed to address taxation issues and
our income and expenditure schedules have detailed breakdown to ensure minimal accounting
expenditure for planning and taxation purposes.
This, together with the backup of highly experienced Directors and a wide range of complementary
real estate services, places us at the pinnacle of property management expertise to maximise
your income and protect your asset.
INTRoDuCTIoN
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PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
Our objective in managing your property is to provide quality professional service to
ensure maximum investment yield whilst maintaining the building to ensure maximum
capital growth.
THE PROPERTy
_________________________________________ is ideally located in the centre of the ________________
PROPERTy dESCRIPTION
The property is of outstanding physical appearance with most tenancies having a net lettable space of square metres. The property is currently ___________ percent let and there are ____________ five tenancies, ___________two being multiple tenancies occupying ten floors.
MANAgEMENT SERVICES
First National Commercial will provide full management and reporting of rental tenancies and supervision
of contractors with the priority to maintain the property to achieve maximum capital growth.
AgENCy FEES
We recommend management on a fixed annual fee basis of $______________ for the upcoming financial year subject to annual review until the property is 80 percent let when a percentage fee can be set. Ancillary services to be charged as per the Real Estate Scale of fees (Appendix J).
INTRoDuCTIoN eXeCuTIve SummARY
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FIRST NATIoNAl CommeRCIAl
Our Company was founded by local partners John and David Smith. The agency has a combined wealth of local
knowledge with highly trained and experienced directors and staff, all of whom have business relationships at
national and international levels. The following is a brief summary of our current Directors:
J A M E S S M I T H B.Com
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
A R N O L d L E S L E y S M I T H F.S.L.E. (Val)
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
T R A C E y S M I T H
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
B R I A N S M I T H B. Bus (Val) A.S.L.E. (Val)
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
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FIRST NATIoNAl CommeRCIAl PRoPeRTY mANAGemeNT DePARTmeNT
First National Commercial Property Management takes a professional, comprehensive approach to property
management using modern technology. Personal service to you, the client, is of the highest priority. We aim to
maximise the performance of every property we manage and to be rewarded for the results.
Amongst the innovations of our Property Management Department are:
1. We recognise the different skills involved in the management of office towers and First National
Commercial provide significant training and supervision of each specialist in the management
team.
2. SPECIAL ONE OFF SERVICES
Clients can appoint First National Commercial on a special task to analyse specific areas aimed
at improving the property’s performance, e.g. energy analysis.
3. ASSET MANAGEMENT
This service utilises all First National Commercial’s specialist resources and is more fully
explained on page 84.
4. COMPUTER TECHNOLOGY
Over past years, we have used a specialised software package aimed at providing accurate
streamlined reports on our in-house computer.
We demand that our staff keep abreast of technological change and to respond to every changing need from
clients and business generally.
Add to this our backbone management services to:
• Maximiserentalincome
• Minimiseoutgoingexpenditure
• Provideaccurateandreliableaccountingrecordsandreports
• Maintainthepropertytoahighstandard
• Maintainfulloccupancy
• Monitorlegislation
• Maintainastrongrelationshipbetweenlandlordandtenant
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 278
Our experienced management team, with its comprehensive skills, will capitalise on the following benefits of the building to complement the owners building objectives:
Insert aspects of the building here, perhaps pictures at the end of the page.
• Excellentlocation
• Spectacularriverviews
• Floorplanflexibility
• Uninterruptiblepowersupply
• Flexibleinstallationofpower,communicationsanddataservicecabling
• Standbyservicesfortenants
• Variablevolumeairconditioningsystemwithworkloadefficiency
• Eliminationofdiseaserisk
• Specialtenantsub-zonefireservicesrequirements
• Parkingfacilities
PRoPeRTY mANAGemeNT DePARTmeNT
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
79C O M M E R C I A L O P E R A T I O N S M A N U A L v o l u m e 2
First National Commercial manages a total of 1,000,000 square metres of floor space in the metropolitan area. The major buildings managed include:
ABC Building 22,500 sqmC.B.C. House 35,000 sqmXyZ Centre 40,000 sqm
COMPLIMENTARy REAL ESTATE SERVICES
In addition to our professional property management services, we provide ongoing:
• PrivateSalesandSalesbyAuctionandTender
• Leasing
• Valuation
• RentReviews
• Arbitration
• CapitalValue
• Insurance
• Compensation
• RatesandTaxes
• ProjectMarketing
• InvestmentAnalysisandSales
• FinancialManagement
We coordinate all these activities to provide efficient back-up to our property management team to ensure that our clients have the best possible property services available to them.
PRoPeRTY mANAGemeNT DePARTmeNT PRoPeRTIeS CuRReNTlY DISPlAYeD
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
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CommeRCIAl PRoPeRTY SeRvICeS
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
REPORTINg
Our management team meet regularly to coordinate information to be in a position to summarise and report to owners on an annual as well as a monthly basis. We recommend that you meet with our Directors and the Property Manager each month to review the reports.
FINANCIAL MANAgEMENT
We place high priority on payment of rental and other outgoings being paid by the lessee on the specified date in their leases and we institute the appropriate procedures for payment and recovery, when necessary, including penalty interest on late payments where specified in the lease.
We wil issue, promptly, each month the following specialised property management computer program statements:
i. Budget Analysis
ii. Income and Expenditure
This includes a detailed breakdown of each tenant showing amounts debited each month, monies received, balances owing and total amounts received and a summary of income and expenditure in each category.
iii. Variable Outgoings
Payment of outgoings will be carefully monitored and approved for payment by the Property Manager. These are all recorded by category on the computer. Recovery of outgoings, as specified in the lease, will be closely supervised.
iv. Tenant Arrears
Our computerised arrears report is run weekly detailing all outstanding
PHySICAL
A monthly report will be provided detailing repairs and maintenance as well as summarised reports from all appointed contractors.
In addition to monthly reporting, we will promptly advise your office of any major maintenance problems, equipment or service breakdowns and replacement capital expenditure items required.
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CommeRCIAl PRoPeRTY SeRvICeS
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
gENERAL
Monthly reporting will also include:
i. Rent Reviews
Rentals being paid by tenants are regularly reviewed in accordance with market conditions and recommendations for adjustment made within the terms of each lease prior to rent review dates.
ii. Lease Expiry (well in advance)
iii. Capital Items
Showing monthly and year to date figures.
iv. Vacancy
ANNUAL REPORTS
Annual reports will include an initial Property Condition Report followed up by annual reviews.
FUNdS
We recommend in respect to net monies disbursed, that First National Commercial account for all holding funds used for the payment of statutory charges and other creditors.
We will bank all variable outgoings received from tenants, pay all accounts and forward net funds to your designated bank account, less our management fees, leaving in our account any amounts required for payment within the month of operation.
LEASE OPTIONS ANd RENEWALS
We will seek to be appointed to negotiate lease renewals and options with existing lessees in accordance with the provisions of the lease and for renewals to make recommendations to owners according to market conditions and owners policy guidelines. As part of our service to owners, we can where required, serve tenants with the statutory notices required for valid lease renewals.
ASSIgNMENT OF LEASES
Interviews will be conducted with prospective assignees, references checked, financial projections and business plans considered and recommendations made to owners on proposed assignments to satisfy the “suitability, solvency and responsibility” test found in most leases.
CommeRCIAl PRoPeRTY SeRvICeS
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PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
BUdgETINg
We will request a meeting with you six months in advance of each financial year to prepare a budget. We will provide a budget report detailing projected income and expenditure for the ensuing financial year and this will be analysed monthly to provide a guide to projected cashflow for the year.
ANNUAL FINANCIAL REPORT
Following the end of the financial year and audit, actual income and expenditure figures are prepared, comparing budgeted and actual income and expenditure figures.
TENANTS
Tenants will be issued with Tax Invoices (for rental) and trust receipts for all monies received. Monthly statements to tenants will include balances of rental and variable outgoings and energy accounts. Other reports as appropriate, including arrears, rent reviews and lease expiry will also be issued to tenants.
TENANCy SCHEdULE
We enclose a sample of our computerised tenancy schedule which we will forward to you on a monthly basis. This will show current occupancy with any variations and a comparison with previous years. The tenancy schedule includes tenant and public parking.
CONTRACT SERVICES
We will provide periodic reports with details and performance of contractors.
Engineer consultants
We will consult with the appointed Engineer Consultants in respect of the operation monitoring and reporting of Building Automation Systems (B.A.S.) We will monitor contractors and staff in the operation of all of the B.A.S. functions.
Electrical services
We will consult with the Engineers and appointed Electrical Contractors for information on reporting, recording and controlling energy consumption including the maintenance and monitoring of the Uninterruptible Power Supply (U.P.S.)
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CommeRCIAl PRoPeRTY SeRvICeS
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
CommeRCIAl PRoPeRTY SeRvICeS
CONTRACT SERVICES
Mechanical services
Our management team will have close contact with the Engineers on operating maintenance and monitoring of all mechanical equipment including Direct Digital Control (D.D.C.), energy and maintenance management, alarm monitoring and to facilitate reports on all these areas.
Airconditioning
Consultation and reporting with the Consulting Engineers and staff will be a prerequisite to ensure that the airconditioning system is run and maintained to provide maximum comfort to tenants whilst energy expenditure is kept to a minimum. This will involve control of temperature, humidity and contaminant levels, monitor airconditioning loads and V.A.V.C. control and a detailed knowledge of the stand alone computer boxes system.
Lift services
We will initially request perusal of the service contract and discuss with the contractors details of compliance with Australian standards of maintenance, regular inspections, emergency procedures and regular reports.
Fire services
It is important that maintenance and monitoring of fire services be of high priority for fire protection and safety and to comply with regulations. We may need to rewrite or adapt the existing evacuation procedure document in consultation with the Metropolitan Fire Brigade. Assessment will also be carried out of any tenants special sub-zone requirement.
Cleaning services
With our Property Manager being located in the building, we will be able to manage and monitor the performance of cleaning contractors. We recommend contractors to avoid direct responsibility for workers’ compensation, health and safety, superannuation and industrial relations problems.
We recommend, we analyse your building’s cleaning requirements to provide the most cost effective cleaning and maintenance. Our computer program is designed to facilitate cleaning recovery from tenants.
Security services
We will control the two Security Guards provided by the security company under contract. We will request examination of the contract and services with the security company including night roving patrols.
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ASSeT mANAGemeNT PlAN
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
We highly recommend we carry out an Asset Management Plan including detailed discussions with your Board of Directors to fully determine the present and future status of your investment and to assist in future decision making.
First National Commercial believes that more in depth advice on the overall investment is necessary, in addition to the acknowledged normal services involved in property management.
Our suggested team approach involves systematic checking of the various elements of your investment. We plan toidentify‘addedvalue’opportunitiestodeterminepotentialadditionalincomeandimprovedcapitalgrowth.
• Identifyyourproperty’spositioninthemarket.Wewouldbelookingtocapitalisethebestfeaturesofthe property and to take note of the weaknesses, physical or otherwise, where some action may be required.
• ReviewthephysicalfeaturesandconditionofthepropertycomparingthesetoP.C.A.guidelinesandtaking note of the impact of new developments, particularly those surrounding other competition.
• Werecommendreviewofcurrentmaintenancecontracts,investigationofoperatingandenergycostsand periodic energy audit reviews.
• Reportonthelatestlocalplanningpolicies.
• Reportonthepresentleasingmarketinrespectofavailablespaceandtheissueofincentives.Wewillexamine all current leases particularly noting lease terms, options and the status of tenants to expand or contract.
• Afinancialanalysisisrecommendedforthisfinancialyearandprojectionsforincomeandexpenditurefor the next four years. Projected capitalisation rates should be assessed for the next five years using all the information collated in the Asset Management Plan.
• Despitebeinganewbuilding,afuturestrategyshouldbeconsidered.
Not only will First National Commercial be concerned with the day to day operation of your property, but concerned as asset managers with life cycle property performance and the effects of capital expenditure to improve returns.
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ASSeT mANAGemeNT PlAN
PROPERTy MANAgEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051
AgENCy FEES
First National Commercial has a range of fees commensurate with the property being managed and welcomes the opportunity to outline the services which you could expect were the group appointed to manage the property.
MANAgEMENT SERVICES
We recommend management of ………………to be on a fixed fee basis of $.........................for the 20xx/yy financial year, subject to annual increase and review until the property is 80 percent let, in which case a percentage fee can be set.
FOR PROPERTy MANAgEMENT dUTIES SEE (APPENdIX I).
80 square metres of office space on the ground floor adjacent to the control centre would be utilised for on-site staff.
ANCILLARy SERVICES
Ancillary Services including rent reviews and leasing to be charged as per the scale of fees (Appendix J).
LEASINg
Due to the desirability of leasing space in the building, we recommend the owners consider paying full leasing fees to conjunctional leasing agents and 50 percent to the management agent, should such transactions occur.
APPOINTMENT
We recommend we be appointed by letter following agreement on our submission and that we be appointed for a three year term with a review of the appointment annually thereafter.
We would be pleased to clarify or elaborate on any aspect of our management submission and seek an early appointment with your company.
AGeNCY APPoINTmeNT
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TERM dEFINITION
AAct A set of rules that have been passed by Parliament, received Royal Assent and
become law.
Affidavit A written statement in the name of the person who signs it and swears or affirms to its truth.
Agent’s Representative An employee who is authorised in writing to act on behalf of an estate agent and to perform the functions of that agent as specified. Not a licensed agent.
Appraisal An opinion of the market worth of a property without resorting to a full-scale valuation.
Assignment of Lease The transfer of a lease from one tenant to another tenant.
Authority to Act A document signed by an estate agent and given to an employee (agent’s representative or another estate agent), authorising the employee to perform the functions of an estate agent as set out in section 4 of the Estate Agents Act.
BBody Corporate The collective ownership of the common areas in a subdivision of land or buildings.
It is responsible for the administration, upkeep and insurance of the common areas shared by all the owners (the common property).
Bond An amount paid as an assurance that the tenant will not breach the conditions of the tenancy, for example, the tenant will pay rent and on vacating will leave the premises in a state of good repair and order. See Security Deposit.
Branch Manager An estate agent or approved agent’s representative who manages the branch office of a real estate agency business.
Branch Office Any agency office, other than the principal office, from where real estate business is conducted.
Breach of Contract The breaking of one or more of the terms or conditions of a contract.
Business A commercial operation ranging from a small retailer to a large manufacturing or service organisation. The business includes the goodwill, which is its reputation and clients, any plant, equipment, chattels stock and other assets.
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TERM dEFINITION
Business Broker An estate agent or agent’s representative who specialises in the sale or lease of businesses.
Business Day Any day other than a Saturday, Sunday or a gazetted Public Holiday.
CCommercial Property Property zoned and used as office buildings, shops and retail premises.
Commission The fee paid by the principal to the agency for undertaking a transaction relating to the sale, purchase, leasing or management of property. The amount of commission is negotiable between the principal and the agency. It may be either a flat fee or a percentage (or a combination of both), of the purchase price or the rent collected.
Common Law The system of laws originated and developed in England and based on court decisions, on the doctrines implicit in those decisions, and on customs and usages rather than on codified written laws.
Common Property Areas of a property that are used by and belong jointly to all of the owners of a strata title property. This applies to common driveways, paths, courtyards, stairs, passageways, lifts, lobbies, fences, common garden areas and other facilities in multi-dwelling complexes.
Condition Report A report on the condition of a property to be leased where a bond is to be taken. The condition report must be completed by the agent and given to the tenant before the tenant takes possessions of the property.
dDamages Money ordered to be paid as compensation for injury or loss.
Disbursements Expenditure by the estate agent on behalf of the principal, including for example advertising expenses, rates, taxes and insurance.
Duration of Lease The period of the lease. The remaining time for which the property is leased. Also known as the “lease term”.
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TERM dEFINITION
EEstate Agency A licensed person who is authorised to act on behalf of another person to bring
about the sale, purchase, lease or management of a property or business.
Ethics The standards of governing the conduct of real estate practitioners. The standards may be set in legislation or by an industry body and are based on the principle of right conduct.
Exclusive Agency Authority
The principal appoints a single agency and regardless of who is the effective agent of the sale or lease, (including the principal or another agency), the appointed agency is entitled to the commission.
Extension of Lease An agreement extending or renewing the terms of lease for a period beyond the initial termination date.
FFittings Items that can be removed without damaging the property, such as garden
ornaments, lighting and airconditioners. They must be listed in the contract of sale if the purchaser wants them to remain with the property.
Fixed Term Tenancy A tenancy where there is an agreement that ends on a specific date. Except where the tenant has breached the law or the tenancy agreement, the landlord is not entitled to terminate the tenancy agreement before the expiry of the fixed term. On expiry, a fixed term tenancy automatically continues as a periodic tenancy.
Fixtures Items that are attached to the property and cannot be removed without causing damage to the property, such as bathroom suites, built-in wardrobes and kitchen stoves. They are usually included in the sale.
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TERM dEFINITION
gGeneral Agency Authority
The principal appoints an agency but reserves the right to appoint other agencies or to personally sell or lease the property. Of the agencies appointed, only the agency that is the effective cause of the sale or lease is entitled to commission. Also referred to as open or non-exclusive authority.
Goods and Services Tax (GST)
A consumption tax of 10% levied on the final consumer of the goods or services. The supplier of the transaction is responsible for collecting the GST and sending it to the Australian Taxation Office.
IIndustrial Property Property zoned and used for factories and warehouses.
Insurance A method of guaranteeing or indemnifying an individual or company against loss from a specified hazard. For the payment of an agreed premium, the insurer issues a policy to the insured that gives financial protection for a stated period of time.
Investment Property Property in which a person invests to get a return on money.
LLandlord The owner or head lessor of leased property.
Land Usage The use being made of land or the uses permitted under zoning ordinances. Zoning ordinances act to control land usage in a community.
Lease Document detailing the conditions agreed between the landlord (lessor) and the tenant (lessee). “Lease” is the preferred expression for commercial and industrial property. “Tenancy Agreement” refers to residential property.
Leasehold Property held under a lease that is to continue for a period of time.
Leasing The activity of sourcing a tenant, negotiating and ensuring that all the legal documentation and requirements are completed before the tenant takes possession.
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TERM dEFINITION
LLegal Capacity Capacity to legally enter into a contract.
Legislation Laws in the form of Acts and Regulations enacted by a state government or the federal government.
Lessee See tenant.
Lessor See landlord.
Liability for Trust Money The principal estate agent (of a sole trader or partnership) and the officer in effective control (of a corporation) are personally liable for any trust money received by the agency.
Licence (Real Estate) Formal permission from a government authority to undertake real estate transactions on behalf of other people.
Listing The agency obtains the written authority of the principal to act on the principal’s behalf and records the property or business as being available for sale or for lease.
Listing Agent The estate agent’s representative who lists the property on behalf of the estate agency.
MMaintenance The process of keeping a property in the condition appropriate for its use.
Managing Agent An estate agent who manages the property on an ongoing basis on behalf of the landlord. Management includes, for example, collecting the rent, lodging and claiming the bond, inspecting the property and advising the landlord on maintenance, resolving disputes and representing the landlord.
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TERM dEFINITION
NNegligence A failure to exercise a duty of care that is the direct cause of another person loss or
injury. The injured person may make a claim for damages.
Notice of Intention to Vacate
Written notice given by the tenant to the landlord or agent advising that the tenant wants to end the lease or tenancy agreement and vacate the property.
Notice to Vacate Notice given by the landlord to the tenant advising that the landlord wants to end the lease or tenancy agreement and wants the tenant to vacate the property.
OOccupancy Having possession of property. Physically residing in the property as the owner or
the tenant.
Offence Breach of the law (Acts and Regulations).
Officer in Effective Control
The title given to the principal estate agent responsible for the financial and day to day management of a real estate agency business that is a corporation.
Outgoings (i) Any costs incurred by the vendor or landlord in addition to the agent’s commission. For example, advertising costs. All outgoings are negotiable.
(ii) Any costs in addition to the rent, for which a tenant is responsible under the terms of the lease. For example, rates and insurance premiums.
PPenalty Punishment for breach of law, usually in the form of fine or a jail sentence.
Periodic Tenancy Where the tenancy carries over from one rental period to another. Notice to terminate the agreement may be given by either party during this period.
Prescribed A requirement or form set out in an Act or Regulation.
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TERM dEFINITION
PPrincipal (i) the person who engages the services of an agency and to whom the agency
should look for payment of the commission or fees, in return for services rendered. Is generally the owner of the property (vendor or landlord) or may be another person who engages the agency.
(ii) The estate agent in charge and responsible for the day to day administration of an estate agency and who, in the case of corporation, is also the officer in effective control.
Principal Office The head office of the estate agency. The principal agent or officer in effective control of a corporation administers the day to day operations of the agency from its principal office.
Property Management The activities of leasing property, collecting rents, selecting tenants and maintaining and managing the property for the landlord.
RReal Estate Land and its improvements.
Rebate Discount received, usually for bulk purchases such as advertising. Any rebate received by an agent must be passed on to the vendor. It may be non-monetary.
Registered Address An address nominated by an agent’s representative where communication is received from government agencies. See registered office.
Registered Office An office address nominated by an agent where communication is received from government agencies.
Registered Proprietor The person whose name appears on the title to the property.
Regulations Rules made under the authority of an Act that are as enforceable as the Act. Also referred to as subordinate legislation.
Remedy A legal order preventing or redressing a wrong or enforcing a right.
Rent The amount paid by a tenant to a landlord to occupy premises and to use facilities and services under a tenancy agreement or lease.
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TERM dEFINITION
Rent Roll The lease of all properties leased and managed by the property management department of an agency.
Residential Property Property zoned and used for dwellings such as houses, flats and apartments.
Residential Tenancy Agreement
Lease prescribed under the Residential Tenancies Act for residential property.
Retail Property A category of commercial property zoned and used for retail buildings such as shops and shopping centres.
Rural Property Property zoned for non-urban uses, including farmland.
SSecurity Deposit A bond for a commercial lease.
Sole Agency Authority The principal appoints a single agency but still retains the right to personally sell the property. The agency will be entitled to commission if it sells the property but not if the vendor sells the property. Also referred to as a non-exclusive agency authority.
Statute An Act made by Parliament.
Statute Body A government agency established through an Act of Parliament.
Strata Title Individual ownership of an apartment or unit within a block or multi-unit complex. This is separate from and additional to the joint ownership of common areas shared by all the property owners in the building or complex. See company title.
Stratum Title Each owner has a certificate of title and is the absolute owner of a freehold flat. A service company has the title to the common property and each flat title holder has a responsibility to the service company. The service company, in which each flat title holder has shares, administers, manages and maintains the property in which each owner’s flat is registered. See company title.
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TERM dEFINITION
TTenant Any person paying rental in exchange for accommodation or in possession of
property with the owner’s permission.
Termination (Tenancy) The act of removing a person from property. It may be by mutual agreement or, where this cannot be achieved, through legal process.
Trust Money Money received by an estate agent as a stakeholder or on behalf of another person (principal or third party). It must be paid into the estate agent’s trust account in an approved financial institution and recorded in the agency trust accounting records. Deposits on sales, residential bonds paid in cash, rents and prepaid advertising are all examples of trust money.
UUnfair Contract Terms A term of a contract that is contrary to the requirements of good faith and causes a
significant imbalance in the rights and obligations of the parties to the detriment of the consumer (the vendor or landlord).
Urgent Repairs Repairs required to a leased property to ensure the provision of essential services.
VValuation An estimate of the value of a property prepared by a valuer, usually for a fee. A
valuation may be used to obtain a mortgage or insurance, or in a legal contest.
Void Not binding, invalid or has no legal effect.
Voidable An agreement that may be made void at the option of one of the parties.
WWear and Tear The depreciation of an asset due to ordinary usage.
Working Day See business day.
ZZoning The system of controlling the use to which land may be put.
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