Property Management

Philip Angell MRICS Director

• Purpose• Check Lease • Budgets & Reconciliation• Extent of Services• Mandatory / Discretionary• Method of Apportionment• Sweeper Clauses• Improvements

Service Charge Overview 

Service Charge Overview

• Trend in Service Charges - UP !• Compliance with legislation, codes of practice,

health & safety, threat of litigation………….• Service charge caps – balance• Include utilities?• Comparing service charges

• 3rd Edition

• Status - Guidance Note

• Lease takes precedence

• Proportionality

RICS Service Charge Code

RICS Service Charge Code

• Core principles:• Service Costs

– Competitive quotations/benchmarking– Owners should not profit from the service charge

• Allocation & Apportionments– Costs allocated to appropriate schedule & cost category– Apportionment must be fair, reasonable & transparent

• Certification– True and accurate record of expenditure– In accordance with lease

RICS Service Charge Code

• Communication & consultation• Duty of Care• Financial competence

– Spending occupiers money– Act with high degree of competence, integrity,

professionalism, diligence, objectivity & transparency– Separate client account– Recommended Industry Standard Cost Headings

• 7 cost classes, 22 cost categories, cost descriptions• Occupier responsibilities

• ADR in new leases• Timeliness

– Communication– Budgets – 1 month– Accounts – 4 months

• Transparency• Value for Money

– Service quality appropriate to use location & character

RICS Service Charge Code

• Residential Legislation• S20 Consultation• LVT Challenge• Right to Manage• Notices:-

Rent - s166 Service Charge – s153

• RICS Guidance Note

Beware!

Mixed Use Schemes

Other Service Charge matters

• VAT – opt to tax?

• EPC – not a service charge item

• 2018 – EPC rating E or above

Heat Network (Metering and Billing) Regulations 2014

• Residential and commercial • Applies if you supply and charge for heat to more

than one final customer through a district heat network or communal heating system

• Aim –reduce energy consumption by raising end users awareness of usage

• Heat includes cooling and hot water• Should have notified NMRO by December 2015• Install meters by 31 December 2016?• www.gov.uk/heat-networks

Dilapidations –A Method of Protecting Your AssetsJohn Day MRICS – Director in Charge of Building Surveying

Lease – The weapon of Choice

The lease will contain covenants in respect of:• Repair• Decoration• Alterations• Statutory Regulation• Fees.

What Are Dilapidations

• During the lease period – a list of works required to put the landlord in a position he would be if the tenant had complied with the lease covenants

• At the end of the lease period – a claim for compensation

• Interim Schedule

• Terminal Schedule

Interim Schedules

• Myths and Truths

• Is it worth serving an interim schedule?

• YES but you need nerves and money

Interim Schedule

• Small Defect

Interim Schedule

• Large cost of resulting repair

Jervis V Harris

• This case established:

• The landlord can enter the property and carry out repairs if the tenant fails to do so

• The cost of works can be reclaimed as a debt –the landlord does not have to show a loss

Jervis V Harris

• Advantages:• It gets the works done• The cost can be recovered as a debt

• Disadvantages:• The landlord must finance the works• The tenant will be disrupted (and upset)• Loss of quiet enjoyment

Terminal Schedule 

• Prepare and serve un-costed schedule

• Agree scope of works• Tender the works• Complete the works

OR pursue a settlement based on tendered works

Schedule Process

Terminal Schedule

• Advantages:• An agreed schedule of works if it progresses to

legal• An accurate cost of the works• Recovery of the cost as a debt• The ability to identify previously hidden defects

during the works

Defending the Claim

Modern Techniques

Defending the Claim

• The cup of Coffee Method

• Completing the Works

• Section 18 (1) Valuation

VAT and Other Matters

• VAT – does this affect the claim?

• Recovery of Fees – Can the landlord reclaim negotiation fees?

• Loss of Rent – Can the landlord claim for loss of rent?

• Supersession – Does it exclude works from a claim?