Commercial property
management in
England and Wales
RICS GUIDANCE NOTE
England and Wales
2nd edition, October 2011
Eective from October 2011
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MANAGEMENT IN
ENGLAND AND WALES
RICS guidance note, England and Wales
2nd edition, October 2011
Eective from October 2011
Published by the Royal Institution of Chartered Surveyors (RICS) Parliament
Square London SW1P 3AD www.rics.org
No responsibility for loss or damage caused to any person acting or refraining
from action as a result of the material included in this publication can be
accepted by the authors or RICS.
Produced by the Commercial Property Professional Group of the Royal
Institution of Chartered Surveyors.
This guidance note was amended January 2022 to update references to the
RICS Rules of Conduct.
ISBN 978 184219 721 9
© Royal Institution of Chartered Surveyors (RICS) October 2011. Copyright
in all or part of this publication rests with RICS. No part of this work may
be reproduced or used in any form or by any means including graphic,
electronic, or mechanical, including photocopying, recording, taping or
Web distribution, without the written permission of the Royal Institution of
Chartered Surveyors or in line with the rules of an existing license.
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Acknowledgements
RICS would like to thank the following individuals for their contributions to this guidance note:
David Lowe, lead author, Partner, Wragge & Co. LLP
David Gardiner MRICS, Director, Jones Lang LaSalle
Peter Thomas FRICS, Director, BNP Paribas Real Estate
And a special thanks to the RICS Property Management Group
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Contents
Acknowledgements ���������������������������������������������������������������������������������������������������� ii
RICS professional standards and guidance ������������������������������������������������������������� 4
RICS guidance notes ............................................................................................................... 4
1 Introduction ������������������������������������������������������������������������������������������������������������ 6
2 Purpose and scope ������������������������������������������������������������������������������������������������� 7
3 Overview – key principles ������������������������������������������������������������������������������������� 8
3.1 Acting as agent of the landlord ..................................................................................... 8
3.2 Managing third party suppliers .................................................................................... 8
3.3 Duty of care ..................................................................................................................... 8
4 The property manager’s core duties ����������������������������������������������������������������� 10
4.1 Liaising and reporting with the landlord ................................................................... 10
4.2 Collection of monies ..................................................................................................... 10
4.3 Client accounts ........................................ ...................................................................... 11
4.4 Defaulting occupiers .................................................................................................... 11
4.5 Service charge ............................................................................................................... 11
4.6 Deposits ......................................................................................................................... 12
4.7 Managing the building ................................................................................................. 12
4.8 Management policies ................................................................................................... 13
4.9 Insurance relating to the property ............................................................................. 13
4.10 Occupier liaison ............................................................................................................ 14
4.11 Energy management .................................................................................................... 15
4.12 Building management systems ................................................................................... 15
4.13 Health & safety and re safety ................................................................................... 15
4.14 Procurement of third party suppliers ........................................................................ 16
4.15 Management fees ......................................................................................................... 16
5 Additional responsibilities of the property manager �������������������������������������� 18
6 Landlords’ responsibilities to the property manager �������������������������������������� 19
7 Employees and employment law ����������������������������������������������������������������������� 20
8 Specialist Issues ��������������������������������������������������������������������������������������������������� 21
8.1 Managing a portfolio ................................................................................................... 21
8.2 Mixed use developments ............................................................................................ 21
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8.3 Oshore ownership .................................................................................................... 21
8.4 Duty of care deeds ..................................................................................................... 22
8.5 Insolvent landlords and LPA receivers ...................................................................... 22
Appendix 1 Main English legislation relevant to the management of a
commercial property ������������������������������������������������������������������������������������������� 24
Appendix 2 Property management contract ��������������������������������������������������������� 45
RICS professional standards and
guidance
RICS guidance notes
Denition and scope
RICS guidance notes set out good practice for RICS members and for rms that are regulated
by RICS. An RICS guidance note is a professional or personal standard for the purposes of RICS
Rules of Conduct.
Guidance notes constitute areas of professional, behavioural competence and/or good practice.
RICS recognises that there may be exceptional circumstances in which it is appropriate for a
member to depart from these provisions – in such situations RICS may require the member to
justify their decisions and actions.
Application of these provisions in legal or disciplinary proceedings
In regulatory or disciplinary proceedings, RICS will take account of relevant guidance notes
in deciding whether a member acted professionally, appropriately and with reasonable
competence. It is also likely that during any legal proceedings a judge, adjudicator or equivalent
will take RICS guidance notes into account.
RICS recognises that there may be legislative requirements or regional, national or international
standards that take precedence over an RICS guidance note.
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Document status dened
The following table shows the categories of RICS professional content and their denitions.
Publications status
Type of document Denition
RICS Rules of Conduct These Rules set out the standards of
professional conduct and practice expected of
members and rms registered for regulation
by RICS.
International standard High-level standard developed in
collaboration with other relevant bodies.
RICS professional statement (PS) Mandatory requirements for RICS members
and RICS regulated rms.
RICS guidance note (GN) A document that provides users with
recommendations or an approach for
accepted good practice as followed by
competent and conscientious practitioners.
RICS code of practice (CoP) A document developed in collaboration with
other professional bodies and stakeholders
that will have the status of a professional
statement or guidance note.
RICS jurisdiction guide (JG) This provides relevant local market
information associated with an RICS
international standard or RICS professional
statement. This will include local legislation,
associations and professional bodies as well
as any other useful information that will help
a user understand the local requirements
connected with the standard or statement.
This is not guidance or best practice material,
but rather information to support adoption
and implementation of the standard or
statement locally.
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1 Introduction
1.1 Management is about achieving dened objectives that should be agreed with the client at
the outset of each instruction, particularly the provision of quality services which are value
for money.
1.2 This guidance note is principally concerned about how the person(s) in control of a building
should act and in particular how they manage, communicate and control income and
expenditure and minimise various associated risks. Managers should at all times seek to
comply with the principles set out in this guidance note. While this guidance note refers
principally to the management of multi-let properties the principles can be applied to the
management of all types of commercial property. The property manager is commonly
appointed on behalf of the landlord to assist them with services that may include:
• meeting their investment objectives, e.g. to preserve and enhance value or to facilitate a
future redevelopment
• maintaining comprehensive tenancy records
• discharging their obligations under leases and ensuring tenant compliance with lease
covenants
• day-to-day tenant liaison and service satisfaction
• ensuring that they meet their statutory obligations
• operating the property day to day on a sustainable basis including procurement of cost
eective facilities management services
• undertaking the nancial administration of the property, including rent collection and service
charge administration
• ensuring that adequate insurance is in place to satisfy lease covenant and any lending
institutions and administering any claims.
1.3 It should be appreciated, that subject to the occupiers’ rights under the lease and the law,
the landlord has to decide what actions to take or not to take in respect of a property.
Equally, the property manager must manage. Nevertheless, eective management needs
to take into account what occupiers think. Occupiers are landlords’ customers and business
is generated from satised customers. Whilst the objectives of landlord and occupier
may dier, mutual benets will be derived through an understanding of each party’s
requirements and by co-operation, resulting in fewer unforeseen disputes for the manager.
Eective communication is critical if success is to be achieved.
1.4 A successful property manager must be ecient, eective and accountable. They should
be open about their methods of management. Consultation and communication will invite
challenge, but they are essential if standards are to be improved.
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2 Purpose and scope
2.1 This guidance note applies to all members who undertake property management, for the
landlord as managing agent. However, the general principles would apply to any property
manager.
2.2 The purpose of this guidance note is to summarise best practice in property management
of commercial properties and highlight key aspects that property managers should bear in
mind in successfully managing a property
2.3 It is focused on the management of commercial properties in England and Wales (and refers
to English law throughout).
2.4 Although commercial property (i.e. oce, retail, industrial) is the focus, special mention
is made of mixed use development where commercial property is typically mixed with
residential property.
2.5 This guidance note deals with property management, not asset management or facilities
management.
2.6 Appendix 1 provides a summary of the main areas of English statute law that are relevant to
the management of a commercial property. These are accurate at the time of going to press.
Please visit www.legislation.gov.uk to check current information on English law. Appendix
1 should be a useful resource to property managers for checking they have the procedures
in place to manage these legal responsibilities, and understanding the context in which they
provide their services. Please note this information is not exhaustive and is not intended to
be legal advice – in specic cases it is recommended that specic legal advice is sought.
2.7 This guidance note only provides an overview. Other useful RICS documents that go into
more detail on property management include:
• RICS code of practice, Service charges in commercial property, 2nd edition (2011)
• RICS information paper: Managing mixed use developments (2009)
• RICS information paper: Commercial property handover procedures (2011)
• RICS guidance note: Insurance for commercial property managers (2010)
These can all be found at www.rics.org/standards
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3 Overview – key principles
The overall objective for a property manager is to act as an agent for the landlord to manage:
a some or all of the responsibilities the landlord has:
i under the property’s lease, if any, from a superior landlord and
ii under the property’s occupational leases to occupiers and other occupiers
b some or all of the landlord’s responsibilities regarding laws in owning or operating a
property;
and support in:
i making a nancial/economic success of the property; and
ii the successful use and operation of the property.
3.1 Acting as agent of the landlord
3.1.1 It is an important principle that the property manager manages the property on behalf
of a landlord. Although the landlord is delegating the management of the property to the
property manager, the landlord still retains the primary responsibility for the property.
The landlord would have made the necessary capital investment and will therefore take
the capital risk or reward arising from that. This does not mean that the property manager
has no responsibility at all (see 3.3 on duty of care), but it is important to bear in mind this
agency relationship.
3.2 Managing third party suppliers
3.2.1 The property manager will carry out some signicant tasks, but many substantial aspects
of the operation of a building will be fullled by other suppliers such as various providers of
facilities management services (e.g. security, cleaning, plant maintenance). Therefore, the
property manager ensures the property is successfully operated, not necessarily by doing
everything but by managing others to do so.
3.3 Duty of care
3.3.1 The primary duty of care that a property manager has is to his/her client, the landlord. This
is usually set out in the contract with the landlord (see Appendix 2 on property management
contracts). Even in the absence of a written contract the English courts are likely to nd
that a property manager has a ‘duty of care’ to the landlord, which means that the property
manager will have legal liability if he/she is negligent – i.e. fails to manage the property with
reasonable skill and care.
3.3.2 A property manager will not just have responsibilities to the landlord; they will also have
signicant day-to-day contact with the occupiers, among others. At the very least this
creates commercial and reputational duties to those occupiers, and could have the potential
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to create a legal duty of care to those occupiers. Therefore a good property manager will
need to ensure they take good care of the occupiers and other relevant stakeholders.
3.3.3 A property manager may also be asked to agree to have a duty of care to parties providing
nance in connection with the properties being managed (see section 8.4 on duty of care
agreements).
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4 The property manager’s core
duties
The property manager has two core duties, and the application of the following points diers
between multi-let and single-let properties:
a the collection of rent, service charge and other sums, owing by the occupiers to the landlord,
from the occupiers and
b the management of the property.
4.1 Liaising and reporting with the landlord
4.1.1 It is critical that the property manager seeks to develop a positive relationship with the
landlord, understands the landlord’s objectives and approach, and establishes a format and
frequency for reporting.
4.2 Collection of monies
4.2.1 A key role is the collection and management of sums owing by occupiers relating to rent,
service charge, insurance, and any other sums due under the lease. It is important that a
property manager has an established process in place to arrange for the ecient collection
of these monies. This means that a property manager will:
a have a thorough understanding of the relationship between landlord, occupier and other
occupiers in the building;
b obtain, wherever possible, from the landlord, copies of all relevant documents, leases,
licences and so on;
c understand from those documents the payment obligations;
d maintain a database of the occupiers and other occupiers to record the nancial position
with each of them;
e put payment processes in place so that the occupiers are clear exactly how much, when
and to whom rent, service charges, insurance, rents and other amounts are due;
f make sure the payment process is clear so that no occupier or occupier can argue that the
amount due or the time of payment is not known;
g have a mechanism in place to notify of any default in payment or a dispute over any
payment and promptly report this to the landlord in the manner agreed about such
default;
h have a process in place to pursue occupiers for defaults in payments;
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i have arrangements in place to forward sums collected, less deductions, e.g. service
charge, on to the landlord. The landlord will want these sums to be forwarded as quickly
as possible; and
j report to the landlord on the reconciliation of the amount actually paid to the landlord
and the amount collected.
4.3 Client accounts
4.3.1 A key advantage of a property manager who is professionally qualied is the ability to use
client account arrangements, which the landlord can have condence in as being subject to
regulatory review. Where the property manager is a member of RICS they will be required to
comply with the RICS Rules of Conduct. RICS Regulation has also issued a help sheet, Clients’
money: general advice for rms, that sets out guidance in its requirements for the handling
of client money.
4.4 Defaulting occupiers
4.4.1 It is recommended that the property manager agrees with the landlord how defaulting
occupiers should be dealt with; in particular, when the landlord wants to be alerted to a
default. As a recommended minimum, property managers should inform the landlord as
soon as the property manager feels it is sensible to instruct debt collection agencies, to take
legal proceedings to recover monies owed or take steps to repossess the property under the
lease terms.
4.4.2 It is important for the property managers, if they do instruct a solicitor and/or a debt
collection agency on behalf of the landlord, to ensure it is made clear to the debt collection
agency/solicitor that the property manger is acting on behalf of the landlord and that all
liabilities and costs arising from the instruction will be for the landlord’s account.
4.5 Service charge
4.5.1 Calculating the service charge apportionment and corresponding budget is a key duty
of the property manager and needs to be handled with care. Occupiers will be anxious to
ensure that the service charge budget is appropriate in its amount and allocation. Landlords
will want to ensure their obligations under the occupational leases are fullled and the
property is properly maintained. Service charges can be the cause of signicant friction
between occupiers and landlords, which mean the property manager will need to take
particular care to communicate and be clear and transparent.
4.5.2 The property manager should keep monies collected as part of the service charge in a
separate service charge account with transparent records for all income and expenditure.
The 2nd edition of RICS code of practice, Service charges in commercial property (2011) goes
into more detail on this.
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4.6 Deposits
4.6.1 The property manager will need to review the occupational leases and associated rent
deposit deeds to understand what deposits are held and on what terms. It is recommended
that the property manager establishes a separate, interest-bearing account to hold
occupiers’ deposits and manages the funds and any accrued interest in accordance with the
relevant legal documentation.
4.7 Managing the building
4.7.1 The landlord will have responsibilities to ensure that the building is managed to its
superior landlord (if any), to its occupiers, licencees and occupiers under the relevant lease
or similar document, and responsibilities in law. It is the property manager’s responsibility to
ensure that the landlord understands their responsibilities, and that these are appropriately
delegated to the property manager.
4.7.2 The property manager should ensure the eective operation of the property. This
means ensuring the property is eciently managed; anticipating and monitoring potential
problems; maintaining regular contact with occupiers; and seeking to comply with the
service charge budget.
4.7.3 In addition, it is essential that the property manager has copies of all of the leases and
related documents relating to the relationship of the superior landlord (if any), and with
each and every occupier, licencee and other occupier. It is essential that the property
manager reviews and understands these documents and identies any missing documents.
If the property manager identies any gaps or missing documents these should be promptly
notied to the landlord. Please note the landlords obligations under 6.1.
4.7.4 The property manager should consider maintaining an electronic database of all the key
documents, dates, etc.
4.7.5 Handover from the previous property manager (and handing over to the next property
manager) is an important process. The RICS information paper, Commercial property service
charge handover procedure (2011) provides useful information.
4.7.6 It is important that the property manager has a good understanding of the landlord’s legal
responsibilities. Appendix 1 lists the key statutory responsibilities in England at the time of
publication. It is the property manager’s responsibility to keep abreast of developments and
advise the landlord of signicant changes.
4.7.7 It is important that property managers not only ensure that they assist their landlord
to full all of their legal obligations, but also maintains records to demonstrate that the
property manager has done so.
4.7.8 It is recommended that property managers have clear policies setting out how they are
dealing with the review of documents related to the building, compliance with all laws and
so on.
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4.8 Management policies
4.8.1 It is recommended that policy documents are kept by the property manager detailing the
following:
a calculation and management of the service charge account;
b collection of rent, service charge and other monies;
c repair and maintenance of the building;
d operation of the building;
e appointing and managing contractors;
f health and safety compliance;
g insurance;
h liaising with occupiers – generally, and also specically in relation to consents such as
consent to assign, consent to alter and so on; and
i management of procurement.
4.9 Insurance relating to the property
4.9.1 The landlord is normally required under its occupational leases to obtain insurance against
damage to the property, including loss of rent, and public liability insurance, and the lease
will usually allow the landlord to charge the occupiers for the insurance premium.
4.9.2 The advising on, brokering or arranging of insurance policies is subject to various nancial
services regulatory requirements. This is a complex area. For example, introducing
the landlord to an insurer or handling claims may or may not be subject to regulation,
depending on the circumstances. If a property manager has agreed to do more than simply
collect insurance premiums for occupiers in relation to an existing policy then the property
manager should check whether he/she is therefore subject to nancial services regulations
and if so, what level of compliance is required and how this will be achieved. Please refer to
RICS guidance note, Insurance for commercial property managers, 1st edition (2011).
4.9.3 It is important for the property manager to understand the insurance arrangements and
the property manager’s role in these insurance arrangements as:
• a failure to have appropriate insurance in place could create a huge potential claim if there
was a catastrophic loss. Making sure insurance is in place is a simple step to manage a huge
risk
• the property manager needs to understand what is to be charged to and collected from
occupiers to pay for the insurance
• the property manager needs to be able to identify when it may be appropriate to make an
insurance claim.
4.9.4 It is sensible for the property manager to hold appropriate public liability insurance. If a
person is injured whilst in the managed property then they will consider making a claim
against all of the people involved – the landlord, the relevant occupier, the relevant service
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provider (e.g. cleaning contractor or security contractor) and the property manager. This
risk is especially high for buildings open to the public with high footfalls such as shopping
centres. Traditionally the landlord and property manager hold separate public liability
insurance, recognising that their interests are dierent. It is recommended that property
managers ensure that they factor in to their charges the costs of securing public liability
insurance (especially where a high footfall public building is being managed). If a property
manager wishes to hold no/minimal public liability insurance and rely on the landlord’s
insurance, then it is important that this is expressly agreed in detail with the landlord to
ensure the property manager is not exposed. This is a complex area but it is covered in the
guidance note referred to in 4.9.6.
4.9.5 The property manager will also need to consider which insurances they are required to
hold by law such as employers’ liability insurance and motor insurance (if relevant), and
those that are sensible to hold
4.9.6 The RICS guidance note, Insurance for commercial property managers, 1st edition, (2010)
explains in detail the insurance covers required by commercial property owners.
4.10 Occupier liaison
4.10.1 Seeking to create a good relationship with occupiers is essential to good property
management. Therefore the property manager should:
• ensure the occupiers know who the property manager is and how to contact them
• seek regular contact with each occupiers
• establish a regular occupiers forum
• provide emergency contact details for out of hours incidents, e.g. a helpdesk facility
operated by a specialist third party or in house operation
• properly respond to occupier queries and
• comply with the communication and consultation provisions set out in RICS code of practice,
Service charges in commercial property (2011).
4.10.2 Part of the property manager’s role is to manage applications by occupiers under the
occupational leases, such as licences to assign, alter and underlet. The property manager
should have a system in place to ensure these are dealt with properly and eciently,
reviewing them and making recommendations to the landlord. The property manager
should bear in mind that although these applications may seem routine, to the occupiers
they are often important and therefore need to be managed accordingly. The property
manager needs also to ensure that it acts in accordance with statutory requirements under
the Landlord & Tenants Acts (please refer to Appendix 1).
A particular consideration is the issue of time limits when responding to a tenant’s application.
In circumstances where a landlord is under an obligation (direct or implied) to act reasonably,
the courts have determined that decisions must be made within strict timeframes. Failure to
issue a decision within a reasonable timeframe could expose the property manager (as agent
for the landlord) to a potential claim for damages should the tenant subsequently lose an
opportunity to assign or sub let.
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Therefore tenant applications must be reviewed and handled expeditiously if there are direct or
implied obligations to act reasonably, and clients will need to be advised of the time constraints
when matters are referred to them for decision by the property manager.
The property manager may recommend to their client that legal advice should be taken if the
tenant is not supplying sucient information required to make a decision or the landlord wishes
to refuse consent.
4.11 Energy management
4.11.1 Energy management is increasingly important with rising energy costs and growing
responsibilities around CO
2
omissions and energy conservation. The property manager
should be aware of any new regulations relating to environmental performance of buildings.
The property manager also needs to ensure that energy procurement, energy conservation
and regulatory competence is given a high prole.
At the outset of an instruction the property manager should determine whether or not their
client is obliged to provide annual Carbon Reduction Commitment (CRC) returns and, if so,
ensure there are clear responsibilities for the information required by the client, the timing of
the information and the format of the information, e.g. electricity supply meter readings.
It should be noted that where a landlord is responsible for the electricity supply for a multi-let
property, and there are sub meters recording consumption by the occupiers, the sub metered
supplies will still be recorded against the owner’s consumption prole.
In this event the property manager will also need to consider the need to implement a
recharging of electricity consumption to the occupiers. The 2nd edition of RICS code of practice,
Service charges in commercial property (2011) indicates that ‘reasonable administrative charges’
are appropriate for a property manager operating a mechanism of recharging utility costs.
4.12 Building management systems
4.12 .1 Many buildings now have a building management system – in eect, an IT system to
operate the building. It is the property manager’s responsibility to ensure the system is
operating properly and is maintained regularly, not least because the system will be a key
part of ensuring compliance with the regulatory obligations applying to the building.
4.13 Health & safety and re safety
4.13.1 A key role for the property manager is overseeing health & safety and re safety in the
property, ensuring it is managed to comply with all legal obligations. Keeping the building
safe and ensuring compliance with relevant legislation will require the establishment
of systems and procedures to ensure statutory inspections are in place and systems
monitored. Appendix 1 sets out the key legal rights which property managers need to be
mindful of.
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4.14 Procurement of third party suppliers
4.14.1 Many of the services required for the good operation of a building e.g. security, cleaning
and plant maintenance will be provided by third parties To source these services the
property manager will normally enter into arrangements with third party suppliers as agent
for the landlord. This means that the contracts (if properly created) are actually between the
landlord and supplier. This has the eect that:
• the supplier is liable to the landlord for the performance of the services, which is important
as the landlord is, in turn, responsible to its occupiers
• if the property manager changes, the third party contracts will not be aected
• ultimately the landlord is responsible for paying the suppliers so if, for example, the landlord
becomes insolvent owing money to the suppliers, the property manager is not liable to the
supplier.
4.14.2 It is recommended that the property manager has an appropriate procedure for
selecting third party supplies to ensure that they are capable, reputable and good value
for money. That procedure should identify when (e.g. annual contract value trigger) a more
formal competitive tender should be used. Where the services procured are substantial,
consideration should be given to using a procurement specialist.
4.14.3 The property manager should:
• ensure they have a comprehensive, signed contract in place with all third party service
providers
• ensure the contracts clearly state that the property manager is entering the contract as
agent for the landlord
• ensure the contracted scope of services is clear
• ensure that the contracts with the service provider comply with any requirements the
landlords has included in its property management contract (e.g. length of contract)
• ideally, ensure that all contracts with service providers can be terminated on one months
notice on sale of the property (see RICS information paper Commercial property service charge
handover procedures (2011)
• consider including in the services contract a performance management regime or service
levels
• consider maintaining an electronic database of suppliers and contracts.
4.15 Management fees
4.15.1 It is important that details of the property manager’s fee, such as the amount, when and
how it is payable and the invoicing and reporting processes are made clear to the landlord.
RICS guidance in relation to management fees is set out in the RICS code of practice, Service
charges in commercial property (2011) which requires that:
‘…fees are set on a xed price basis rather than being calculated as a percentage
of expenditure. Percentage is no longer appropriate and is considered to be a
disincentive to the delivery of value for money. The management fee should be a
xed fee subject to annual review or indexation.
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It is recognised that many leases refer to the management fee as a percentage of
the total service charge or contain a percentage cap. This guide cannot override
the terms agreed between the parties and recorded in the lease.’
4.15.2 For the complete text of this clause please refer to section 1.3 of the RICS code of
practice: service charges in commercial property (2011). It is worth noting here that the Code
expressly states that the cost of collecting rent should be excluded from the service charge
management fee.
4.15.3 It is also worth considering the following when setting and administering the fee:
• Whichever means of fee calculation is applied it is essential that how it is calculated is clear.
• Consideration may be given to the impact of voids in a property upon any formula for
calculating the fee.
• Where the term of the property management is a signicant period, usually more than a
year, then consideration needs to be given to how the fee will be adjusted or reviewed.
• It should be made clear whether the fee is payable in advance or in arrears, monthly or
quarterly.
• Consideration should be given to the reporting a landlord requires and invoicing processes.
• The mechanics for payment will need to be established. The property manager will want
to have express authority to deduct (to the extent appropriate) payment from the service
charge account, and require the landlord to fund the account if the service charge is not
adequate (e.g. vacant building, high level of voids).
4.15.4 The property manager will not be able to manage a property if the service charge
account is insuciently funded. If the building is fully occupied and occupiers are paying
their service charges then the service charge account should normally be suciently funded.
However, property managers should ensure a landlord continues to fund the service charge
account for any shortfall – such as in relation to voids.
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5 Additional responsibilities of the
property manager
5.1 As well as the core duties, property managers often become involved in other property
issues. For example:
• Acquisition and sale support and advice
• Rent reviews
• Rating reviews
• Letting agency
• Dilapidations advice.
5.2 Property managers should ensure that any additional services (and their related fees) are
properly documented. Property managers should be aware of the industry code for leasing
business premises – available from www.leasingbusinesspremises.co.uk.
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6 Landlords’ responsibilities to
the property manager
6.1 A key responsibility of the landlord to the property manager is to provide information
regarding the property and the relationships with occupiers. A property manager cannot
eectively, eciently and successfully manage a property without that information. The
property manager should make the landlord aware that if the landlord cannot provide
all necessary information then the property manager’s service will be impaired and that
additional costs may be incurred. Where there is a change in property manager the outgoing
property manager will provide the information to the incoming property manager. The
incoming property manager needs to check the information received. RICS’ information
paper, Commercial property service charge handover procedures (2011) goes into more detail
on handover from one managing agent to another.
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7 Employees and employment
law
7.1 The property manager will usually employ one or more people whose duties will include
managing certain aspects of the property. If a property is large or especially complex (e.g. a
shopping centre or multi-let oce) then it is likely there will be a number of employees who
will focus on the management of the property or, where applicable, a particular landlord’s
portfolio of properties. In addition, the various suppliers of services to the property (e.g.
security, cleaning and so on) will also employ individuals who will spend a signicant amount
of their time working in or in relation to that property.
7.2 This means that the employees of the property manager and the service suppliers to
the property are likely to have the benet of the Transfer of Undertakings (Protection of
Employment) Regulations 2006 (TUPE). TUPE has the eect, in certain situations, of moving
employees automatically from old supplier to new supplier. Mishandled it can present a
signicant liability to property managers. It is often not properly understood by landlords.
Therefore it is essential for property managers to understand TUPE to ensure they
understand and avoid the risks and are able to explain them to landlords. Appendix 2
includes the RICS information paper TUPE – Information for Property Managers (2009) setting
out the issues in more detail.
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8 Specialist Issues
8.1 Managing a portfolio
Where a landlord has a portfolio of properties and a property manager is appointed to manage
all, or part, of them, it is possible to do that with a single contract. When drawing up this
contract it is worth considering the following:
• how properties are added and removed (and consequential impact on fees)
• TUPE – it is more likely the property manager will have dedicated sta (not just on site but
also back oce) and therefore TUPE is an increased risk
• whether or not the types of service are the same across all properties.
8.2 Mixed use developments
8.2.1 Mixed use developments are those with a mix of commercial and residential occupiers.
There are considerable dierences between the nature of managing a commercial occupier
and a residential occupier. The nature of managing residential occupiers will vary further
depending on whether occupiers’ leases are assured shorthold tenancies or long leases.
8.2.2 There is, in addition, signicant legal protection for residential occupiers (see for example
the Landlord and Tenant Acts 1985 and 1987, the Commonhold and Leasehold Reform Act
2002 and the Leasehold Reform, Housing and Urban Development Act 1993). This means, for
example,
• residential leaseholders who pay service charge can challenge any item of the service charge
before the Leasehold Valuation Tribunal and
• long-term contracts (i.e. more than 12 months) with service providers must be the subject of
consultation with residential leaseholders.
8.2.3 The property manager must be clear on the statutory requirements for administering
service charges in residential properties (or where residential use forms part of a
larger mixed use property and contributes to a building or estate service charge). The
requirements must be adhered to completely unless qualifying exceptions apply. See the
RICS information paper, Managing mixed use developments (2009) for more information.
8.3 Oshore ownership
8.3.1 It is not unusual for properties to be owned oshore, e.g. by a Jersey registered company,
to mitigate tax exposure. This raises three potential issues, which the property manager
needs to be aware of and give due consideration to:
• Due diligence/Client ID. The property manager will need to identify the client and
the benecial owners of the properties being managed and full money laundering
requirements. This will be more dicult with an oshore company, but equally that is why
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this cannot be ignored. For further guidance, please see the Money laundering guidance,
November 2010, co-authored by the National Federation of Property Professionals, Royal
Institution of Chartered Surveyors, Association of Relocation Professionals, and the
Association of Residential Managing Agents.
• Non-resident landlord scheme. This is a tax scheme operated by HMRC requiring UK ‘letting
agents’ to deduct tax from rent they collect for non-resident landlords, unless the agent
receives notication from HMRC that it can transfer rents to the non-resident landlord
without deduction of tax. The agent will need to register with HMRC and account to HMRC
quarterly in respect of any tax due to HMRC. The agent is also required to complete annual
returns to HMRC in respect of income received for all non-resident landlords.
• It is often a requirement that the property manager pays over VAT to HMRC as advised by
the client’s adviser. In these situations the property manager will need a standing approval
from their client to take instructions from their client’s adviser in respect of amounts to be
remitted to HMRC.
8.4 Duty of care deeds
8.4.1 A duty of care deed is a document between a property manager and the landlord’s funder.
The purpose is to create a direct legal relationship between property manager and funder,
particularly as to payment of rent, but also more generally. They create additional risk for
the property manager. RICS’ information paper, Duty of care deeds and commercial property
(2009), explains duty of care deeds in more detail and how property managers should deal
with them.
8.5 Insolvent landlords and LPA receivers
8.5.1 If a landlord becomes insolvent then an administrator, liquidator or Law of Property Act
receiver is likely to be appointed. Each of these have dierent powers and approaches:
• An administrator will be looking to operate the landlord’s business as a going concern
with a view to selling the business and maximising the return to creditors. Therefore to an
administrator the property manager is important to collect rent and manage the building
pending the sale of the business.
• A liquidator will be looking to liquidate the landlord’s business – i.e. break up and sell the
individual assets. Usually an administrator is appointed rst and the administrator often
concludes the best approach for the creditors is to liquidate and then the administrator
will become a liquidator. Again to a liquidator the property manager is useful to continue to
manage a building pending its disposal.
• A Law of Property Act receiver (LPA receiver) is appointed by someone who has a xed charge
or mortgage over the property where the owner has failed to make payments. The LPA
receiver is appointed as an agent to the borrower, but the courts recognise that the LPA
receiver will take heed of the lender’s interests. The exact scope of the LPA receiver’s powers
will depend on the detail of the mortgage/charge agreement. An LPA receiver is likely to wish
to sell the property if that is the best approach for the lender, but where the better approach
is to delay selling then the LPA receiver may be prepared to operate the building. The
property manager will therefore be useful to the LPA receiver in these circumstances.
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8.5.2 The property manager should:
• monitor the nancial health of the client so that he/she can be aware of a potential
insolvency
• ensure the contract with the landlord allows the property manager to terminate on the
landlord’s insolvency, which means that if the landlord becomes insolvent the property
manager at least has a choice and
• contact the administrator/liquidator/LPA receiver immediately if a landlord becomes
insolvent to request a copy of their appointment; identify if the property manager’s services
are required; and obtain conrmation that the property manager will be paid, preferably
in advance rather than in arrears. Given the onerous legal duties that arise from owning a
property then the property manager’s services are likely to be needed at least in the short
term, but the property manager will require commitment on fees before proceeding.
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Appendix 1 Main English
legislation relevant to the
management of a commercial
property
This schedule sets out the principle relevant English legislation that applies to the operation of
commercial property.
The information is not exhaustive. In particular, it focuses on legislation specic to property
management or arising from a property. It does not include the variety of laws that any
company will need to comply with.
A short summary is included for each item. This is only intended to be a very brief summary
for reference and is not legal advice. Specic legal advice should be sought to understand the
impact of legislation.
This is only a list of English legislation. Outside of England other legislation may apply.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
HEALTH AND SAFETY
Corporate
Manslaughter and
Corporate Homicide Act
2007
This act creates a new oence in
England & Wales or Northern Ireland,
which enables a corporation to be
guilty of manslaughter and homicide.
An organisation is guilty of this oence if it causes a person’s
death due to a gross breach of the organisation’s relevant duty of
care to the deceased.
An organisation is only guilty of an oence if the death was
caused by the way in which its activities are managed or
organised by senior management.
Occupiers Liability Act
1957
This act imposes a duty of care on
persons occupying or in control of any
premises in relation to visitors.
The occupier has a duty to ensure that any visitor is reasonably
safe whilst on the property.
The occupier’s duty of care is relative to the visitor (e.g. the
occupier must be prepared for children to be less careful than
adults).
The occupier will not be released from liability by merely putting
up a warning sign, unless the warning sign was suciently clear
to enable the visitor to be reasonably safe.
If injury has been caused to a visitor due to faulty work carried
out by a third party (e.g. subcontractor), the occupier will only be
released from any liability if he/she has taken reasonable steps to
satisfy him/herself that the contractor was competent and that
the work had been done properly.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Occupiers Liability Act
1984
This act confers a duty on the
occupier of a premises to any persons
other than visitors.
The occupier owes a duty to any person who is not his visitor in
the same way as he owes a duty to his visitor if:
a he is aware of any danger or hazard on the premises or has
reasonable grounds to believe that one exists;
b he is aware or has reasonable grounds to believe that any
person is or may be at risk from any danger (this applies
whether or not the person is lawfully or unlawfully on the
premises); and
c the occupier should be expected to oer reasonable protec-
tion against that danger (i.e. fencing o a dangerous area or
putting up warning signs).
Placing a sign that simply says ‘Danger’ will not be sucient.
The sign should state the nature of the danger and some sort of
preventative measure should be put in place deterring the visitor
from entering the premises or preventing the visitor from being
harmed.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Heath & Safety at Work
etc. Act 1974
This act confers a duty on employers
to ensure, so far as is reasonably
practicable, the health, safety and
welfare at work of all their employees.
The employer must provide information, instruction, training and
supervision to all employees to ensure their safety at work.
He/she must also ensure that the premises are maintained in
a condition that is safe and without risks to any health of his
employees.
The employer must provide and maintain adequate facilities for
the needs of his/her employees.
This information must be recorded, and all health and safety
measures (i.e. re alarms) must be tested.
The same duties apply to people not directly employed by the
employer, but doing work on his/her behalf.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Management of Health
and Safety at Work
Regulations 1999 (SI
1999/3242)
These regulations confer further
obligations on the employer to
provide for employees’ adequate
health and safety. This includes
making assessment checks on risks to
employees’ health. This duty extends,
for example, to carry out portable
appliance testing (PAT testing).
The employer must make a suitable and sucient assessment of
all the risks to the health and safety of his/her employees (and
non-employees carrying out work on the employer’s instruction).
If the employer employs more than ve employees, the ndings
of any risk assessment (and how the ndings might aect any
groups of his/her employees identied as being especially at risk
(i.e. any disabled employees)) must be recorded.
The employer must appoint one or more competent person to
assist with complying with statutory provisions for health and
safety (i.e. a health and safety ocer).
The employer will provide all employees with comprehensible
and relevant information on risks to their health and any
preventative measures (i.e. the health and safety risk
assessment/policy).
The Provision and Use
of Work Equipment
Regulations 1998
(PUWER)
These regulations apply to work
equipment used by employees at
work, and ensure that employers are
responsible for the equipment used
by employees at work.
Every employer shall ensure that work equipment is maintained
in an ecient state, in ecient working order and in good repair.
(Regulation 5 (1) Maintenance (PUWER, 1998)
The regulations only apply to work equipment used by workers
at work. This includes all work equipment (xed, transportable
or portable) connected to a source of electrical energy. PUWER
does not apply to xed installations in a building. The electrical
safety of these installations is dealt with by the Electricity at Work
Regulations.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Control of Substances
Hazardous to Health
Regulations 2002 (as
amended)
These regulations place a general
duty on an employer, prohibiting the
use of certain substances and to carry
out risk assessments or preventative
measures to ensure that employees
are not exposed to hazardous
substances.
Employers must not carry out work that may expose employees
to hazardous substances unless a suitable and sucient risk
assessment has been made. Employers must also take steps to
minimise the exposure of its employees to such risk.
Risk assessments must be reviewed regularly. If any risk
assessment shows that employees are at risk, the employer must
prevent the risk of exposure or, if not possible, control the risk to
the fullest extent possible.
Every employer must also ensure that personal protective
equipment, including protective clothing, is properly stored,
checked at suitable intervals, andif discovered to be defective,
repaired or replaced before further use. It is the employer’s
responsibility to check that this equipment is either made safe or
correctly destroyed.
Where the risk assessment indicates that employees are at risk,
the employer has a duty to adequately monitor its employees
through a suitable monitoring procedure. Records must be kept
of the monitoring procedure.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Water Supply (Water
Fittings) Regulations
1999
These regulations seek to regulate
anyone who installs, alters, connects
or disconnects etc. water ttings.
The purpose of these regulations
is to prevent waste, misuse or
contamination of water, for example,
to prevent legionella (Legionnaire’s
disease).
Water ttings must not be installed, connected, arranged or
used in such a manner that they cause waste, misuse, undue
consumption or contamination of water.
Every water tting must be of an appropriate quality and
standard. (The specic requirements are set out in Schedule 2 of
these regulations).
Where a water tting is installed, altered, connected or
disconnected by an approved contractor, the contractor must
provide a signed certicate stating that the water tting complies
with the requirements of these Regulations to the person who
commissioned the work.
Electricity at Work
Regulations 1989
(EAWR) (SI 1989/635)
These regulations impose a duty
on every employer and employee,
and self-employed person to ensure
safety in the workplace in relation to
electricity.
These regulations also impose a
duty on employers to carry out PAT
testing on all electrical systems and
equipment.
The employer must ensure that all systems are maintained so as
to prevent danger, and that any equipment provided to protect
persons working on or near electrical equipment shall be suitable
and properly maintained.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
The Defective Premises
Act 1972
This act imposes a duty on the
landlord to prevent injury to persons
on the premises by ensuring the
premises are properly maintained.
If the tenancy places an obligation on the landlord to maintain
and repair the premises the landlord owes a general duty of care
to anybody who might be at risk from personal injury or damage
to their property caused by any defect in the general state or
repair of the premises.
The landlord owes this duty if he/she knows of any defect that
needs to be repaired/remedied, or if he/she ought to have known
of such defect.
Control of Asbestos
Regulations 2006 (SI
2006/2739)
These regulations place an obligation
on the dutyholder to assess whether
or not any asbestos is present on the
premises.
These regulations will generally not apply where exposure of
employees to asbestos is generally low.
The dutyholder (every person who has, by virtue of a contract
or tenancy, an obligation to maintain or repair a premises) must
carry out a suitable and sucient assessment to ascertain
whether or not asbestos is on the premises.
The assessment must be recorded and reviewed if the
dutyholder has any reason to suspect that the assessment is no
longer valid.
If the dutyholder is employing persons to carry out work at the
premises, a suitable and sucient assessment of the risk to the
health of any employee must be made. This assessment should
also be recorded and reviewed as above.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Regulatory Reform (Fire
Safety) Order 2005 (SI
2005/1549)
These regulations impose a
responsibility on employers to create
a safe working environment to its
employees in relation to re safety.
The responsible person (employer or person in control of a
premises) must take such general re precautions to ensure the
safety of his/her employees and other occupants of the premises.
The responsible person must make a suitable and sucient
assessment of any risks to his/her employees/occupants who
might be exposed to any potential re risks.
The responsible person must record the risk assessment if he/
she employs ve or more people, there is a licence in force in
relation to the premises, or there is an alteration notice requiring
the assessment to be carried out.
The relevant person must ensure that the premises are equipped
with re ghting equipment and re detectors and alarms, that
there are adequate re escapes and he/she must nominate a
competent person to implement safety measures.
Pressure Systems and
Safety Regulations 2000
(PSSR) (SI 2000/128)
These regulations impose a duty of
care on any person who designs,
manufactures, imports or supplies
any pressure system or any article
which is intended to be a component
part of any pressure system.
The user shall not operate the pressure system or allow it to be
operated unless he/she has established the safe operating limits
of that system.
The user is also responsible for ensuring that the pressure
system is properly examined and maintained. All maintenance
checks should be recorded, and the user must keep a record
of the last report made, or any other report still relevant to the
condition of the pressure system.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Gas Safety (Installation
and Use) Regulations
1998 (SI 1998/2451)
These regulations impose a duty on
an employer or self-employed person
to take reasonable steps to ensure
that the person undertaking work
relevant to gas safety is approved
under the Health and Safety
Executive (HSE).
The responsible person for any premises must not use a gas
appliance, or permit a gas appliance to be used, if at any time he/
she knows or has reason to suspect that it might be dangerous.
If an employer requires any work in relation to a gas tting to be
carried out, he/she must ensure that the person undertaking
that work is, or is employed by, a member of a class of persons
approved by the HSE.
The employer must ensure that any gas appliance, installation
pipe work or ue installed at the premises is maintained in a safe
condition.
A landlord must -
a. ensure that each appliance and ue is checked for safety
within 12 months of installation, and then regularly checked
at 12 month intervals;
b. ensure that a record in respect of any appliance or ue so
checked is made and retained for a period of two years from
the date of that check.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Construction (Design
and Management)
Regulations 2007 (CDM)
These regulations impose a duty
on construction managers to
manage and coordinate projects in a
competent manner.
The client must not -
a. appoint or engage a CDM co-ordinator, designer, principal
contractor or contractor unless he/she has taken reasonable
steps to ensure that the person to be appointed or engaged
is competent;
b. accept such an appointment or engagement unless he/she is
competent;
c. arrange for or instruct a worker to carry out or manage
design or construction work unless the worker is competent,
under the supervision of a competent person.
Every client shall ensure that the arrangements made for by
persons managing the project (including him/herself) are suitable
to ensure that the construction work can be carried out without
risk to the health and safety of any person.
Every place of work shall be made and kept safe for any person at
work there.
NB. ‘client’ means a person who in the course or furtherance of a
business—
a. seeks or accepts the services of another which may be used
in the carrying out of a project for him/her; or
b. carries out a project him/herself;
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
The Lifting Operations
and Lifting Equipment
Regulations 1998
These regulations ensure that all
lifting equipment and activities are
operated and carried out safely within
the workplace.
Every employer must ensure that lifting equipment is of adequate
strength. Every employer must also ensure that lifting equipment
must be designed to prevent a person using it being crushed,
trapped or struck, or generally exposed to danger.
Machinery and accessories for lifting loads should be clearly
marked to indicate their safe working loads.
All lifting operations involving lifting equipment must be properly
planned, appropriately supervised and carried out in a safe
manner.
LANDLORD AND TENANT
The Landlord and
Tenant Act 1988
This act imposes statutory duties
on landlords in connection with
covenants to assign, underlet, charge
or part with the possession of the
premises without consent.
This act applies where a tenancy includes a covenant that a
occupier cannot assign, underlet etc. the premises without the
consent of the landlord (such consent not to be unreasonably
withheld).
If a occupier serves a written application on the landlord to
assign, underlet etc. the landlord must within a reasonable time
either:
– give consent; or
– if it is reasonable not to give consent, serve on the
occupier written notice of his decision either completely
withholding his consent, or giving his consent subject to
certain conditions.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
The Landlord and
Tenant Act 1954
This act provides security of tenure
for occupying occupiers under certain
leases, including leases for occupying
property for business, professional or
certain other purposes.
Terminationoftenancybythelandlord
The landlord may terminate a tenancy if he/she gives notice
to the occupier, providing the notice is given not more than
12 months and not less than 6 months before the date of
termination of the tenancy.
The Landlord must state one or more of the statutory grounds
for opposing the tenancy in the notice.
Occupier’srequestforanewtenancy
A occupier can request a new tenancy where the current tenancy
is for a term greater than one year. (This includes a rolling
contract tenancy that has lasted for over a year).
A occupier is not able to make this request if the landlord has
already given notice to terminate the current tenancy.
If the landlord has failed to give notice, then he may oppose the
application for a new tenancy within two months of the occupier
making the request, stating his grounds for opposition.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Landlord and Tenant
(Covenants) Act 1995
This act imposes new rules on
tenancies dated on or after 1 January
1996, concerning the relationship
between landlords and occupiers.
When any occupier assigns a tenancy, the ‘new’ occupier becomes
bound by any occupier covenants (subject to exceptions), and
becomes entitled to the benet of the landlord covenants
(subject to exceptions).
Where the landlord assigns a tenancy, the ‘new’ landlord becomes
bound by the landlord covenants (subject to exceptions), and
becomes entitled to the benet of the occupier covenants
(subject to exceptions).
The ‘original’ landlord and/or occupier will then be released from
their obligations under the tenancy.
If any covenant of the tenancy confers any rights in favour or
against a management company, then it shall be treated as if it
was a occupier covenant exercisable by the landlord; and/or a
landlord covenant exercisable by the occupier.
The Regulatory Reform
(Business Tenancies)
(England and Wales)
Order 2003 (SI
2003/3096)
These regulations reform legislation
in relation to business tenancies,
such as the Landlord and Tenant’s Act
1954.
The landlord is entitled to request the following information from
the occupier:
a. whether the occupier occupies the premises for business;
and
b. whether there are any sub-tenancies aecting the tenancy.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Financial Services
and Markets Act 2000
(Regulated Activities)
Order 2001 (SI
2001/544)
and (amended by)
Financial Services
and Markets Act 2000
(Regulated Activities)
Order (No 2) 2003 (SI
2003/1476)
These regulations aim to protect
the general public when purchasing
insurance by ensuring that all persons
who undertake insurance mediation
are registered and meet strict
professional requirements.
If any person is involved in advising, arranging, administering
or performing insurance contracts on behalf of the landlord (or
any other third party), they are conducting insurance mediation
activities, which are regulated activities under these regulations.
No one can carry out a regulated activity unless authorised by
the Financial Services Authority.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
The CRC Energy
Eciency Scheme -
(CRC Energy Eciency
Order 2010 – SI
2010/768)
The CRC Energy Eciency Scheme is a
UK mandatory cap and trade scheme
designed to cut CO
2
emissions
and increase energy eciency. It
aects large commercial and public
sector organisations including local
authorities, central government
departments, hotel chains, owners of
large oce and industrial premises,
shopping centres etc.
Any organisation that meets the qualication criteria must
participate in this scheme. Participants must report emissions
and purchase ‘allowances’ to cover those emissions. One
‘allowance’ must be paid per tonne of CO
2
emissions emitted.
Both property managers and landlords should be aware that
the scheme is aimed at emissions of organisations, and not
individual properties. An organisation is viewed widely – a group
of companies is considered to be one organisation.
The person responsible for paying the ‘allowances’ will vary
depending on the circumstances. Generally speaking, the person
responsible will be the person who has a direct agreement with
the energy supplier and who receives the benet of the energy
supplied. The bill payer will normally either be the landlord or
occupier depending on notice of contract.
It may be the case that a occupier only occupies part of a
premises and that the landlord (supported by the property
manager) is responsible for paying the bills for the common parts
of any building. Careful consideration should be given to who is
responsible for paying the ‘allowances’ and how these payments
should be managed.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Energy Performance of
Buildings (Certicates
and Inspections)
(England and Wales)
Regulations 2007
These regulations impose a duty on
the landlord to present a prospective
occupier (or prospective buyer) with
an Energy Performance Certicate
when renting (or selling) a property.
EnergyPerformanceCerticates
The relevant person must make available free of charge a valid
energy performance certicate to any prospective buyer or
occupier at the earliest opportunity.
The energy performance certicate must be accompanied by a
recommendation report.
A recommendation report is a report containing
recommendations for the improvement of the energy
performance of the building, and is issued by the energy assessor
who issued the energy performance certicate.
Inspectionsofair-conditioningsystems
It is the relevant person’s duty to ensure that the air-conditioning
system is inspected by an energy assessor at regular intervals at
least every ve years.
The relevant person must keep the most recent inspection report
made by an energy assessor.
The ‘relevant person’ is either the seller, landlord or (for the
purposes of air conditioning systems) person in control of the
relevant part of the premises.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Private Security
Industry Act 2001
This act established the Security
Industry Authority, which regulates,
reviews and monitors the private
security industry. Participants of
this industry must have a licence to
carry out certain specied security
activities.
The current designated sectors or activities that must be covered
by a licence are as follows:
∫ security guarding - under contract
∫ door supervisors - under contract and in-house
∫ vehicle immobilising - under contract and in-house
∫ private investigation - under contract
∫ security consultants - under contract
∫ keyholders - under contract.
The following categories of people will need licences:
∫ security contractors, directors of security companies and
partners in security rms
∫ employees of security contractors, security companies and
security rms
∫ agency workers performing the designated duties
∫ persons who manage or supervise security operatives supplied
under contract by a security contractor (but not in-house
supervisors of contractors)
∫ agency-supplied managers or supervisors of security operatives
supplied under contract
∫ directors of security companies and partners in security rms
who do not themselves carry out the designated activities
∫ in-house door supervisors and vehicle immobilisers and their
employers, managers and supervisors
∫ others who immobilise vehicles on private land against a
release fee.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Transfer of
Undertakings
(Protection of
Employment)
Regulations 2006 (SI
2006/246) (TUPE)
These regulations were put in place to
protect employees during the transfer
of any business, including a service
provision change.
These regulations apply to a service provision change. This
includes a property manager providing services on behalf of the
landlord.
In summary these regulations might potentially apply on
appointment of the property manager or termination of an
appointment if there are any employees spending a signicant
amount of time dedicated to the account or property. If there
is such a person then they might be transferred to or from the
property manager.
Unless an employee objects to being employed by the new
employer, the contract of employment of that person will not be
terminated.
Any employment contract would transfer to the new employer,
as though it was originally made between the employee and
the new employer. Upon the transfer, all the rights of the old
employer in relation to the employment contract will transfer to
the new employer.
The new employer will also be responsible for any act or omission
that the old employer committed before the transfer (but it is
common to reallocate liability in contract).
Any contract of employment that is transferred cannot be varied
unless the sole reason for the variation is:
i. the transfer itself, or
ii. a reason connected with the transfer that is not economic,
technical or an organisational reason entailing changes in the
workforce.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Data Protection Act
1998
This act regulates the processing of
information relating to individuals,
including the obtaining, holding, use
or disclosure of such information
(data controllers).
Personal data must not be processed by a data controller unless
an entry is made on the register, which is maintained by the
information commissioner.
The commissioner is appointed to ensure that data controllers
comply with the provisions of this act.
Any data controller who wishes to be added to the register shall
give a notication to the information commissioner. A notication
must specify a general description of measures he/she will
take to ensure compliance with data protection principles. The
notication must be accompanied by a fee.
Subject to certain exceptions, the data controller must, within 21
days of receiving a written request from any data subject, make
the relevant particulars available to that person in writing free of
charge.
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Number Nameoflegislation Briefsummaryoflegislation Keypoints/keysections/schedules
Disability
Discrimination Act 1995
and
Disability
Discrimination Act 2005
These acts impose a duty on
persons occupying a premises not
to discriminate against disabled
persons.
It is unlawful for a person managing any premises to discriminate
against a disabled person occupying those premises:
a. in the way he/she permits the disabled person to make use
of any benets or facilities;
b. by refusing or deliberately omitting to permit the disabled
person to make use of any benets or facilities; or
c. by evicting the disabled person, or subjecting him/her to any
other detriment.
It is also unlawful for a person with power to dispose of any
premises to discriminate against a disabled person:—
a. in the terms on which he/she oers to dispose of those
premises to the disabled person;
b. by refusing to dispose of those premises to the disabled
person; or
c. in his/her treatment of the disabled person in relation to any
list of persons in need of premises of that description.
The Equality Act 2010 This Act requires employers (and
others) to have regard generally to
reducing socio-economic inequalities,
discrimination and victimisation and
to increase equality of opportunity.
The Act itself contains very
detailed information and specic
advice should be sought to ensure
compliance with it.
The Act covers equality issues over many areas – not just the
employment of workers, it covers the supply of services.
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Appendix 2 Property
management contract
Property managers should ensure that they have a comprehensive written contract with their
landlords. The written contract should set out clearly the scope of services of the property
manager and the amount that the property manager gets paid.
All too often, property management arrangements are too informal, either with no written
contract at all or a very brief written arrangement. Entering into an informal property
management contract of this nature can present signicant risks to both the client and the
property manager:
a It will not be clear what the scope of the property manager’s responsibilities are. Given that
the property manager has a duty of care to the landlord, if a contract is unclear a court may
nd that a property manager did have responsibility for an aspect of managing the property
the property manager had not contemplated. This could pose considerable risk and cost to
the property manager.
b The property manager will often be handling signicant sums of money and therefore it is
important that there is a clear understanding between landlord and property manager how
those payments are calculated and sums managed.
c In an informal contract it may not be clear how much a property manager will be paid. This
means that a property manager risks being paid less than expected.
d The length of the contract will be unclear, which could mean the landlord, or the property
manager, could terminate on short notice.
This means that simply referring to managing a property ‘in accordance with the principles of
good estate management’ with no further detail is no longer an adequate approach.
A well drafted property management contract will usually include the following:
a the identity of the property or properties – this may seem like an obvious point but all too
often the property is identied loosely, which will only lead to confusion and risk.
b commencement and duration – the contract should clearly set out when it starts its
duration, whether the contract is xed term or rolling, whether either party can terminate
on notice at any time, and procedures in the event that the landlord sells his/her interest in
the property.
c scope of services – the contract would typically include general obligations on the property
manager to provide the services. There should be a detailed services schedule setting
out exactly the scope of the property manager’s responsibilities. In particular handover
transition at the beginning and end of the property manager’s appointment should be
identied.
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d obligations of the landlord – it is important that the property manager is provided with all
information that the landlord has available relating to the property; therefore the contract
will need to make this responsibility of the landlord clear.
e payment – the contract should make it clear how much the property manager will be paid
and when and how this will be reconciled against the service charge; for example, what
is the position if the building is empty or there are voids and what impact does that have
on the property manager’s fee? If the contract is for a signicant duration what are the
mechanics to alter the fee? To what extent can the property manager deduct his/her fee
from the service charge account?
f liability – there should be basic clauses protecting the property manager, limiting and
controlling his/her liability. Ideally there should be a ‘force majeure’ clause, which makes it
clear that the property manager has no liability if he/she is unable to supply the services due
an event outside his/her reasonable control. See 8.4 for more detail on contract liability.
g TUPE – given the signicant likelihood that an employee of the property manager spends
a signicant amount of their time on a particular account or a particular property, it is
important to consciously consider the risk of TUPE. If there is any risk of TUPE applying,
whether at the time of the contract or in the future, then TUPE clauses should be included.
For more information see at Appendix 2 the RICS Information Paper TUPE: Information for
property managers (2009).
h termination – the contract needs to make it clear that the contract can be terminable by
either party if that party is in material breach and to also allow the party to terminate if the
other party becomes insolvent. Detailed insolvency clauses are often required to ensure
that the property manager is not in a position of managing a property on behalf of the
landlord who has no money but who is not yet formally insolvent.
i other parties - to what extent:
i can either party assign the contract?
Assignment means transferring the benet of the contract to another person (it
is not possible to transfer the ‘burden’ without the agreement of all three parties).
If the contract is silent then usually the benet will be freely assignable. The ideal
position is that the landlord cannot assign but the property manager can assign.
Usually a landlord will object to that and so it is normally agreed neither party can
assign without the other party’s consent (possibly allowing the parties to freely
assign within the group).
ii can the property manager subcontract its responsibilities?
If the contract is silent on subcontracting then normally the property manager
can freely subcontract. If the property manager does subcontract, the property
manager remains responsible to the landlord for the performance of the
subcontractor.
iii should any third parties (for example members of the property manager’s group or the
landlord’s group) benet from the contract?
It is normal to expressly state no third parties have the benet of the contract.
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j general clauses, for example:
i condentiality; and
ii law and jurisdiction (usually English law and English courts).
It is an important part of a property manager’s risk management to ensure that the property
management contract addresses and manages their level of liability. This is important as
normally the property manager’s fee (and margin) is disproportionate to the value of the
building being managed. In other words the potential risk is very dierent to the reward. The
RICS information paper, Limiting liability in property management contracts (2009) goes into this
in more detail but in summary:
• Make sure the contract is in writing and the scope of the services is clear.
• Include a ‘force majeure’ clause – the property manager will be liable for events outside of his
control (e.g. a ood) unless a force majeure clause is included.
• Cap liability - it is normal for a property management contract to include a cap on liability.
The amount will depend on the building, the fee and key risks.
• Exclude indirect losses. These are losses that are not, in broad terms, reasonably foreseeable
and are unlikely to be insured.
• Avoid giving indemnities – they extend liabilities.
It is important that a property manager holds appropriate professional indemnity insurance.
However, do not confuse holding insurance with capping liability – for example, a property
manager agreeing with a landlord to hold £2 million of professional indemnity insurance does
not cap the property manager’s liability to £2 million, it merely means that the manager has
agreed to have insurance covering the rst £2 million of any losses.
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