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Hot Topic Highlight - Christmas Crackers!

RICS APC and AssocRICS mandatory competency business planning

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What is today's blog about?

Moving into the festive season, no doubt most Chartered Surveyors will have the RICS CPD deadline (on 31 December) in the back of their minds (we certainly do!). 

Equally, if you are an RICS APC candidate, then this CPD blog module will provide a welcome boost to your yearly CPD hours.

This article will highlight three key Christmas crackers; our property hot topics for December 2017 and beyond.

Essential reading for RICS APC and AssocRICS candidates.

You can also listen to our CPD podcast on Anchor for more free AssocRICS and RICS APC training and support.

Why is this relevant?

Being aware of and being able to advise in the context of recent caselaw and property market changes is an essential component of providing a high standard of service to clients. It also helps us to promote trust in the profession, whilst taking responsibility for our own CPD.

There are just three of the five RICS ethical standards, again something that we all need to be aware of (and refresh our knowledge of on a 3-yearly rolling basis).

This article will highlight some Christmas crackers; property hot topics for December 2017 and beyond.

What are the CPD requirements for members?

  • Minimum of 20 hours between 1 January and 31 December each year

  • At least 10 hours must be formal CPD, i.e. any structured learning with a clear learning objective and outcome. This can be self-managed, as long as it meets these criteria

  • RICS Professional & Ethical Standards must be reviewed on a 3-yearly rolling basis

  • CPD activities must be recorded online by 31 January of the following year

What are the CPD requirements for RICS APC candidates?

These are different to the requirements for Chartered Surveyors:

  • All RICS APC candidates must complete at least 48 hours' CPD

  • At least 50% must be formal CPD (see explanation above)

  • Structured training candidates - minimum of 48 hours per 12 months' structured training

  • Preliminary review candidates - minimum of 48 hours in the 12 months prior to preliminary review, with CPD record updated to reflect the requirement prior to submitting your final assessment documents

  • If you are on an accredited part-time or distance learning degree, your final year will count towards your CPD hours for that year

  • To be recorded within your RICS APC submission in the CPD section 

Christmas Cracker 1 - Lease renewals pilot scheme

Security of tenure exists under Part II of the Landlord & Tenant Act 1954. Where this applies and the parties are unable to agree the terms of the new lease, there were historically two ways to resolve disputes. 

The first is through Professional Arbitration on Court Terms (PACT), an Alternative Dispute Resolution (ADR) mechanism used for unopposed lease renewals. Typical disputes include the new rent, length of term and tenant break options.

The second is through full Court proceedings, which can be both time consuming and costly. 

From 1 December 2017, however, HM Courts & Tribunals Service has introduced a pilot scheme for an alternative third method of resolving disputes. 

This relates to unopposed renewals issued only at the Central London County Court, which will be subsequently transferred to the First Tier Tribunal (Property Chamber). This should help to speed up the process and reduce associated Court costs.

The key differences to full Court proceedings are:

  • The parties can delay for 3 months but only if they are pursuing PACT (or another ADR mechanism)

  • Draft standard directions will be used with a rapid 20 week period to trial, e.g. tenant has one opportunity to review the draft lease, experts must engage earlier in the process, no provision for disclosure or witness statements

  • 2 day period schedule during which the tribunal will hear the caseTribunal judge and tribunal valuer will assess the case

There are likely to be a variety of issues with the new process, e.g. postponement period is short, tenant is potentially disadvantaged by only having one opportunity to comment on the draft lease, key legal issues or contentious points may not be afforded due consideration and attention.

Christmas Cracker 2 - Service charge consultation

RICS have recently consulted on a 4th edition of the Service Charge Code for Commercial Property. Responses were requested by 6 December 2017.

Service charges continue to be contentious, particularly given that the tenant wishes to keep overheads to a minimum, whilst the landlord wants to protect their assets and mitigate financial risk.

Some of the key proposed changes are:

  • The current code is advisory, whereas the new edition will become mandatory with accompanying best practice guidance

  • No more than 100% of the proper and actual costs can be recovered, unless the lease provides an explicit right to do so

  • Annual budgets (together with supporting commentary), signed reconciliations and apportionment schedules must be issued to tenants

  • Recoverable expenditure must comply with the terms of the lease

  • Discrete accounts must be set up for service charge moniesInterest must be credited to the service charge account after appropriate deductions

  • In the event of a dispute, withheld service charge payments by tenants must reflect only the actual sums in dispute

Christmas Cracker 3 - Assignment and the EMI case settlement

Anti-avoidance provisions in the Landlord & Tenant (Covenants) Act 1995 have had unintended and surprising effects. These played out in the K/S Victoria Street v House of Fraser (Stores Management) Limited (2011) and EMI Group Limited v O&H Q1 Limited (2016) cases.

In K/S Victoria Street v House of Fraser (Stores Management) Limited (2011), the Court of Appeal held that:

  • The guarantor of the outgoing tenant cannot also be the guarantor of the tenant's assignee (ingoing tenant), i.e. cannot give a second guarantee

  • Even with agreement between the parties, a lease cannot be assigned from the tenant to their guarantor

In EMI Group Limited v O&H Q1 Limited (2016), the High Court held that a tenant cannot assign the lease to their guarantor, even with agreement between the parties. The case was due to be held by the Court of Appeal earlier in 2017 and it was hoped that the High Court's decision would be overturned, but the parties instead reached an out of Court settlement.

The general industry sentiment seems to be that the current position is uncommercial and lacks clarity. In certain circumstances, e.g. corporate restructuring or insolvency procedures, it also prevents the parties from using lease assignments effectively.

How can we help?

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Stay tuned for our next blog post to help build a better you

N.b. Nothing in this article constitutes legal or financial advice.