Case study

Question 1

1. Describe the construction of unit 6?

Answer 1

a. Steel portal frame with a brick and glazed elevation under a flat roof

Question 2

2. What are the defects to look out for?

Answer 2

a. Cracks in the brick work
b. Damage to the glazed elevation
c. Blocked gutters
d. Damp
e. Rust on metal work
f. Leaks

Question 3

3. Were you instructed to do void checks? What are they?

Answer 3

a. Turn off water but if not then ensure toilets regularly flushed
b. Electric on to feed fire and security systems
c. FRM checks monthly
d. Looks for fire hazards, evidence of rodents and leaks
e. Ensure service charge being billed to landlord
f. Council informed for business rates to Landlord

Question 4

4. Anything to be mindful of due to age?

Answer 4

Asbestos and RAAC

Question 5

5. Do you have a procurement policy in place? What is it?

Answer 5

a. Yes, whilst I have limited amount of experience in the procurement we do have a policy that ensures
i. Competent contractors that complete Savills pre-contract checks
ii. Value for money, scope of appointment, fee bid, analysis
iii. Appropriate insurance
iv. Comply with laws and H&S

Question 6

6. Is there anything else within the lease you could have used aside from forward funding?

Answer 6

a. No there wasn’t but I am aware that sum leases may include a sinking or reserve fund

Question 7

9. Is it fair that tenants are picking up the shortfall because the unit doesn’t exist?

Answer 7

a. Lease clause within the service charge schedule allows change to configuration of the property.
b. landlord was invested £5m to regenerate an area that uninviting and increase to increase trade and footfall.

Question 8

10. What is the LL paying for resurfacing vs cap breaches?

Answer 8

a. The resurfacing costs are £300k but the breach in caps were £23k

Question 9

11. Why was 6 years forward funding decided?

Answer 9

a. The unexpired term certain for the retail park is 7.31 so it meant that the funding would be paid off before any vacancies occurred.

Question 10

12. Why was the building demolished and not carved up?

Answer 10

a. Because the plans was to increase parking spaces for tenants employees and easier access into the loading bay area which required removing the back of the unit.

Question 11

16. What is the cleaning in the schedules for?

Answer 11

This is for things like litter picking, sweeping of leaves, emptying bins, cleaning signage and general keeping clean and tidy.

Question 12

17. What was the inflation before issuing budget?

Answer 12

a. 11.1% in October it has now fallen down to 6.7% (August 2023)

Question 13

18. What do plans need to be registry compliant?

Answer 13

a. Title
b. Scale
c. North point
d. Redline

Question 14

19. What does it mean when a landlord goes into administration?

Answer 14

a. when a company becomes insolvent and is put under the control of Licensed Insolvency Practitioners.

Question 15

20. What is the difference between FRI and IRI?

Answer 15

a. Under an FRI lease the landlord has no repairing or insuring liability. IRI stands for an Internal Repairing Insuring lease where the tenant will have a narrower liability for maintenance, decorations, repairs and insurance confined to the internal parts of the property occupied by him/her.

Question 16

24. Do you know the average £ per sq ft for retail parks?

Answer 16

a. £1.40-£150 p Sq Ft

Question 17

25. Why was this retail park lower than the average £ per sq ft?

Answer 17

a. I am not 100% sure as I have not done analysis into this. I am aware that our maintenance costs, since having this on board, has remained low and the resurfacing is the first major works we are doing. In addition to this, we do not need to invest as much into the marketing budget due to the park sitting right next to the main centre

Question 18

26. Is it a concern that the £ per sq ft has increased to £1.42?

Answer 18

a. No, at the moment the amount of the budget with unit 6 removed. The works for the three new units have now completed and once this is factored back in at the point of reconciliation then this will reduce it. In addition to this I did some analysis, projecting the increases for the next 6 years and once the forward funding for the roof works falls away in 2024 this will bring the £ per sq ft back to a normal level.

Question 19

27. What is the current national living wage?

Answer 19

b. £10.90

Question 20

28. How is the management fee set?

Answer 20

c. It used to be a percentage of the SC budget but now it calculated by benchmarking, finding out what work is involved, how big the site is, looking at comparable schemes.

Question 21

30. Please can you explain what forward funding is?

Answer 21

a. It is where the landlord will front the cost of, in this case, the resurfacing costs and then charge the cost back to the tenants over a number of years

Question 22

31. Is there any other way you could fund for these works?

Answer 22

a. No, not within these leases. But I am aware that, if the lease permits it, there is the possibility of using either a reserve fund or sinking fund. In this instance.

Question 23

32. What is the difference between a sinking fund and reserve fund?

Answer 23

a. Sinking fund is where you money aside for planned expenditure
b. Where you put money aside for unexpected costs but this is really uncommon

Question 24

34. Can you charge interest for forward funding?

Answer 24

a. Yes you can but only at the level the client is being charged

Question 25

35. Where would you look for the FRI or IRI obligations?

Answer 25

a. You would look in the repairing and insuring obligations along side the description of the demise.

Question 26

36. Is there any other ways apart from weighted you can apportion?

Answer 26

a. RV b. Area c. Percentage

Question 27

37. Why did you apportion the retail park based on floor area?

Answer 27

a. Because this is the specified method within the lease

Question 28

38. How did you manage the landlord and tenant relationship?

Answer 28

a. Primarily with the client, I ensured I kept them update on my progress and informed them of any delays. I had regular meetings with them and if I had any queries I would initially give them a call then follow up with an e-mail.

Question 29

1. What budget have you had for previous tarmac repairs?

Answer 29

£5k -£15k pa

Question 30

2. There was no savings made in doing the resurfacing works compared to the annual cost of maintenance, why was this the done?

Answer 30

a. Not done since 2007 possibly longer b. Survey concluded resurfacing required c. If not done this would invalidate insurance as ignored recommendaton

Question 31

3. Why do Mcdonalds and Pizza hut pay towards drainage maintenance and repairs

Answer 31

a. This is in relation to drains within the common areas

Question 32

4. When was the car park last resurfaced?

Answer 32

a. Before 2007 but it is believed to have never been done since the property was built

Question 33

7. Is there any other staff costs in the retail park budget?

Answer 33

a. The only staff costs we have within the expenditure is for the cleaning of the site which as per the service charge statement advices these should be included within cleaning. b. This is the same for security. We do not have physical security that walk around but they monitor from a main control room and

Question 34

8. There is forward funding for the roof works on the terrace of units. Was the Toys R Us roof done within these works?

Answer 34

a. At the time of agreeing the forward funding, the landlord at the time, was not sure of the plans to Unit 6. Therefore 2 options were provided for. The option for the full roof and the option for the full roof less unit 6. At the time, it was fair for unit 6 to contribute towards this. Works not done. Now it is demolished, the cost of this will not be charged and therefore the LL should not pay towards it.

Question 35

9. Do we charge interest on the roof works forward funding?

Answer 35

a. We do not but you can charge providing reasonable and commercial rates on borrowed money

Question 36

10. What are the current commercial loan rates?

Answer 36

a. No experience b. Dependent on amount and term c. Around 2%-13%

Question 37

11. Who owns the roads around the park ?

Answer 37

a. adopted highway

Question 38

12. Is it fair that the roof works were phased?

Answer 38

a. It is standard practice that this would be phased. In addition to this, setting the fee at the start means you don’t pay for increases in the future.

Question 39

13. What is included within expenditure of the retail park?

Answer 39

Management fees Utilities security cleaning marketing repairs maintenance

Question 40

5. How would you deal with RAAC within a property?

Answer 40

a. Building survey to identify if present b. if present, condition and recommendations on manging/removing.

Question 41

Why does the client want new units to be on FRI leases?

Answer 41

As they are brand new, you would expect them to be handed over to tenants in the best condition. The client wants to uphold that condition and by having an FRI lease in place means it is the tenants responsibility rather than the LL.

Question 42

Why does the LL want remaining units to convert to FRI?

Answer 42

Now that the the three new units are build, the retail park as a whole is far more presentable. The landlord would like to keep it to this high standards and FRI leases means the responsibility is pushed onto the tenant.