Residential Property Management - Essay Example

These additional questions were not specifically mentioned in the earlier request. However, answers for these questions are given separately inthe end, in different font colour, which may be incorporated at the right place) Residential property management: Case Study A household is an indispensable building block of social, economic, and political life, and it is the responsibility of a liberal society to grant its citizens a safe place to arrange their household. A household is likely to involve several participants having distinct relationships, for example between landlords and tenant, who are bound to follow written contracts structured to minimize their affairs in property management. The members of a household, namely owners or their representatives and occupants, together manage a real estate enterprise that makes use of inputs of land, capital, and labour for providing shelter and other services essential for maintaining a household. In the early 1930s UK social housing policy underwent a shift as local authorities abandoned general needs housing and the standards were reduced to make the housing affordable by poor families. Nevertheless, “by the beginning of World War II, Britain had over a million council units, 10 per cent of the entire housing stock” (Malpass and Maurie. 1999, p38- 43). Present case study has to be viewed in this perspective as the buildings block were built in 1930s, which may require major repair and maintenance cost, at the same time may be exacerbated with tenant issues. Case study I: The tenants of 10 flats, who are under rent controlled occupancy, have to be shifted to a newer better block two miles away. Decanting these occupants may involve many hurdles as there may be occupants from the very beginning and most of them may be legal heirs to the original owners. Because of long stay in the same locality, may be from birth, majority of them will be unwilling to shift their housing locality to a new environment, and it also involves relocating their professional or commercial activities. It may be noticed that in areas which are typified by poor quality housing estates, many of which were developed before 1945, were using non-traditional forms of construction, and decaying infrastructure. Repair and maintenance of these blocks are costly and vacating these buildings is coupled with mixture of tenures caused by the Right to Buy (RTB) power vested on the tenants, which makes demolition/renewal more expensive. Compensating the home owners at full market value for the loss of their home is also a heavy burden on the developers. Taking into consideration the Housing Act 2004, Empty Dwelling Management Orders (EDMO) gives local authorities a discretionary right to secure occupation and proper management of privately owned houses and flats that have been unoccupied for a specified period of time and where certain other conditions are met., it will be appropriate to vacate these ten flats immediately. As other twenty flats are already vacant imposing EDMO will be practical, and deprive the benefits that may be available to the landlord. As such, depending on the law of the land and the jurisdiction involved, before a tenant is evicted a landlord must have an eviction law suit in possession. It is to be kept in mind, before initiating relocation procedures, that every tenant has the legal right to apply for court injunction against illegal, or even legal, eviction and landlords must follow the correct legal procedure to evict a tenant. Protection from Eviction Act 1977 provides that “If a person unlawfully deprives the residential occupier of any premises of his occupation of the premises or any part thereof, attempts to do so, he shall be guilty of an offence unless he proves that he believed, and had reasonable cause to believe, that the residential occupier had ceased to reside in the premises.” Similarly any act likely to interfere with the peace or comfort of the residential occupier or members of his household, or persistently withdraws or withholds services reasonably required for the occupation of the premises as a residence shall be guilty of an offence. In addition, any re-entry to the dwelling on lease should be with advance written notice or by the proceedings of the court. Validity of notice to quit should contain such information as may be prescribed and be given not less than four weeks before the date on which it is to take effect. A landlord may be criminally liable on re-entering physically upon the property let out, by use of violence or threat to the tenant or to property, as it is not lawful to adopt such methods. A re-entry to the property is possible, by commencing an action for possession, after serving of the writ (or summons). Under such circumstances the tenant may obtain relief against forfeiture, which has important consequences leading to relief of the tenant from the covenants in the tenancy and continued possession by payment of “mesne profits,” a damage for trespass. (Eviction Act, 1977.Clause: 2.11, p. 16).Under these circumstances the tenants should be served advance notice of the procedure, and a detailed strategy for development of the property and future use clearly informed to the Housing authority and concerned agencies of the area. Tenants may also be given an opportunity to express their willing and applying for Housing Benefit and Council Tax Benefit claims. Any person who is displaced from a dwelling unit as result of relocation scheme may be entitled to a home less payment and/or disturbance payment of 3,800 pounds under sections 29 and 37 of the Land Compensation Act, 1973, as amended. If certain conditions are met, essentially during the 12 months prior to the date of displacement the tenant has been in occupation of the dwelling as his/her only or main residence by virtue of a qualifying interest or right, they will be entitled for compensation. The disturbance payment claim may include such items like, (1) the cost of removing furniture by removal contractor or the cost of van hire and petrol, (2) the cost of curtains, carpets, soft furnishings, including refitting and altering charges, (3) cost of removing and reinstalling of security alarm/locks, (4) the cost of disconnecting domestic appliances, telephone, television and its reconnection/re-installation, (5) special adaptations under the supervision of Occupational Therapists, and (6) re-direction of mail. Private and social landlords, who live in the property, will receive market value of the property, based on the open market valuation by District Valuer. An owner occupant will be entitled for market value and home loss compensation. They will receive market value of their current property regardless of any outstanding mortgage, enabling them to buy a replacement property. In addition to this, owners are entitled to a home loss payment of 10% of the agreed market value of the property. (Financial package for relocation of tenants. 2007). Case study II: In this case a house of 1930s was let on Assured Shorthold Tenancy (AST), two months ago, and the tenant has not paid the rent since occupying the house. The tenant was also instrumental in causing damages to the interiors by removing central heating system. It has to be construed that the new tenant is occupying the premises after entering a clear contract terms. When a landlord and residential tenant enter into a lease, both parties are entitled unilaterally to end the relationship at the end of the term. In addition, in the event of a material breach of the terms of the lease, the party not in breach is entitled to rescind the arrangement at an early date. A lease may contain provisions that limit transfer rights, partly because an abusive occupant can inflict massive damage on a dwelling unit, which will safeguard landlord’s interest. Thus, any action against the tenant has to be taken in the light of lease hold terms and conditions prescribed under AST. An assured short hold tenancy is a type of assured tenancy that gives more rights to the landlord when he wants his property back. After February 28, 1977 new lettings in private rented sector in UK are generally in short hold tenancy. It only provides security of tenure for the duration of the agreed term, and after that the landlord may ask for the property back, by serving a written notice at least two months in advance. An assured short hold tenancy will have the rent fixed for the length of the term and the landlord will not be able to increase it unless specified in the tenancy agreement. Assured short hold tenants are liable to pay rent for the entire agreement period, and final electrical bills have to be paid. It is also obligatory that a written notice of vacation should be served on the landlord before moving from the property. The situation leading to removal of central heating system and non-payment of rent after occupancy by the tenant has to be analyzed on the basis of Leasehold Property (Repairs) Act and the provisions of breach of covenant. Leasehold Property (Repairs) Act 1938,(notified on 23rd June 1938), is an Act to amend the law as to the enforcement by landlords of obligations to repair and similar obligations arising under leases specify that “where a lessor serves on a lessee under subsection(1) of section 146 of the Law of Property Act, 1925, a notice that relates to a breach of a covenant” or agreement to keep or put in repair during the currency of the lease ‘all or any of the property comprised in the lease,’ and at the date of the service of the notice three years or more of the term of the lease remain unexpired, the lessee may within twenty-eight days from that date serve on the lessor a counter-notice to the effect that he claims the benefit of this Act. Breach of covenant specify that “If, as a term of tenancy, a tenant agrees with his/her landlord (expressly or impliedly) that he will do or refrain from doing certain things, (for example, that he will pay rent or keep the property in repair, or that he will not change its use), he is said to enter into a covenant and a failure to comply with it is a breach of covenant. The forfeiture may also take place if the tenant becomes bankrupt (or on the happening of associated or similar events, such as the tenant entering into an agreement or composition for the benefit of creditors).” (Leasehold Property Repairs Act, 1938. 1991). Clause 2.20 specify that even though the terms of the tenancy include a covenant to pay rent and a forfeiture clause, the landlord is not entitled to forfeit for non-payment of rent until he has made a formal demand for rent. But this rule is subject to exception where a formal demand is unnecessary if a half year’s rent is in arrear and any goods to be found on the premises available for distress are not sufficient to satisfy all the arrears which are due or where the terms of tenancy itself exempt the landlord from making a formal demand. If a breach is irremediable the landlord need not required to be remedied and the tenant is left with no remedial options. The tenant will be aware that withholding rent may prompt the landlord to initiate legal action for extracting arrears and seek possession of the property. However, rent may be withheld when the landlord has failed to perform a repairing obligation and the tenant carried out the required work, then the cost deducted from the rent. Any such move should always be followed with expert advice and must provide an opportunity to the landlord to perform the repair. A landlord may terminate a tenancy as a result of breach of covenant or condition by the tenant irrespective of the term of tenancy under the provisions of the law of forfeiture. It is the only means available to the landlord to respond breaches of covenant by ending the tenancy and recovering possession. However, a landlord wishing to warn the tenant of the impending action for breaches of covenant should serve a ‘Tenant default notice,’ on the tenant as well as mortgagees and sub-tenants, as the case may be, setting out in details of the breach, any remedial action required, and the date by which it should be completed. The primary purpose of the tenant default notice is to ensure that the tenant complies with the obligations under the tenancy, with a minimum notice period of 7 days which provides a period for negotiation by the parties. This also forebodes the landlord from taking any further steps in the process that might culminate in the termination of the tenancy. In the event of a tenant notice fails in its primary purpose, the landlord may make a termination claim from the tenant and all the qualifying interest holders to the property. Under these circumstances the landlord could seek court intervention, and the court will arrive at an appropriate decision taking into account the conduct of the landlord and the tenant, action taken to remedy the default, and reasonableness of the remedies. The court may issue either a termination order or a remedial order, depending on the gravity of default. A termination order ends the tenancy and any interests deriving out of it on a date specified in the order. A remedial order sets out remedies to the initiated by the tenant and the date by which it must be remedied. Unlike the termination order a remedial order does not affect the continued existence of the tenancy, but during the period of stay of three months the landlord can apply to lift the stay and proceed with the termination claim. A landlord may resort to summary termination procedure as an alternative under which the landlord can bring a tenancy to an end without applying to the court. This procedure cannot be used where (1) someone is lawfully residing in the premises, (2) the unexpired term exceeds 25 years, or (3) the tenancy was granted for a term in excess of seven years and there are three or more years unexpired, and the default is breach of repairing covenant. (Termination of Tenancies for Tenant Default. 2006). Hence, this case should be dealt with legal backup for eviction of the tenant for breach of lease terms Types of insurance Section 164 of the Commonhold and Leasehold Act 2002 prescribes the conditions for insurance where a long lease of a house requires the tenant to insure the house with an insurer nominated or approved by the landlord. Insurance cover for landlords While letting or renting property landlords sometimes rely on normal household cover, and tenants do not bother with insurance. There is much risk associated with renting a property posed by third party liabilities, as building policies provide some kind of Employer’s Liability for the safety of workers employed in the premises, loss of rent and tenant accommodation cover, Perils coverage, and also for maintaining the replacement cost of the property. An insurance policy essentially should include property owners liability with maximum cover based on the valuation of property by a chartered surveyor. A professional insurance valuation, particularly in the case of unusual properties such as old, listed, conservation area, or specialist properties should be carried out by chartered surveyors, will be appropriate to index link the annual premiums to the retail price index in order to maintain an accurate insurance value over time. It is also important to get permission in writing from the mortgage lender, insurer and landlord before letting the property to tenants to maintain the insurance cover. Landlords do not normally need full content cover when the property is let un-furnished or partially furnished, and the responsibility of safeguard to property falls on the tenant. Opting emergency assistance insurance will be more useful for landlords living away from the property and assist them in covering labour charges and cost of material in the event of plumbing, heating system, electrical, security, drain, and roofing problems. Rent Guarantee Insurance is another excellent and important safeguard, as even a reliable tenant can have difficulty in paying the rent due to unforeseen contingencies, during the long period of legal battle with a bad tenant and a best way to maintain mortgage payments and minimise risk. Legal expenses insurance is the ultimate cover to protect the hard earned cash on legal fee involving bad tenant as a relatively small annual sum spent on it can cover major portion of legal fees. Tenant’s Insurance: It is the general notion all tenants that security of the residential property, the building, and contents are the landlord’s responsibility to ensure. Whereas insuring the property against burglary and theft; damage caused to the property from drain and showers overflow/leak; accidental damage to landlord’s fitting, equipments, and furniture; and loss of personal possessions from natural calamities are essential for a tenant to be prepared against any of the eventuality that may put in financial constraint. A landlord who wished to impose upon his tenant an obligation to insure could do so either by taking from him an ordinary covenant to insure or by granting the tenancy “upon condition that” be insured. It is advisable to go for insurance cover with reputed firms for all the valuable articles in the property and in possession of the tenant so that living in a rented house will not be a liability. (Landlord’s insurance. 2007). Commonhold and Leasehold property “In England and Wales, there are two ways to own land, freehold and leasehold, where freehold comes closer to absolute ownership and leasehold confers ownership for a temporary period, subject to terms and conditions contained in the contract or lease”(Explanatory Notes) Each has its advantages and disadvantages. Commonhold and Leasehold Reform Act 2002 is an “Act to make provision about commonhold land and to amend the law about lease hold property” was introduced on 1st May 2002as an alternative to leasehold in England and Wales. (Commonhold and leasehold reform Act 2002. 2002). It allows freehold tenure to part of a multi-occupancy building with shared ownership, and responsibility for management of common areas and services. It will be possible to convert from leasehold to common hold but only if certain criteria are met, as well as consent to conversion from the existing leaseholders and other owners of what would become units of commonhold are obtained. The Act of 2002, Part 2, Chapter 1: Right to manage, introduces the new right for leaseholders of flats to manage their own building, at the same time protecting the legitimate interests of the landlord. The Landlord and Tenant (Licensed Premises) Act 1990 (c.39) is an Act to repeal section 43(1) of the Landlord and Tenant Act, 1954. (Public Act 1990). (Explanatory Notes to Common hold and leasehold Reform Act 2002. 2002). The Licensed Premises will be used only for carrying on business and for no other purpose, and it comprises a portion of a tenant’s premises, as agreed between the licensor and licensee, on a monthly tenancy basis. Repair, Renew, and license When a property is proposed for sale or renting it should be kept in good repair and shape in order to attract tenants. Painting the exterior and interior of a building proposed for rent or sale could double the investment that is put in the work. Landlords are required to attend essential repairs to roof, doors and windows, walls, rewiring as well as improvements like hot water system or bathroom installations. Upkeep of common areas and park in the case of flats are also to be maintained and kept in good repair. The landlord is responsible for the repairs to the structure and exterior of the building, basins, sinks, baths, toilets and heating when letting a property for less than seven years lease. A Licensing aims to raising housing standards in order to benefit tenants. Under the Housing Act 2004, where more than two people occupy a property but don’t form a single household, usually because they are not related, the property is classified as and HMO (Houses in Multiple Occupation).. From 1st October, 2007, private landlords with HMOs of three or more storeys and with five or more tenants will require a license. A license from the appropriate authority is an important prerequisite, and certifying that the residential/commercial unit is suitable for occupation by the number of tenants, the building fulfils fir precaution standards, the proposed management standards and arrangements are satisfactory, etc., are essentially required before leasing a property. Health and safety measure standards set by the Housing Health and Safety Rating Systems for the residential premises must be strictly adhered to. An original Real Estate license is valid for one year period ending the last day of the month during which it was obtained, and each renewal thereafter is for a 2 year period. Case:1. Provision of heating, bathroom, and cooking area Health and safety problems exist in many older buildings and must be corrected with respect to health and safety, as per the existing building codes of the area. All rental housing accommodations are subject to inspection by the regional health authorities, and it is the responsibility of every landlord to provide basic necessities of lodging. It includes proper cooking and bathing facilities, electrical and heating equipment installed in accordance with the relevant codes and properly maintained. All heating appliances and ventilation devices must be installed in accordance with health and safety requirements. If fuel-burning appliances are not operating properly, they can give off combustion gases such as carbon monoxide and nitrogen oxides, which can have serious effects at high concentration. All heating appliances are to be properly installed and maintained in good working condition, and be capable of safely and adequately heating all habitable rooms, bathrooms, and toilet rooms to temperature of 22 degree Celsius. It is mandatory on the part of landlord to provide tenants with a toilet, bath sink, and keep them properly connected, sanitary and in safe working order at all times. Cooking is basic necessity of each occupant to a dwelling unit, and hence adequate food preparation area should be earmarked in each unit, equipped with fire safety, and keep kitchen appliances, such as stoves, ovens, refrigerators, etc., in proper working condition. It is also essential that a tenant should check all the facilities available in the residential unit and get satisfied himself/herself that all the facilities and fittings of appropriate standard and in good working condition. A landlord should present the tenant with a comprehensive list of all existing fixtures before the tenant moves in and a list of damages when tenant moves out. This list should be signed by both tenant and the landlord. When the tenant complains to the government agency charged with responsibility for enforcement of a building or housing code of violation applicable to the property affecting health and safety or complained to the landlord of a violation under the Landlord Tenant Act, immediate action should be taken to rectify it. Municipal inspectors may be involved before undertaking any renovation job as permits may be required for significant changes to the electrical or plumbing systems. Thus, landlords must comply with the Residential Tenancies Act, and any associated regulations and standards for maintenance and provision of quality housing. Case: 2 Letting on Assured Shorthold Tenancy Before letting any residential or commercial unit on rent a Lease agreement, a legal agreement specifying the tenancy terms and conditions, has to be signed between landlord and tenant. In the present case of a dwelling unit where the original tenant is expected to shift after some time, letting it on short tenancy basis will be economically viable, at the same time it involve second tenancy lease agreement. The lease should specifically indicate beginning and ending of the lease period; security deposits payable; weekly or monthly rent fixed for occupancy; and council taxes, water charges, fixed service charges, etc., payable by the tenant as well as services that are provided by the landlord. Assured Shorthold periodic tenancies should be entered upon with caution as the tenancy agreement made for one month may turn out to be a liability in case the second tenant turns out to be non-cooperative and the first tenant demands immediately occupancy, as it is a single bedroom accommodation Provisions given in different terms for a Statutory Periodic Tenancy should be strictly followed and legal advise obtained before entering second tenancy in single bedroom flat. Best alternative is to keep the property on daily rental terms with the consent of original tenant. Works Cited Leasehold Property (Repairs) Act 1938 (c.34). Ministry of Justice. The UK Statute Law Database. 1991. 30 Dec. 2007 . Malpass, Peter and Murie, Alan. Housing Policy and Practice. 5th ed. New York: Palgrave. P.38- 43. 1999. Financial package for relocation of tenants. Agenda Item No 12. To the Mayor and Members of the Cabinet. 2006. 30 Dec. 2007 . Termination of Tenancies for Tenant Default. Executive summary. Law com No. 303. 2006. 30 Dec. 2007 . Explanatory Notes to Commonhold and leasehold Reform Act 2002. Chapter 15. 2002. 30 Dec. 2007 . Commonhold and leasehold reform Act 2002. Office of Public Sector Information. 2002. 30 Dec. 2007 . Landlord’s insurance. Landlord Zone. 2007. 30 Dec. 2007 . Read More