Solutions to Managing Residential Property, the Estate Surveyors and Valuers Perspective

Udo Emmanuel Sunday

Introduction

Investment in Real Estate has provided the easiest way to fortune. Unarguably, it has proved the most secure income earning investment available. Real property investment for whatever motive in any known business climate involves the tying up of scarce resources in a venture in anticipation of future capital gains, income or utility. This anticipated gains or income can only be achieved when the property is properly managed. Property letting has become a prominent function of the Estate Surveyor in practice because of the awareness already created and the hard times which have made it imperative to reach a wider market, if properties are to be let in good time and at competitive rent and prices.

The principal role of an Estate Surveyor is to bring about the transfer of ownership of an interest in real property either for a short time (in the form of leases) or eventual disposal (outright sale).

This article will involve the critical examination of the post–letting problems thereafter proffer viable solutions to the observed problems and make recommendations.

Challenges of Property Management

The Surveyor who accepts to manage a client’s property assumes such heavy responsibilities as may be specified by the extent and scope of the authority conferred in line with his appointment.

The letting surveyor is usually eager to conclude more transactions that he may unconsciously over-look important details before handing over the property to the management department.

The post-letting problems encountered during the management of the multi-tenanted residential building are numerous; it takes a professional to handle them. They include, though not limited to the following;

Rent Collection and Default

Payment of rent is the primary obligation of any tenant; this is not usually the case in our country. It is usually easy to collect the first one or two years in advance when a tenant is coming into a property, but subsequent rent is usually the problem.

In the course of our management of the property, we noticed that most tenants find it difficult to renew their rents. This results most times to the issuance of a “notice to quit”.

Lease Agreement

This is one of the problems encountered in the course of our management. The tenant will always take so much time and persuasion before they sign the lease agreement. This is done mostly to avoid the issue of accepting responsibility for repair and payment of dues in terms of service charge, utilities etc.

Design Problem

This is another problem which we have encountered. This can be as a result of the landlord’s inability to seek professional advice at the design and construction stages. This has resulted to serious defects and functional obsolescence that has created management problems for the managing Surveyor.

Other problems resulting from design defects are problems associated with parking, facilities, toilets, staircase, ventilation etc.

Maintenance/Repair Responsibilities

The management of the maintenance and repair responsibilities is another problem faced in the management of the property. We observe that sometimes, the landlord does not live up to his obligation to repair or to provide and keep certain services functioning; usually you find him passing the buck on such repairs, whilst the tenant on the other hand as a result of the above finds it difficult to pay their rent and sufficiently perform their obligation regarding repairs and maintenance.

The Service Charge Administration

As certain types of properties have become more complex, landlords and tenants’ expectations have changed, the services provided by owners now include provision for the recovery of cost of a multiplicity of services. In providing the services, the owner’s objective will be to maintain the quality and value of his investment with 100% recovery of the costs incurred. The tenant on the other hand will seek reasonable enjoyment and use of the premises, at a reasonable cost, excluding unnecessary or inappropriate costs.

The services which the service charge cover are as follows;

*       Security services

*      Emergency/security lighting for common areas

*       Payment of general and water rates.

*       Repair and maintenance of stand-by generators

*       Cleaning of common areas

*       Management cost of the services etc.

Possible Solution/Approaches for Solving Challenges

There are several possible solution or approaches for solving some of the challenges highlighted in the previous section. These could be discussed as follows. 

Rent Collection and Default

As discussed in the previous chapter, rent collection is not an easy task, therefore the managing surveyor at the entry state of the tenant should make proper enquiries about the tenant, i.e occupation, place of work etc to ensure that tenant can fulfil his obligation to pay rent. Demand notices for rent should be sent six months to the expiration of rent and a reminder at three months and one month to the expiration of the rent. This follow-up method can also be very effective in the collection of rent. 

Lease Agreement

The solution of this however is for the lease to be prepared and executed by both parties before the commencement of the tenancy and before keys are formerly handed over to the tenants.

Design Problem

It is necessary for the Estate Surveyor and Valuer to be included at the design stage, to advise on several issues as it relates to materials to be used with regards to their sustainability, durability and cost at the long run. The purpose of use and to ensure during management it is actualized.

Maintenance/Repair Responsibilities

The managing surveyor should clearly state in the lease agreement the obligations of the landlord and tenant and explain same to them. A schedule of maintenance should be drawn up and also keep a percentage of rent to be agreed with the landlord for emergency maintenance as the case may be.

The Service Charge Administration

Where services are provided such as in blocks of flats or in other multiple occupation property, ensuring that such services are run to the satisfaction of both owners and tenants. This will also involve the determination and collection of maintenance fund or service charge. In this regard, it is advisable to remember that service items such as lifts, generators, pumps etc., will usually require replacement at some time in the future. Therefore, a fund or provision for this should be included in the service charge account. Dealing with tenement, general and water rates, ensuring collection from those liable to pay, and that payment are made promptly to the relevant authorities.

Performing other management functions including reviewing and advising on re-development, refurbishment and re-adaptation, on disposals, acquisition and conservation

Keeping property register and records which all provide necessary data on the property, including location address, details of ownership, details of tenants, long range diary of events, details of rent reviews, options to renew etc. the records should be kept in such a manner that the events could be picked up and acted upon in good time.

Dealing with the selection of tenants, negotiating and agreeing on terms and ensuring that tenancies/lease/sub-leases are appropriately documented and where consents are required, ensuring that such consents are obtained.

Ensuring that the covenants, either in head-lease, in a certificate of occupancy or other forms of conveyance are observed and performed, inducing payment of ground rents and development charges.

Advising on adequate insurance for the property, reviewing the sum insured at required intervals and ensuring that premiums are paid regularly.

Proposed Recommendations

Management is a leading factor in any investment. It is the resources well managed today that makes for tomorrows prosperity.

The key to the success of any property investment is professional management. There is urgent need for innovations in the management of most of the post letting problems associated with commercial properties. There is need for proper planning on the techniques for selection of tenants and collection of rents, effective planning and execution of maintenance.

To effectively tackle these post-letting problems, the expertise of a well-trained professional manager is required and that professional manager is the Estate Surveyor and Valuer.

There is urgent need for innovations in the management of most of the post letting problems associated with commercial properties. There is need for proper planning on the techniques for selection of tenants and collection of rents, effective planning and execution of maintenance.

Recommendations

A close study of the post-letting problems we have discussed will reveal that their root cause is more in the Landlords and tenants than in the Estate Surveyor who manages the property.

However, the following recommendation is apt for managing the post-letting problems associated with residential properties.

Preparation of Offer Contract

The management surveyor, should try and prepare an offer of contract at the commencement of the lease stating certain conditions to be met. Thereafter get the acceptance of the offer before entering into the lease.

The Manager Should Be in Control

The management Surveyor should be given free hand in the management of the property. It will be improper for him to suffer untold and unnecessary interference from the landlord on issues he is professionally trained to handle.

Involving Property Managers at Design Stage

For a successful management of this type of property (residential property), its management must be taken into consideration from the very beginning. It is necessary in the design of the building to take into account the interest of the investor, the building and the user. The long-term needs of the occupants should be taken into consideration. In this regard, it is important that the property manager who stays in close association with the property, the investor and the user should be involved at the design stage.

Adequate Enlightenment/Promotion of Alternative Dispute Resolution (ADR)

It is also important to enlighten both the landlord and the tenant on their responsibilities to make the investment/management successful. A dispute in the property management is better settled through alternate dispute resolution than through the litigation, or the illegal and crude process (e.g forceful ejection) usually employed. Arbitration for example is a quicker process; it handles technical issues better and takes place in a less formal and more cordial atmosphere. For the realization of the investment goals, the relationship between the landlord and the tenant who are partners in progress must be cordial. Though problem and disagreements may arise, it is the duty of the Managing Surveyor to promote a better landlord/tenant relationship.

The Use of Computers

The importance of the use of computer in property management cannot be overemphasized. The computerization of the property management operation will assist the property manager to maintain a lively and active property database which would be useful for planning and budget preparation.

Information on day-to-day repairs, routine and planned maintenance work all form part of the maintenance history required for an efficient maintenance system.

Furthermore, this work will recommend that the better approach to maintenance will be; to adopt a policy of periodic inspection of the property and subsequent rectification of observed defect. Observing and rectifying a defect at an early stage is likely to reduce repair. 

Conclusion

Property management is very detailed as it includes management of the property, management of people, proper accounting and record keeping, management of finances etc. therefore the need for an Estate Surveyor and Valuer to undertake this task.