First National Commercial Operation Manual Volume 2 by First National Real Estate

COMMERCIAL

O P E R AT I O N S M A N U A L volume 2

DIST R I B U T I O N Principal

Commercial Manager

Property Manager

Administration

Commercial Sales People

CON TA C T National Commercial Manager Direct : 03 9418 9137 Phone : 03 9418 9111 Fax : 1800 653 666 89 Hoddle Street Richmond VIC 3121 e n q u i r i e s@commercialfn.com w w w. f i rstnationalcommercial.com.au

C O M M E R C I A L O P E R AT I O N S M A N U A L

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C O M M E R C I A L O P E R AT I O N S M A N U A L

volu m e 2 Introduction

Leasing SECTION 1

5 6 10 18 24 25 26 28 32 34 36 37 40

The Leasing Manager Understanding Leasing Managing the Lease Enquiry Disclosure Statements Tools to Assist With a Lease Enquiry Identifying a Tenancy or Business Location Structuring Incentives Lease Assignments Legislation Commercial Property Leasing Form Estimating Yields and Rents Leasing Area Activity Report

Property Management SECTION 2 What is Property Management? Property Management Budget Understanding Rent and Lease Reviews Property Listing Form Property Information Form Council Rates and Outgoing Charges Property Characteristics Property Inspection and Condition Report O ffice Building Inspections Essential Services and Safety Measures Property Maintenance and Contracts Retail Properties Property Management Handover Property Management Submission

43 44 45 51 56 57 58 59 60 61 62 65 67 69 70

Glossary OF Terms

COPYRIGHT All rights reserved: these materials are copyright. Apart from any fair dealing for the purpose of private study, research or as permitted under the Copyright Act, no part may be reproduced or copied in any form or by any means without prior permission. First National Commercial believes that all information, in this Manual is accurate and reliable. However, no warranty of accuracy or reliability as to such information is given and no responsibility for loss arising in any way from or in connection with errors or omissions in any information provided (including responsibility to any person by reason of negligence) is accepted by First National Commercial or by any of its agents or employees or by any person. DISCLAIMER Every effort has been made to ensure that this manual is free from any error or omission. However, you should conduct your own enquiries and seek professional legal, financial or other advice before relying on any fact, statement or matter contained in the manual.

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LEASING

INTROD U C T IO N

C O M M E R C I A L O P E R AT I O N S M A N U A L

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LEASING

INTROD U C T IO N This volume, the second in the series of Commercial Operations manuals will enable principals, sales people and property managers to become familiar with leasing and managing commercial property. The manual is designed to assist in the day to day operations of the commercial property portfolio within their real estate office. Leasing commercial property can be extremely complex, however very rewarding for the real estate agents that embrace this segment of the property market. The leasing section aims to increase the level of understanding of the responsibilities of the Leasing Manager and covers all aspects of the lease process, from the initial enquiry through to the use of forms and templates. Templates provided on the accompanying disk will assist personnel in the preparation of reports, letters and documents. The property management section provides information and resources required once a tenant has been secured and the property then comes under the management of the real estate office. The management of commercial property involves attention to detail and the ability to recognise and comply with all aspects of a commercial lease agreement. The property management section includes listing forms, checklists and detailed condition reports, all in template form and available on the disk enclosed with the manual. As part of the groups commitment to continuous improvement we encourage feedback and ideas for improving the manual and these may be directed to the National Commercial Manager.

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C O M M E R C I A L O P E R AT I O N S M A N U A L

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SE CT IO N 1

LEASING C O M M E R C I A L O P E R AT I O N S M A N U A L

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LEASING

INTROD THE LEAU S ICNTG IOM N A N A GE R 1.

Objective The objective of a leasing manager is to develop and foster a strong relationship between a building owner and prospective lessee. In essence, the Leasing Manager could also be regarded as an account relationship manager. The Leasing Manager has three major functions: i.

Servicing the bank of listed stock

Through its market presence, property management and other services, the agency attracts building owners to seek the companyâ&#x20AC;&#x2122;s assistance in leasing their properties.

ii. Marketing Specific Properties

The Leasing Manager will draw up and implement a full marketing program to lease properties and / or floor space.

iii. Awareness of Creating Further Opportunities for the Agency

The Leasing Manager needs to be aware of and promote the further services the agency can offer clients in terms of sale, valuation, property management, etc.

Appearance, Dress and Manner As most commercial negotiations are carried out at a Senior Management level, it is important that managers are professional in both appearance and manner. Emphasis should be placed on keeping owners informed of progress in the leasing of their premises by way of emails, letters and telephone conversation. During negotiations managers must know all of the details about the property in question and must have inspected it prior to the initial meeting. All important matters in negotiations must be fully documented in accordance with the respective State Legislation and sound business practice.

Education It is helpful for managers to consider working towards a recognised tertiary qualification relative to the real estate industry. These qualifications may be obtained through TAFE and REI in each State University. Having formal qualifications gives a greater depth of knowledge and improves your credibility in the market. Qualifications available include: Bachelor of Applied Science (Property or Urban Planning)

Bachelor of Planning and Design (Property and Construction)

Bachelor of Urban Planning and Development

Bachelor of Business (Real Estate Valuation)

Diploma of Property

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THE LEA S I N G M A N A GE R 4.

Commission - Leasing Property The standard fees for the leasing of commercial space vary around the country. Examples are: Prime term between 1 year and 3 years

8% of first years net annual rent

Prime term of 4 years

10% of first years net annual rent

Prime term of 5 years

12% of first years net annual rent

Prime term of 6 years

15% of first years net annual rent

Prime term of 8 years

18% of first years net annual rent

Prime term of 10 years

18% of first years net annual rent plus

It is also possible to negotiate further fees in situations where an owner wishes to give an added incentive. Commission is usually billed when either: 1.

(a) (b)

The letter of agreement to lease (letter of intent) has been executed, Occupation of premises has taken place, First month’s rental payment is held in Trust Account and, Rent is being regularly paid to the Lessor,

Upon execution of the lease by the Lessee,

Or, if both parties agree, it can be billed earlier when some of the above criteria are satisfied.

NOTE:

CHECK YOUR OFFICE POLICY IN THIS REGARD. WHATEVER THE FEE CRITERIA IS, IT MUST BE WRITTEN INTO ‘THE APPOINTMENT TO ACT’.

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THE LEA S I N G M A N A GE R 5.

Commission â&#x20AC;&#x201C; Selling Property There will be occasions where the property owner instructs the agency to sell their property. Whilst this is covered in Sales, the Property Manager should be aware of the typical commission rates. Upon selling the property, Commercial real estate agents typically charge between 2.0 to 3.0 percent (plus GST) of the actual price that appears on the contract. However a flat fee arrangement like this is always negotiated to ensure that the needs of the property owner are met. Remember that they may be considering other agents, so offering incentives (also covered in this volume) is often a way to move the negotiations forward. An incentive based fee scale may be appropriate and an example is shown below: Example - Incentive Based Fee Scale

Proposed Rate

Applicable Price Range

Calculating Overall Fee Progress Total Percentage of Price By Range

Up to $499,000

$4,990

1.0%

$499,000 to $699,000

$4,000

$8,990

1.3%

$700,000 to $899,000

$8,000

$16,990

1.9%

10%

Over $900,000 The property owner will no doubt consider these fees along with the agencyâ&#x20AC;&#x2122;s overall marketing proposal.

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THE LEA S I N G M A N A GE R 6.

Understanding the property owners It is important to develop a good rapport with property owners; the Leasing Manager should use the following checklist to assist them to maintain a good relationship. CALL and MEET FREQUENTLY • Develop a regular call plan which suits the property owner UNDERSTAND THEIR PROBLEMS • Listen • Be considerate • Show empathy • Treat confidentially – Use discretion FIND OUT: • Period of ownership • How acquired? • Long term plan? Strategy? • Other properties they may own • Are they entrepreneurial, conservative, cautious? • Market knowledge • Latest information • Financial arrangements OWNERS ARE CONCERNED WITH: • Return on investment • Period of lease • Renewal and options • Frequency and method of rent reviews • Covenant of tenant • Suitability of tenant • Obligation for capital expenditure • Payments that cannot be ‘passed on’ to the tenant • Liability for structural repairs

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LEASING

UND E R S TA N D I N G LE A S I N G This section covers the vital elements of a lease agreement. The owner of freehold property may, at their discretion, choose to use it for their own purposes (an ‘owner-occupier’) or they may use it to produce income by ‘selling its use’ to another person for a set period of time.

OVERVIEW The agreement between the owner and this second person may be by way of a Tenancy Agreement or a Commercial Property Lease. State Laws affect these documents. Prior to entering into a lease agreement the prospective tenant must provide to the Leasing Manager a Letter of Intent or Offer, or Agreement to Lease. This is covered in detail in the section on Lease Enquiry, however there are various elements which must be contained in this letter. The following is a check list of items that should be covered in all lease proposals: • Correctly identify the proposed tenant

• Car parking (Bay No and charge)

• Ensure that their address is correct

• Other standing charges

• Identify if the proposed tenant is an individual or a corporation

• Usage (permitted)

• Carefully identify the address/location of the tenancy including suite No./shop No. and where possible, include a plan with the Letter of Intent

• If parcel mortgaged - subject to mortgagee’s consent

• Provide the area of premises in square metres • Term of lease • Options - if any

• Personal guarantees where corporate tenant • Repair and maintenance • Tenant obligations at expiration of lease

• Initial annual rent

• Obligation to insure

• Rent review basis

• Owner’s works

• Percentage rent if applicable • Clearly defined outgoings basis

• Security deposit/bond • Caveat able interest by tenant on property title

• Commencement date of the lease

• Cleaning charges

• Any other points peculiar to the lease

• Tenant’s works • Option to purchase / right of first refusal • Rent free period

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UND E R S TA N D I N G LE A S I N G TENANCY AGREEMENT A Tenancy Agreement is a document (often in standard format) signed by both the building owner and the tenant setting out the rights and obligations of both parties, the rental and the period of tenancy (typically short term, e.g. monthly, quarterly, half-yearly or yearly). A Tenancy Agreement is not normally registrable on the owner’s Certificate of Title and used where a lease is not entered into. As it is a simple document, it is not recommended for properties with a higher degree of complexity.

WHAT IS A LEASE? A lease is a legal grant of the possession of real property to last for a fixed period of time. It generally contains: • A predetermined rental period • Rental adjustments and conditions • Obligations upon both the lessor (i.e. building owner) and the lessee (the occupier) The basic obligation upon the lessor is to give to the lessee the quiet enjoyment of the leased area for the agreed period of time. The basic obligation upon the lessee is to pay the rent (and other payments, e.g. outgoings, as prescribed by the lease), keep the property in good order (again as set out in the individual lease) and, upon termination, give vacant possession back to the lessor. Leases (in most States) should be in registrable form (i.e. stamped and acceptable to the Registrar of Titles). In some States, leases of over three years must be registered on a Title Deed: this is optional for documents with a term of three years and under.

As each State and Territory may have differing legal positions on Leases. Enquire with your Solicitor BEFORE you act. Both leases and tenancies may be for the whole or part of a freehold property. Where part only (i.e. building only or multiple tenancies) are involved, the occupied area must be clearly identified (in the case of a lease using a plan prepared in a format acceptable to a Valuer or Licensed Quantity Surveyor). Any access arrangements and restrictions must also be stipulated. Leases rather than tenancies are used in commercial and industrial property. Whilst they are much more expensive to establish (such costs normally being met by the lessor), leases offer significant advantages to both parties.

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UND E R S TA N D I N G LE A S I N G ADVANTAGES OF A LEASE For the Lessor • Protect future income (and therefore enhance/reinforce capital value) • Physically protect the leased property as laid down in the lease • Enable the lessor to take specific legal actions against the lessee in the event of a default

For the Lessee • Provides a place of business without the large outlays of a freehold purchase • Provides security of tenure (including protection of goodwill, fit-out etc) • Protects from arbitrary actions by the lessor • Provides medium to long term flexibility • Frees up capital • Often sets up tax advantages • Improves balance sheets whilst maintaining a saleable item (e.g. the business with lease).

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UND E R S TA N D I N G LE A S I N G ELEMENTS OF A GOOD LEASE DOCUMENT Lease documents are often long and may be very complex. It is essential for the Leasing Manager to become familiar with existing and proposed lease documents. The process is simplified by the use of headings and subheadings in contemporary leases. Elements which need to be contained in a Commercial Property Lease are: • Lease definitions • Name of lessor • Name of lessee • Definition of area subject to lease in square metres (sq mtrs) • Plans of the premises • Date of commencement • Term of lease (duration) • Expiry date • Initial rental (ensuring that GST is clearly noted) • Other fixed and variable charges • Options and

o Option period

o Conditions pertaining to the ability to take up options

o Mechanisms and timing for the taking up of options

• Rental review

o Timing

o Mechanism (inc. any minimum increases)

o Arbitration/determination

o Date and effect of last review

• Subleasing and assignment

o Provisions for

o Mechanism (lessor’s consent)

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UND E R S TA N D I N G LE A S I N G ELEMENTS OF A GOOD LEASE DOCUMENT (cont.) • Outgoings

o Defined (include insurances, Land Tax etc)

o Responsibility for outgoings

o Mechanism for payment

o % of charge or increase over a BASE year of charge

• Restrictions on use and indemnities to lessor • Lessee’s ability to alter, modify, fit-out, affix signs etc. (including ownership of fixtures etc.) • Miscellaneous covenants • Insurance requirements • Periodic maintenance and actions at end of lease (e.g. cleaning, re-paint, re-carpet) • Services provided within the building • Level of security available • Rights of access, egress and use of joint facilities (in case of multiple tenancies) • Car parking

o Exclusive use

o Visitor parking

• Provisions for late payment of rental/default provisions/interest charges • Holding over provisions • Guarantees on payment of rental (plus Assignable at Sale) • Demolition clause • Building rules • Whether lease is registered or in registrable form; (If not registered, does a clause exist to fully protect the lessee’s interests in the event of a change of freehold ownership?) • Has stamp duty been paid? • Options to purchase / first right of refusal • Right to Strata Title • After hours expenses

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UND E R S TA N D I N G LE A S I N G SETTLEMENT Upon settlement of a sale or finalisation of a lease, the Property Manager must obtain a letter from the vendor or lessorâ&#x20AC;&#x2122;s solicitor advising that the transaction has settled and request the agency account either to their trust account or direct to the vendor or lessor. If a vendor or lessor is self acting and advises the agency that settlement has been effected and requests the agency to account, the agency should obtain confirmation from the purchaser or lessee or their solicitor that the matter has been finalised before the agency can account to the vendor or lessor. Once the appropriate letters have been received, it is then necessary to advise the respective solicitors in writing of the disbursement of funds. Be sure that the tax invoices are accurate and account for GST correctly.

REFUNDS In the event of a lease not proceeding due to lack of finance, a letter from the purchaser or their solicitor requesting a refund of deposit is required, together with a copy of the letter from the Lending Authority addressed to the purchaser, advising that finance is not available. If the purchaser is unable to produce such letter from the Lending Authority, a letter from the vendor or his solicitor authorising the refund to the purchaser, must be obtained. In the event that an Offer to Lease is withdrawn and the Letter of Intent was signed by either the lessor or lessee, the agency must require a written authority from both parties to release the deposit held in the Agency Trust Account. In many instances, the deposit held in trust is equal to the commission. Often in the event of settlement, the vendor, lessor or their solicitor, overlook the requirement to notify the agency of settlement before the agency are entitled to disburse monies from the agencyâ&#x20AC;&#x2122;s Trust Account to the General Account to facilitate the payment of commission to the Salesperson.

SUPPORTING DOCUMENTS The following letters to and from the lessor are examples which may be used by Leasing Managers. To assist you further the Commercial Resource Centre contains a comprehensive selection of letters to assist the Leasing Manager. Leasing property is not difficult, and when followed in a systematic manner, will be very rewarding for those who choose this as part of their real estate career.

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UND E R S TA N D I N G LE A S I N G EXAMPLE LETTER TO LESSOR

Address Your Street Town PO Box VIC 3196

30th June 2010 Mr and Mrs Bill

Unit 7

Contact T (03) 9418 9111 F (03) 9418 9122 E info@yourc ompany.com. au W firstnationa lcommercial. com.au

W Bloggs

99 Harmony Ro ad Harmony Ville NSW 9999

Dear Mr and M

rs Bloggs

80 GERALDIN

E STREET, N

ORTH SYDN

EY - LEASE TO

ABC CORPO

RATION We would like to take this op portunity to th your agent in th ank you for selec is particular tra ting our First N nsaction and we ational Commer trust that you fo cial to act as und your dealing s with us satisfac tory.

Would you kin dly confirm that the Lessee, AB premises and th C Corporation, at the lease do has taken up oc cument is being release of depo cupation of the executed. If all sit monies from above is in order, wo our trust accoun uld you kindly t, by signing an authorise the d dating the atta ched. Yours sincerely,

Margaret Jones LEASING MAN AG

First National Group of Ind ependent Real ACN 005 942 192 Estate

Agents Limite d

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LEASING

UND E R S TA N D I N G LE A S I N G

ABC

EXAMPLE LETTER FROM LESSEE

CORPORATION

1st July 2007 Mrs Margaret Jo

nes

Leasing Manager COMMERCIAL FN

.COM

Dear Margaret,

80 GERALDIN

E STREET, N

I, the Lessor of

ORTH SYDN

EY - LEASE TO

ABC CORPO

RATION

the abovementio

ned premises co

nfirm that: • ABC Corpor ation has taken up tenancy of th • All lease docu e above premise ments are being s executed • We authorise the release of de posit monies fro Appointment to m your trust ac Act. count in acco We thank First

rdance with yo

National Comm

ercial for negotia

ting and manag

ing the lease pr

ocess.

Yours sincerely

____________ ___________ __ Mr and Mrs Bill W Bloggs ______________ Date

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LEASING

MANAGING THE LEAS E ENQUIRY Enquiries to your office will be generated by press advertisements, signs, the internet and email; now you have an understanding of leases you’ll be able to manage these enquiries with confidence. Following introductions, the first task is to qualify the prospect’s requirements. The Lessee Enquiry Form sets out a series of questions that should be asked. Refer to this form on page 19. This list is not exhaustive, however it should be taken as a minimum, with the Manager using their initiative to determine further questions. This worksheet should be completed as it is a useful tool, providing a record of discussions with the prospect throughout negotiations. After qualifying the prospect’s requirements the Manager will present the properties that most closely fit the criteria. It should always be stated to the prospect that the Manager will either ring back or make an appointment to present this information; don’t attempt to relay this information over the phone as it is possible that a property may be overlooked. It is very important with larger properties to put all this information in writing (submissions) and personally present it as soon as possible. This has the dual effect of having the presentation documented and also having the opportunity to create a rapport with the prospect that may not have developed over the phone. Submissions will comprise a covering letter with index of properties submitted with individual property detail. The timeline from enquiry to presentation, of written information, should be not take longer than 24 hours – timely action is the essence of professionalism. THE NOMINATION After inspecting the property, or before if necessary, it is important to nominate in writing the lessee to the building owner. An email with an accompanying letter should be used for the nomination (evidence everything in writing). THE INSPECTION After presenting the written information on all properties that most closely fit the property criteria, the prospect should be asked to choose a few properties which they wish to inspect. It is important to have been through all of the properties chosen by the prospective lessee prior to the inspection. Prior to the inspection, the Manager should ensure the property is presented in its best light i.e. lights on, doors open etc. During the inspection the Manager should subtly take the prospect through the property’s best points. Be sure to answer all questions honestly, but never over emphasise any point. Always look to overcome any barriers or objections which the prospective lessee may have. For example, if parking is an issue, provide acceptable solutions for the client. There are many instances in commercial property where the client has specific requirements in terms of office or warehouse space. If the Manager has not listened carefully to the client in the first instance, showing a property which does not meet or exceed the criteria is wasting everyone’s time.

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MANAGING THE LEAS E ENQUIRY

M EE ENQUIRY FOR

LESS

Reference No: Rating:

________________

Date:

___

____ ________________ ________________ __ __ __ __ __ __ __ ______________ ________ : ______________ ________________ CONTACT NAME ________________ __ __ __ __ __ __ __ __________ ____________ : ______________ ________________ COMPANY NAME ________________ __ __ __ __ __ __ __ ______ ________________ ESS: ____________ ________________ COMPANY ADDR ___________ A/H: __ __ __ __ __ __ __ ______ ________________ ________________ PHONE No: ______ ________________ __ __ __ __ __ __ __ ____________ __________ : ______________ ________________ TYPE OF BUSINESS ________________ __ __ __ __ __ __ __ ______ TION: __________ BUILDING DESCRIP _____

______ _____ OTHER: __

FLOOR AREA

__ _ OFFICES: ______ USE: ____________

_ WAREHO

__ TOTAL: __________

_ ________________ ________________ ________________ __ __ __ __ __ _ __ __ __ __ ________________ ________________ LOCATIONS: ____ ________________ __ __ __ __ __ __ __ ____________ _________ ________________ ________________ ________________ ________________ __ __ __ __ __ __ __ ________ ________________ ________________ ___ ________________ ________________ __ __ __ __ __ __ __ ________________ ________ : ______________ ________________ RENTAL BUDGET ________________ __ __ __ __ __ __ __ __________ ____________ ________________ ________________ HOW SOON: __ ________________ __ __ __ __ __ __ __ _ ______ ________________ EXPIRY DATE: ____ ________________ CURRENT LEASE ________________ __ __ __ __ __ __ __ __ __ ________________ G: ______________ ________________ WHY RELOCATIN ________________ __ __ __ __ __ __ __ __________ P.A.: ________ ________________ CURRENT RENTAL ________________ __ __ __ __ __ __ __ ________ __________ D: ____________ ________________ ZONING REQUIRE ________________ __ __ __ __ __ __ __ ________ TION: __________ OTHER INFORMA ISSIONS

PROPERTY SUBM

DATE

ADDRESS

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REMARKS

LEASING

MANAGING THE LEAS E ENQUIRY At the conclusion of the inspections try to narrow the preference down to one or two properties. It is important then to send the prospective lessee a letter of Agreement to Lease on the most preferred property, whether or not it is requested. This should have the effect of formalising the prospective tenant’s intentions towards the property and set the scene for final negotiations. In this section, is a copy of the Lease Negotiation Work Sheet. This is used to record the negotiations in terms of commencement dates, lease term, rent per annum, adjustments and outgoings. If negotiating many transactions at the same time it is hard to commit everything to memory: this worksheet enables the Manager to record all offers and compromises agreed during the lease negotiation process.

THE LETTER OF INTENT OR AGREEMENT TO LEASE A standard Letter of Intent, or Offer or Agreement to Lease should be provided to all prospective lessees for their signature. Two copies should be sent, one for the prospect’s records the other to be signed and returned with the relevant information completed. It is most important that Letters of Intent to Lease detail the proposed terms as comprehensively as possible. The proposed tenant’s Letter of Intent should be accepted in entirety so that certainty, one of the most important elements of a valid contract exists. The Leasing Manager may assist prospective tenants prepare this letter however in most cases, the tenant’s solicitor will be engaged. Costs for such preparation will be to the tenant. Some Leasing Managers choose to hand deliver the letter and return the signed copies. A copy of a Letter of Intent, or Offer or Agreement to Lease is contained in this Section.

Note: In some States of Australia, the Retail Tenancies Act has impact on the content and serving of the Letters of Offer. If you are not familiar with those issues in your State, FIND OUT BEFORE YOU ACT.

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MANAGING THE LEAS E ENQUIRY LEASE NEGOTIATION WORK SHEET ITEM

LISTED

OFFER

IMPROVED OFFER

Line of Compromise LESSEE

LESSOR

Date of Commencement Lease Term Rental Per Annum Rental Adjustments Outgoings 1. 2. 3. 4. SPECIAL CONDITIONS

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MANAGING THE LEAS E ENQUIRY EXAMPLE: LETTER OF INTENT OR OFFER OR AGREEMENT TO LEASE

er The Manag ercial nal Comm First Natio ,

adam Dear Sir/M

14.In considerat

ion of the Les

sor reserv LEASE$................................. ...being <<'X'>> ing the premises for our use and EMENT TO cal fur pre

R AGRE R OFFER O

__ endar month's ther in conside mises __ __to and execute a Lease rental, we hereb ration of the sum y agree to lease on the basis set of se documentat the abovementio out above and ion by the Lessor within a reason ned ’s solicitors. abl e time after sub at d te __ ua mi sit __ ssion of In the__eve nt__ r. e premises that the Lease ____ ____ ____abo to lease th t hereunde shall not have ve, and provided We agree __________ itions set ou s and cond that the premises been executed prior to the co __________ __ __ __ __ __ __ ren __ __ on the term mm __ are available for for__the first mo encement date ____ __tal occupation, the __________ nth of a month referred to __________ ly tenancy from deposit now pai __________ __________ the commencem ssor: ______ d may be applied __________ 15.Th__ ________ 1. Le __ en __ as __ t e __ dat Lea __ e __ se __ qu do oted. cuments shall be ______ __________ prepared by the registration and __________ __________ Lessor’s solicitors sta__ __ing thereo mp __________ of ______ __ __ __ __ __ and __ f. __ The Lease shall lea the Lessee shall ____ of__ ____ similar buildings __ses contain all be responsible __________ in the area and __________ for the tive legal advise __________ subject to the app the normal terms and conditio __________ Lessee: __ ____ ing_ to reach agr ns applying to __fail roval of the Les 2. __________ __rs __ __ __ __ in __ ee __ dis me __ __ sor pu nt, te and Lessee and as to the terms shall be referred ____ ____ __ __ __ __ __ __ the __ __ and to the Presiden ir respecconditions of the their decision sha ______ ________ t for the time be _ Lease, then the of ______ ____ ll be __________ fina ____ ing of the Real l and binding on matters __________ __________ Estate Institute the parties heret s: ________ for arbitration and __________ ise o. __ em __ Pr __ of __ __ __ __ Address __ __ 3. ________ Dated this…… __________ ……………… emises: __ …………….da R.P.D. of Pr y of…………… ______ 4. ……………… tr __________ m __ Les __ _sq see __ __ : … __ 20……. __ … __ __ … __ __ … ……………… __ __ ____ __ __ : __ ea __ Ar … ……………… ____ ___ Floor __ __ __ __ 5. __ __ … __ __ Th e signatory warra ____ ____ __ __ __ __ __ __ __ __ nts his authority e: ________ __________ to sign for and __________ Proposed Us on behalf of the 6. __________ __________ Lessee Company __________ __ of Lease: __ Les __ t sor . __ en : m __ … ce … __ ……………… mmen ________ ……………… Date of co 7. __________ ………… __________ We hereby ack _______________ __________ __ __ : no __ wle rm dge …………… ____ __ Lease Te __ __ ise 8. d __ … Ag ……..First Natio ent in respect of ______ nal Commercial thi__ s Lea ding GST) t of ______ ____ se__and agree to Act'. It is furthe ______ __ (The Agent) as annum (inclu in advance by paymen pay them comm the Lessors Au Rental per ________r agreed that the said Ag __dat ission in accord __ 9. thoron __ r monthly the __ en da __ t ma len ance with the 'Ap e __ wh ca y account for the ich the Lessee ______ ____ __ payable __ pointment __ __ en de __ ters into posse posit monies so the Lease which__________ __ __ __ __ ssio __ pai __ eve n d as against comm to of the subject pre r date shall be ____ ____ __ __ __ __ __ __ __ the __ mi ission ses or upon the earlier. Reviews: ________ date of executio _______ 10. Rent T) ______ Dated this…… n of __________ __… (Including GS __ e: … __ sse __ … Le … __ by ……………… ____ ings payable __________ _____ ….day of………………… 11. Outgo __________ …………20..… LESSOR: __________________ __________ . ________ __________

LETTER OF

INTENT O

______ ____ the Lea

__________

______ __________ __________

n: ____ __________ __ 12. Optio __________ __________ COMMISSIO __________ __________ __ __ __ : __________N AGREED: __ nditions __ Co __ ial __ ec __ 13. Sp ________ __________ __________ Lessee's __ __:________ sol__ icit__ors __________ __ __ __ __ __ __ __ __ ______ ______ ________ __________ __________ Address: __________ … ________ __________ __________…………………………… __ __ __ __________ __ ……………… ________ ……………… __________ Lessor's solicitors Ph…………… __________ ………. : __________

Address: ……… ……………… ……………… Ph …………… ……… …

………………

……..

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MANAGING THE LEAS E ENQUIRY INFORMING THE OWNER The owner should be kept informed of progress in negotiations, at all times, however once the signed letter of Agreement to Lease is received and the references and balance sheet checked, a copy should be forwarded for their formal approval. It is the owner’s decision as to whether or not the tenant should be accepted.

LEASE DOCUMENTATION The signed letter of Agreement to Lease to the owner recommending that solicitors be instructed to prepare lease documentation. Unless the owner instructs the agency in writing to instruct solicitors, this should be adhered to. This negates the possibility of the agency being liable for solicitor’s fees if the tenant decides not to proceed.

SETTLEMENT OF COMMISSION In normal situations, commission is deducted from the month’s rent contained in the agency trust account when the lease is signed. Settlement may occur earlier if the owner agrees. The owner must agree in writing to release monies from the trust account and the agency’s actions MUST be supported by State Law and the agency’s Appointment to Act.

FOLLOW UP As part of a commitment to customer service and identifying new lease prospects (as many relocate), it is important to follow up all new tenants quarterly or every six months. Likewise, regular contact with the building owners will ensure the agency receives instructions to lease, sell, etc. when necessary.

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DISCLO S U RE S TATEMEN T S In retail tenancies, there is a requirement for the landlord to provide a disclosure statement relating to the property. In addition, the landlord is to provide an information brochure from the respective State legislators in Victoria, for example, this is provided by the Office of the Small Business Commissioner. If the tenant has exercised or is entitled to exercise his or her option to renew the lease agreement, the landlord is to provide a disclosure document the required number of days before the tenancy agreement expires (may vary in different states). Where all of the parties to a retail premises lease enter into an agreement to renew the lease, the landlord is required to provide this statement to the tenant at least 14 days after the lease has been entered into. Failure to do this means the tenant is able to withhold the rent or even rescind the tenancy agreement. A well written disclosure statement should contain all of the following: • Landlord details • Tenant details • Premises information • Information on the shopping centre • The lease terms • Rent payable • Permitted use of premises • Outgoings • Lease assignments • Fit out or refurbishments to be performed • Relocation or demolition • General comments • Declarations by the landlord and the tenant For further information refer to your respective State legislators which are listed in the “Legislation” section of this manual.

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TOOL S TO ASSIST WITH A LEASE ENQUIRY Even before the initial lease enquiry the Leasing Manager must have a tool kit which will assist in their day to day operations. Known affectionately as a ‘Leasing Kit’ it contains tools such as hammers, signs, ladders and street directories. Today, there are companies who will erect signs for the agency, however in many rural and regional areas these may not be available and the manager may have to make the arrangements themselves. This is what the ‘Leasing Kit’ may contain. 1.

Diary

Wire

17.

Pens

2. 3. 4. 5. 6. 7. 8.

Mobile phone Digital camera Listing forms Corflute signs Name stickers Nails Hammer, claw

10. 11. 12. 13. 14. 15. 16.

Pliers 3 step ladder Cleaning rags Umbrella/raincoat Street directory Flood map/local map Writing paper

18. 19. 20. 21. 22. 23.

Rubber Gum boots 5mm retractable tape Micro tape recorder Calculator Business cards

FORMS Below is a selection of forms which the Leasing Manager must have available at the time of a leasing enquiry: • Appointment to Act (Sale and Lease) • Leasing Enquiry Form • Listing Sheet (Sale and Lease) • Nomination of lessee to lessor • Negotiating worksheet • Letter of Agreement to Lease • Marketing Schedule • Locating a New Business Address • Vacancy Summary Template forms and letters are available from the disk enclosed with the manual and if required, Real Estate Institute forms are available from the respective State REI offices.

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I D E N T I F YING A TE NANCY OR BUSIN ESS LOCATI ON There will be occasions when a client will be looking for a particular type of property to lease. Let’s assume that the person making the enquiry to your office is already one of your clients and they have asked you to find a property to lease, which is suitable for operating their business. You may want to complete the Locating a New Business Address Form. This will assist in identifying the client’s specific requirements and will assist you to match suitable properties for their inspection. When a property is matched, the client is to be contacted and a property inspection organised.

LOCATING A NEW BU __________________

BUSINESS ADDRESS:

__________________

CONTACT: _________

__________________

__________ _________

_____

__________________

_____

___ TELEPHONE NO

:__________________

___

REQUIREMENTS SIZE OF OFFICE:

When completing the details be sure to complete the ‘Vacancy Details Form’ if the property is not on file. This opens up the opportunity to list the premises being vacated, particularly if arrangements have not been made with an agent.

SINESS ADDRESS

BUSINESS NAME: ___

__________m2

__________________

_____________ TOTAL NUMBER OF STAFF:

________

QUALITY OF ACCOM MO

DATION (Please tick)

Older, air conditioned, carpeted. Modern, air conditioned, carpeted. New, air conditioned, carp eted. We would like to be loca

Approx $ ____________ _ m2 p.a. Approx $ ____________ _ m2 p.a. Approx $ ____________ _ m2 p.a.

ted in _______________

________________ Stre

et/Anywhere in the Cen

tral Business District.

CAR PARKING Number of car parks requ

ired? _______________ ___ car parks in the building you occupy? Is parking close by in a parking station/area suita ble? Is it necessar y to have

Yes

NAMING RIGHTS Would you like naming

rights of the building you

occupy?

Possibly ____________ _

MOVE IN DATE Month ____________

__________________

OTHER (Please list any __________________

__________________

_____

__________________

C O M M E R C I A L O P E R AT I O N S M A N U A L

_____

__________________

other requirements)

__________________

__________________ __________________

__ Year ____________ ___

_____

__________________

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VACA N C Y SUMMA RY FOR M Use ths section for details of the property being vacated.

VACANCY SUMMA RY ADDRESS _________ _________

__________________

FLOOR AREAS ______

__________________

______

__________________

RENTAL ____________ ______

__________________

______________

__________________

LEASE TERM ______ _______________

_______

__________________

OUTGOINGS ______

__________________

RENT REVIEWS ______ ____________

_______________

__________________

SECURITY DEPOSIT ___

__________________

CLEANING _________

__________________

_____________

__________________

FACILITIES _________

__________________

______________

__________________

PARKING ____________

_______________

__________________

NAMING RIGHTS ___ __________________

_____________

__________________

CURRENT LANDLORD

______________

/OWNER _________ ____________

__________________

CURRENT MANAGIN

__________________

G AGENTS _________

REMARKS _________ _________

__________________

______________

__________________

______

__________________

_______________

__________________

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STR U C TUR I N G I N CE N T I VE S INTRODUCTION In periods of accommodation oversupply and/or difficult economic conditions, competition for prospective lessees creates a situation whereby various incentives are offered in the market place. The underlying objective of those incentives is to relocate a tenant that would not otherwise consider a move. When structuring a package, the primary decision to be made is the dollar value of the total package. Once this budget is established, there are a number of ways the incentive may be channelled to the prospective tenant. The model used is determined by the particular tenantâ&#x20AC;&#x2122;s situation and needs. Detailed below are a number of alternatives. We have used for a working example, a building for lease with floors of 1440 square metres and a net rental of $200.00 per square metre per annum. (GST has not been included in examples).

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STR U C TUR I N G I N CE N T I VE S 1.

Rent Free

A rental holiday is the most common form of incentive offered. An incentive of $144,000 equates to a six month rental holiday in the building used as an example. The rental holiday may be analysed in terms of its effect on the rate per square metre per annum as follows: One Year Time Frame Total Net Annual Rent

$288,000

Net Rental Payable

$144,000

Less Total Rent Free

$144,000

Issues â&#x20AC;˘ Rent only â&#x20AC;˘ Net outgoings Two Year Time Frame Total Net Rental

$576,000

Less Total Rent Free

$144,000

Net Rental Payable

$432,000

Equated Annually

$216,000

Divided by Area (1440 m2)

150

The effective rental over a two year time frame is $150 per square metre per annum. The effective rental thereafter is usually dependent upon the effect of rent review provisions in the lease. Ensure that any incentives do not include outgoings or GST. GST is still payable and you need to ensure the tenant is aware of this when negotiating.

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INTROD U CI N T IO STR U C TUR G NI N CE N T I VE S 2.

Lease Negotiation and Subsidy

This incentive is applicable to large office buildings because of the long construction periods involved. An approach which can be helpful in certain circumstances involves the offer of professional assistance (presumably gratis) plus a rent subsidy. This approach would normally be used in association with one or more of the techniques described above. Assume the following: • A prospective 2,000 square metre tenant with current space of 1300 square metres • A rental of $150 per square metre • Its lease term expires in late 2008 at which time a three year option is available • The building is not available until 2009 • The prospect wants to relocate and has attractive offers now to relocate to a recently completed building The problem is to give the tenant a chance to come to the building. If the tenant waits the rent may be more than the client or the tenant wishes to pay. One approach that can be used in this situation is to offer to act for the prospective tenant immediately in renegotiating its existing lease so that the present term is extended to coincide with the building’s completion date. It may also be possible to offer to pay any increase in rental occasioned by the renegotiation. On top of this, you lump an incentive package on more traditional lines. The rent subsidy involved is not ordinarily large in proportion to the value of the deal, and the tenant must now decide whether to go to the building based on its merits rather than a timing problem.

Building Fit-out

Many prospective tenants require a fit-out of the leased premises. Besides the possibility of a cash contribution from the lessor as an inducement, which is unusual, the fit-out may be undertaken by the lessor or the lessee. If the lessor fits out the premises on behalf of the lessee, the lessor usually requires this capital expense to be amortised over the term of the lease. If a loan or interest bearing debt (e.g. when Lessor provides office fit-out) is discharged by equal payments, then it is said to be amortised. (The word amortisation comes from the French word ‘amort’ meaning at the point of death that is killing off a loan by paying it off).

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STR U C TUR I N G I N CE N T I VE S PAYING FOR FIT-OUTS When considering fit-outs there are several factors that need to be taken into account, particularly for the Lessor, the Lessee and the Real Estate Agent. Advantages and Disadvantages for the Lessor ADVANTAGES

DISADVANTAGES

• The Lessor will own the fixtures at the end of the lease

• Increased capital risk

• The lessee will maintain the assets for the lessor

• Possibility of creating a specialised building

• The Lessor can claim a tax deduction (accelerated depreciation over five years)

• Some extra work

• Increased rental • The rent reviews based on CPI will increase the rent and therefore increase the return • Secures Lessee usually over a longer term • Increase in capital value through lower capitalisation rate • Increased capital outlay Advantages and Disadvantages for the Lessee ADVANTAGES

DISADVANTAGES

• The lessee will have a specific design for their needs

• The partitions belong to someone else

• The higher rent is a tax deduction

• The tenant has to maintain the Lessor’s asset

• The fit-out is not a capital outlay therefore more capital available for the tenant which can be invested into their business

• Higher rent • High increase through rent reviews by CPI

Advantages and Disadvantages for the Real Estate Agent ADVANTAGES • Long term lease • Higher leasing commission through higher rental • Flexibility in offering packages will make it easier to clinch the deal • Higher sales commission through higher rental and maybe better capitalisation (could make it easier to sell property)

DISADVANTAGES • More work load (may have to supply additional information) • Need to improve knowledge of the process (this is really no disadvantage as long as one retains the interest and the desire to learn)

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LE ASE A S S I G NME N T S 1.

Lease Assignments - What are they?

Lease assignments come about as a result of an existing lessee wishing to vacate the premises. Where a period of time still remains on their lease, a lessee must assign this remaining portion to a new occupant. In effect, this means the incoming tenant takes over all the terms and conditions applicable to the previous lessee. Lessees and Real Estate Agents must be mindful that if the new lessee defaults on any of the terms and conditions, the previous lessee is responsible. However, in some States the obligations of the old lesseeâ&#x20AC;&#x2122;s guarantor are released on the assignment pursuant to retail tenancies legislation.

Assignment Process - How does it happen?

The present lessee will notify the Agent requesting help to re-lease their space. At this stage, it is important to establish the reason for re-leasing which may be: i. Business is contracting ii.

Business is expanding

iii.

Change in operation mode e.g. location or space requirements

iv.

The lessee receives an offer to purchase their business

It is obvious that if the business is contracting, care must be taken with all negotiations. However, if the business is expanding, the company may not yet have finalised new premises and there may be an opportunity to relocate the company. Regardless of the reasons for wanting to assign the lease, the Leasing Manager should point out to the current lessee that it is their responsibility to pay commission (where the assignment is to a new lessee located by the leasing manager). The current lessee must confirm in writing the following: i.

Relevant details of the tenancy, especially the remaining lease term and any price they are seeking for fixtures and fittings,

ii.

Appointment to Act as their Agent in this matter and thereby,

iii.

Agree to pay commission for the successful assignment of the Lease.

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LE ASE A S S I G NME N T S 3.

Common Mistakes

Real Estate Agents should ensure that they follow sound business principles when negotiating the assignment of a lease to a new tenant. Some common mistakes to avoid include; i.

Failure to receive an Appointment to Act (legally binding).

ii.

Failure to ensure that the appointment comes from the legal lessee and not just the company in occupation. (In the majority of situations they are one and the same).

iii.

Failure to get the first month rental and a replacement Security Deposit. This is particularly relevant if the present lessee has assigned due to financial difficulty.

Alternative to Assignment - New Leases

It is often to the advantage of all parties concerned to re-negotiate a new lease. Often the incoming lessee can offer a better covenant to an owner than the previous lessee. From the previous tenantâ&#x20AC;&#x2122;s point of view, a new lease frees them from any obligations under the old lease (which in some States is guaranteed by retail tenancies legislation). Ensure that the landlord accepts this outcome. An important factor when considering the possibility of re-negotiating a new lease is what the new market rental could be. Before offering such an alternative to a new lessee, changes to rental and any other terms and conditions should be discussed, approved and finalised with the lessor.

Consideration of Option Periods

It is important to remember that the present lesseeâ&#x20AC;&#x2122;s option period(s) are not part of the actual lease term. Before a lessee can offer an option as part of the lease term that lessee must exercise (i.e. take up) the option. Therefore, if a lessee has been in occupation for two years of a three plus three year lease, only one year remains and not four years (except of course if the option is exercised). In most States, the owner is required to give the lessee as at the last date, the opportunity to exercise any option for renewal.

CAUTION:

If the lease is a Retail Shops Lease or a Retail Tenancy Lease, it is essential that the agency source out the statutory documentation and declarations that support the assignment process. The penalties for non-compliance are severe.

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LE GIS L AT IO N There is State and Federal legislation which needs to be adhered to when undertaking retail leases or commercial property leases. One should familiarise themselves with the relative Acts in each State:

State

Retail Leases

Queensland

www.legislation.qld.gov.au

NSW

www.legislation.nsw.gov.au

ACT

www.legislation.act.gov.au

Victoria

www.sbc.vic.gov.au

Tasmania

www.consumer.tas.gov.au

South Australia

www.legislation.sa.gov.au

Western Australia

www.commerce.wa.gov.au

Northern Territory

www.nt.gov.au

Many commercial agents will come across ‘Retail Leases’ which are suitable for smaller retail properties. These leases generally protect people who establish shops or small businesses, such as newsagents, clothing stores, cafes and the like. If you are managing an industrial property, where for instance, a manufacturing process occurs and the tenant is generally not dealing with the public, then a Commercial Lease would apply. All the following Acts of Parliament have an influence on leasing property and provisions therein may override a lease or come into play, if a Commercial Lease agreement is silent on a particular matter. • Strata Titles Act 1985 (as amended)

• Land Act 1933

• Commercial Tenancy (Retail Shops) Agreements Act 1985

• Land Amendment Act No 14 of 1986

• Small Business Commissioner (Victoria)

• Trade Practices Act 1999

• Transfer of Land Act 1893 – 1972

• Privacy Act 1988

• Property Law Act 1969

Other State or Commonwealth Acts and Regulations that may bear on a Lease transaction include, but are not limited to: The Franchise Code of Conduct, Hotel and Liquor Licensing, The Corporations Act and The Fair Trading Act 1999.

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LE ASE S Y NO P S I S FO R M This form provides a summary overview of the lease on a property. The form provides a guide to determining lease reviews and options.

LEASE SYNOPSIS FO

PROPERTY: _________

__________________

DATE: ____________ ______ TENANCY NUMBER:

__________________

______

__________________

_____

__________________

USE: _______________ ___

______________

__________________

ADDRESS: _________ _________ AREA OF PREMISES:

_________

__________________

CONTACT PERSON:

__________________

TENANT: _________ _________

______________

__________________

_______________

__________________

_______________

__________________ COMMENCEMENT DA __________ TE: _______________ __________________ __________________ _____________ TERM: ____________ __________________ __________________ __________________ _______________ FURTHER TERM (OPTI ON): _______________ __________________ __________________ _____________ RENT:_______________ __________________ __________________ DUE: _______________ RENT REVIEWS: ______ __________ __________________ __________________ __________________ _____________ LAST REVIEW: ______ __________________ __________________ __________________ ______________ NEXT REVIEW: ______ __________________ __________________ __________________ _____________ TENANTS RESPONSIBIL ITY FOR OUTGOINGS : __________________ __________________ TENANTS INSURANCE __________ : __________________ __________________ __________________ ____________ SECURITY DEPOSIT: __________________ __________________ __________________ _______________ CAR PARKING: ______ __________________ __________________ __________________ ______________ GUARANTOR: ______ __________________ __________________ __________________ ______________ COMMENTS:_________ __________________ __________________ __________________ _____________ __________________ __________________ __________________ __________________ _______________ __________________ __________________ __________________ __________________ _______________ __________________ __________________ __________________ __________________ _______________ __________________ __________________ __________________ __________________ _______________

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LE AS I N G FO R M

G FORM

OPERTY LEASIN R P L IA C R E M M

The Commercial Property Leasing Form is similar to the forms used in property management, however is not as reliant on the physical features of the property. It provides the Leasing Manager with a template for the description of the property and relevant lease negotiations. Whilst it is important to gather as much information about the property as possible, agents should be concerned primarily with the financial and administrative aspects of the lease.

_________ _______________ _______________ _______________ ___ ___ ___ ___ _________ __ LEASE: _________ _______________ PROPERTY FOR INDUSTRIAL TE: ____________ ______ RETAIL _ LISTING DA ___ ___ ___ ___ ___ E ___ ___ FIC ___ OF ___ TO ACT: ___ _______________ APPOINTMENT _______________ ______________ LISTING AGENT _______________ ___ ___ _____ ___ ___ CY ___ _______________ TYPE OF AGEN _______________ __________ _______________ ___ ___ ___ ___ ___ ON ___ ___ TI ___ LOCA ____________ ____________ __________ _______________ _______________ _______________ _______________ Building Name: ___ _______________ _______________ ___ ___ ___ _________ ___ ___ ___ ___ ___ ___ ___ _________ ____________ Address: ______ _______________ p ref: _________ _______________ __________ Ma ___ ___ ___ ___ Address: ______ ____ State _ _______________ _______________ Postcode: ______ _______________ _______ _______________ ___ ___ ___ ___ ___ ___ ___ ___ ___ _________ OWNER _______________ _______________ _______ _______________ _______________ _______________ Owner’s Name: _______________ _______________ ___ ___ ___ ___ ___ ___ ___ ___ ______________ ___ :______ ___ ___ ___ ___ ___ ___ ___ ___ Contact’s Name ___ de: ______ ____________ _____________ ________ Postco _______________ _______________ Address: ______ _______________ Mobile No: ______ _______________ ___ ___ NMENT ___ ___ SIG ___ ___ AS ___ ___ ___ Address: ___ E _______________ r) DIRECT LEAS _______________ _____ Per Sq Mt ___ ___ B-LEASE ___ Office No: ______ SU ___ _ _________ AND TERMS _______________ ___________ ($_ ___ ___ ___ ___ ___ ___ ___ LEASE PRICE ___ ______ ______ _______________ _______________ _____________ ___ ___ ___ ___ ___ ___ .): ___ ___ (P.A ___ l ___ Renta _________ _______________ ___________ _______________ uired: _________ _______________ _______________ Term of Lease req _______________ _______________ ___ ___ ___ ___ : ___________ ___ ons ___ ___ visi ______ ____________ Rent review pro _______________ 1:____________ __ _______________ _________ Year _______________ ___ ___ ___ ___ ___ ___ ___ Fur ther Terms: ___ ___ ______ ______ _______________ ____________ _______________ ___ ___ ___ nt: Re ___ ___ m ___ ___ Ter r ___ ___ Fur the _________ _______________ _______________ ____________ e: ____________ _______________ _______________ Outgoings payabl _______________ _______________ ___ ___ ___ _________ ___ e: abl ___ ___ pay ___ ______ _________ ___ Operating costs _______________ _______________ _______________ _______________ ___ ___ ___ ___ Insurance: ______ _________ __ _______________ _______________ Security Deposit: s: ____________ _ Land dimension ________ ___ ___ ___ ___ ___ ___ ON ___ TI ___ ___ DESCRIP _________ _______________ No. of floors: ___ _______ : _______________ _______________ _______________ Land area (sq m) _______________ rises:____________ ___ __ of . ___ No ___ ___ ___ ___ : ___ ___ _______________ ___ ___ ___ ___ ___ ___ ___ Office area (sq m) ___ : ______ _________ ____________ _______ Suitability _______________ : ___ ___ size ___ ___ or ___ flo ___ ge ___ ___ Avera t: _________ ____________ ___________ _____ Natural ligh _______________ _______________ _______________ Class of buildings: _______________ _______________ ___ ___ _________ ___ ___ ___ ___ ___ ___ ___ ___ ______ _________ Appearance: ___ _______________ _______________ _______________ _______________ _______________ ___ ___ ___ ___ ___ ___ ___ ___ Views/outlook: ___ _________ ____________ __ _______________ _______________ _______________ Major tenants:___ m: ____________ _______________ __ Kitchen/tea roo _______________ _________ ___ ___ ___ le: ___ ___ ilab ___ ___ ava ___ ce ___ ___ s: ______ Other spa _______________ Window furnishing ________ _______________ _______________ _______________ Airconditioning: _______________ treatment: ______ g ___ ilin ___ Ce ___ __ ___ ___ _______________ n: ___ ______ ___ ___ ___ ___ ___ ___ ___ : Floor constructio ___ _________ al building hrs ___ ________ Norm _______________ _______________ Floor coverings: _______________ es: ____________ _______________ _______ __ Loading faciliti ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ Lifts: ______ ____________ _______________ _______ _ Par king: ______ _______________ _______________ _______________ Hours of access: _______________ _______________ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ______ _______________ ___ ___ ___ ___ ___ ___ Par titions: ______ ___ ___ ______ ______ _______________ _____________ _______________ r: ___ ___ ake ___ ret ___ Ca ___ ___ ent ___ ___ Resid possession:___ ____________ _ ______ Date of _______________ _______________ _______________ Building Manager: nts: _________ _______________ _____ Fee arrangeme ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ______ _________ Plans available: _______________ __ _______________ gements:______ _______________ _______________ Inspection Arran _______________ _______________ ___ ___ ___ ___ ___ ___ ___ ___ ___ ______ ___ ___ ___ ___ ___ s: ___ ent ___ Comm ____________ _______________ _______________

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E STI MAT I N G Y IEL D S A N D REN TS Yield is deemed to be the profit that one makes on a particular venture. In the case of commercial property, it is said to be the money derived by way of income or profit from a property deal. The simple formula for calculating yield is: Yield = Annual Rental / Amount Paid for the property EG: 45,000 / 750,000 = 6% Whilst this is mathematically correct, it does not take into account the expenses incurred to maintain a property. Hence, when calculating property performance, it is wiser to calculate an internal rate of return, rather than just yield. This is covered separately. So, whilst yield is easy to calculate, the property manager and, in particular, the property owner, must consider many factors associated with the property. Factors to consider before estimating appropriate yield: • All components of land and improvements as per summation approach • Relativity of rent levels to others in locality • Length of Lease(s) • Strength of Lease(s) • Security of income stream i.e. Guarantees • Location i.e. Location sales reflect different yields • Prevailing interest rates • Prevailing market conditions • Price level or range • Taxation allowances particularly construction cost write-offs • Allowable tax deductions

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E STI MAT I N G Y IEL D S A N D REN TS Summation Calculations The Agency may be asked to determine the sale price on a property; several factors need to be considered in order to complete this calculation. When completing a summation calculation both the income derived from the property, as well as the expenses incurred, need to be taken into account; in so doing, the dollar value per square metre per annum will then be calculated. In completing this calculation, add up all of the incomes and all the expenses against the property. Then next calculate the per square metre rate and subtract the expenses from the income. It is necessary to consider the following: Property, Location, Date Expenses

Income • • • • • • • • •

• Statutories Rental income • Insurance Percentage rent (and base details) • Lift maintenance Licences (all types) • Security Electricity • Cleaning Repairs and Maintenance • Cleaning Signage • Landscaping Miscellaneous • Staff Outgoings recoveries and base years • Car park Outgoings by categories and tenants charges • Airconditioning • Capital Expenditure • Sinking fund • Legal Expenses

Total Income Per Sq Mtr Per Annum

Total Expenses Per Sq Mtr Per Annum

$________________ (A)

$________________ (B)

Net amount Per Sq Mtr is then (A) minus (B) When this has been calculated, and in view of the owner’s required return, determine the rent to charge.

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LEASING

E STI MAT I N G Y IEL D S A N D REN TS Many methods are used to evaluate and compare investment projects and / or properties. Net Present Value and Internal Rate of Return are two of the more commonly used financial models used and these are all based on projected cashflows which are discounted to reflect the time value of money. Consequently, these are known as discounted cashflow (DCF) methods. The net present value (NPV) is equal to the difference between the present value of the net cashflows generated by a project and the initial cash outlay. In terms of the property, these terms would be: • • • • •

Purchase price of the property Net ongoing rent per annum received by the owner Net outgoings from the property Life (or length of time) that the owner will hold the property Required rate of return

C2 Cn C1 __________ __________ __________ NPV = 2 n (1+ k) (1+ k) (1+ k)

- Co

This may be written as:

NPV =

∑

Ct __________ t (1+ k)

- Co

The Internal Rate of Return (IRR) is the rate of return that equates the present value of the net cashflows generated by a project with its initial cash outlay. C1 C2 Cn __________ __________ __________ IRR = 2 n (1+ r) (1+ r) (1+ r)

- Co

Thus IRR may be written as:

NPV =

∑

Ct __________ t (1+ r)

- Co = 0

Whilst the formulae provide useful background information, the calculations may be done easily using Microsoft Excel.

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LEASING

LE ASING AREA ACTIVITY REP OR T The leasing area activity report is to be used to assess the market place and the potential for growth in property leasing. The report assists the Leasing Manager by providing a snapshot of the available space currently in the market.

LEASING AREA ACTIVIT

FOR MARKET SEGMENTS

1. Total area available at start of month COMMENT

CBD

Y REPORT

- CBD, INDUSTRIAL, RETAIL 1 - 5000

5001 - 10000

MONTH: _______________

_____________

10001 - 20000

20001 - 30000

30001 & OVER TOTAL M2

2. Areas leased during month COMMENT 3. Sub total COMMENT 4. Additional area available COMMENT 5. Total area available at end of month COMMENT

INDUSTRIAL

1. Total area available at start of month COMMENT 2. Areas leased during month COMMENT 3. Sub Total COMMENT 4. Additional area available COMMENT 5. Total area available at end of month COMMENT

RETAIL

1. Total area available at start of month COMMENT 2. Areas leased during month COMMENT 3. Sub Total COMMENT 4. Additional area available COMMENT 5. Total area available at end of month COMMENT TOTALS:

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LEASING

C O M M E R C I A L O P E R AT I O N S M A N U A L

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C O M M E R C I A L O P E R AT I O N S M A N U A L

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SE CT IO N 2

Property Management C O M M E R C I A L O P E R AT I O N S M A N U A L

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PROPERTY MANAGEMENT

WHAT IS PRO PE R TY MANAGEMENT? Many sales people start their real estate career in property management as it forms the basis for understanding properties and what is involved in the ownership and leasing of a property. A property under management may be owned by a corporation as part of a wider portfolio or by investors who may own one, two or three properties. Property management may be defined as the activity involving the lease and management of property on behalf of the property owner. There is more to managing a property than just finding a suitable tenant, leasing and then collecting rent. Property management is about ensuring that the owner’s asset is looked after and that the owner achieves the returns that they are expecting. In managing this asset on behalf of the owner, the agent will become involved in repairs and maintenance, undertaking inspections and completing condition reports and, in some cases, even locking a defaulting tenant out of the premises. The activities that you could expect to undertake as a property manager include: • • • • • • • • • • • • • • • •

Prospecting for properties and or landlords Listing properties Communicating with landlords Promoting and marketing a property Processing tenancy applications Preparing information memorandums Preparing and processing tenancy documents Undertaking regular property inspections Property maintenance Undertaking rent reviews Renewing leases Assisting tenants with exercising options Assigning leases Terminating leases Resolving disputes Carrying out evictions, if necessary

Commercial, industrial and retail leasing differs from residential property leasing, however, the principles are identical when it comes to conducting oneself and undertaking the actual tasks involved on a day to day basis. The property manager needs to be mindful of the relative legislation (refer to Section 1 Leasing) and all activities need to be conducted in an ethical manner.

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PRO PER TY MANAGEMENT BUDGET In all businesses, it is important to develop and maintain a strict budget. Once a budget has been developed, it must be reviewed for accuracy and adhered to during the reporting period. This section covers essential elements of the Property Management budget process. The objective of this section is to: • • • •

Outline the budget process Establish a budget Explain cashflow and income Outline expenses

There is no mystery to budgeting and accounting. In fact, it encourages one to analyse the implications of tenancy and building management in advance. Budgeting is not an exact science. It is an estimate based on current information backed by professional judgement. Although budgeting and accounting can be time consuming, it is one aspect of property management which is very thought provoking, if not satisfying, and provides a welcome change from some of the more routine daily tasks carried out by Property Managers such as organising repairs and maintenance etc. Many Property Managers cringe when it comes to budget time. But for the astute Property Managers who work with good accounting records of previous years’ income and expenditure, budgeting isn’t difficult. Before getting into the actual budget preparation, let’s look at why Property Managers prepare budgets. Property investments are measured against one another and need to: • Provide income • Provide capital growth • Provide a return on investment Budgets are developed to: • • • • • •

Provide an estimate of costs, revenues and resources Reflect managements reading of the future financial position Provide a plan of action for achieving quantifiable objects Determine a standard for measuring financial performance Determine corrective action where the reality falls short of the budget Assist and guide expenditure and investment decisions

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PROPERTY MANAGEMENT

PROPER TY MANAGEMENT BUDGET BUDGET PREPARATION It is much easier to prepare budgets where you have past records available for the property. The exercise is more difficult and time consuming when preparing a budget for a new development as you are dealing with many unknowns and assumptions. The following is required: 1. Up to date and accurate tenancy schedule 2. Alert Date Report or Property Diary

Containing details of property and tenancy events in the forthcoming year e.g. rent review and lease expiry dates, car parking review dates, contract review dates, insurance renewal etc.

3. Statement of Income and Expenditure Accounts for the past year

Your accounting system will provide you with detailed reports of property transactions for the previous 12 months. Particularly useful is a detailed expense report which separates all items of expenditure under their respective codes.

4. Details of any income or expenditure which may not be recorded

There may be some expenses paid by the owner directly and not recorded on the property account. These need to be identified and determined if they are required in your budget.

5. Rental Information

Investigate likely rental and car parking increases which will be achievable on review during the forthcoming year. Obtain rental information on comparable properties, and results of recent reviews.

6. Statutory Outgoings

Make enquiries of rating and taxation authorities concerning likely assessments for the forthcoming year. Be aware of when rates and taxes revaluations are due or carried out.

7. Operating Expenses

Investigate likely increases for operating expenses, for example. • New maintenance fees payable upon contract renewal. • CPI adjustments over previous 12 months. • Changes to electricity and gas tariff rates. • Changes in cleaning awards. • Preview any likely capital or major building repair and maintenance expenditure.

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PRO PER TY MANAGEMENT BUDGET EXPENDITURE BUDGET a. Variable Outgoings On a monthly basis estimate expenditure, including rates and taxes, under the PCA Chart of Accounts headings. Keep working notes on each category of expenditure which record your assumptions. It is helpful to have an expenditure record of the previous year in order to assess the likely costs and timing of when the expenditure will be incurred e.g. month in which insurance premium is payable, items paid annually, quarterly, monthly etc. You may not be able to calculate management fees at this stage unless it is a fixed fee. b. Owner’s Costs Estimate owner’s costs such as rent review fees, leasing fees, capital expenditure, structural and owner’s repairs and maintenance. Show these items for the months in which they are expected to be incurred.

When preparing a budget prior to the end of the outgoings year, use as many months actual expenditure for the current year and estimate the expenditure to be incurred for the balance of the year. Don’t use the current year’s budget as the basis for next year’s budget. You should also review last year’s actual income and expenditure against budget projections to ensure that no significant variations have occurred which might affect your budget e.g. rent review not completed at year end.

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PROPERTY MANAGEMENT

PRO PER TY MANAGEMENT BUDGET INCOME BUDGET a. Rental Assess the anticipated rental and car parking income on a monthly basis having regard for the applicable rent review dates. Naming rights, signage rights etc. should also be assessed if applicable. b. Recoverable Outgoings Calculate the recoverable outgoings for each tenant using the expenditure budget and having regard for those leases where outgoings are not fully recoverable (e.g. increases in outgoings only payable) or not at all recoverable. Apportion the recoveries on a monthly basis.

Management Fees Where management fees are on the basis of a percentage of gross receipts, in the case of net leases, the following procedure may be followed to calculate management fees for the year: 1. Calculate gross income (including variable outgoings, rates and taxes etc.) but excluding management fees and apply the applicable management fee percentage to the resulting figure, 2. Then calculate the management fee recoverable on management fees (refer 1 above) and add to the original management fee calculated, 3. Apportion the total management fee on a monthly basis to the variable outgoings expenditure schedule. 4. Complete the variable outgoings and income budgets.

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PROPERTY MANAGEMENT

PRO PER TY MANAGEMENT BUDGET NET INCOME The final calculation of the budget will appear as follows: Gross Income Less Variable Outgoings Less Owners Costs __________________ = Net Income Generally, the budget is forwarded to the building owner for approval so that you may proceed to charge the tenants the revised outgoings from the commencement of the outgoings year. Always get the building ownerâ&#x20AC;&#x2122;s approval of the budget in writing. Accounting systems are able to produce monthly property performance reports which are submitted to the owner and compare actual income and expenditure each month relative to budget figures. This report is very useful, particularly for expenditure, as you are able to carefully monitor expenses and take corrective action where necessary. At the end of the outgoings year, the actual expenditure may then be calculated and the tenantâ&#x20AC;&#x2122;s charges adjusted accordingly. It should be noted that the Retail Tenancies Act provides that for such premises, the owner must provide actual expenditure statements to the tenants within three months of the end of the outgoings year and these are to be audited by an accountant.

Make sure you know the requirements of this Act in your State.

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PRO PER TY MANAGEMENT BUDGET NET INCOME Whilst budgets may differ from office to office, the principles are the same. Once you prepare a budget, it may look like this:

ement

Budget - Property Manag INCOME JAN LEASE (PCM) SIGNAGE RIGHTS

3000 500

OUTGOINGS RECOVERED

150

BODY CORPORATE FEES

100

GROSS INCOME

3750

EXPENSES

JAN

MAINTENANCE

200

REPAIRS

120

MANAGEMENT FEE 4% OF LEASE AMOUNT

120

OUTGOINGS

150

BODY CORPORATE FEES

100

LOAN REPAYMENTS

2500

GROSS EXPENSES

3190

NET INCOME

$560

AUG

SEPT

OCT

NOV

APR

JUL

TOTAL 12 MONTHS

JUN

DEC

MAY

3000

36000

3000

500

6000

500

150

1800

150

100

1200

100

3750

45000

3750

AUG

SEPT

OCT

NOV

APR

JUL

TOTAL 12 MONTHS

JUN

DEC

MAY

140

125

120

100

140

1285

120

300

100

150

1120

120

1440

120

150

1800

150

100

1200

100

2500

30000

2500

3010

2920

3295

3290

3070

3160

36845

2870

2990

2870

$455

$460

$680

$590

$8,155

$880

$760

$880

$740

$830

MAR

FEB 3000 500 150

FEB 150 0 120

2500 3020 $730

MAR

2500

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PROPERTY MANAGEMENT

UND ERSTANDING RENT AND LEASE REVIEWS The terms and conditions of a lease will always vary and Property Managers need to be mindful of the need to undertake regular reviews of the tenanted property and the lease agreement that relates to that property. The following section will guide you through the various aspects of undertaking a rent review and the implications that this will have for yourself and the landlord of the property.

OBJECTIVE OF THE RENT REVIEW PROCESS • Maximise profitability of leasing • Undertake the review in a professional manner • Avoid mistakes or misunderstandings • Market rent reviews need to ensure fairness to both parties • Recognise the property’s value • Ensure rental is fair and reasonable

IS THE LEVEL OF RENT IN LINE WITH THE MARKET? • This may force the tenant to burden additional costs, ultimately, resulting in the loss of the tenant • Could encourage the tenant to seek an alternative property to lease • Be aware of the valuation methodology applicable to market rental reviews

If the rents are too low: • The Property Manager may feel that they do not need to strive harder to increase sales which could lead them to lose their competitive edge • It may be unfair to the landlord • The tenant may not value the property and the lease agreement in the same way as if they were paying a higher rent

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UNDERSTANDING RENT AND LEASE REVIEWS Pre-determined rent reviews • Requires the Property Manager to write to the lessee reminding them that the rent is to be increased

In undertaking a rent review on behalf of an owner: • Obtain a copy of the lease and any variations of lease, assignments of lease or other lease related documentation • Read all the lease documentation before you proceed • Obtain a copy of the Property Information Form • Obtain a copy of the letter and documentation - copy to the lessee - confirming your appointment to act • Obtain copies of all correspondence in relation to this matter • Obtain a schedule of outgoings for the property • Obtain plans for the tenancy • Obtain a point of contact with the lessee • Ascertain if all relevant notices relating to the rental review and/or the exercise of the option for a further term have been given to the tenant

STEP 1 – THE LEASE AGREEMENT Read and understand the lease. It is the essential element of the agreement • • • •

Ensure that you have received the correct document(s) Check that it is signed, dated and stamped (where applicable) Prepare a lease summary of commercial terms and, in particular, any special conditions Ensure that you have a thorough understanding of the lease agreement and any related documentation

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PROPERTY MANAGEMENT

UND ERSTANDING RENT AND LEASE REVIEWS Read the lease documents closely to accurately determine the rent review cycle, and the method of review • Special attention must be given to the recovery of outgoings • Determine the responsibilities of the tenant, and the notices required to be given • The outgoings provision needs to cover the following items: 1. All user charges such as gas, electricity, phone and excess water 2. Rates and Taxes and Body Corporate Charges and Special Levies (if any) 3. Airconditioning - operating and maintenance charges 4. Insurance premiums for • Full replacement value • Public Risk • Plate Glass • Usual Business Risks 5. All charges connected with the lessee’s business 6. Repairs, maintenance and cleaning apart from repairs of a structural nature 7. Compliance with any statutory requirements for the premises There are three separate occasions in landlord tenant relationships when the question of establishing market rental generally arises. These are: a. The granting of lease to a new tenant b. A scheduled rent review c. A lease renewal to an existing tenant Market rent is the best rent that might reasonably be expected assuming: • • • • •

A willing lessor and lessee (with neither party acting under duress) A reasonable period in which to negotiate the letting Values remain static during the letting period The property is freely exposed to the market No account is taken of any higher price or rent that might be paid by a party with a special interest e.g. an adjacent occupier • Rental for comparable premises • Industry ratio of rental based on area

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PROPERTY MANAGEMENT

UNDERSTANDING RENT AND LEASE REVIEWS STEP 2 – INSPECTION A property inspection is to be conducted annually. Refer to the Property Condition Report, noting; • The standard of accommodation • The structure of the property • Area of premises • Use of the premises

STEP 3 – COLLATION OF COMPARABLE EVIDENCE It is always useful to gather information from the market on comparable properties. This information may be gathered from; • Other advertised properties with similar features • The internet • Newspaper advertising • Commercial real estate agents • Properties in your portfolio • Historical data • Rental/Area ratios

STEP 4 – REPORT TO THE LANDLORD Report your findings and recommendation to the landlord or client for their consideration and instructions. You need to be mindful to provide information that is relevant to the property. If you provide information, which has no bearing or relation to the existing property, this could mislead or confuse your landlord and hinder negotiations and the determination of a market rental.

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PROPERTY MANAGEMENT

UND ERSTANDING RENT AND LEASE REVIEWS RENTAL DETERMINATION If the landlord and tenant are unable to agree on a rent then there must be a mechanism to resolve the difference. Subject to the terms of the lease, options for dispute resolution include: • Appointing a valuer, being mindful that the valuer should have regard to the terms and conditions of the lease agreement • Asking the valuer to act as an expert, not as an arbitrator • Seeking independent advice

CASE STUDY An example of a standard lease for AMP for office premises in Australia was that the landlord advises the tenant in writing of its opinion of market value. • The tenant then has 14 days within which to object to the proposed rental. If he doesn’t object then the proposed rental becomes the rent • If the landlord receives the lessee’s notice of their objection, the landlord and tenant then have a further 14 days to appoint their own valuers • The two valuers then have 21 days from the expiration of the second 14 day period to reach agreement • If the two valuers fail to agree a third valuer, who is either mutually appointed by the two valuers or appointed by the President of The Institute of Valuers, then has a further 21 days within which to deliver their determination with reasons Many companies would find it especially difficult to obtain expert advice within a 14 day period on whether the asking rent was market value or otherwise. So, if you see a clause with a very tight time frame (eg: 14 days), consider advising your client to allow at least a 21 day period for the tenant to satisfy themself on market reviews and to reach an agreement. Rent and lease reviews, if handled correctly, will benefit all parties. The benefits include: • The landlord will achieve a higher return • The agent has an increase in management fees • The tenant will have a landlord more willing to improve the property • The tenant will have comfort that the terms of the agreement are fixed and not subject to unexpected changes during the lease period

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PROPERTY MANAGEMENT

PR O P ER T Y L I S T I N G FOR M Once you have a signed authority to manage your client’s property, you should complete a property listing form. When listing commercial property for lease, it is important to gather as much information as possible about the property and the proposed lease. There are two forms which may be used to gather, collate and enter the information into your office’s property management system. The two forms which may be used are: • Summary Property Listing Form • Detailed Property Information Form Both forms will be extremely useful and will assist the property manager and even the office’s sales people to identify key features of a property and the lease that will be on offer. The summary form may be used in conjunction with the Authority / Appointment to Act and if there is insufficient room, attachments may be used and kept on file. The Detailed Property Information Form is to be used where the property manager requires detailed information on the property under management.

SUMMARY C

PROPERTY FO R

OMMERCIAL

LISTING FOR

LEASE: ______ ____________ ____________ OFFICE ____________ RETAIL ____________ LISTING AGEN INDUSTRIA ____________ T ____________ L ____________ ___ ____________ TYPE OF AGEN ______ ___ ____________ CY _________ ___ ___ _ ____________ LISTING DATE LOCATION ____________ : ___ ____________ ________ AP ___ ___________ Building Name POINTMENT : ____________ TO ACT: ______ ____________ ____________ Address: ______ ____________ ___ ____________ ____________ ___ ___ ___ ____________ ____________ Address: ______ ____________ ____________ ____________ ___ ___ ___ ___ ___ ___ ___ ___ ____________ Region/Geograp ____________ ________ ____________ ____________ ic Code: ______ ____________ ____________ ____________ Title Par ticulars ____________ ____ ____________ : ____________ ____________ ___________S ____________ ___ tat ___ OWNER e____________ _______ ____________ _____ Map ref ____________ : ____________ ____________ Owner’s Name __ ____________ : ____________ ____________ ____________ Address: ______ _______ ____________ ____________ ___________ ____________ Co nta Address: ______ ct’s Name: ______ ____________ ____________ ____________ ____________ ____________ ____________ ____________ Business Ph: ___ ____________ ____________ ____________ ___________ ____________ ____________ Pos tco Email: ______ _______ de: ____________ ____________ ____________ ___ ___ ___ ___ ____________ _____ Private ____________ LEASE PRIC Ph: _________ ____________ _____ E AND TERM ___ ___ ___ ___ ___ ___ ____________ ____________ S Rental (P.A.): ___ SUB-LEASE ____________ ____ ____________ ___ ___ ___ ____________ ____________ DIRECT LE Term of Lease ASE ____________ ___ required: ______ ___ ___ AS _____ ($____ ____________ SIGNMENT Rent review pro ____________ ____________ visions: ______ ___ ___ ___ ___ ___ ___ __ Per Sq Mt ____________ ____________ Fur ther terms r) ____________ ____________ : ____________ ____________ ____________ ____________ ____________ __________ Fur ther term ____________ ____________ rent: _________ ____________ ___ ___ ___ ____________ ____________ ____________ Outgoing costs ____________ _ ____________ payable: ______ _________ Yea ____________ ____________ r 1:_________ Insurance: ___ ________ ____________ ____________ ____________ ___________ ___ ___ ___ ___ Operating cos ____________ ___________ DESCRIPTI ts payable:___ ____________ ON ____________ _______ Securi _________ Land area (sq ty Deposit:____ m): _________ ____________ ___ ___ ___ ____________ ___________ Office area (sq ____________ m): _________ ___ ___ ___ ___ _ Lan ____________ d dimensions: Average floor ____________ ____________ size: _________ ______ No. of ____________ ____________ Class of buildin floors: ______ _____ ____________ gs: _________ ____________ ____________ ___ ___ ____________ No ___ . of rises:______ Appearance: ___ ____________ __ ____________ ____________ ____________ ____ Suitability ____________ ____________ Views/outlook: ____ : ____________ ____________ ____________ ___________ ____________ ____________ Na ___ tur Major tenants: ___ al light: ______ _____ ____________ ____________ ____________ ____________ ____________ ____________ Age of buildin Other space ava ____________ ___ g: ____________ ilable:_________ ____________ ____________ ____________ _ Car par king Airconditioning ___ ____ ____________ available: ______ : ____________ __________ Sec ____________ ____________ uri Floor constr uct ___ ty _____ arrangements: ____________ ion: _________ ____________ ___________ ____________ ____________ Common areas: Floor coverings ____________ ____________ : ____________ ____________ ____________ ____________ Kitc hen Lifts: _________ ___ /Te ____________ a Room: ______ ___ ____________ ___________ ____________ ____________ Window furnis __________ Hours of access ____________ hings: _________ : ____________ ___________ ____________ ____________ Ceiling treatm Par titions: ___ ___ ___ ___ ent: _________ ____________ ____________ ________ No ____________ ____________ rmal building hrs Normal buildin ________ ____________ g hrs:_________ : ____________ ____________ ____________ ____________ _ Loading faciliti Resident Caret ___ ___ es: ___ ____________ ____________ aker: _________ ___ ___ ____________ ____________ __ Sanitar y Co Building Manag ____________ ___ nveniences: ___ er: _________ ___ ___ ___ ___ ___ ___ ___ ____________ ____________ ____________ Plans available: ____________ ____________ _ ____________ ____________ ____________ ____________ ____________ __________ Inspection Ar ____________ ____________ rangements ____________ ___ : ___ ___ ____________ ____________ Date of posse Comments:___ ____________ ssion:_________ ____________ _________ Fe ____________ ____________ e arrangeme ____________ _______ ____________ nts: _________ ____________ ____________ ____________ ___ ___ ___ __________ ____________ ____________ ____________ ____________ ____________ ____________ _____ ____________ ____________ ________

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PR O P ER T Y I N FO R M AT I O N FORM When considering the physical attributes of a property, it is often very difficult to remember every aspect of that property. Features such as area, the number of delivery or loading docks, meeting rooms and general fit out can easily be lost when you have many properties under management or being listed in your office. A ‘Detailed Property Information Form’ has been designed to enable sales and administrative personnel to list the substantive features of the property. This form, once completed, may be used by the office administrative staff whereby the information can be uploaded management maintained for

PROPERTY IN PROPERTY AD DR

FORMATION

FORM - DETA

ILED

ESS: ________ ____________ DIMENSIONS ____________ into the property / AREA:_____ ____________ ____________ ____________ ____________ TITLE PARTIC ____________ ____________ UL AR S: ____________ files (Platform) and ____________ __ ____________ ____________ OWNER ____________ ____ ____________ ____________ future reference. GST REGISTER _______ ED Yes No POSTAL ADDR ESS: ________ ABN ____________ Yes SUBURB: ____ ____________ No ____________ ____________ ____________ ____________ PHONE: ____ ____________ ____________ ____________ _________ ST ___ ____________ ATE: ______ P/CODE: ____ EMAIL: ______ ____________ ____ ____________ _________ FA ____________ X:__________ MANAGEMENT ____________ ____________ ____________ ___ FEE: ________ ____________ ____________ BUILDER / IN ____________ __ __________ ___ SURER _______ AUTH OR ITY DATE:____ MAINTENANC _________ E Plumber : ____ ____________ SOLICITOR: _______ Electr ____________ ician: ________ ____________ ____________ PHONE: ____ ____________ _________ ____________ ____________ ____________ ____________ LESSEE:____ ____ eMAIL: ____________ ____________ ____________ ___ ____________ ____________ ____________ TRADING AS ____________ ____ : ____________ ____________ ____________ ____________ POSTAL ADDR ____________ ____________ ____________ ___ ESS: ________ ____________ ____________ SUBURB: ____ ____________ ____________ ____________ ____________ ___ ____________ ____________ OFFICE PH: __ _____ ______ ____________ __________ ST ____________ ___ ____________ ATE: ______ P/CODE: ____ MOBILE:____ ____ FAX: ____________ ____________ ____ ____________ ____________ _____ eMAI ____________ USE OF PREM L: __________ ____ ISES: ________ ____________ ____________ ____________ COMMENCE ____________ _____ MENT DATE: __ __ ____________ ____________ __ ____________ ____________ COMMENCING _________ ____________ RENTAL: $_ ____________ ____________ ____________ LEASE TERM: ____ pa payab _____ ____________ le $ __________ ____________ ____________ _____ OPTIO REVIEW METH NS: ________ p.c.m OD: ________ ____________ ____________ ____________ OUTGOINGS ____________ _____ ____________ ____________ ____________ Council Rates ___ Paid by Ow ner / Tenant Water Rates Landscaping Paid by Owner / Tenant Paid by Ow B/Corp Fees ner / Tenant Security Costs Paid by Owner / Tenant Paid by Ow Plate Glass Ins ner / Tenant Bu ild . ing Ma Paid by nagement Pa Owner / Tenant id by Owne Public Liability r / Tenant Building Prom Ins. Paid by otion Ow Pa ne id r by Owner / Te na Building Ins. nt / Tenant Ad mi nistration Paid by Owner / Tenant & Management Waste Remova l Paid by Paid by Ow Owner / Tenant ner / Tenant

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PROPERTY MANAGEMENT

COUNCIL RATES AND OUTGOING CHARGES Property Managers should be well aware of the rates and outgoing charges applicable to a particular property. Utilising a Council Rates Information Checklist enables the Property Manager to clearly identify and list all of the statutory charges applicable. It is also useful during discussions with the tenant or the landlord where they may be reviewing the returns and financial performance of a property.

li ATION - Check M R O F IN S E T A COUNCIL R

_______

_______________

____________ _______________

____________

R ____________

REG. PROPRIETO PROP. ADDRESS

_________

_______________

TION ___ ___

RAL / DATE

____________

_______________ ____________ ______

_________

_________ ______

URANCE ______ USE RATE ___

PEDESTAL RATE

_________

_________ ___

_______________

_______

_______________

____________ _______________

_____

_______________

____________ _______________

____________

_______________

____________ _______________

_______________

______________

_______________

____________ _______________

___

_______________

_____________

_______________

____________ _______________

_______________

___ NOTES: ______

__________

_______________

____________ _______________

___ ARTER ______ TOTAL PER QU

_________

_______________

____________ _______________

_______________

__________

_______________

____________ _______________

TE ______ SEWERAGE RA

_______

_______________

____________ _______________

CLEAN OR REF

____

_______________

____________ _______________

PERIOD OF INS

___

_______________

____________ _______________

_________ BROKER ______

_______________

____________ _______________

_________ POLICY NO. ___

_____________

_______________

____________ _______________

VER _________ CURRENT CO

____________

_______________

____________ _______________

_______________

INSURANCE ___

________

_______________

____________ _______________

____________ WATER RATE ___

_______

_______________

____________ _______________

____________ GEN. RATE ___

_______

_______________

____________ _______________

ASSESS NO.___

____

_______________

____________ _______________

E ____________ RATEABLE VALU

____

_______________

______ _______________ NERAL / DATE

_______________

_________ _______________

ER GENE CURRENT VALU ER GE PREVIOUS VALU

_______________

____________ _______________

_______________

LAND AREA: ___

__________

_______________

____________ _______________

PERTY DESCRIP

REGISTERED PRO

_________

_______________

____________ _______________

STED BY: ___

SEARCH REQUE

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PR O P ER T Y C H A R A C TE R I S T I C S Property Managers need to have a full understanding of the characteristics of commercial, retail and industrial properties. The Commercial Resource Centre Disk contains several property checklists which may be used by those new to property management. They will assist to get a good understanding of a particular building and its features. Whilst the checklists may appear similar to each other, they actually focus on the physical and structural elements of the building rather than the condition of the building.

TICS O CHARACTERIS

PROPERTY COMMERCIAL

CHECKLIST ________

______________

____________ ______________

__________ ___________ SS: __________ E: ____________ AT D _ __ __ __ ______________ ______________ __ __ __ __ __ __ T:__

DRE PROPERTY AD TENAN

LASSIFICATIO

PROPERTY C

FFICE

O COMMERCIAL INDUSTRIAL OTHER

Yes

RETAIL WAREHOUSE

Yes

N LASSIFICATIO OPEN

PROPERTY C C AR PARKING

UNDERCOVER BASEMENT

CENTRAL CITY

SUBURBAN

LOW RISE

HIGH RISE

C ARPETS

E FLOOR SURFAC

SINGLE TENAN

ANTS

MULTIPLE TEN

G CONDITIONIN

AIR

LIGHTS

HEATING ELECTRIC AL

ADINGS RAL - FLOOR LO

STRUCvTU C O M M E R C I A L O P E R AT I O N S M A N U A L olume 2 HYDRAULICS

ROOF AREA

PROPERTY MANAGEMENT

PRO PER TY INSPECTI ON AND CO NDITION REPOR T A Condition Report is completed by the property management department and it provides a record of the condition of a property at the time that an inspection is carried out. The Condition Report is useful in identifying and recording defects or damage in buildings. The ‘Condition Report’ is to be used: • When entering a new lease agreement, • When new tenants take up the lease, • On an annual basis (recommended) If there are any defects in the property these are to be noted and acknowledged by the tenant and the landlord. Key aspects of a property noted in the Inspection and Condition Report are: • External walls • Mechanical, data and electrical services • Internal walls and their finishes • Landscaping and external works • Roofs • Staircases and escapes

NDITION REPO

TION AND CO

EC PROPERTY INSP

• Superstructure

__________ _______________ _______________ _______________ _________ ___ ___ ___ ___ ___ ___ ___ _________ _______________ _______________ ___ BUILDING: ___ ___ _ ___ ___ _______________ ____________ __ DATE:_____ _______________ _______________ ___ LOCATION: ___ ___ ___ ___ _________ _______________ OWNER: ______

• Substructure • Floors • Ceilings • Fitments Use the last page of the Condition Report to acknowledge the date the inspection was carried out. Be sure that you and the tenant sign the form before presenting the report to the landlord. Once completed ensure that the tenant receives a copy and that a copy of the Condition Report goes on the Property File.

_________ _______________ ALLS _______________ EXTERNAL W _______________ ___ ___ ___ ___ _________ CONCRETE ___ ______________ _______________ Y NR SO MA _______________ ___ __ ___ ___ ___ _______________ _______________ _______________ BRICK ______ _______________ ___ ___ ___ ___ ____________ BLOCK ______ RETE

PRECAST CONC

STRUCTURAL

_____________ _______________ _______________ ___ ___ __ ___ ___ ______ _______________ _______________ _______________ TILT-UP SLABS _______________ ___ ___ ___ ___ ___ ___ ___ ____________ G ON GIRTS ___ _______________ METAL CLADDIN _______________ _____ _______________ _______________ ___ ___ ___ ___ ___ ___ C _________ PREC AST GR ____ _______________ ___ ___ ___ ___ ___ ___ ___ G ______ ITE CLADDIN _______________ ___ MARBLE/GRAN ___ ___ ___ _________ ____________ _______________ _______________ CURTAIN WALLS _______________ ___ ___ ___ ___ _______________ _________ AZING ______ _______________ FRAMELESS GL _______________ ___ ___ ___ ___ ___ _______________ SHOPFRONTS _____ _______________ _______________ WINDOWS _______________ ___ ___ ___ ___ ___ ___ ___ ___ ___ _________ _________ FIXED ______ _______________ ______ _______________ ___ ___ ___ ___ ___ ___ ___ ___ ___ ______ SLIDING ______ _______________ _______________ _____________ _______________ _______________ ___ ___ PIVOTED ______ ___ ___ ___ ___ _ ___ ___ ___ ___ _______________ ED _________ _______________ DOUBLE GLAZ _______________ _ ___ ___ ___ ___ ___ ___ ___ ___ ______ S _________ _______________ INTERNAL BLIND _______________ ___ ___ ___ ___ ___ ___ ___ ___ ___ ROL ______ _________ SOLAR CONT _______________ _______________ _______ _______________ _______________ ___ ___ ___ ___ HOODS ______ ______ ___ ___ ___ ___ _____________ _________ CLADDING

Above is an extract of a condition report; a copy of the full report may be accessed on the disk included in this manual.

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O FFIC E B UI L D I N G I N S PE C T IO NS Office buildings differ from industrial warehouses and retail shops and include common areas such as foyers and tenant areas used by all persons entering or using the office building. Service areas and plant rooms are areas of a building, not normally accessed by most in the building, however they still require regular maintenance and upkeep. The Office Building Inspection Form will be very useful for Property Managers and tenants to undertake regular inspections of a commercial office building. As with the Property Inspection and Condition Report, Office Building Inspections are to be carried out: • When entering a new lease agreement • When new tenants take up the lease • On an annual basis An Office Building Inspection Form may be used when undertaking and completing inspections and condition reports of office buildings.

N FORM

ING INSPECTIO

OFFICE BUILD

____________ ________________

____ PROPERTY: ____

PLANT MECHANICAL

WATER INSIDE LEAKS - SPRAY

REM

________

TED ________

OF CURBS POS

____________________________

___ OR ____ THE ELEVAT ________ PENTHOUSE

________________

____________ ________________

_______ OK

EMERGENCY LIGH

ING TILE, CARPET

ENGINEERS’ _______ SHOP ________________ OK

MENTS

NOT OK

REMARKS/COM

EMPLOYEES’ TIME CLOCK AREA FOR OSHA AND ACCIDENT REPORT FORMS

_______ ________ AID____ SUPPLIES ____________FIRST _______________ ____ ____ ____ DAILY WORK PROGRAM ________ ________________ ________________

____

________________

___________

________________

________ ________________

WALL FINISH

____________________________

___

________________

TENANT’S SUI

___________

____________________________

________

____________ ________________

________ ________________

CAPS

ON TEST BUTTONS

____________________________

___________ EXTINGUISHERS _______________

________________

REMARKS/COMMENTS

____________________________

____________ ________________ FIRE

________________

NOT OK

____________________________

AMPLE LIGHTING

MENTS

REMARKS/COM

NOT OK

________________

VALVES FIRE STANDPIPE

___________

________________

DOOR CLOSING

___________

____________________________

NUMBERING ON MOTOR CONTROL DISCONNECTS

LIGHTING/CEIL

____________________________ ____________________________

________________

STAIRWELLS

___________

MENTS

REMARKS/COM

NOT OK

____________ ________________

SIGNS ‘NO PARKING’

MISSING VALVE

____________________________

WATER FOUNTAIN/PRESSURE

___________

____________________________

____________

CAR PARK

REMARKS/COMMENTS ____________________________

_______ ________LIGHT DIFFUSERS

_______ ________________CEILING TILES ________________

________________

LY PUMP ASSEMB

NOT OK

LIGHTING _____________________ _______

________________

____________ ________________

FAN CHAMBER

NG FIRE LANES/PAINTI

OK LIGHT FIXTURES/ALL ASPECTS OF

TS ARKS/COMMEN

NOT OK

N FORM

____

____ ___ DATE:____

________________

OWNER: ________

OFFICE BUILDING INSPECTIO

_____________ PUBLIC FLOOR AREAS ___ ________________

________________

____________ ________________

NOT OK

REMARKS/COMMENTS

____________________________

___________

____________________________

C O M M E R C I A L O P E R AT I O N S M A N U A L

___________

____________________________

volume 2

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PROPERTY MANAGEMENT

ESSENTIAL SERV ICES AND SAFE TY MEASUR ES To ensure that occupants, in a building, work and operate in a healthy and safe environment, the maintenance of essential services and safety measures in a building is of utmost importance. Property managers need to be aware of, and understand the need for, essential and safety services in a building. This section aims to improve the understanding of: • Essential services • The type of buildings where essential services apply • Identifying building services that are included in essential services The Building Control Commission defines essential services as: • the fire and safety items installed or constructed in a building to ensure the adequate levels of fire safety over the life of the building Essential services include all traditional building fire services such as sprinklers, mechanical services, passive fire safety doors, fire rated structures and other building infrastructure items such as paths of travel to exits. Essential services only apply to buildings constructed on or after 1 July 1994. The regulations that cover essential services are contained in Part 11 of the Building regulation 1994. You may assist the property owner by advising that they: • Are required to display an occupancy permit including any conditions associated with the permit, • Are required to prepare an essential services report in accordance with the regulations before each anniversary of the date of occupancy of the permit • Are required to keep all essential services reports and records of maintenance, repairs and service checks • Are required to display a copy of the essential services report

Key Essential Services Include: Egress and Access • Emergency Lifts • Exit Doors • Fire Doors • Fire Isolated Passageways, Ramps and Stairs • Smoke Doors • Paths Of Travel to Exits • Vehicular Access Around Large Isolated Buildings

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ESSENTIAL SERV ICES AND SAFE TY MEASUR ES Electrical Services • Emergency Lighting • Emergency Power Supply • Emergency Warning and Intercommunication System • Exit Signs Fire Detection and Suppression Equipment • Fire Control Centre • Fire Detection and Alarm System, Fire Brigade Connections, Fire Control Panels • Fire Extinguishers – Portable • Fire Hose Reels, Fire Mains • Fire Hydrant System, Fire Mains • Smoke Alarms • Sprinkler System, Fire Mains • Static Water Supply • Pumpsets Fire Resistance • Fire Curtains • Fire Indices For Materials • Fire Isolated Lift Shafts • Fire Protective Covering, Fire Rated Control Joints, Fire Rated Materials Applied to Building Elements • Fire Rated Access Panels • Fire Resisting Shafts • Fire Resisting Structures • Fire Shutter, Fire Windows • Lifts, Warning Systems • Lightweight Construction • Penetrations in Fire Rates Structures Mechanical Services • Airconditioning Systems, Mechanical Ventilation Systems • Smoke Control Measures, Stairwell Pressurisation Systems, Fire Dampers • Smoke Vents

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ESSENTIAL SERV ICES INTROD U C T IO N AND SAFE TY MEASUR ES Asbestos On 1st February 2003, the revised Occupational Health and Safety (Asbestos) Regulations came into play. Landlords and tenants now have defined duties relating to exposure to asbestos that could pose a risk to health. It is the duty of the landlord and of the tenant to: • Identify if asbestos is present and to conduct a risk assessment • Control risks by removing the materials • Review and revise the risk assessment at least every five years • Provide a copy of the risk assessment to any new tenant • Adjacent occupiers must be notified of asbestos removal activities During audits, if the presence of asbestos is uncertain or there are inaccessible areas that are likely to contain asbestos, it must be assumed that asbestos is present. Asbestos records are to be kept indefinitely and the removal of asbestos must be conducted by licensed asbestos contractors. For more information regarding essential services refer to your State Building Commission Office.

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PROPERTY MANAGEMENT

PRO PER TY MAINTENANCE AND CO NTRACTS The previous section focused on essential services; taking this one step further is the maintenance side of property management. Regular maintenance and the review of service contracts are required on all buildings and property managers should be proactive in establishing a maintenance program in conjunction with tenants and landlords. A property maintenance and contracts checklist is to be used in the review of maintenance contracts of a managed commercial or industrial property. The checklist covers off items such as the building, gardens, kitchens, water services, fire services, airconditioning, electrical services and building communications. This is what the Property Maintenance and Contacts Checklist contains, a copy of which can be accessed on the disk included in this manual.

TENANCE PROPERTY MAIN TS CHECKLIST AND CONTRAC : _______________

File Ref __________ _______________ ___ ___ ___ ___ ____________ _____ _______________ _______________ ___ ___ ___ ___ ___ ___ ___ ___ Proper ty: ___ ____________ _______________ _______________ ___ ___ ___ ___ ___ ___ ___ ___ _______________ Owner : _________ __ _______________ _______________ : _______________ __________ Date: Proper ty Address _______________ ___ ___ ___ ___ ce Y/N r: ____________ Contract in pla Proper ty Manage L AND GENERA ding buil e Y/N BUILDING q bas Re and 1. ures for tenancies Alteration proced a. Key register on b. structural inspecti Building facade and c. procedures tion cua eva and Emergency d. inspection Essential ser vices e. conformance Plant registration f. tem Central Vacuum Sys g. CLEANING 2. Tenancy cleaning a. ning Base building clea b. Common areas c. Toilet requisite d ING WINDOW CLEAN 3. External and faรงade a. Common areas b. SECURITY 4. Staffing a. General security b. Patrols c. Alarms d L PEST CONTRO 5. GOODS DANGEROUS 6. Storage a. Labelling b. Register c. ARY NOTES: SUPPLEMENT

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PROPERTY MANAGEMENT

C O M M E R C I A L O P E R AT I O N S M A N U A L

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PROPERTY MANAGEMENT

R E TAIL P RO P E R T I E S PHYSICAL FEATURES OF RETAIL PROPERTIES When listing retail properties within a larger retail shopping centre, the type of centre needs to be noted as well as its location, size, state, type of shops, number of carparks and other features such as appearance that would attract buyers. Demographic factors should be explored, for example, how is the population distributed in relation to the centre? What is the growth rate and the spending power of the target community? Records of turnover, number of customers through the centre, rate of growth in outgoings and rate of growth in rental income should also be noted. Buyers will also be vitally interested in management methodology. The nature of existing building quality and future refurbishment potential should not be overlooked when listing. When listing individual shops that are part of a strip development, the same information needs to be noted for, while a buyer is only obtaining one shop, the type and number of other shops in the area, as well as the availability of car parking, are all factors that must be taken into account by prospective purchasers looking for sound long term investments.

RENTAL VALUE, LEASE PERIOD, AND LEASE CONDITIONS Lease Terms Peculiar to Retail Property Whereas most investors in commercial and industrial areas desire the security of a long term lease, investors in the retail market may prefer short leases with no option of renewal as they can gain better tenants if, and when, possible. Tenants’ Outgoings and Rental Value Most retail leases assume that tenants will be responsible for all statutory outgoings. These include municipal rates and water rates. In addition, tenants are responsible for the operating costs of shopping centres which include public lighting, cleaning, heating and airconditioning. All these costs are in addition to the rent paid by the tenant. The rental terms for retail property are markedly different to those that apply in the commercial and industrial sectors. For example, rental, which is an agreed percentage of sales turnover - once it exceeds a budgeted amount - is paid as overage. It is not unusual for rents to reflect 10% to 15% of a tenant’s retail turnover. This % is product relative with ‘food’ outlets being able to sustain a % at the higher end of the scale. There may also be a restriction on the products that any particular tenant is permitted to sell. Rents paid by large tenants, who have bargaining power, differ markedly from those paid by small specialty shops in the same shopping centre. For example, the rent of large anchor tenants such as Woolworths or Coles may be 25% lower than those being paid by small speciality traders in the same buildings. Such tenancies are often referred to as “key” or “anchor” tenancies.

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R E TAIL P RO P E R T I E S OWNERS AND OCCUPIERS OF RETAIL PROPERTY Owners Small Investors - The traditional strip shopping centres tend to be owned by a variety of small investors who receive comparatively low yields on their investment. Such well located retail real estate is regarded as a safe investment. Factors that contribute to their safety are probably to do with capital growth and the ability to lease the premises quickly, if they fall vacant. A well located retail property increases in value as the supply of such property is limited. Tenants who have developed a great deal of goodwill are not anxious to move to a new area in case that goodwill is lost. This gives the owner a strong position in rent negotiations, and lease expiry. Institutions - Institutions like superannuation groups, insurance companies and property trusts generally own larger retail property. Some institutions acquire their investments through active development. Others, particularly property trusts, are passive and simply acquire the completed property from developers or current owners. Retail real estate investment appears to be attractive to institutions because of the size of the acquisition, as well as the return. Well located regional shopping centres, for example, have proven to be the best form of real estate investment available in Australia. This may be because some institutions have recognised that particular expertise is required to effectively manage and promote shopping centres and have ensured they acquire that knowledge. Tenants Tenancy Mix and Suitability - The grouping of shopping centre tenants is a science. If properly handled, it can add to the success of a shopping centre. When it is incorrectly addressed, it may mean business failure for individual tenants and loss of income for the owner. The anchor tenants, who are usually the major retailers (supermarket, department store or discount store), are the tenants who attract the pedestrian traffic. Around these should be grouped the high trading and therefore high rent paying tenants such as butchers, hot bread shops, fruit shops etc. Tenants that do not generate pedestrian traffic (finance companies, banks, building societies) are located elsewhere. Particular care should be taken with bank tenancies as they are a volatile and high risk tenant. Any lease of such space needs to protect the landlordâ&#x20AC;&#x2122;s position and cashflow stability.

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PROPERTY MANAGEMENT

PRO PER TY MANAGEMENT HANDOVER When an office has been appointed, the Property Manager of a commercial property, it is essential to obtain and complete the necessary administrative information relative to that property. The New Property Management Handover Checklist is to be used to gather and keep track of that information. Two checklists have been developed to assist the property manager. Depending upon the complexity of the handover, the property manager may opt for a summary or a detailed form. These forms are available on the disk included with this manual.

DETAI

EN- T ED GELM A PROPE N A M TY RTY M R E P H O A R N T A S -P D I L Y O K R V A C E E M R CHE NAGEMENT CH SUM R E V O C KLIST HAND PROP

ERTY

TY RIAL PE:

RETAIL

DUST IN PR

__ CO__ ________ ME __ M__ RCIAL Y: ____ ________ ERCIAL ______ _______ ____ __ COMM LOC AT____________ ______ __ __ __ ______ __ ION: __ INDU PE: __ __ ________ STRIA __________________ ___ RTY TY ________ OWNER ________ L ________ ________ ______ PROPE ________ ________ __________ __: __ __ ____ ____ ______ E: ____ ________ ________ ____________ AT __ __ __ D RETA __ __ __ __ __ __ __ ______ ______ ____ ________ IL ____ ______ __ __ __ __ __ __ __ __ __ __ __ __ __ ______ ______ ______ Y: ______ ________ ______ ______ ______ PROPERT ________ ________ ______ ______ ______ __ __ __ __ E __ __ S __ __ ______ ______ TATE ______ ____ N: ____ __ IO __ __ __ AT ______ __ __ __ C M ______ ______ LO ANAG ______ ____ ______ ______ ________ EMEN ___________ Notify ______ ______ : ______ ______ DATE: __ relevan ____T OWNER __ __ ___ __ __ ______ Insuran ______t__c__o__ __ n __ tr __ __ acto__ __ ______ __ c rs__ _____ /s__ ________ e / Workc________ up__plie ________if no __ are OPERT

t pre________ ____ cover d ______rs o__ ____ ntly on ________ ______se etails a f Managemen ________ re__________ ________ n__ t Ap d __ ome __ Q_uality tails) __ ________gister. de __ __ se __ __ Rental inc ba __ __ __ nd Assura pointment an • ________ rease (a ________ nce sta d requ ________ __ ty) ____Requ ge rent inc __ ta __ er __ en __ op est tus for rc __ pr __ Pe e ____ ________ • advertising Registe mentst__statutor ________ me from n eqhuip __ co a tio _ y r n __ (in ica __ a d __ un __ u ge o thoritie __________ ve__r__ ____ Signa comm __ d d an a ls te • __ aeria in the__fo________s__to carr ____ unication ________ __ llowing ______y __ o__ u ____ Telecomm year s __ ________ • ircumst t final readin s and base ________ ____c__ g from s recoverie ges •____ Whe a ________ ar n __ ces: ch __ s nt __ re Outgoing settlem clie__ __ d tena • • gories an ________ nt has recent ent or ly purc s by cate ________ Where hased pr Outgoing proper ________ __ __ op • ty __ er ty __ has rece ____ __ us __ nt __ eo ly been __ __ Miscellan built ______________________ • ______ ______ Notify ________ ______ ____ all statu__________________ ________ ______ ________ ____________ ______ __ to __ (unle__ __ __ r __ __ y ______ __ ______ au__ ____ th __ ss__own _ __ __ __ __ o ______ __ __ __ ri S __ __ ti e__ SE es of c __________ r __ ____ ____ ______ in __ __ st __ EXPEN ru __ __ h ______ cts oth __________ange o ____ ______ __ __ ___ __ _ ies __ __ __ f e rwise) b__illi__n__ ____•__ Statutor ______ __ __ __ g __ __ __ a __ __ __ ddress • ____ ____ ______ Gas ____ _ ________ (all types) ____ ______ ________ Licences ________ ________ ______ ______ • ________ ________ • ________ Electr ____ __ic__ ________ ________ ity ____ ___ ____ ____ e __ __ __ nc __ __ __ __ ra __ __ su __ __ In ____ ________ __ ____ ____• • __________ Teleph__ __________________ __________ ________ __ on__ ______ __ e ____ __ ________ _______ • ________ Utilities __ ____ ________ ____________ ______ __________ ____________ • Council ____________ ______ ________ ________ ______ __ ______ __ __ __ __ __ __ __ ity __ ___ ______ ______ ____ ____ ____ ________ • ________ __ o Electric __ __ __ __ __ __ ______ ______ __ __ ________ Land Ta ____________ ____ ______ ________ x ________ ____ ________ __________________ ____ ____ ______ • ____________ __________ __ __ __ __ __ ______ o Gas __ __ __ ______ ______ __ ______ Water ______ ____ __ __ __ _____ __ __ __ __ __ __ __ __ __ __ / __ ______ Se__ __ ______ ______ ____ wer__ __ __ ne __ __ ag __ • __ ho __ __ __ e __ __ __ __ __ lep __ ____________ ______ ______ o Te ______Other s ______ ________ ____ ______ ____ ______ ________ __ ____ ________ ____________ __________ ______ ____ ______ ________ ______ ____ ______ ______ ______ __________________ Lifts __ ________ ______ ________ ____________ ___ __ ____ ______ • ____ ________ ________ __ __ __ __ __ __ __ __ __ __ __ __ __ __ ____ __ __ ____ ______ ____ ___ ______ ____ Security ______ ________ ______________________ ______ ________ • ________ ______ __ ________ nance __ ______ ________ _ ____ ________ d Mainte __ __ an __ __ __ ir __ __ __ __ pa __ ______ Re ____ ______ __________ ________ • ________ ______ ________ ________ ________ ______ ___ ________ ________ Cleaning ___ ________ ________ ________ • ________ ________ ation __ __ __ str __ __ ini __ __ m ad ________ ________ ________ Building ________ ________ ________ • __ __ __ __ __ __ __ __ __ sposal ______ ___ ________ Waste di ________ ________ ________ • ________ ________ ________ ________ _ ________ ing ____ ________ ________ Landscap ________ __ __ __ __ __ __ __ __ __ • ____ ________ ________ ________ _____ ________ ________ __ __ __ __ Car park __ __ __ __ __ __ • ______ ______ ______ ________ ning ____ ________ ________ Airconditio ________ ________ • ________ nditure __ ________ pe __ ex __ l ta __ Capi ______ • ________ nd ____ Sinking fu • E

INCOM

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PROPERTY MANAGEMENT

PRO PER TY MANAGEMENT SUBMISSI ONS COMMERCIA L PR OP ER TY It is important for commercial offices to be able to present their skills and experience in a format which will be seen favourably by any prospective client. The following sample submission may be used as a template for submissions by your office. Whilst it gives the structure for the submission, you may feel that you need to add specific detail relative to your office. This will strengthen your submission and add to your credibility when making that all important presentation.

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

PRO PER TY MANAGEMENT SUBMISSI ON 1 SMITH STREET NORTH MELBOURNE, VI C 3 0 5 1

First National Commercial Licensed Estate Agents 89 Hoddle Street Richmond VIC 3121 Tel: (03) 9418 9111 Fax: (03) 9418 9122

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

TAB LE O F CO N T EN T S Introduction Executive Summary First National Commercial Property Management Department

Properties Currently Managed

Complementary Real Estate Services

Reporting

Funds

Lease Options and Renewals

Assignment of Leases

Budgeting

Annual Report

Tenants

Tenancy Schedules

Contract Services

Asset Management Plan Agency Appointment

Agency Fees

Management Services

Ancillary Services

Leasing

Appointment

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

APPE N D I CES

APPENDIX

Sample Tenancy Schedule - Rental details

Sample Tenancy Schedule - Lease details

Sample Arrears Listing

Income and Expenditure Budget

Variable Outgoing Expenditure Budget

Emergency Procedures

Tenants Fitout Guide

Cleaning Tender Document

Property Management Services

Schedule of Real Estate and Business Agents Fee

Exclusive Authority to Act as Managing Agent

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

INTROD U C T IO N First National Commercial _____________________________________ is an accredited office of First National Commercial, the commercial division of the First National Real Estate Group. We have pleasure in presenting our proposal to seek appointment as the Managing Agents of ________________________________________________________________________________ In our introductory submission, we provide a brief outline of our experience in property management, which includes leasing, selling and managing properties in since ______________ With ________________ square metres of property currently under management, our success has been built around long term practical experience, skilled staff, continuing staff development, training and specialised computer property management systems. We emphasise that our financial reporting systems are designed to address taxation issues and our income and expenditure schedules have detailed breakdown to ensure minimal accounting expenditure for planning and taxation purposes. This, together with the backup of highly experienced Directors and a wide range of complementary real estate services, places us at the pinnacle of property management expertise to maximise your income and protect your asset.

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

E XE CUT I VE SUMM A RY Our objective in managing your property is to provide quality professional service to ensure maximum investment yield whilst maintaining the building to ensure maximum capital growth.

THE PROPERTY _________________________________________ is ideally located in the centre of the ________________

PROPERTY DESCRIPTION The property is of outstanding physical appearance with most tenancies having a net lettable space of square metres. The property is currently ___________ percent let and there are ____________ five tenancies, ___________two being multiple tenancies occupying ten floors.

MANAGEMENT SERVICES First National Commercial will provide full management and reporting of rental tenancies and supervision of contractors with the priority to maintain the property to achieve maximum capital growth.

AGENCY FEES We recommend management on a fixed annual fee basis of $______________ for the upcoming financial year subject to annual review until the property is 80 percent let when a percentage fee can be set. Ancillary services to be charged as per the Real Estate Scale of fees (Appendix J).

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

FIRST N AT IO N AL COMME R C I AL Our Company was founded by local partners John and David Smith. The agency has a combined wealth of local knowledge with highly trained and experienced directors and staff, all of whom have business relationships at national and international levels. The following is a brief summary of our current Directors:

JAMES SMITH

B.Com

F.S.L.E. (Val)

__________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ TRACEY SMITH __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ BRIAN SMITH

B. Bus (Val) A.S.L.E. (Val)

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

PRO PER TY MANAGEMENT DEPAR TMENT First National Commercial Property Management takes a professional, comprehensive approach to property management using modern technology. Personal service to you, the client, is of the highest priority. We aim to maximise the performance of every property we manage and to be rewarded for the results. Amongst the innovations of our Property Management Department are: 1.

We recognise the different skills involved in the management of office towers and First National

Commercial provide significant training and supervision of each specialist in the management

team.

Special One Off Services

Clients can appoint First National Commercial on a special task to analyse specific areas aimed

at improving the property’s performance, e.g. energy analysis.

Asset Management

This service utilises all First National Commercial’s specialist resources and is more fully

explained on page 84. 4.

Computer Technology

Over past years, we have used a specialised software package aimed at providing accurate

streamlined reports on our in-house computer.

We demand that our staff keep abreast of technological change and to respond to every changing need from clients and business generally. Add to this our backbone management services to: • Maximise rental income • Minimise outgoing expenditure • Provide accurate and reliable accounting records and reports • Maintain the property to a high standard • Maintain full occupancy • Monitor legislation • Maintain a strong relationship between landlord and tenant

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

PRO PER TY MANAGEMENT DEPAR TMENT Our experienced management team, with its comprehensive skills, will capitalise on the following benefits of the building to complement the owners building objectives:

Insert aspects of the building here, perhaps pictures at the end of the page. • Excellent location • Spectacular river views • Floor plan flexibility • Uninterruptible power supply • Flexible installation of power, communications and data service cabling • Standby services for tenants • Variable volume airconditioning system with workload efficiency • Elimination of disease risk • Special tenant sub-zone fire services requirements • Parking facilities

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

PRO PER TIES CURR ENTLY DISP LAYED First National Commercial manages a total of 1,000,000 square metres of floor space in the metropolitan area. The major buildings managed include: ABC Building C.B.C. House XYZ Centre

22,500 sqm 35,000 sqm 40,000 sqm

Complimentary real estate services In addition to our professional property management services, we provide ongoing: • Private Sales and Sales by Auction and Tender • Leasing • Valuation • Rent Reviews • Arbitration • Capital Value • Insurance • Compensation • Rates and Taxes • Project Marketing • Investment Analysis and Sales • Financial Management We coordinate all these activities to provide efficient back-up to our property management team to ensure that our clients have the best possible property services available to them.

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COMMERCIAL PROP ER TY SERVIC ES Reporting Our management team meet regularly to coordinate information to be in a position to summarise and report to owners on an annual as well as a monthly basis. We recommend that you meet with our Directors and the Property Manager each month to review the reports.

Financial Management We place high priority on payment of rental and other outgoings being paid by the lessee on the specified date in their leases and we institute the appropriate procedures for payment and recovery, when necessary, including penalty interest on late payments where specified in the lease. We wil issue, promptly, each month the following specialised property management computer program statements: i. Budget Analysis ii. Income and Expenditure

This includes a detailed breakdown of each tenant showing amounts debited each month, monies received, balances owing and total amounts received and a summary of income and expenditure in each category.

iii. Variable Outgoings

Payment of outgoings will be carefully monitored and approved for payment by the Property Manager. These are all recorded by category on the computer. Recovery of outgoings, as specified in the lease, will be closely supervised.

iv. Tenant Arrears

Our computerised arrears report is run weekly detailing all outstanding

Physical A monthly report will be provided detailing repairs and maintenance as well as summarised reports from all appointed contractors. In addition to monthly reporting, we will promptly advise your office of any major maintenance problems, equipment or service breakdowns and replacement capital expenditure items required.

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

COMMERCIAL PROP ER TY SERVIC ES General Monthly reporting will also include: i. Rent Reviews

Rentals being paid by tenants are regularly reviewed in accordance with market conditions and recommendations for adjustment made within the terms of each lease prior to rent review dates.

ii. Lease Expiry (well in advance) iii. Capital Items

Showing monthly and year to date figures.

iv. Vacancy

Annual Reports Annual reports will include an initial Property Condition Report followed up by annual reviews.

Funds We recommend in respect to net monies disbursed, that First National Commercial account for all holding funds used for the payment of statutory charges and other creditors. We will bank all variable outgoings received from tenants, pay all accounts and forward net funds to your designated bank account, less our management fees, leaving in our account any amounts required for payment within the month of operation.

Lease options and renewals We will seek to be appointed to negotiate lease renewals and options with existing lessees in accordance with the provisions of the lease and for renewals to make recommendations to owners according to market conditions and owners policy guidelines. As part of our service to owners, we can where required, serve tenants with the statutory notices required for valid lease renewals.

Assignment of leases Interviews will be conducted with prospective assignees, references checked, financial projections and business plans considered and recommendations made to owners on proposed assignments to satisfy the â&#x20AC;&#x153;suitability, solvency and responsibilityâ&#x20AC;? test found in most leases.

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COMMERCIAL PROP ER TY SERVIC ES Budgeting We will request a meeting with you six months in advance of each financial year to prepare a budget. We will provide a budget report detailing projected income and expenditure for the ensuing financial year and this will be analysed monthly to provide a guide to projected cashflow for the year.

Annual Financial Report Following the end of the financial year and audit, actual income and expenditure figures are prepared, comparing budgeted and actual income and expenditure figures.

Tenants Tenants will be issued with Tax Invoices (for rental) and trust receipts for all monies received. Monthly statements to tenants will include balances of rental and variable outgoings and energy accounts. Other reports as appropriate, including arrears, rent reviews and lease expiry will also be issued to tenants.

Tenancy Schedule We enclose a sample of our computerised tenancy schedule which we will forward to you on a monthly basis. This will show current occupancy with any variations and a comparison with previous years. The tenancy schedule includes tenant and public parking.

Contract Services We will provide periodic reports with details and performance of contractors. Engineer consultants We will consult with the appointed Engineer Consultants in respect of the operation monitoring and reporting of Building Automation Systems (B.A.S.) We will monitor contractors and staff in the operation of all of the B.A.S. functions. Electrical services We will consult with the Engineers and appointed Electrical Contractors for information on reporting, recording and controlling energy consumption including the maintenance and monitoring of the Uninterruptible Power Supply (U.P.S.)

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

COMMERCIAL PROP ER TY SERVIC ES Contract Services Mechanical services Our management team will have close contact with the Engineers on operating maintenance and monitoring of all mechanical equipment including Direct Digital Control (D.D.C.), energy and maintenance management, alarm monitoring and to facilitate reports on all these areas. Airconditioning Consultation and reporting with the Consulting Engineers and staff will be a prerequisite to ensure that the airconditioning system is run and maintained to provide maximum comfort to tenants whilst energy expenditure is kept to a minimum. This will involve control of temperature, humidity and contaminant levels, monitor airconditioning loads and V.A.V.C. control and a detailed knowledge of the stand alone computer boxes system. Lift services We will initially request perusal of the service contract and discuss with the contractors details of compliance with Australian standards of maintenance, regular inspections, emergency procedures and regular reports. Fire services It is important that maintenance and monitoring of fire services be of high priority for fire protection and safety and to comply with regulations. We may need to rewrite or adapt the existing evacuation procedure document in consultation with the Metropolitan Fire Brigade. Assessment will also be carried out of any tenants special sub-zone requirement. Cleaning services With our Property Manager being located in the building, we will be able to manage and monitor the performance of cleaning contractors. We recommend contractors to avoid direct responsibility for workersâ&#x20AC;&#x2122; compensation, health and safety, superannuation and industrial relations problems. We recommend, we analyse your buildingâ&#x20AC;&#x2122;s cleaning requirements to provide the most cost effective cleaning and maintenance. Our computer program is designed to facilitate cleaning recovery from tenants. Security services We will control the two Security Guards provided by the security company under contract. We will request examination of the contract and services with the security company including night roving patrols.

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

ASSET MA N A GEME N T PL A N We highly recommend we carry out an Asset Management Plan including detailed discussions with your Board of Directors to fully determine the present and future status of your investment and to assist in future decision making. First National Commercial believes that more in depth advice on the overall investment is necessary, in addition to the acknowledged normal services involved in property management. Our suggested team approach involves systematic checking of the various elements of your investment. We plan to identify ‘added value’ opportunities to determine potential additional income and improved capital growth. • Identify your property’s position in the market. We would be looking to capitalise the best features of the property and to take note of the weaknesses, physical or otherwise, where some action may be required. • Review the physical features and condition of the property comparing these to P.C.A. guidelines and taking note of the impact of new developments, particularly those surrounding other competition. • We recommend review of current maintenance contracts, investigation of operating and energy costs and periodic energy audit reviews. • Report on the latest local planning policies. • Report on the present leasing market in respect of available space and the issue of incentives. We will examine all current leases particularly noting lease terms, options and the status of tenants to expand or contract. • A financial analysis is recommended for this financial year and projections for income and expenditure for the next four years. Projected capitalisation rates should be assessed for the next five years using all the information collated in the Asset Management Plan. • Despite being a new building, a future strategy should be considered. Not only will First National Commercial be concerned with the day to day operation of your property, but concerned as asset managers with life cycle property performance and the effects of capital expenditure to improve returns.

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PROPERTY MANAGEMENT SUBMISSION - 1 SMITH STREET, NORTH MELBOURNE, VIC 3051

AG E N C Y A P PO I N T ME N T AGENCY FEES First National Commercial has a range of fees commensurate with the property being managed and welcomes the opportunity to outline the services which you could expect were the group appointed to manage the property.

MANAGEMENT SERVICES We recommend management of ………………to be on a fixed fee basis of $.........................for the 20xx/yy financial year, subject to annual increase and review until the property is 80 percent let, in which case a percentage fee can be set.

FOR PROPERTY MANAGEMENT DUTIES SEE (APPENDIX I). 80 square metres of office space on the ground floor adjacent to the control centre would be utilised for on-site staff.

ANCILLARY SERVICES Ancillary Services including rent reviews and leasing to be charged as per the scale of fees (Appendix J).

LEASING Due to the desirability of leasing space in the building, we recommend the owners consider paying full leasing fees to conjunctional leasing agents and 50 percent to the management agent, should such transactions occur.

APPOINTMENT We recommend we be appointed by letter following agreement on our submission and that we be appointed for a three year term with a review of the appointment annually thereafter. We would be pleased to clarify or elaborate on any aspect of our management submission and seek an early appointment with your company.

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D EFIN I T IO N S A N D TE R M S

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DEFINITIONS AND TERMS

TE RMS U SE D IN COMMERCIA L AND INDUSTRIAL RE AL ESTATE Term

Definition

A Act

A set of rules that have been passed by Parliament, received Royal Assent and become law.

Affidavit

A written statement in the name of the person who signs it and swears or affirms to its truth.

Agent’s Representative

An employee who is authorised in writing to act on behalf of an estate agent and to perform the functions of that agent as specified. Not a licensed agent.

Appraisal

An opinion of the market worth of a property without resorting to a full-scale valuation.

Assignment of Lease

The transfer of a lease from one tenant to another tenant.

Authority to Act

A document signed by an estate agent and given to an employee (agent’s representative or another estate agent), authorising the employee to perform the functions of an estate agent as set out in section 4 of the Estate Agents Act.

B Body Corporate

The collective ownership of the common areas in a subdivision of land or buildings. It is responsible for the administration, upkeep and insurance of the common areas shared by all the owners (the common property).

Bond

An amount paid as an assurance that the tenant will not breach the conditions of the tenancy, for example, the tenant will pay rent and on vacating will leave the premises in a state of good repair and order. See Security Deposit.

Branch Manager

An estate agent or approved agent’s representative who manages the branch office of a real estate agency business.

Branch Office

Any agency office, other than the principal office, from where real estate business is conducted.

Breach of Contract

The breaking of one or more of the terms or conditions of a contract.

Business

A commercial operation ranging from a small retailer to a large manufacturing or service organisation. The business includes the goodwill, which is its reputation and clients, any plant, equipment, chattels stock and other assets.

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Term

Definition

Business Broker

An estate agent or agentâ&#x20AC;&#x2122;s representative who specialises in the sale or lease of businesses.

Business Day

Any day other than a Saturday, Sunday or a gazetted Public Holiday.

C Commercial Property

Property zoned and used as office buildings, shops and retail premises.

Commission

The fee paid by the principal to the agency for undertaking a transaction relating to the sale, purchase, leasing or management of property. The amount of commission is negotiable between the principal and the agency. It may be either a flat fee or a percentage (or a combination of both), of the purchase price or the rent collected.

Common Law

The system of laws originated and developed in England and based on court decisions, on the doctrines implicit in those decisions, and on customs and usages rather than on codified written laws.

Common Property

Areas of a property that are used by and belong jointly to all of the owners of a strata title property. This applies to common driveways, paths, courtyards, stairs, passageways, lifts, lobbies, fences, common garden areas and other facilities in multi-dwelling complexes.

Condition Report

A report on the condition of a property to be leased where a bond is to be taken. The condition report must be completed by the agent and given to the tenant before the tenant takes possessions of the property.

D Damages

Money ordered to be paid as compensation for injury or loss.

Disbursements

Expenditure by the estate agent on behalf of the principal, including for example advertising expenses, rates, taxes and insurance.

Duration of Lease

The period of the lease. The remaining time for which the property is leased. Also known as the â&#x20AC;&#x153;lease termâ&#x20AC;?.

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DEFINITIONS AND TERMS

Term

Definition

E Estate Agency

A licensed person who is authorised to act on behalf of another person to bring about the sale, purchase, lease or management of a property or business.

Ethics

The standards of governing the conduct of real estate practitioners. The standards may be set in legislation or by an industry body and are based on the principle of right conduct.

Exclusive Agency Authority

The principal appoints a single agency and regardless of who is the effective agent of the sale or lease, (including the principal or another agency), the appointed agency is entitled to the commission.

Extension of Lease

An agreement extending or renewing the terms of lease for a period beyond the initial termination date.

F Fittings

Items that can be removed without damaging the property, such as garden ornaments, lighting and airconditioners. They must be listed in the contract of sale if the purchaser wants them to remain with the property.

Fixed Term Tenancy

A tenancy where there is an agreement that ends on a specific date. Except where the tenant has breached the law or the tenancy agreement, the landlord is not entitled to terminate the tenancy agreement before the expiry of the fixed term. On expiry, a fixed term tenancy automatically continues as a periodic tenancy.

Fixtures

Items that are attached to the property and cannot be removed without causing damage to the property, such as bathroom suites, built-in wardrobes and kitchen stoves. They are usually included in the sale.

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DEFINITIONS AND TERMS

Term

Definition

G General Agency Authority

The principal appoints an agency but reserves the right to appoint other agencies or to personally sell or lease the property. Of the agencies appointed, only the agency that is the effective cause of the sale or lease is entitled to commission. Also referred to as open or non-exclusive authority.

Goods and Services Tax A consumption tax of 10% levied on the final consumer of the goods or services. The (GST) supplier of the transaction is responsible for collecting the GST and sending it to the Australian Taxation Office.

I Industrial Property

Property zoned and used for factories and warehouses.

Insurance

A method of guaranteeing or indemnifying an individual or company against loss from a specified hazard. For the payment of an agreed premium, the insurer issues a policy to the insured that gives financial protection for a stated period of time.

Investment Property

Property in which a person invests to get a return on money.

L Landlord

The owner or head lessor of leased property.

Land Usage

The use being made of land or the uses permitted under zoning ordinances. Zoning ordinances act to control land usage in a community.

Lease

Document detailing the conditions agreed between the landlord (lessor) and the tenant (lessee). “Lease” is the preferred expression for commercial and industrial property. “Tenancy Agreement” refers to residential property.

Leasehold

Property held under a lease that is to continue for a period of time.

Leasing

The activity of sourcing a tenant, negotiating and ensuring that all the legal documentation and requirements are completed before the tenant takes possession.

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DEFINITIONS AND TERMS

Term

Definition

L Legal Capacity

Capacity to legally enter into a contract.

Legislation

Laws in the form of Acts and Regulations enacted by a state government or the federal government.

Lessee

See tenant.

Lessor

See landlord.

Liability for Trust Money The principal estate agent (of a sole trader or partnership) and the officer in effective control (of a corporation) are personally liable for any trust money received by the agency. Licence (Real Estate)

Formal permission from a government authority to undertake real estate transactions on behalf of other people.

Listing

The agency obtains the written authority of the principal to act on the principalâ&#x20AC;&#x2122;s behalf and records the property or business as being available for sale or for lease.

Listing Agent

The estate agentâ&#x20AC;&#x2122;s representative who lists the property on behalf of the estate agency.

M Maintenance

The process of keeping a property in the condition appropriate for its use.

Managing Agent

An estate agent who manages the property on an ongoing basis on behalf of the landlord. Management includes, for example, collecting the rent, lodging and claiming the bond, inspecting the property and advising the landlord on maintenance, resolving disputes and representing the landlord.

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DEFINITIONS AND TERMS

Term

Definition

N Negligence

A failure to exercise a duty of care that is the direct cause of another person loss or injury. The injured person may make a claim for damages.

Notice of Intention to Vacate

Written notice given by the tenant to the landlord or agent advising that the tenant wants to end the lease or tenancy agreement and vacate the property.

Notice to Vacate

Notice given by the landlord to the tenant advising that the landlord wants to end the lease or tenancy agreement and wants the tenant to vacate the property.

O Occupancy

Having possession of property. Physically residing in the property as the owner or the tenant.

Offence

Breach of the law (Acts and Regulations).

Officer in Effective Control

The title given to the principal estate agent responsible for the financial and day to day management of a real estate agency business that is a corporation.

Outgoings

(i)

Any costs incurred by the vendor or landlord in addition to the agentâ&#x20AC;&#x2122;s commission. For example, advertising costs. All outgoings are negotiable.

(ii)

Any costs in addition to the rent, for which a tenant is responsible under the terms of the lease. For example, rates and insurance premiums.

P Penalty

Punishment for breach of law, usually in the form of fine or a jail sentence.

Periodic Tenancy

Where the tenancy carries over from one rental period to another. Notice to terminate the agreement may be given by either party during this period.

Prescribed

A requirement or form set out in an Act or Regulation.

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DEFINITIONS AND TERMS

Term

Definition

P Principal

(i)

the person who engages the services of an agency and to whom the agency should look for payment of the commission or fees, in return for services rendered. Is generally the owner of the property (vendor or landlord) or may be another person who engages the agency.

(ii)

The estate agent in charge and responsible for the day to day administration of an estate agency and who, in the case of corporation, is also the officer in effective control.

Principal Office

The head office of the estate agency. The principal agent or officer in effective control of a corporation administers the day to day operations of the agency from its principal office.

Property Management

The activities of leasing property, collecting rents, selecting tenants and maintaining and managing the property for the landlord.

R Real Estate

Land and its improvements.

Rebate

Discount received, usually for bulk purchases such as advertising. Any rebate received by an agent must be passed on to the vendor. It may be non-monetary.

Registered Address

An address nominated by an agentâ&#x20AC;&#x2122;s representative where communication is received from government agencies. See registered office.

Registered Office

An office address nominated by an agent where communication is received from government agencies.

Registered Proprietor

The person whose name appears on the title to the property.

Regulations

Rules made under the authority of an Act that are as enforceable as the Act. Also referred to as subordinate legislation.

Remedy

A legal order preventing or redressing a wrong or enforcing a right.

Rent

The amount paid by a tenant to a landlord to occupy premises and to use facilities and services under a tenancy agreement or lease.

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DEFINITIONS AND TERMS

Term

Definition

Rent Roll

The lease of all properties leased and managed by the property management department of an agency.

Residential Property

Property zoned and used for dwellings such as houses, flats and apartments.

Residential Tenancy Agreement

Lease prescribed under the Residential Tenancies Act for residential property.

Retail Property

A category of commercial property zoned and used for retail buildings such as shops and shopping centres.

Rural Property

Property zoned for non-urban uses, including farmland.

S Security Deposit

A bond for a commercial lease.

Sole Agency Authority

The principal appoints a single agency but still retains the right to personally sell the property. The agency will be entitled to commission if it sells the property but not if the vendor sells the property. Also referred to as a non-exclusive agency authority.

Statute

An Act made by Parliament.

Statute Body

A government agency established through an Act of Parliament.

Strata Title

Individual ownership of an apartment or unit within a block or multi-unit complex. This is separate from and additional to the joint ownership of common areas shared by all the property owners in the building or complex. See company title.

Stratum Title

Each owner has a certificate of title and is the absolute owner of a freehold flat. A service company has the title to the common property and each flat title holder has a responsibility to the service company. The service company, in which each flat title holder has shares, administers, manages and maintains the property in which each ownerâ&#x20AC;&#x2122;s flat is registered. See company title.

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Term

Definition

T Tenant

Any person paying rental in exchange for accommodation or in possession of property with the ownerâ&#x20AC;&#x2122;s permission.

Termination (Tenancy)

The act of removing a person from property. It may be by mutual agreement or, where this cannot be achieved, through legal process.

Trust Money

Money received by an estate agent as a stakeholder or on behalf of another person (principal or third party). It must be paid into the estate agentâ&#x20AC;&#x2122;s trust account in an approved financial institution and recorded in the agency trust accounting records. Deposits on sales, residential bonds paid in cash, rents and prepaid advertising are all examples of trust money.

U Unfair Contract Terms

A term of a contract that is contrary to the requirements of good faith and causes a significant imbalance in the rights and obligations of the parties to the detriment of the consumer (the vendor or landlord).

Urgent Repairs

Repairs required to a leased property to ensure the provision of essential services.

V Valuation

An estimate of the value of a property prepared by a valuer, usually for a fee. A valuation may be used to obtain a mortgage or insurance, or in a legal contest.

Void

Not binding, invalid or has no legal effect.

Voidable

An agreement that may be made void at the option of one of the parties.

W Wear and Tear

The depreciation of an asset due to ordinary usage.

Working Day

See business day.

Z Zoning

The system of controlling the use to which land may be put.

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