Abstract
This article describes main elements of operational real estate management, which include ways of drawing rents, the control of the building and premises, recovery proceedings and eviction, as well as supervision of the building.
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The real estate owner, while transferring management of the real estate, shall have the possibility to estimate the value of the real estate, before and upon management termination. The property manager shall have a clearly specified range of rights, assigned to him by the owner. The initial situation shall be assessed objectively and written down in the real estate management agreement to guarantee right real estate management.
The procedure of taking over the management of the real estate consists in the act of signing the real estate management agreement. However, it requires that some basic elements of taking over the management of the real estate are specified, that is:
- drawing up an inventory sheet.
- list of the owner’s purpose.
- estimation of the real estate value, conducted by surveyor.
- manager’s knowledge of the market.
- 5.approval of the action plan with consideration to the manager’s work schedule.
- real estate management agreement formally drawn up.
Ad.1. The inventory sheet is a technical action, however, it enables direct familiarization with the real estate, assessment of its technical condition and is a basis for the action plan and work schedule.
Ad.2. Unequivocally specified and reduced to writing owner’s purpose is a basis for the budget estimation and possibility of carrying out e.g. marketing action. The purpose, specified by the owner, directs all actions of the manager, as well as selection of methods for its achievement. The purpose can be profit maximization, which can lead to rent of the whole building, e.g. office building, or to its sale. The purpose can be either long-term or short-term , however, to be achieved, the manager adapts their way of acting.
Ad.3. The appraisal report – the value of the real estate before the take over shall be appraised by surveyor. The next appraisal shall be made upon termination of the management agreement. Then it will be known whether the management was exercised properly and whether the manager, by means of their actions, contributed to increase in the value of real estate or structure. One shall remember that the appraisal before and upon the management should be conducted with the same method.
Ad.4. The knowledge of the real estate market. Analysis made by the manager, especially SWAT analysis that is strengths and weaknesses, opportunities and threats, relating to real estate, prove manager’s knowledge of the market. Even the least real estate is placed within a given territory. The territory, known as local real estate market, is subject to different factors, that in- or directly influence a given real estate; on its attractiveness and, therefore, on its value. The knowledge of the market also enables the manager to create other possibilities of real estate development and to meet the owner’s expectations e.g. by investments, modernizations, etc.
Ad.5. The action plan and the management agreement are two documents very coherent with each other. The action plan, divided into technical work schedule, inspections and conservations, as well as a plan of marketing action, should be attached to the real estate management agreement. It is a very significant element while taking over the management of the real estate, as the activity carried out in accordance with a plan that is with the schedules will generate expenditure that must be taken into consideration in the cash flow. Properly drawn up contract protects both the real estate owner and its manager. Such contract shall provide for: Time- that is how long the management will endure. Owner’s purpose to be achieved during the validity of the contract. Proper delegations for the manager – the possibility and limits of decision making. Work schedule as well as remuneration for performed work.
There are several forms of the manager’s remuneration. The first one is lump sum remuneration in which the contracting parties agree to constant remuneration. The second form is commission, dependent on the income. The third and most popular one is mixed remuneration. It consists of the basic wages – lump sum plus the mobile part – commission, dependent on the result. The insurance policy of manager shall be attached to every management agreement. Recently there has been a custom to attach also two other documents; the ethical code of real estate managers and working standards.
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The organizational regulations are a basic document that regulates organizational order in the building. It is part and parcel of the tenancy agreement. Both documents determine reciprocal rights and duties of the tenant and landlord. They determine safety rules, accessibility rules and reciprocal relations between the tenants.
Organizational regulations can be divided into following sections:
- Rules of operation of the building and its protection.
- Duties of the manager and the user
- Rules of keys’ storage and hand – over
- Rules of garage use.
- Rules of hand-over of correspondence.
Each of these divisions contains necessary information regarding each issue, so that the users of the structure could move within in a free and safe way.
The regulation also takes into account the image of the building and ways of advertising of particular tenants. Above all, however, it indicates the manager and their function to be executed within a given real estate.
The legibility of functions and their accessibility by the building users influence significantly on the management efficiency. The basic functions determined in the regulation are: technical function, administrative function, function of security and information, function of maintenance of cleanness, which cover basic divisions of the organizational regulations. The basic rules of operation of the building and its protection contain division into accessibility zones:
- with general access, including: hall, restaurant, passageways and
- zone for tenants only – office space and garage.
The present rule differentiates accessibility of flow of people, with limitation per hour. The only aim of the hourly limited accessibility is to protect real estate and order in the office space, as well as providing information on persons present in given places, which will be useful e.g. by fire evacuation.
The basic duties of the manager consist in ensuring efficient operation and proper use of the structure. Stress should be put on his/her responsibility for security of the structure and – as a result – for safety of people present in the structure and the property gathered there.
Moreover, the manager is responsible for the proper service of the reception office, as well as for ensuring order both inside and around the building.
The duties of the user contain, above all, complying with enforceable (accepted) regulations, proper use of the building equipment and appliances. The other duties embrace reporting on every faults and maintenance of order in the zone directly used by the tenant.
The rules of keys’ storage and hand-over and the rules of hand-over of correspondence, set forth in the organizational regulations, significantly facilitate work of both user and tenant. What is more, they prevent third or unauthorized persons from entering into premises occupied only by the tenants. The leaving and receiving of correspondence has the same purpose.
The last section contains the rules of the garage use. The authorization of the garage use is a pass given to particular tenants, dependent upon subscriptions and number of places appoints an employee, co-operator or guest to make use of the pass, although sometimes it may require joint decision making. A determined garage place is allocated to each pass. The administration of the building watches over so that the cars would park in determined places. Parking in different places may cause disorder and arguments between tenants or between tenant and the manager, so it is forbidden and may result in tenant’s losing the pass.
Each section regulates specified reactions of users, tenants and managers of the buildings. However, only the whole of the regulations enables right relations between the parties.
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ORGANIZATIONAL REGULATIONS (example)
Table of contents:
1) General provisions
2) The rules of operation of the building and its protection.
- General rules
- Real estate protection
- Fire protection
3) The duties of the Manager
4) The duties of the User
5) The rules of keys’ storage and hand-over
6) The rules of garage use
7) The rules of hand-over of correspondence
General provisions
- The present regulations is enforceable for all employees of Users (Tenants) having their registered offices in the building at. ……………………. Street, Warsaw. It constitutes an integral part of the tenancy agreement signed with each User.
- Having its registered office on the ……. floor in the room no……. (hereinafter called “Manager”) exercises the management of the building and control over execution of the provisions resulting from the regulations.
- Within the terrain of the building Manager exercises his/her through the following services:
- technical,
- administrative,
- of protection and information,
- of maintenance of cleanness.
The rules of operation of the building and its protection
General rules
- In the building, allowed for users and customers, there are following zones: o zone of general access (main hall, restaurant, escape routes), o office space ( from 0 to +9 floor), o garage ( from –1 to –2,5 floor),
- It is forbidden to smoke in the building.
- To protect property and order in the office space, there are two valid periods of differing flow of people. o Flow related to work, between 7.00 a.m. and 20.00 p.m. during all working days, o limited flow, between 20.00 p.m. and 7.00 a.m. during all working days and 24 hours a day on holidays
- While entering the building in the working time, employees of the Users shall present access cards (drawn up by the Manager on the basis of list of names of company workers prepared by the Users).
- The clients of the User can enter office space after receiving, in the reception office, telephone entry permission from the User.
- So that the employees and clients can be in the building beyond the working time (that is in the time of limited flow) it is required that User’s Management informs the Manager or security and information service about this fact earlier and in writing ( it does not refer to the staff employed beyond the working time).
The duties of the Manager
The duty of the Manager is to ensure efficient operations and use of the structure and, in particular:
- To ensure efficient operation of the technical appliances and amenities like fire protection system, as well as efficient placement of fire protection equipment and its periodic inspections.
- To set and sign evacuation routes and to prepare building evacuation plan.
- To ensure all day reception desk service and building protection
- To maintain general access rooms and space around the building in a clean and order condition.
- To draw up for all the employees of ……………………. on the basis of lists made by the Users) : o access cards, o garage entrance passes (for garage users in accordance with tenancy agreement) o receipts allowing to receive keys.
- To make the building available for work for Users and their clients during the working time, that is during all working days from 7 till 20 7.00 – 20.00 and on holidays for authorized Users.
- To make the rooms available for cleaning services.
- The duty of the User is to obey order regulations provided for in the regulations, proper use of technical appliances, own property protection and, in particular:
- To hand over lists of names of employees to the Manager, with the aim of drawing up access cards, as well as to hand over lists of persons authorized to receive keys and use the garage.
- To restore access cards of the dismissed employees to the Manager ;
- To equip all the employees with company identity cards including company’s name, name, surname and employee’s photography;
- To use all the appliances in the building……………….. in accordance with their designated use;
- To maintain order and cleanness in occupied premises;
- To inform the Manager immediately on breakdowns and defects, which could threaten security or cause material loss. The reports shall be submitted to the Technical Service (telephone number…………………) or to the reception desk (telephone number …).
- The duties of the User upon work termination:
- To turn off the light in rooms and corridors and to switch off electric energy receivers, unless they require constant power supply.
- To check closings of the water consumption points.
- To lock the occupied rooms with a key.
- It is forbidden for the Users:
- To carry out, without Manager’s permission, any repairs relating to air conditioning, with the exception for the regulation of temperature in the building and technical installations
- To regulate without permission sanitary and air-conditioning appliances, with the exception for the regulation of temperature in the office space.
- To unbolt and dismantle electric devices (sockets, switches, mounting), as well as to use additional electric heaters;
- To block slotted window- stool openings, ventilators and cover ventilation exhaust openings
- To open windows when air-conditioning is switched on.
- To block evacuation routes, corridors, halls and staircases with objects;
- To enter into technical premises
The rules of keys’ storage and hand-over
The exclusive duties of the Manager include administration of keys for rooms in the building, installing additional locks and making new keys (with the exception for banks, which may assemble additional security devices, in arrangement with the Manager).
The User receives a set of keys to his rooms from the Manager and is responsible for them until leaving premises, by keeping them properly protected in the secretary’s office of the User’s company. In the case of losing keys, the User shall inform the Manager and security and information services about the fact immediately and in writing, The Manager, upon User’s order, shall make new keys or change key inserts. It is possible to assemble additional locks, at the expense of the User, upon condition of written arrangement with the Manager regarding the security method for access to keys, in the case of breakdown or fire (it refers to a bank). The User is obliged to submit to the Manager or the head of security and information service a written list of persons authorized to receive and return keys in the reception desk. The Manager shall draw up, on the basis of received lists, receipts authorizing receiving keys from the secretary’s office of the User’s company (the receipt will be kept in the reception desk on receiving keys and given back on their returning).
- A pass drawn up by the Manager, on the basis of garage tenancy agreement, authorizes use of appointed garage space. The duties of the garage user are to:
- show the pass on entering and exiting the parking
- observe traffic signs, indicated route directions, and switch on passing lights while driving
- park the car forward facing the wall
- guard damaged car (broken window, locks, doors, etc.) before leaving it in garage place
- maintain cleanness in the appointed garage place, protect the car against oil and petrol leakage
- comply with garage use recommendations.
- In the garage it is forbidden to:
- store engine fuels and lubricants, as well as other inflammable and vehicle refuelling materials.
- repair car and wash its body and engine
- keep the engine working while parking
- park the car in a reverse way
The rent is a commitment, resulting from the arrangement concerning payment for the used space of the real estate, between the parties, where one party is a landlord and the other one is a tenant. The tenant pays the rent resulting from the tenancy agreement. All the elements of the rent, terms of payment, ways of warranty of the contract provisions shall be laid down in the tenancy agreement.
The elements of the rent are: basic rent, operating costs, additional elements resulting from the contract, such as costs of parking or advertising.
Concerning the influence of time on the rent, the following types of rent can be distinguished:
- constant rent
- variable rent
The constant rent in the period laid down in the contract is fixed, while variable rent requires a method of its alteration. That is why one can distinguish:
- rolling rent
- indexed rent
- percentage rent
Constant rent (fixed in a given period of time) refers mainly to the basic rent, which, often referred to in contracts as net rent, does not include operating costs incurred by the owner. If they are included in the basic rent, it is often referred to as a gross rent. In practice there is a term “mixed rent”, which means that only a part of operating costs is included in the net rent rate (basic rent rate).
The variable rent is deemed to mean basic rent rate with additional scalar, mainly referring to observed and assumed inflation. In the case of the rolling rent, it changes at the same rate e.g. 2% per quarter.
The indexed rent is deemed to mean rent calculated with the use of indexes, e.g. inflation index, provided by the Central Statistical Office, however, monthly indexing is practically out of use. The most popular indexation is per quarter, half a year and even per annum. It results from economic stabilization and, connected with it, price stabilization.
The percentage rent is a rent resulting from summation of the basic rent composed of a basic threshold and a percentage of turnover performed by the tenant in the hired commercial premises. This type of rent is the most frequent in shopping centers or restaurants. It guarantees the owner to receive rent rate which would meet their minimal economic satisfaction and let them make use of additional surplus generated by the tenant, in the case of the tenant generating high turnover, resulting e.g. from a favorable location of the real estate.
Basic rent 120 000,- Rent rate 4% Annual turnover 3 500 000,- Basic threshold 120 000 : 0,04 = 3 000 000
Annual rent equals: Annual turnover – basic threshold x rate % o rent + basic rent
(3 500 000,00 – 3 000 000,00) x 0,04 + 120 000,- = 140 000,-
There are two methods of calculating the amount of the basic rent. The first one is the method of income capitalization. It consists of arithmetic rent rate evaluation with reference to one square meter of commercial premises, taking into account construction costs, assumed capitalization rate, operating costs.
real estate with usable floor space of 10 000m2 costs of building’s construction (investment cost) 1 500 000 PLN annual operating costs 125 000 PLN vacancy (on the average) 6 % capitalization rate 10 %
- Annual repayment of investment costs 1.500 000 PLN x 0,10 = 150.000 PLN
- Annual total costs 150 000 + 125 000 = 275 000,00
- Income indispensable for costs covering, making allowance for vacancy
- 275 000zł x 0,94 = 258 500,00
- basic rent rate 258 500 : 10 000 meters = 25,85 PLN/1m2
The second method is a market method which consists of price determined by the relation of the demand to the supply on the local market. However, also in the case of this method, the basis of the calculation carried out by the owner consists of reasoning presented in the example above. Market situation can, however, ensure greater income or lead to changes in f the calculation, e.g. by the change in the capitalization rate
This attitude explains why operating costs usually convey a separate part of the rent. If, in the case of basic rate, the owner achieves satisfactory income, operating costs are to be covered by the tenants. To notice distinct results, rates are often divided. Receiving repayment for the operating costs may be carried out in advance and then accounted for in an annual cycle. The repayment may be also carried out in lump sum and accounted precisely in the determined intervals of time.
Apart from basic rent and operating costs, there are other additional elements of the rent, such as payments resulting from parking use, or payments for placed advertisements.
While fixing the rent payments, one shall lay down terms of payment and consequences resulting from their disregarding. The rule is that rent charges are paid by the tenant in advance, which means in the beginning of the tenancy period. It may occur that the rent is paid upon the termination of the tenancy period or in the mixed way, where basic rent is paid in the beginning and operating costs upon termination of the tenancy period.
The last question to be discussed, as far as rent drawing is concerned, is the way of guarantee of payment – deposit. The amount of deposit usually depends on the length of the tenancy agreement notice. The situations in which deposit will serve as payment shall be precisely laid down.
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The basic document regulating the duty of building control and storage of technical documentation is Building Law and Decree of the Minister of Infrastructure of 3 July, 2003 on the building structure record book17 Quoted below articles no. 61 and 62 refer in particular to control types and their frequency .
“The owner or building manager shall use the building in accordance with its designated use and environmental protection requirements, as well as keep it in a proper technical and aesthetic condition.” In other words, the article assigns the responsibility for the technical condition of the building to its owner or contracted manager. It means that, in case of renting a part of the premises, the owner or the manager shall be responsible for the premises so they may control its technical condition and the way of its use by the tenants.
“Building structures, during use, shall be subject to:
1) periodic control, at least once a year, based on checking the technical efficiency state of: a) building elements, edifices and amenities prompt to detrimental impacts of the atmosphere, and devastating actions of factors appearing during use of the structure.
- b) installations of environmental protection
- c) gas installations and chimney wiring (smoke, emission and ventilation),
2) periodic control, at least once per 5 years, that is based on checking the technical efficiency state and usability of the whole of building structures, building aesthetics and its surroundings; the control shall include checking of the electrical system and lightning arrester system regarding connection efficiency, fittings, protection and protective from electric shocks, resistance of the wiring isolation and earthing of the installations and apparatus. Carried out by the owner or building manager”.
The above mentioned duty does not refer to building owners and managers of the individual family housing, farmstead and summer cottages.
The controls shall be carried out by the proper authorities. (For instance – the control of the technical state of electrical systems, lightning conductor systems, gas installations, shall be carried out by the persons with qualifications required for exercising control or , in the case of services of repairs, conservation of the proper energetic or gas devices, specified in particular regulations.
All the technical events, including controls referred to, which have occurred since the construction of the building, shall be registered in the structure record book. The purpose of the record book is to register all the technical events occurring during the life cycle of the structure that is since its construction till its demolition. Some managers call it “medical record book of the building”. The terms of future controls and reviews result from the record book. The record book contains recordings made by officers and experts, authorized to exercise control.
The controls of the buildings and premises, which the owner or manager are obliged to, shall be reflected in their further activity that is they shall be properly transferred to:
- tenancy agreement
- management agreement
In every tenancy agreement the owner or manager on behalf of the owner, while commissioning the part or of the whole of the building, reserves the right of exercising controls, assigned directly in the Building Law. They must have the possibility of a statement, whether given premises are used properly and in accordance with the contract.
The manager, while assuming the management of the real estate, assumes an obligation of the proper use of the entrusted real estate, in accordance with valid regulations. The controls’ extension and their frequency shall be set forth in the contract. In this way duties of the owner are delegated to the manager, within the range relating to the managed area or premises.
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Eviction and recovery proceedings result from disregarding the contract drawn up between the landlord and the tenant. The eviction is the last stage of the long and strenuous process.
While signing a tenancy agreement, the tenant usually pays a security deposit. The aim of the security deposit is either to secure prospective demands of the landlord, resulting from damaging the elements of rented premises, or to cover unpaid rent (seldom). Sometimes the amount of security deposit is calculated by taking into account both types of losses mentioned above. If the tenant does not comply with the terms laid down in the contract, nor covers costs of the damages, nor pays the rent, disturbs other tenants or neighbours or their activity differs from the one laid down in the contract, then,
First of all, they shall be called (by means of a written notice) to obey the terms of the signed contract.
If the tenant does not comply with the appeal, the landlord can satisfy their demands from the security deposit. Then the landlord shall proceed with the legal action against the tenant.
When the lawful judgment is favorable for the landlord, the case is handed over to the bailiff that, executing the judgment, proceeds to debt recovery, and, if it is not sufficient, to the eventual variant – eviction.
In practice, these processes are very long, always with a negative impact on the landlord. It is the landlord that loses, as they cannot rent the premises. In the case of insolvency of the debtor (tenant) the situation is even worse, as the assignee in bankruptcy satisfies the liabilities of the landlord in the fifth or sixth turn. The bankrupt’s estate is assigned in the first turn to satisfy claims of the employees, the Treasury, Social Security Service and Tax Office.
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The supervision of the building is one of the basic functions not only of the owner or manager, but also of all the services operating within the given building. The supervision scale differs in relation with the type of the building. In little buildings it is limited to installing interphones (videophones) and is based on the mutual acquaintance of all inhabitants. In more complicated buildings, such as hotels, office buildings or magazines, the control is exercised by technical services, through technical supervision, particularly through cameras and different types of sensors (e.g. fire sensors). The services, using special computer systems, keep on supervising all the technical devices working in the building. The safety of all the persons present in the building depends on efficient operation of the techniques as well as on the services. The electronic devices, being elements of the systems, control lifts, flow rate of air in the building and temperature or fire system.
The security exercises control over the building physically and technically. They supervise it physically by restricting its accessibility.
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