Property Law and Practice Issues - Coursework Example

? Property Law and Practice The landlord and tenant act 1954 is one of the United Kingdom’s acts. The act extends to Wales and England (Baum, et al., 2011, p. 171). The act has several stipulations, which when followed will help ABC manage the premises effectively. The efficient management will have a positive impact on the returns on investment. It has quotations that govern several businesses, properties and tenants. Part II, of the act, contains the statutory code that governs business tenancies. The initial part, Part II of the act whose stipulations dealt with the protection of the residential tenancies, is in the modern days greatly outdated. The main reason that leads to the formulation of part II of the agreement was to bring protection to the business tenants. A business tenant having protection by the act will not get any eviction simply by the receipt of notification to relinquish the house, or by the lapse of a fixed term of the tenancy evacuate the room or building. It is stipulated that the landlord, in consideration to evacuate the tenant, has to serve the tenant with an evacuation notice. The tenant, on the other hand, has to respond to, before any action including eviction can be carried out. On the same note, part II of the same act is applicable to the tenancy where the property being used obtains the protection. The act talks of an inclusion of the premises which includes those occupied by the tenant for the use of the business carried out by that tenant. The purpose might be for the specified business, or any other businesses carried out by the tenant. The act has some exceptions such as the one seen in S.43., for the company to improve that all the tenants take a lease period of more than six months. This is already applicable to all the tenants to ABC. The act does not provide a cover from the leases less than six months and have no scope for renewal. Even though both parties involved can agree on not to be covered, it is important to note that having a cover is very important, both to the business and its tenants, as well. Additionally, the tenancy that is granted by purpose of engagement by the guarantor has to be covered. Additionally, a tenancy that has obtained a grant by reason of occupation by the grantor gets excluded from the Act. This holds as long as there is clear agreement that states the purpose for which the tenancy exists. The condition of leasing of the building hall to the tenant who will then lease individual rooms to other businesses may prove productive in the long run. The tenant should take advantage of the fortification offered through the act. As a letting company, the houses should be left under the control of the management. This will ensure maximum returns on the investment carried out. For ABC Company to make significant progress, it has to get a timely and accurate performance of the assets. It should also ensure that it gets market information relating to other people who deal in the same businesses. Any successful investor has to make sure that it embraces core assets management strategies. This has a pivotal role in ensuring that they make better investment decisions. They can also see to it that critical staff gets freed, and those left to manage the property do it diligent and efficiently. It is a common undertaking nowadays that most businesses experience fluctuating business cycles. This problem gets compounded by credit contractors and limited liquidity. Therefore, the company should seek accounting and finance services relating to the following scales; account receivable, Corporate Accounting/General Ledger, account payable, portfolio accounting, as well as fund accounting. To avoid the risk incurred by fluctuations in business, ABC Ltd has to make sure that the terms of leases to do not rely on the profits and losses of the tenants. There are several ways that the property investment can be maximized. They include the following 1 Exit strategy: even though the business has already acquired the property; it is still important to have a draft of the exit strategy. This involves the activities and steps that will have to be followed when disposing off the business. This should be made available any time since ABC might find it relevant to dispose the property with the aim of acquiring another property. 2 Leverage: loans, mortgages can be used to improve the state of the property. After improving the state of the structure, it will become possible for ABC to raise the minimum rent. In so doing, it will have attracted more income to its accounts (Imperiale, 2006, p. 202). On making new lease agreements, the business has to consider future trends in the market. The rent due should reflect what the market trends will look like in the future. Even though these values may not be easy to reflect upon, it is still important to have a projection of what the prices would look like in the next future. Although a consideration about the tenants protection act has to be considered, leasing over a very long time may not be very good in terms of the returns that ABC will experience. 3 Tax Efficiency: it is important to review the rent payable in terms of the prevailing tax, in the country. Any amount accrued in terms of tax is susceptible to taxation. Therefore, in line with reviewing the amount of rent payable, such variables as tax have to be given enough considerations. This will not only save the company from operating on loss, but also help it to be in the good records with the taxation authorities operating in the country. The common investment strategies used in the evolving world, in the real estate industry popular with the investors of the industry, vary from company to company. The investment strategies are different, targeting a variety of asset portfolios, risk altitude, possible returns and venture terms. Every strategy’s aim is to increase the property value and manage risk. As any other investment, an overall objective must be set, and subsequent expectations laid down on the table. In this case, the aim is to maximize the investment value of the property. In addition, due diligence and research is the responsibility by the investor on the investment proposal. ABC is aiming at increasing the value of the property. This will involve considerations on capital gains, rental earnings and cash flows. Capital gain occurs when the long-term perspective is in consideration. Value addition strategy for the enterprise can take any dimension. ABC must consider their portfolio through its analysis as well as enterprise strategy, done through external scaling for opportunities and internal scaling for strengths and weaknesses. The various strategies will include the following. Real estate investment trusts (REITs) as a strategy has its own advantages in that it aims to develop an investment structure. Apart from benefiting from tax considerations, members benefit from high yields as well as high liquid investment. They carry on various methods such as equity, mortgage and hybrid investments. Individuals invest in shares or joint funds to realise returns. They are attractive due to their low entry levels, portfolio divergence, robust and steadfast dividends, liquidity, reliable long-term performance and transparency. Some of its demerits will include sensitivity to demand, taxation reducing cash flows and dividends are subject to taxation. Buy to let as an investment strategy accrues benefits to the investor through wealth accumulation over time, as well as steady income from rent receipts. Its major problem is when it comes to forecasting on current market setting. The issues of vacancy period, adverse equity, and maintenance expenses are inherent. Here, ABC Ltd will work on the manipulators: structures, interfaces and conduits. The structure is what is in the property. The interface places for interactions such as public space connection to the outside world and the structures. The conduits are things used indirectly by people such as sewerage, rails they are the machine used spaces. This will help increase the value of the property. Property funds serve the diversification for investors. What happens the investor is risk averse as well as it is an investment in someone else’s property, which has to be avoided as much as possible. There is a chance of future equity gains that on depositing in commercial banks. It is suitable for the investor as it serves office blocks. They invest in assets or shares in property firms. The benefits are the distributions and net proceeds from investment. Others will include the hands-off investment and expertise involvement. Its drawbacks are volatility of the investment and the liquidity condition -long-term investment. Closed property fund is subject to rules of valuation, responsibility of the investment and investment is for property or related assets. Unregulated property funds are subject to high risk and less liquidity. The choice will depend on the ABC’s risk altitude. Leaseback is a long-term investment in property finance. This will work for the investor as the persons are leased the property with pre-agreed usage rights. The investor could probably benefit from tax rebates as well as rental gains. Other benefits are the hands-off investment, the personal utilization of the property that yields income that develops the value of the property. This allows for flexibility in the finances of the ABC through off-loading the investment at attractive long-term rates as well as having an advantage in the commercial banks finance at a later period. Room partition investment strategy, the investor could develop more partitioned rooms. This will work when there is efficient management working on the occupation and development of the rooms. The benefits range from capital gains to desirable returns. The hands-off option and low entrance level are key features. There is constant income on a predetermined basis irrespective of the occupancy level. This strategy works well with leaseback strategy. Other benefits will include the investor is not held a victim of the fluctuations in the industry. The maintenance costs and management will be the responsibility of the management. Flipping strategy, where the ABC Ltd will sell the property to re-buy it later. Capital appreciation is vital to develop the benefits. The value increases through renovation and upon sale of the property. The investor has to commit him or herself to this activity for long-term investment. Thus, the ABC will have to work on this activity on a time bound basis. The problem with this approach is the high rate of failure thus requires high commitment and perseverance by the investor. This strategy is majorly a short-term investment method. ABC shall have to work on their working capital to grow its value. They would consider diversifying their investment portfolio through buying and selling the properties around them. This will help them fetch favourable environment or neighbourhood for appraisal purposes. Fractional ownership is another option where the investor will share ownership with others, co-investment. This will allow increasing the capital base for the ABC to grow the value of the property. Other benefits will include skills sharing, networking and experience for the attainment of the objectives. Problem with this approach is the enforceability aspect in the sense that all decisions have legal aspects. The other problems are on issues arising from character clashes, opinion differences as well as strategy shifting. Renovate and hold as a strategy for ABC. This strategy seeks to look into the property as a building that needs renovation to add its value but will fetch the same price either way. This condition helps the management realign the property to attract the user by either renting or leasing it out. It can also use it for personal-commercial use. This is the strategy that ABC Ltd will use to repossess 11 Market Street for the purpose of their estate office. The renovation is short-term and thus involves much of interior design work to match the current market needs. The property after renovation instead of putting a price tag, the management holds for various uses or sale at a future date, or for personal use. This will help grow the portfolio of the commercial property thus grow rental receipts. After renovations, ABC has to come up with a new price tag for Numbers Plus Ltd (Accountants). This price tag should be unbearable for the tenant. This way, it will be easy for the tenant to opt renting another place rather than meeting the adverse and strict conditions set by ABC. ABC may also consider using staging on straightforward manner. This will be to eliminate any unused or gaudy structures to make their property attractive. This will help setting up arrangements with potential investors and enterprises who need office space or for other commercial use. This method will also work to look for open space to cover up to increase the rental receipts. ABC can also focus on the environment. To make the property environmental friendly, ABC could introduce signing an agreement that ensures sustainability of the environment thus realizing energy and cost savings. The energy and cost saving policy will result in supplementary cash flow for the property by increasing its appeal. As with every policy, it should undergo careful evaluation to maximize effectiveness, sustainable achievement and cost saving for property value sustenance. Conclusion ABC has to consider its choices as they will have to work on their strategies by ensuring they have an action plan to keep them in track. The company draws its action plan due diligence, and research of each choice of strategy is up to the management of the company. This is to guarantee the viability of the choice. The action plan should be flexible enough for the company to fit the changing environmental conditions and provide for independent valuation of the property. On the various options, ABC has to develop a personal touch together with the objectives to create value for the property by having an innovation mind-set. This will help form the strategic direction, provide the company with the big picture, and thus increase the value of the property. The Management of ABC should be time conscious as it is an investment activity. This avoids the opportunity costs arising from time loss. Reference list Baum, A., Mackmin, D. & Nunnington, N., 2011. The Income Approach to Property Valuation. 6th ed. Boston: Taylor & Francis. Imperiale, R., 2006. Getting started in real estate investment trusts. Hoboken, N.J.: John Wiley & Sons. Read More