‘Badly maintained properties or incomplete records cause costly delays in property deals. Proactive facilities maintenance and record-keeping gives our clients the best chance of smooth transactions.’
So says Lindsay Cunningham, Senior Associate at Farrer & Co, when she joined us for a conversation about the importance of residence and facilities management for her clients.
What are your thoughts about Residence and Facilities Management, and why is it essential from a legal purchasing and leasing point of view?
When clients hire an FM company to look after their properties, they not only know that their homes are cared for, but they also receive a record of maintenance. As a seller, if clients can present their buyer with a complete and comprehensive set of documents (commissioning certificates, service history, annual inspection reports/certificates) relating to the facilities at the property, it immediately gives the buyer comfort that the property is looked after and complies with regulations.
A complete record also makes the buyer’s solicitor’s job much easier (and potentially quicker), as many documents they need to carry out their due diligence are readily available. This is especially the case when provided in the form of an electronic logbook like the one provided by Walter Lilly.
Often a client’s surveyor won’t delve into the minutiae of checking that all the facilities at the property are operating correctly (unless they are willing to pay for a separate M&E survey), so having all that information readily available is also a bonus.
Furthermore, if a client (or prospective buyer) intends to carry out work on their property, having an in-depth understanding of how the facilities/M&E equipment work can be beneficial.
Having all the maintenance and management records to hand gives our clients and us the best chance of a smooth transaction. In contrast, poorly maintained properties or incomplete records cause costly delays in property transactions.
From a legal perspective, at what point would you recommend your clients consider involving a facilities maintenance contractor?
This depends on the client and the property, but the sooner, the better. High-end properties often have complex M&E systems, swimming pools etc., and we always recommend that an M&E survey be carried out before exchange to confirm equipment is working as it should and identify any potential costly issues.
If a buyer instructs a facilities contractor from the point of exchange, subject to the contract allowing for it, any additional services or commissioning works required could be carried out before completion, allowing for a smooth transition to occupation on completion.
If this isn’t possible, then as soon as possible, following completion is the next best option. Clients can then ensure that everything is maintained satisfactorily throughout their ownership and is always in good working order. Plus, they have a wonderfully complete pack of documents to pass to their solicitors when they come to sell.
Another point to note is that for clients using a property as a pied-à-terre, having a facilities maintenance contract in place provides comfort that everything will be in good working order when they visit the property. They won’t have to deal with the hassle of calling someone out to fix the lift or the swimming pool heating.
Finally, for many of our clients, security is essential and knowing that an FM team regularly services the security system is vital.
What are some of the ramifications for the client, and Farrer & Co, if a facilities management service isn’t considered?
As mentioned above, security is an essential factor. Our clients usually own more than one residential property and split their time among them. When not residing in a particular property, they want to be safe in the knowledge that it is still being well looked after and remains secure.
An FM contract can also save costs on properties in the long run. For example, regular servicing and maintenance of swimming pools, lifts, and M&E can prevent clients from being hit with a huge bill should equipment fail.
A lot of the properties you advise clients on are not just homes, but also places of work for household staff members. How do you advise clients on their legal and statutory obligations to maintain the property for employees?
This is a good question and an important point.
The occupation of staff members is usually governed by either an assured shorthold tenancy or a service occupancy agreement. If the former, the client, as the legal owner of the property, has a legal obligation to keep the installations for the water supply, heating etc., in proper working order to comply with health and safety regulations. They are also obliged to keep the structure and exterior of the property in good repair (drains, gutters etc.).
Clients also need to ensure that the properties occupied are correctly insured and that the terms of these policies are complied with.
Clients must be aware of these obligations before entering into any such arrangements. Again, having an FM contract in place helps with compliance.
Can you explain the insurance and liability consequences for clients if they do not manage their property correctly?
If properties are managed incorrectly and tenanted, this can result in clients being liable for breach of contract under the terms of the tenancy agreement.
If in a flat as a tenant, the client must keep it in good condition (although they will not be responsible for any structural elements). If they do not, and it leads to damage to common parts or other flats in the building, the client could be liable to the landlord and other tenants regarding the cost of repairs.
Would you suggest that facilities management, whether it be at the initial property exchange stage or post completion, is a worthwhile investment for your clients?
Facilities management, particularly bespoke packages tailored to the client’s needs or the specific property, is a must for many of our high-net-worth clients. It enables busy clients to enjoy their properties without worrying about essential facilities working or the property being secure.
Regular maintenance of complicated systems (typical at our level of the market) can avoid costly one-off payouts and ensures a full suite of commissioning certificates and inspection reports for an incoming buyer or lender, which goes a long way to providing comfort that the property has been well looked after.
About Lindsay and Farrer & Co
Farrer & Co is an independent law firm advising individuals, families, businesses, financial services, education, and not-for-profit organisations on various legal issues. As a Senior Associate in the Residential Property and Secured Lending Team, I specialise in the legalities of high-end residential properties. This includes buying and selling, acting for private banks lending on residential property, landlord/tenant matters, and private client and matrimonial matters with a property angle.
I have many UK-based clients but also serve clients from the US, Hong Kong, the Middle East, and Europe. My clients include high-profile sportspeople, famous musicians, successful entrepreneurs, and financiers. I act for them and their families on a range of property matters, for example, buying and selling their homes and assisting with landlord and tenant issues.
Many of our clients come from word-of-mouth referrals or introductions from existing clients. We also work closely with several estate agents, buying agents and intermediaries who refer clients to us.
Farrer’s residential property offering is one of the best in the UK. We have a breadth of technical expertise and experience within the team that enables us to advise clients on any property issue that may arise. Based on research and feedback from clients and market leaders, we are also one of a handful of firms with a Tier 1 ranking in the legal directories.
Unlike many other firms, Farrer offers expertise in every area of law that an individual or family may need (unless they need a criminal lawyer, but fortunately, that doesn’t happen very often!). In addition, we work hard to build lasting relationships with clients to be trusted advisers for any legal issues they may have.
At what point do you interact with a new client and where do most of your client referrals come from?
It varies depending on the client, but for most new clients, we start helping our Clients when offers are accepted or when properties are about to go to market. Whether buying or selling, the earlier we can be involved, the better. We can then advise our clients on what they can do (and what they should provide to us) so that they can move forward quickly. At the top end of the market, speed getting to exchange is vital. Given the challenging conditions, particularly on the buying side, speed can mean the difference between a successful and unsuccessful transaction.
If you’d like to talk to Lindsay about your own property matters, please contact her at Farrer & Co.