APC Series: Summer sizzlers

There are a range of current topics that APC candidates should be up to speed with, but here we explore five which should be at the top of the list: Covid rent arrears recovery; residential reform; anti-money laundering sanctions; RICS Japanese knotweed guidance; and RICS reviews. Covid rent arrears recovery First up is the recovery of commercial rent arrears from the Covid-19 pandemic. This will be of particular interest to APC candidates pursuing the property management technical competency. By way of background, the government restricted the use of various rent arrears recovery options, including commercial rent arrears recovery and forfeiture, during Covid-19. In March 2022, the government ended these restrictions to allow rent arrears recovery to commence again. This meant that section 82 of the Coronavirus Act 2020 and amendments to the Taking Control of Goods Regulations 2013 fell away. However, although this allowed newly accruing rent arrears to be recovered, it did not deal with substantial rent arrears that had built up during Covid-19 and were difficult to recover at the time.  To deal with Covid-related rent arrears, the government legislated through the Commercial Rent (Coronavirus) Act 2022, which will operate alongside the new Commercial rent code of practice following the Covid-19 pandemic. The Act only applies in England and Wales. This recommends that:  tenants should pay rent and arrears if they are able; landlords should waive some or all rent arrears where they are able; negotiations should be held between the parties; parties will be encouraged to find means of dispute resolution before arbitration; binding arbitration will not be compulsory; either party may refer the dispute to arbitration; there will be a six-month window for an application for arbitration to be made; and there will be a maximum 24-month period to pay arrears in an award. Residential reform The Leasehold Reform (Ground Rent) Act 2022 will take effect within six months of February 2022, by which time ground rents for new residential leases will become unlawful. Leases of retirement homes will be affected on 1 April 2023. The Act applies to leases of single residential dwellings for a term of more than 21 years, disregarding any options to terminate the lease. This means that leases falling under the Act cannot contain a ground rent of more than a peppercorn. The Act does not cover existing leases, but it is expected that this could follow in the future.  Anti-money laundering sanctions The Sanctions and Anti-Money Laundering Act 2018 established the UK Sanctions List, primarily in response to the Russian invasion of Ukraine. RICS has issued updated guidance on the requirements placed on property professionals who deal with multiple clients and have a key role in identifying and managing the risk of money laundering.  Firms should already have in place robust processes, which surveyors must follow diligently. This includes identifying any politically exposed persons, persons with significant control and any imposed sanctions. This could include reviewing the current Sanctions List and regularly checking the status of higher-risk clients.  RICS Japanese knotweed guidance Surveyors should be aware of the RICS guidance note Japanese knotweed and residential property, 1st edition. While this is aimed towards residential surveyors, any property professional could encounter Japanese knotweed on site, so it is essential guidance to be aware of. The guidance note replaces an earlier 2011 information paper to reflect the current position and understanding of Japanese knotweed. Japanese knotweed is a hardy deciduous perennial plant that is a bit like bamboo. It grows extremely quickly (it can grow more than 2m during the spring and summer months) and can spread underground through rhizomes or shoots.  Under the Wildlife and Countryside Act 1981, it is an offence to “plant or otherwise cause Japanese knotweed to grow in the wild”. This means that Japanese knotweed is typically classified as “controlled waste” under the Environmental Protection Act 1990. Contaminated soil, therefore, needs to be removed by a licensed contractor at an additional cost.  Recent research suggests that structural damage caused by Japanese knotweed is rare, despite the media and public perception to the contrary.  Surveyors need to know how to identify, record and report on Japanese knotweed. This includes the following five factors that should be taken into account when valuing property affected by the presence of Japanese knotweed: impact on the market prior to remediation; restrictions on use; impact during remediation; impact of infestation present on adjacent land; and post-remediation impact on saleability. RICS reviews There have been a number of recent RICS reviews, including the Levitt, Pereira Gray and Bichard reviews. Do you know what each relates to? The Levitt review was an independent review commissioned by RICS into press allegations relating to an internal report into RICS finances in 2018/19. Alison Levitt QC found that sound governance principles had not been followed by RICS, before setting out 18 specific recommendations on governance, executive remuneration, whistle-blowing and legal advice.  The Bichard review was commissioned by RICS’s governing council in December 2021, being published in June 2022. This was in response to the Levitt review’s recommendation that a “wide-ranging examination of purpose, governance and strategy” should be undertaken externally to RICS. Lord Bichard made 36 recommendations, including refocusing on the public interest, maintaining self-regulation, promoting diversity and inclusion, empowering the membership, streamlining governance and increasing accountability. The Pereira Gray review is also known as the Review of Real Estate Investment Valuations. It was commissioned by the RICS Standards and Regulation Board to review how investments (predominantly those relied on by third parties, eg financial reporting) are valued as a result of structural market changes and Covid-19. Thirteen recommendations were made, including creating an independently led valuation regulatory quality assurance panel, introducing a valuation compliance officer role in firms, issuing further valuation guidance and promoting the use of discounted cashflow methodologies.  In context How could these hot topics translate into what might be asked at an APC final assessment interview? What advice have you given a client on rent arrears accrued during the pandemic? How would you advise a residential client purchasing a dwelling with an existing lease and ground rent? Explain your pre-instruction due diligence in relation to money laundering. If you identified Japanese knotweed during an inspection, how would you advise your client on the impact on value? How will the Bichard review affect RICS in the next year? The quick quiz 1. What is the current Bank of England base rate? a) 1% b) 1.25% c) 2% 2. Who is the current RICS president? a) Clement Lau b) Richard Collins c) Sean Tompkins 3. How many consultation submissions did the Bichard review receive? a) 551 b) 90 c) 372 Answers: 1:b   2: a   3: a Further reading and resources Commercial Rent (Coronavirus) Act 2022 Leasehold Reform (Ground Rent) Act 2022 RICS anti-money laundering sanctions update RICS guidance note Japanese knotweed and residential property (1st edition, 2022) Levitt review Bichard review  Pereira Gray review Jen Lemen BSc (Hons) FRICS is a partner at Property Elite Photo © imageBROKER/Shutterstock