INTRODUCTION
The real estate industry is a dynamic sector which focuses on analysing the cost and value of buildings through different factors associated with it. With increasing population, liberal international policies and high interest of people in relocation, the growth of the industry enhanced widely (Abu-Elanien and Salama, 2010). Facility management is a significant concept which focuses on the coordination of space, infrastructure, people and organization.
It is an integrated process of managing the real state functions and providing valuable services to the consumers interested. Asset management on the other hand is the process whereby companies focuses on increasing returns on the properties by maximizing the value and minimizing the cost of it (Campbell, Jardine and McGlynn, 2010). Asset management is a crucial factor for facility manager as it helps them in undertaking strategic options to deal with demand and supply forces in the market while creating maximum value from the stated process.
The present study will undertake in-depth research on the concept of asset management in property dealing and its significant for facility managers. The study will analyse and discuss the concepts and aspects dealing with asset management and the measures companies undertake to manage the same in the economy.
The factors associated with lease management, cost estimation, legal aspects, consumer choices etc. It will be an effective and well defined approach to analyse the concepts and strategies for handling asset management.
TASK 1
A. Analysing how leases are used to create new legal interests in freehold property
Real estate industry is a complex and dynamic industry and the products in the sector are highly demanded and valuable. The impact of legal legislation is high in the stated sector as the transfer of rights is a significant aspect for the industry (William East, Nisbet and Liebich, 2012).
The concept of leasehold property and freehold property is a critical concept for developing an extensive understanding about the legal aspects of the concept.
A freehold property is the one where the ownership of the land is subjected to two crucial title which are immobility that means the property involves land, or interest attached to it; and indeterminate duration which reflects that the tenure of ownership of the property is not fixed (Nizam Kamaruzzaman and Marinie Ahmad Zawawi, 2010).
The above subjective reflection clearly reveals that a freehold property is the one where the ownership of the land is for an indefinite time to the owner and no state is involved for the same. The subjected land can be used personally or may be leased by the owner.
A leasehold property on the other hand is the one where temporary rights to occupy the land is handed over to another person. A freehold property handed over on lease creates a legal relation of the landlord and tenant between two parties who are owner and person occupying the property respectively (Alexander, 2013).
A lease is a lengthy written, legal document based on contractual law that effectively defines the rights and obligations of the parties involved. The lease on the freehold property is for a limited tenure which is defined in the contractual document and the tenant has the right to use the property (under legality) for his personal use by paying a nominal lease rent and acknowledging the fact that the title of ownership of the property is with the land lord. Lease provides tenant a legal right to occupy the property for a specified period of time.
B. Analysing why a business organisation might choose to acquire leasehold premises in preference to freehold
Leasing is a simple yet lengthy process for the property owner as it involves wide prospect of legal implications and transfer of rights and obligations involved. There are different types of leases involves in generating effective and valid use of property for the property seeker. The two major differentiation in lease involves building lease and occupational lease (Campbell, Jardine and McGlynn, 2010). The two leasehold properties have complete different purposes hence rights and obligations involved for the same also varies subsequently.
The residential or building leases are the ones where tenants seek a living arrangement for the property and the rights and obligations demands a permanent arrangement accordingly. This lease refers that the tenant is applying for the property for specific time frame against which he/she will pay a specified amount of rent. The title of ownership is with landlord hence maintenance and management is often controlled by him/her.
Occupational lease on the other hand is the one where the tenants seek the property for the commercial purpose rather that living purpose (Swayne, Duncan and Ginter, 2012). The usage of the estate will be undertaken to make profit and carry out the business activities. A leasehold property is useful for the same because it involves a variety of advantages over freehold properties. The former can be arranges and applied for in the preferred location at a modest rent for a considerable time frame (Teicholz, 2013). The cost of maintenance and security is controlled by the landlord which reduces the burden for tenants. Moreover, many modifications or redesigning is not required for commercial actions thus it is a preferable option for carrying out the business actions. In addition to this the impact of leasehold property on cost management and maintenance is high as compared to that of a freehold property.
C. Analysing Break clause in commercial leases and the reasons for exercising the same
Break clause is the concept which reveals that the landlord and tenants who are carrying out the lease interest tends to end the lease before specifies time by adopting a specifies procedural process. This is a commonly adopted practice in the competitive environment of the present market because tenants seek an effective means of establishing their business operations or seek an effective and well developed approach to carry out the lease. Exercising break clause may cause penalty to the tenants based on liabilities involves which can be negotiated by agents (Langston and Lauge-Kristensen, 2013). The major reason analysed for adopting break clause for the lease includes relocations, demand for negotiation or liquidation of the business. These are the major causes which has been analysed for increasing demand for adopting break clause in the economy.
Alienation is the term used which defines the rights and obligation of the tenants to deal with the lease property by:
- Transferring the lease (Assignment)
- Under-letting the premises (Subletting)
- Sharing occupation of the premises
Alienation is the legal term which provide tenant a legal right to deal with the property as and how he needs. The term has a wide and crucial impact in the commercial lease as it lets a tenant to deal with the property in their won way for a specifies time frame. Complete freedom for the tenant to deal with the premises without the landlord’s consent will be possible if the lease does not contain any restrictions on alienation (Warren, 2010).
D. Analysing the concept of licence in Commercial property and the difference between licence and lease
Licensing is a flexible option for the tenant to seek the property for a specifies period of time which provides both landlord and tenant a right to terminate the agreement. It can be defines a short term lease between landlord and the tenant which is based on a specified agreement between the parties (Alexander, 2013).
For example for a start up business forecasting sales activities, space requirements terms and level of activities involves may be difficult hence licence gives the business unit a flexible solution to deal with the stated issue. This is an effective approach to deal with the property issue and involve effective means and strategies for terminating the agreement as and when demanded. The landlord has the right over his/her property (Scarrett, 2010).
Lease provides a tenant, legal title and right of the property for a specified (mostly long) period. In other words tenant is the owner of the land or property.
However, licence is a short term agreement between landlord and tenant where the rights of the land are not fully transferred to the tenant and the landlord has the right to enter the property as and when needed. Licence renewable is not an option for the tenants.
TASK 2
A. Analysing the term legally binding obligation in a lease agreement explaining with range of examples
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