30th April 2021

UK Commercial Property Management Software

commercial property management software UK

by Roy Benton, Property Industry Consultant & former Director at Cushman & Wakefield

 

A free 8-point guide showing what to look out for in commercial property management systems

Type ‘commercial property management software UK’ into Google and instantly it returns over 150 million results.

This is not a particularly helpful statistic, if you’re trying to assemble a shortlist of contenders.

In fact, only a handful of systems can ever deliver the breadth and depth of functionality that the modern property management organisation requires.

So here are eight things to look out for if you’re a UK-based organisation in the market for an integrated multi-user commercial property management system:

  1. Does it meet the needs of your whole team?
  2. Does it ensure accurate data?
  3. Can it manage complex service charges?
  4. Can it manage commercial rent collection?
  5. Does it have integrated accounts that are property-focused?
  6. Can it produce the reports you need, when you need them?
  7. Can it handle the basics of facilities management?
  8. How much development and support is based in the UK?

 

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1. Does it meet the needs of your whole team?

In any large property management organisation you’ll find multiple professional skill areas, from surveying and facilities management to accountancy. Each has its own specific requirements and complexities – often driven by statute or regulation.

A multi-user commercial property management system must support all these specialist activities, linking them together in a fully integrated system. Data and financial transactions must be available in real time to support decision making with accurate enquiries and reporting.

The ability to configure the interface, so that each professional has access to the tasks and data specific to their role, will significantly increase efficiency across a large organisation. User portals or apps should also be available for third party users, such as suppliers, tenants, clients and investors.

The system should also be flexible enough to meet the needs of specific sectors in property management, such as commercial or residential property owners, managing agents, corporate occupiers and housing associations. Each has a different focus, and the system must be able to reflect that.

"Only a handful of systems can deliver the breadth and depth of functionality that the modern property management organisation requires"

Roy Benton, Property Industry Consultant

 

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2. Does it ensure accurate data?

Data is the bedrock of all property management.

As the number of properties under management increases, so too does the volume and complexity of the data that the system needs to manage.

Getting all the data into the system and ensuring its accuracy drives all key processes, reports, and accounting.

How the system manages data is therefore key to your organisation’s success.

Lease Data: the lease defines all of the actions and processes that follow, and the system must import this data accurately. Systems vary widely in how they import and subsequently update data, but when selecting software you should scrutinise all data management systems extra carefully.

Data includes critical dates such as rent reviews and lease break options, which are laid down in the lease, usually with a regular review pattern e.g. every 5 years.

A commercial property management system must therefore include a Critical Event Diary, able to generate diary events based on this pattern, while also creating linked “notice by” date entries, to ensure that the landlord serves statutory notices to tenants in good time. This whole area is governed by Landlord and Tenant law, and the property management software must comply fully.

But it’s not just the law. On any large commercial lease, the financial consequences of missing a notice date and forfeiting a rent review can be many thousands of pounds.

Break Options and Expiries are similarly time critical. Lease expiries require notice to be served in good time, if the landlord does not want to renew the lease.

Property Data: commercial property management systems must also accommodate multiple complex ownership structures if they are to provide the necessary financial reporting. Agents in particular face difficulties if the software is not up to the task: for example, it is not uncommon for an agent to have to produce separate financial reports for a) the client, b) the property owner, and c) the mortgagee who financed the property’s purchase – each in a different format.

 

"Commercial property management systems must be able to accommodate multiple complex ownership structures"

Roy Benton, Property Industry Consultant

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3. Can it manage complex service charges?

For both commercial and residential properties, the service charge process is regulated by RICS. The software must fully support compliance.

The service charge year end date is fixed in the lease and cannot be varied without agreement by all tenants. However, this year end date is not fixed to the property owner’s main financial accounting period, and can vary from property to property within a portfolio.

The property management system must therefore be able to handle a property’s service charge accounting using an independent financial period.

It must also be able to adopt the correct treatment for VAT on costs – which can be different for Residential and Commercial properties, dependant upon whether the property in question is VAT-applicable.

A true commercial property software system must be able to manage service charge budgets in periods that are linked to the service charge year end date – again, not necessarily the same dates as other financial budget reporting periods.

Often, services supplied to a property are not applicable to all tenants within a single building (why, for example, should a ground floor tenant pay for lift maintenance?), and so separate cost centres are needed, known in the industry as “Service Charge Schedules”. The property management system must be able to cope with these Schedules and allocate costs accordingly, if it is to allow accurate calculation of each tenant’s apportionment.

RICS service charge rules dictate that each property’s service charge account be treated as a separate fund, and never overdrawn. The system needs to control this, both in terms of the financial commitment when purchase orders are created, and at the point when payments are generated.

Budget vs Actual: it’s also a RICS requirement that tenants are kept up to date with service charge spending at periods throughout the year, and that they be advised as soon as possible of any significant overspends, before the year end.

Year End Reconciliation and Balancing Charges: as soon as possible after year end, the landlord must produce a certificate of expenditure for the service charge year and, in a similar way to the Budget process, the property system needs to calculate these apportioned shares and deduct “payments on account” from the budget process to produce a balancing charge or credit.

Again, the property management software needs to produce separate calculations and documentation for each tenant, with explanations for any variations from budget.

Automation: yes, service charging is complicated! Which means you need a system that encourages maximum automation – sending out correspondence and accurate statements to tenants as necessary – and it needs to be supported by extensive intelligent exception reporting, able to flag up any errors before they become costly mistakes.

Given the complexity of Housing Association tenancies, these are particularly vulnerable to financial losses through poor service charge management.

 

"For both commercial and residential properties, the service charge process is regulated by RICS. The software must fully support compliance."

Roy Benton, Property Industry Consultant

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4. Can it manage commercial rent collection?

Commercial rent demands can be issued in a variety of formats and the system must be able to support them all.

For example, not all commercial rents in the UK are subject to VAT. Where they are subject, the rent demand must be either a valid VAT invoice or an Application for Payment. This involves the issue of an initial request for payment (the Application), which is VAT-inclusive, followed by the subsequent issue of a tax receipt upon payment. The VAT is only accounted for once the tax receipt is issued.

Like everything else, rent due dates and their frequency are stipulated by the lease. On commercial leases these are typically quarterly – falling on what are known as the Usual English Quarter Days or the New English Quarter Days but frequency of charge can be almost anything. The system must be able to accommodate whatever dates the lease demands.

Residential rent demands are subject to more legislative control than commercial demands. The software must be able to recognise residential tenancies and produce demands in the mandatory format. Residential rents are usually due monthly, but they can fall on any date within the month or even weekly, on a set day. Again, your property management system must be able to handle all possible dates and combinations.

UK leases also have late payment interest clauses which stipulate the bank and late payment interest rate, usually x% above base rate. A commercial property management system must be able to generate late payment interest and apply this to future rent demands as required.

As rent collection is a bulk process the property management system will need to support payments by Direct Debit and also have automatic bank links and imports to identify tenant receipts and post these accurately into the accounting system. In a commercial property management environment, the back office credit control process will likely have to deal with very high volumes of transactions around the main rent due dates at quarter days and month ends. All this is best handled by a system with intelligent automation and extensive exception reporting.

 

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"Commercial rent demands can be issued in a variety of formats and the system must have the necessary flexibility to support them all"

Roy Benton, Property Industry Consultant

Bridge ove rthe River Tees

5. Does it have integrated accounts that are property-focused?

I’ve written elsewhere why it’s so important to have specialist property accounting in commercial property management, even if that accounts data is then transferred upwards into corporate financial systems.

I won’t repeat that information here, but do follow the link and give my earlier article a quick read.

Let’s instead move on to a particularly important aspect of that accounting functionality:


6. Can it produce the reports you need, when you need them?

They say that anything you can measure, you can control.

That is never truer than in a business as complex as commercial property management.

The ability to report clearly on both financial and other aspects of the business is a major requirement for any commercial property management system.

It needs to accommodate specific reporting periods for financial accounting, particularly if you’re servicing clients or investors; a fully configurable general ledger to give granular visibility to all parts of your portfolio or estate; and the ability to write and save your own novel report formats.

Automation of report production, real-time display on online dashboards, and Excel download options are also extremely useful tools.

"Anything you can measure, you can control"

Roy Benton, Property Industry Consultant

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7. Can it do the basics of facilities management?

Facilities Management is rapidly becoming an industry unto itself, with sophisticated best of breed systems that can optimise maintenance and repair and even control building systems directly.

However, commercial property management software often includes a simple FM component, to ensure its integration with the accountancy function.

Any FM system should include:

An Asset Register: to ensure that plant, machinery and equipment within a property is correctly maintained and replaced, the property management system will need to record data on these building assets.

Linked to this should be a Planned Maintenance Programme for each asset, which automatically generates work orders for suppliers for routine maintenance tasks.

A Help Desk facility, to manage unplanned reactive maintenance and repairs, enabling calls to be logged and progress tracked.

And a Purchase Order System, to generate works orders that request a contractor carries out work. Once agreed, the Works Order should convert into a Purchase Order which records the financial commitment in the accounting records. On completion, there should be automatic payment approval of the invoice, if it matches the purchase order.

 

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8. How much development and support is based in the UK?

The UK property industry has a unique set of leasing, legislative, regulatory and accountancy requirements.

This can pose challenges to organisations whose development team is primarily located outside the UK – or whose software takes a generic approach, to try and accommodate sales across multiple territories.

Examples of UK-specific functionality include RICS client money regulation, UK long leases and rent review patterns, rent due date patterns, late payment interest calculation, service charge management, and application for payment in commercial rent collection. It’s clearly much better if your software understands these quirks from the start.

Your software’s developers must also be able to respond rapidly and cost-effectively whenever regulatory changes mean that an update is necessary – HMRC’s Making Tax Digital initiative being a recent prominent example.

In this, a package approach to software can be helpful, where a single common codebase ensures that all users receive the update simultaneously. Regulatory changes can often force expensive bespoke development on those whose systems have been ‘built to order’ from toolkits.

A supplier who gets the intricacies of the UK property market is particularly important when it comes to support. You need to access support staff who understand wider UK property processes, and how the software supports those processes – not just the functions of software itself.

"Support staff need to understand wider UK property processeses, and how the software supports those processes – not just the functions of the software itself"

Roy Benton, Property Industry Consultant

DOWNLOAD FREE CHECKLIST

The checklist summarises all the key points raised in this article.

You’ll find it an ideal way to make a carefully considered comparison between shortlisted systems.

Naturally we hope Trace Solutions software will be on that shortlist…

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