Millennium bug bites real estate investors

Copyright: David Lawson First published Property Week 1999

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Is it a bomb, a bug, a potential catastrophe, or just a combination of hysteria and business-hunting?  Even the biggest brains can't  agree what will happen when the clocks tick into the first seconds of 2000.

 Some experts predict business chaos as computers malfunction in what has been dubbed the Y2K crisis. The media jumped on one who has stocked a Scottish Highland retreat in anticipation of riots. Those who  accuse the IT industry of hyping the issue to boost its workload, tend to be overlooked.

  Internal RICS research revealed that  apathy and ignorance rules  among smaller firms.  'We are not on the internet, so it does not matter,' said one. 'I use a second-hand portable,' said another, as if older equipment was immune.  'We will wait until after the new year and then update equipment,' was a typical response, while another insisted: 'It's up to clients to sort it out.'

  The cynics and innocents may well be right. The bug may be no more painful than any other minor bite. 'We frankly do not know whether problems will be a major catastrophe or a minor technical hitch,' says RICS president Richard Lay.  'You also have to keep things in perspective,' adds  Keith Noble of BOE  Information Systems, a veteran surveyor who now writes computer software geared to small firms. 'We have all lived through shutdowns of power and phones and survived. We have all survived the pickaxe through an electricity cable.'

  A survey earlier this year by Workman & Partners revealed that only 5% of the 2,500 buildings it manages will suffer problems  because the inbuilt computer hardware - 'embedded chips' in geek-speak - fail to handle the date change to 2000.   Even then, it will involve only low-priority services such as door controls, heating and switchboards, which can be rectified cheaply, and usually have manual backups. 'Opening a front door by hand is not a major inconvenience,' said partner Robert Yeo.

  But at least the firm has done an inventory, following big professional landlords like the Prudential which have spent millions checking their systems over the last year. Noble also warns against ignoring the issue. Anyone who has not at least started looking at the problem could be dicing with fate. 'They may well go down the tube,' he warns.

  How, then, can the average small business, with no real IT expertise,  decide what to do?

What's the Problem?

 The first thing is to understand the problem. Most people should  know after the blitz of publicity  that software on a majority of  personal computers (but not Apple Macs) is flawed. It cannot handle the date change from 1999 to 2000. This  could lead to problems including loss of vital data. Even relatively new machines could be at risk.

  The good news is that programs are  available to test - and sometimes eliminate - this bug. Microsoft has (finally) come up with tests for Dos, Windows, Word and Excel. Get it from a reputable supplier or download details from the internet.   The bad news is that the bug is not confined to the PC. Hundreds of professionals still manage to get by without one but they are not immune if they manage buildings or advise on their  value or condition.

 The bug is more insidious where it is hidden away in the circuits that control lifts, heating, ventilation, security and telephones. Despite the protestations of managers like Workman, things could go wrong which may be disastrous for advisers.  'There could be substantial losses in buildings or shopping centres that do not open because of technical bugs,' says Peter Maguire, a lawyer with Cameron McKenna, who helped investigate the potential problems for the RICS earlier this year.

  That leaves property managers open to claims from landlords. Valuers and surveyors are also at risk if they do not include a risk assessment in their reports. It is not feasible to rely on indemnity cover; the insurance industry has washed its hands of responsibility for the bug, which it says is a foreseeable problem.  'This could spell financial ruin for many firms,' says Maguire. Even if writs are thrown out by the courts, the time and expense fighting them could be more than a small practice could bear.

What Can be Done?

A thin green pamphlet sitting unread in the top draw of thousands of desks  around the UK could help ease the traumas of the next nine months. The RICS sent copies of its guide Beating the Bug to every private practice in February. This outlines the potential problems and steps that should be taken to minimise the risks.   There is probably very little that small firms can do to test buildings. Some big landlords have ripped out thousands of computer chips and firms like Johnson Controls have been working through systems for months. Engineer WSP offered a short cut by inventing a test system which clips onto suspect chips. But at 16,000 pounds, it is beyond most small firms.

  They should concentrate on  getting assurances from suppliers that chips are bug-resistant, although this could be an almost impossible task. The other tack  is to  inspect and amend agreements with clients and suppliers, so liability is clearly defined. Lawyers Cameron McKenna, who helped produce the RICS report, have offered their suggestions.  Ironically, the biggest problem now is time.  Contracts may already have been signed which run past next January. It may also be difficult for small firms to find enough hours in the day to go through their technology and paperwork before the deadline.

 'If you have nor already started looking into the potential risk then the chances are you will not get everything completed before the end of the year and tested in time,' says Noble.   Apathy revealed by  the RICS among members is also not a good sign. 'It is obvious that a lot of people have a long way to go in a very short time,' says Maguire. On the other hand, the property industry as a whole could be better prepared than other sectors. Noble points out that landlords have known about the problem since 1975, when management programs began dealing with the glitch in 25-year leases.

  His advice for those still pondering action is to work out an inventory of what should be done and then prioritise tasks. Decide which data would be disastrous to lose. The RICS points out the danger where there is no paper backup for critical information.

  If the worse happens, deliveries may stop, phones could be unreliable, cheques may not come in - or bounce. Opening doors and lifts may not be life-threatening but could run managers off their feet as they hunt keys and race between buildings. Think the worst and make contingency plans.   A senior officer should be given responsibility for planning rather than allow it to dilute through a firm. But staff must be informed of potential problems, as they may have to do the legwork sorting out any crisis.

  The danger is jokingly illustrated by Noble in the tale of a junior instructed by a busy boss to  'sort out the Y2K problem'. Within days, a memo was on the

chief's desk.  'After many hour's work I have reviewed all files and diaries and made changes as follows: Januark/Febuark/Mak/June/ Julk....etc.  Mondak/Tuesdak/....also etc.  'Can't quite see why everyone was getting so worked up.'