5.2: Commercial Lease: RR Flashcards
How to change any assumption that T is in possession/occupation
Replace w/ ref to vacant possession
What happens to RR memorandum once signed by both parties
Annexed to the lease
How to divide costs of RR between parties
Each party to pay their own costs of RR
Why is it unfair to assume that T has not carried out work that has diminished value
Some works are required by statute and still diminish value
Why is it unfair to assume that premises are fully fitted out and ready for immediate occupation
No costs are involved, so attractive to T - T would usually ask for rent-free period
What does Code recommend for RR
Upwards and downwards
What are the two general rules on assumptions at RR, if acting for T
Resist any assumptions that are less restrictive than under actual lease, and ensure hypothetical lease includes similar RR provisions
Why is it unfair to assume that T has had benefit of any and all concessions
Surveyor would go straight to rent after concessionary period, which is usually higher for L to recoup losses
How to change assumption that all covenants have been complied with
Only T’s covenants have been complied with
How to change assumption that T has benefit of PP/other consents
Remove completely
Why is it unfair to assume all covenants have been complied w/
Allows L to benefit from any potential breach
What does T pay once valuation completed
Pays arrears + interest
When is time of the essence for RR
Only when EXPRESSLY included
How to change a disregard of alienation restrictions
Remove completely
Why is it unfair to disregard RR provisions entirely
Higher rent for no RR as certainty for T
What is the most common type of RR
Open market
How is open market RR done
Periodically re-valuing rent using comparable + hypothetical lease
What kind of rent should surveyor NOT be required to consider in RR clause
Best rent
How to change a disregard of only any alterations voluntarily carried out by T
Ensure covers works by predecessors and works in pursuance of statute or BEFORE term
How to change an assumption that T has had benefit of any and all concessions
Restrict to concession for fitting out purposes only
Why should you assume that any damage caused by an Insured Risk has been fully restored
Insurance monies will be available and L should have O under lease to use monies to fix damage
What is the usual pattern for RR
5-year patterns
What happens to T’s payments pending valuation
T pays old rent
Why restrict an assumption that T has had benefit of any and all concessions to for fitting out purposes only
Rent-free fitting out period is usually offered, but assuming all concessions already given would mean can’t consider L inducing T w/ lower rent
Why is it unfair to only disregard alterations voluntarily carried out by T
Also want to exclude those carried out in pursuance of statute, as can be very costly
Why is it unfair to NOT disregard T’s goodwill at RR
Comes from T’s own effort so makes lease more attractive
If lease is subject to SDLT and RR after five five years, what happens
Only payable if abnormal increase - >20% of rent charged to SDLT
How to change an assumption that premises are fully fitted out and ready for immediate occupation
Remove completely
What is signed once RR completed and agreed
RR memorandum
What additional provision should you include when disregarded T’s occupation, goodwill or fitting out
Occupation, goodwill or fitting out of any permitted occupier or UT
Should L be able to require RR to be determined by arbitrator instead of surveyor?
No
Why is it unfair to assume T can recover VAT charged/not disadvantaged by election to waive VAT exemption
Some Ts cannot recover VAT, so in reality VAT makes lease less attractive - wouldn’t be reflected in RR
How to change an assumption that T can recover VAT charged
Remove completely
Why is it unfair to NOT disregard T’s occupation at RR
T likely prepared to pay higher rent to stay in occupation
How to change assumption that T has not carried out works that have diminished value
State ‘unless required by statute’
Why is it unfair to assume any damage has been fully restored
Damage may not be + L benefits from potential breach
What three things is it unfair NOT to disregard at RR
T’s occupation, goodwill and fitting out of premises
How to change an assumption that any damage has been fully restored
Damage by Insured Risk to means of access/services enjoyed
Why is unfair to assume T’s occupation of the premises at RR
No hypothetical T would make reasonable offer for occupied premises + sitting T would pay more
Should L be able to serve notice requiring earlier RR?
No
What is the frequency of RR called
Patterns
Why is it unfair to disregard alienation restrictions in actual lease at RR
Lack of restrictions makes lease very attractive + does not reflect reality
Why is it unfair to disregard reinstatement Os in actual lease
Onerous provision which T is required to comply w/
Why is it unfair to NOT disregard T’s fitting out of the premises at RR
Increase in value is totally attributable to T’s efforts
Why should surveyor NOT consider ‘best’ rent
Takes account of special bidders with particular interest.
If lease is subject to SDLTand RR during first five years, what happens
Calculate NPV for whole term and then use higher rent for SDLT
How to change a disregard of RR provisions
Remove completely.
How to change a disregard of reinstatement Os
Remove completely
What to do if L will not agree to change so that assumed that only T’s covenants have been complied with
State ‘all covenants complied w/’ but w/ caveat - ‘provided L not in persistent/material breach’ of covenants
Why is it unfair to assume that T has benefit of PP/other consents
Makes lease much more attractive as PP valuable, whilst not reflecting actual state of lease
What interest should T NOT pay once valuation complete and why
Default Interest Rate - not due to T’s default, so only pay at standard
When are there absolutely no SDLT implications at RR
If lease subject to stamp duty
