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RICS APC 2022 > Case Study > Flashcards

Case Study Flashcards

1
Q

Does there have to be a written tenancy agreement under the ATA 1995?

A
  • No, but a failure to have a written agreement can lead to uncertainty.
  • If there is no written agreement then default conditions will apply under the legislation.
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2
Q

What IHT Reliefs are available?

A
  • Nil Rate Band = £325,000
  • Residence Nil Rate Band = £175,000
  • PETs
  • APR (50/100%)
  • BPR (50/100%)
  • Woodland Relief
  • Heritage Relief
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3
Q

What are the ownership conditions for Agricultural Property Relief?

A

To qualify for APR, must have occupied the property for the purposes of Agriculture 2 years prior or owned the property for the last 7 years.

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4
Q

What does NPK stand for?

A

(N) Nitrogen
(P) Phosphorus
(K) Potassium

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5
Q

What are the conditions of an FBT?

A
  • Commenced on or after 1st September 1995.
  • Satisfies Business & Agricultural or Notice Conditions (BAN).
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6
Q

What are the main features of an ATA 1995?

A
  • freedom of contract for the parties to negotiate the terms of the tenancy
  • no minimum term
  • minimal security of tenure
  • limited freedom in respect of rent review
  • complete freedom for the tenant to remove the tenant’s fixtures
  • no restrictions on the parties’ ability to negotiate compensation, other than in relation to the tenant’s improvements
  • a formal statutory encouragement to use alternative dispute resolution (ADR)
  • the encouragement of diversification
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7
Q

What is soil sampling?

A

Process of taking a small sample of soil and sending it to a lab to determine the nutrient content.

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8
Q

What are the minimum BPS requirements?

A
  • 5 ha + of Agricultural Land
  • 5 entitlements or more
  • Active Farmer
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9
Q

How would you deal with a breach under ATA?

A

Depending on the terms of the agreement & severity of the breach you could;
- Review the tenancy agreement,
- Apply for the appointment of an arbitrator under s28 of the Act (£115).
- Write to the tenant & give them ‘reasonable time’ to remedy the breach. If not remedied, serve a s146 notice under the Law of Property Act 1925. Must stipulate breach, time frame to remedy & compensation payable. If still not remedied, LL can commence proceedings in the Court for forfeiture.

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10
Q

How were you certain the previous tenancy had come to an end?

A
  • Wrote to both parties to confirm surrender & issued a ‘deed of surrender’.
  • Crystallised the terms of the tenancy.
  • Confirmed no tenant right matters or compensation payable.
  • Confirm vacation date.
  • Anything can be done by agreement.
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11
Q

How often should you soil test?

A
  • Permanent Grassland; Every 5 years
  • Arable land; Every 3-4 years
    (However I would speak to an agronomist)
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12
Q

How are soil samples carried out?

A
  • W sampling pattern (avoiding gateways, water troughs and muck heaps).
  • Soil sampling Auger & Sandwhich Bags.
  • Push Auger approx 6 inches into ground.
  • Store @ room temp and send to Lab ASAP.
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13
Q

What are the Business, Agricultural and Notice Conditions?

A

Business = All or part of the land comprised in the tenancy is farmed for the purposes of a trade or business.

Agricultural = The character of the tenancy is primarily or wholly agricultural.

Notice =
(a) The LL & Tenant each gave the other a written notice -
(i) identifying the land to be comprised in the tenancy or proposed tenancy.
(ii) containing a statement that they intend that the tenancy or proposed tenancy is to be, and remain, a FBT.
(b) At the beginning of the tenancy the character of the tenancy was primarily or wholly agricultural.

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14
Q

What are the consequences of not serving a s1(4) notice under ATA 1995?

A

Failure to exchange notices might lead to the tenancy falling out of the farm business tenancy category and being governed by other legislation such as the Landlord and Tenant Act 1954.

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15
Q

What are the requirements of a deed?

A
  • Have to be written.
  • Must state their intention to be a deed.
  • Do not require ‘consideration’ (something to be given in return).
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16
Q

What is the benefit of soil sampling?

A
  • Determine the levels of available nutrients in the soil.
  • Allows the farmer to consider adding more nutrients in the soil.
  • More accurately check soil health.
  • Reveals Phosphorus (P) Potassium (K) and Magnesium (Mg).
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17
Q

What fees did you charge in respect of the FBT and why?

A
  • 10% of the rent plus expenses plus VAT.
  • Usual rate for preparing a FBT.
  • Scope of works outline in TOE - anything additional charged at hourly rate.
18
Q

What sections of the ATA 1995 set out default rent review arrangements?

A

Part II, s9 - s14
- Parties can contract out of Part II, providing they satisfy s9 (written tenancy agreement).

19
Q

Who is liable for what under the Agricultural Model Clauses for Fixed Equipment Wales Regulations 2019?

A

LLs: Underground water pipes, roofs, walls, floors.
Tenants: Fences, gates, £500 per annum towards slates.
LL may recover 1/2 of reasonable costs: guttering, barge boards, floorboards.

20
Q

When does BPR apply?

A
  • BPR only applies to trading businesses and NOT investment businesses.
  • Not consist wholly or mainly of dealing in land or buildings or making or holding investments.
21
Q

What are the implications of a 3 & 7 year FBT Term?

A

3 years =
- Must be created by deed

More than 7 years =
- Registered with LR (Land Registration Act 2002)
- SDLT return must be submitted within 14 days of the date of grant, whether or not SDLT is payable.
(Fellows of the CAAV or member & Fellows of RICS are authorised to create an FBT).

22
Q

How do you compare comparables?

A
  • Break it down into different elements.
  • Gather and obtain comparables.
  • Analyse each comparable & make adjustments based on; soil type, land use, access, locations, size, topography, height above sea level. (Use local knowledge).
23
Q

How has the Agriculture Act 2020 impacted FBTs?

A
  • Limited.
  • The only change relates to the bodies which can appoint arbitrators.
  • President of RICS & Chair of ALA.
24
Q

What would you do if the tenant didn’t pay their rent?

A
  • Call & write to the tenant.
  • Keep the LL fully informed.
  • If overdue by 21 days, LL may forfeit the lease by re-entering the property as per the terms of the tenancy agreement.
  • Tenant should indemnify the LL for his reasonable costs under s146 of the Law of Property Act 1925.
25
Q

What section of the ATA 1995 defines Agriculture?

A

s38

26
Q

Did you consider any other methods of letting?

A
  • Yes
  • Formal Tender, however, my client felt this method did not provide him with the room to negotiate, if required.
27
Q

Did you consider any other type of Agreements?

A
  • Yes
  • Both Contract Farming and Share Farming Agreements were considered however my client did not want the level of involvement which is required for such joint ventures.
28
Q

What was included in the TOB?

A
29
Q

What is disregarded when calculating a FBT Rent?

A

Disregards:
- Any tenants dilapidations
- The fact the tenant is in occupation
- Any contribution from the LL made to a tenant’s improvement
- Any increase in rental value due to tenant’s improvements

30
Q

Did the Tenant have an Agent?

A

Yes, the tenant had an Agent who was also present during the round table discussion.

31
Q

End of Tenancy Compensation for FBTs is found under what section?

A

s15 ATA 1995

32
Q

What are the types of tenant improvements they can claim compensation for?

A
  • Physical Improvements
  • Intangible Advantages
33
Q

What is the Rent Review Formula under the ATA 1995?

A
  • S13
  • The rent at which the holding might reasonably be expected to be let on the open market by a willing landlord to a willing tenant, taking into account all relevant factors, including the terms of the tenancy.
34
Q

What repairing obligations were incorporated in the agreement?

A

The Agricultural (Model Clauses for Fixed Equipment) (Wales) 2019 SI2019/1279

35
Q

Was a Record of Condition carried out prior to the commencement of the tenancy?

A

Yes. A record of condition was carried out prior to the commencement of the tenancy. It was then issued for signed and dating by both parties and attached to the tenancy agreement as an Addendum.

36
Q

How do you calculate SDLT for a tenancy of 7 years plus?

A
  • SDLT is payable if the “Net Present Value of the FBT exceeds £150,000 (non-residential stamp duty threshold).
  • Calculating the NPV is quite complex, therefore would advise to seek advice from accountant.
  • Tenant is responsible for submitting SDLT return.
  • SDLT is payable within 30 days of completion of the FBT.
37
Q

How would you register a lease?

A

Send a completed AP1 Form, together with a copy of the lease, SDLT Certificate and a cheque for the application fee to the Land Registry.

£45 fee if Registeredusing Portal and value between £0-£80,000

38
Q

What is the rent of FBTs based on?

A

Market Value

39
Q

Did you consider any other Rent Review basis (apart from MV)

A
  • RPI (Retail Price Index)
    Measure of inflation
  • Cost of commodities
40
Q

Why was RPI & Cost of commodities deemed unsuitable?

A

RPI
- High levels of inflation which may exceed Market Value

Cost of commodities
- Very volatile due to COVID & Ukraine

41
Q

When looking at a potential site for diversification, did you carry out any Desktop Research?

A

Yes, looked at:
- Flood Maps
- Designations (AONBS, Conservation Areas, SSSIs, Ancient woodlands, listed buildings)
- Ecology - siting of ponds/watercourses etc.

RICS APC 2022 (17 decks)

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