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Case Study Flashcards

1
Q

How did you know the building was built in the 1970s

A

I knew front he as built drawings and Triennial report my client had on file

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2
Q

Describe the building

A

4,825 Sq ft GIA
End of terrace warehouse of steel framed construction with a pitched roof.
Benefits from a full height loading door, WC and Kitchenette
Eaves Height of 9.8 meters

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3
Q

What was the SC

A

£0.88 per sq ft

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4
Q

What does the SC cover

A

Maintenance of the external areas, ad-hoc car park repairs
Landscaping
RFM Fee
Gritting
Management Fee

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5
Q

What was the use class

A

B1(c) or B8 - Industrial Warehousing, production and distribution of printed clothing

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6
Q

What effect does an assingment have on rent

A

Dependent on the alienation provisions, the LL can demand that the rent is at Market Rent

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7
Q

What specification was the unit

A

Had stone floors, double glazing
Own WC, kitchenette
Full height loading doors

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8
Q

What was the floor loading capacity

A

30 KN/m2

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9
Q

How was the unit measured

A

Measured by Workman BC prior to my management, on GIA basis in line with the RICS code of measuring practice 2015

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10
Q

How did you come to £13.75 as market rent

A

On advice from local agents
Table of comparable evidence assisted, best comparable was unit 6 in the estate which achieved £13.75 in Dec 2022, however was of better spec so I adjusted accordingly
Acted in line with RICS Comparable Evidence in Real Estate Valuation 2019

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11
Q

What is a hierarchy of evidence

A

Is where you attach weightings to comparables in the following order
1)Open Market Lettings
2) Lease Renewals
3) Rent Reviews
4) Independent Expert
5) Arbitration
6) Court Determinations

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12
Q

Why is a lease renewal given more weighting

A

As negotiations are free, party can walk away
Rent Reviews usually can only stay the same or go up as are upwards only

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13
Q

Where did I get my comparables

A

Internal Sources - For Cornwallis
External Sources - Co-Star & Local Agents Data

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14
Q

What is the code of measuring practice

A

RICS Code of Measuring Practice 6th Edition (2015) - Guidance Note but best practice to follows, sets out how to measure
- GEA
- GIA
- NIA

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15
Q

What are the traditional Quarter Days

A
  • 25th March
  • 24th June
  • 29th September
  • 25th December
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16
Q

What are the modern quarter days

A
  • 1st Jan
  • 1st April
  • 1st July
  • 1st October
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17
Q

What was the initial payment plan for the Dec 22 Q

A

£2k per week until debt was cleared - c.9 weeks

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18
Q

Why did you recommend against a Stat demand

A

At the point that debt recovery was required I recommended using CRAR as it was more effective at recovering the rent arrears

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19
Q

How much debt do you need for a stat demand

A
  • £750 for a company
  • £5,000 for an individual
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20
Q

Why did you delay using debt recovery

A

I spoke with the client who was happy to allow the tenant time to proceed with the more tenant friendly options, assingment and shared occupation

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21
Q

Why did you recommend against the assingment

A

As the assignee was unable to provide proof of funds as recommended by the financial reviewer

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22
Q

What is the process of CRAR

A

Introduced in April 2014 under Tribunals, Court and Enforcement Act 2007. No minimum rent amount for CRAR, min unpaid 7 days rent.
- 7 Day notice to be served.
- If no response EA can re attend to take control of goods,
- If another 7 days passes without payment EA can dispose of goods

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23
Q

What are the fees for CRAR

A
  • 75 + VAT for 7 day letter

When disposing

  • Arrears under £1.5k = £235
  • Arrears over £1.5k = £235 + 7.5% of arrears less first £1.5k
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24
Q

Why did you not surrender and regrant

A

This was disregarded as the main concern was clearing the arrears on the account, the tenant also requested an assignment

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25
Q

Difference between surrender and forfeiture

A

You surrender by operation of law (i.e. giving the keys back) or by deed.

Surrender gives a clean title whilst forfeiture allows for tenant to go to court and claim relief

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26
Q

How long do tenants have to apply for relief

A

6 months

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27
Q

How do you forfeit a lease

A

Lease must have forfeiture clause

In this instance we could forfeit on the basis of the Dec Q being outstanding 15 business days. Allows for EA to peacefully re-enter and change the locks and display a Tort notice.

Once actioned lease ends immediately.

If in breach of repair the LL has to serve notice under Law of Property Act 1925 - S146

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28
Q

What were the vacant liabilities the client would have to pay

A

SC, insurance, business rates, utilities

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29
Q

What were the rates payable

A

RV of £56,500

x bigger multiplier = £28,928

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30
Q

What was the D&B rating for the assignee

A

NB3 - New Business with higher than average risk

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31
Q

What was the EPC rating

A

B34

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32
Q

What does an EPC certificate have to display

A
  • Certificate ref number
  • Property address
  • Rating
  • Benchmark
  • Graph
  • Size of unit
  • Recommendations
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33
Q

Where are EPC certificates held

A

Government register

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34
Q

What EPC changes in legislation are there

A

Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015

  • Rented building must be minimum EPC E from April 2023
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35
Q

How to know if assignee met LL’s financial benchmark

A

If operating profit was 3 x liabilities due under the lease

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36
Q

What are found in company accounts

A

Chairman’s statement
Auditors report
Balance sheet
Income statement
Remuneration report

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37
Q

When can abridged accounts be used

A

If small company, has to have two of the following

  • Turnover of £10.2 million or less
  • £5.1 million on balance sheet or less
  • 50 employees or less
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38
Q

What is to be included in abridged accounts

A

Simpler balance sheet with notes

Can include simple P&L report but not mandatory

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39
Q

How do you benchmark a SC

A

JLL Oscar Report

40
Q

What are the current industrial yields

A

5.25%

41
Q

How do you calculate management fee

A

Set by PIC, reflected amount of time/resources needed to manage a building/unit

42
Q

Difference between headline and net effective rent

A

Net-effective is the rent payable when incentives such as RF are taken into account, calculated using a straight line methods. Headline discounts this

43
Q

What was the size of the estate

A

28,860 sq ft

44
Q

What was the tenant’s rent deposit

A

6 months rent + VAT

Initially £27,818.50

However was £34,356.50 at time of case study due to interest

45
Q

What was the tenant’s annual rent

A

£55,637 + VAT

46
Q

When are business rates payable by the LL,

A

For Industrial - 6 months

3 months for offices

47
Q

What H&S concerns were there with the unit being vacant

A

Risk of illegal occupation

48
Q

Define Market Rent

A

Estimated amount for which a property will be lease on an open market on the valuation date, between a willing lessor and lessee in an arms length transaction, after a period of proper marketing.

49
Q

Where your comparables inside or outside the act

A

outside

50
Q

How can you waive right to forfeit

A
  • Issue/accept rent
  • Communicate with tenant
  • Recognise lease as existing
51
Q

Did you recover any rent

A

No, only depsoit

52
Q

If there had been a guarantor, how would you have pursued this

A

In accordance with the L&T covenants act 1995

53
Q

What did the L&T Covenants Act 1995 replace

A

Privity of Contract

54
Q

What did you do with dilapidations

A

As the tenant absconded we were able to claim the cost on insurance of removing any of their remaining items.

55
Q

Summarise the Coronavirus Act 2020

A

S82 - Introduced moratorium on rent arrears

Prevented LL from forfeiting lease form non payment of rent between 21 March 2020 and 25 March 2022

LL was unable to use CRAR until 25 March 2022

56
Q

What was the D&B rating of the assignee

A

NB3

57
Q

What was the D&B rating of the tenant

A

F3 (Higher than average risk)

58
Q

You said you ran a credit safe report, what was this?

A
  • Calculation of the overall creditworthiness of an organisation, based on evidence provided by their previous dealings
  • Details how likely it is that a debtor will fulfil obligations to creditors
59
Q

Was the lease inside the Act

A

No

60
Q

How was the lease contracted out

A

Under Section 38(a) of the L&T Act 1954

61
Q

What is contained in a Credit Safe Report

A
  • Financial strength analysis, based on balance sheet
  • Financial risk analysis, likelihood of tenant defaulting on liabilities
62
Q

What credit safe score did you receive for the tenant

A

28 - High Risk

63
Q

What credit safe score did you receive for assignee

A

27 High Risk

64
Q

What does High Risk Mean

A

Tenant likely to default

65
Q

Would your client have got any BR relief

A

6 months after expiry

66
Q

What is a S146 Notice

A

S146 Law of Property Act 1925

Notice of intent to forfeit the lease for a breach of covenant

67
Q

How are comparables changed if they are outside the act?

A

Less weight applied to them

68
Q

You state that the lease was contracted out of the LTA act 1954, how would you do this?

A

Serve a notice under Regulatory Reform Order (2003)

+ 14 Days to new tenancy = Simple Declaration
- 14 Days to new tenancy =Stat declaration in with solicitor as witness

Under S38 of Act

69
Q

What is the advantage for the tenant in contracting out

A

Lower rent

70
Q

In a Dun and Bradstreet check, what two companies of a company are measured

A

Financial Strength
Risk Indicator

71
Q

When conducting an assingment, what acts should be considered

A

S19 L&T Act 1927

L&T Act 1988

L&T Covenants Act 1995

72
Q

How did you factor in the client’s short term business plan when undertaking this case study

A
  • In keeping the unit occupied as far as practical, minimise void costs
73
Q

What is the difference in the process of forfeiting the lease for non-payment of rent v breach of other covenant

A

Rent = peaceful entry and change locks

Other covenants = S146 L&P Act 1925

74
Q

What was the main risk associated with forfeiture

A

Tenant can pay and then apply for forfeiture, would then gain reoccupation

75
Q

What are the timescale on tenant’s applying for relief

A

6 moths

76
Q

Was any considering given to a surrender after drawing down RD

A

No, as tenant had absconded and due to results of financial review the risk of the tenant successfully gaining relief was negligible

77
Q

If you were to refurbish the subject property would there be concern of asbestos

A

Yes as building was constructed in 1970s

78
Q

Can the interest in the rent deposit be used to clear arrears

A

Yes, however must check RD deed first

79
Q

How would you confirm if a tenant was a Group Company

A

Check Lease

General def = group of companies controlled by a single economic entity

80
Q

How long is an EPC valid for?

A

10 years

81
Q

What exact year was the building built

A

1973

82
Q

How do you know the construction date of the building

A

Clients as built drawings
Triennial report
Online planning register

83
Q

Why did you opt for CRAR over stat demand

A
  • Inventory as leverage
  • Quicker
  • Cheaper
84
Q
A
85
Q

How would you check for the presence of Asbestos in the premises

A
  • Unit FRI so tenant responsible for asbestos
  • Could check online register
86
Q

What information is provided on BCIS

A
  • Gives estimates on construction costs per m2
  • Measured on GIA basis
87
Q

Where is Eaves height measured to?

A

To the eaves, i.e. Where the edge of the pitched roof meet the top of the wall

88
Q

How did you know the tenant was still trading prior to CRAR

A

RFM inspected October, confirmed in inspection report they were still trading

89
Q

What goods can be seized in CRAR

A
  • Goods owned by tenant (not let machinery)
  • Goods within demised premises
  • Tools of trade
    • Up to value of £1,350, beyond that cap they can
      be seized
90
Q

What form was the payment plan for Dec 22

A
  • Informal, direct with client on without prejudice basis
91
Q

What was the headline rent

A

£57,750 p/a

92
Q

What would the cost to the client be for a stat demand

A

Depends on solicitor, c. £1k

93
Q

Beyond the financial review, what other forms of security could you have obtained from the assignee

A
  • Landlord reference
  • Bank reference
94
Q

What type of FRI was the unit let on

A

Effective FRI

95
Q

Define Effective FRI

A
  • Landlord is able to recover costs of repairs to
    common parts
  • Landlord to insure demised premises, but
    recharge
96
Q

What advise would you give if you were on the tenant’s side

A
  • To sublet unit, as passing rent was lower than
    market rent
97
Q
A

SOE (4 decks)

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