Case Study Flashcards
Prior to accepting this instruction, how did you ensure competence?
Assessed my expertise in lease compliance, subletting and tenant management
Checked the RICS and and legal guidelines (for example I checked the Landlord and Tenant Act 1954)
I spoke to my colleagues and my Line Manager
Spoke to solicitors
Whats the difference between sublease and assignment
Assignment transfers the entire lease to a new tenant. Subletting allows the original tenant to retain the lease and rent out part or all of the property to the subtenant.
Tell me about the current market in London’s financial district?
London’s financial district is experiencing a positive shift in its commercial real estate market with the push to return to office in 2025.
Prime Office Space £85 psf
Prime Retail
Prime Retail £1,000 psf
You mention Use Class of the property is E (as amended) what does this mean?
Class E was amended in 2020 (Town and Country Planning Act) and combines retail, offices, restaurants and other commercial uses allowing flexibility to switch between them without planning permission
Retail formerly class A1
You measured in line with RICS Property Measurement Standards. What are they?
IPMS - International property measurement standards
This is included in RICS PS Property Measurement 2018.
For offices and residential (IPMS all buildings is currently in the process of being completed)
IPMS 1 - GEA
IPMS 2 - GIA
IPMS 3 - NIA
If the property had an EPC rating of E, would this have any bearing on your advice?
Yes, it would have been available to let but I would have recommended to my client that we looked to improve the EPC in line with MEES
What is the difference between a tenant and a subtenant?
A Tenant holds a lease with the Landlord (direct relationship). Whereas a subtenant is someone who rents the property (or part of it) from the tenant and does not have a direct relationship with the landlord.
The lease has security of tenure. What does this mean?
The tenant has additional rights under the Landlord and Tenant Act 1954.
It means that the tenant has the right to remain in the property after the lease-term ends, unless the landlord can provide a valid reason to terminate the lease.
The subtenant was paying less than the tenant, how did this affect the matter?
It did not. The tenant faced a shortfall in rental income.
What is in a conflict of interest check?
A conflict of interest is a personal, professional or financial relationship that could affect impartiality, ensuring transparency.
A COI check is a process to assess whether a person or a firm as any competing interests or relationships.
Party Conflict, Own interest conflict and a Confidential Information Conflict.
What made you satisfied it was ok to proceed with the instruction/TOE?
There were not indicators of illicit activity (conducted background checks, requested KYC information - business info, full name, address, nationality, passport, drivers licence, source of funds, tax information)
Can a sub tenant have security of tenure?
Yes if the original Lease if protected under the Landlord and Tenant Act 1954 and they occupy as a business tenancy
Can you tell me the advice you gave on the serving of the s26 notice?
Checked the lease and liaised with my clients solicitor to check if they had the right to serve this notice.
Option 1 – To oppose it under Section 30(1)(c) on the grounds that the tenant would be in breach of their lease obligations by allowing the subtenant to remain in occupation after their sublease expired. This counter notice would need to be served within two months.
Option 2 – To open negotiations with the tenant regarding a new tenancy for the basement and review the possibilities for the granting of a new lease or sublease to keep the subtenant in occupation.
Option 3 – To oppose the Section 26 Notice under Section 30(1)(c) and grant the subtenant a new lease
contracted outside of the Landlord and Tenant Act 1954. I advised my client that if the Section 26 Notice
were valid, this would be the best option as it would mitigate any potential disputes over tenancy status
What action did you take when you noted the subtenant in situ?
I took immediate action and advised my client that the tenant would need to proceed on a tenancy at will until the new lease was signed
Can you grant retrospective consent to alterations?
Yes - should be documented in writing and the landlord can choose.
What did the sublease say on tenants improvements?
The sublease stipulated that the tenant must obtain prior written consent from the landlord for any improvements or alterations.
These would need to be removed at the end of the lease term.
With no security of tenure, could your client serve notice on the subtenant to remove
them from the property?
Yes. They would need to check the terms of the sublease - check notice requirements
What is the profits test?
Analyse the covenant strength of the occupier
tenant must provide 3 years audited accounts showing net profit of 3x the annual rent.
Can a tenant appeal a s30 notice?
Yes by applying to Court. The court will then determine whether the tenant is entitled to a lease renewal despite the Section 30 notice.
If the tenant had to leave following a s30 notice are they entitled to compensation?
Only if the section 30 grounds are E(uneconomic subdivision) F (demolition) or G (owner occupation)
14 years plus 2x rateable value
14 years or less 1x rateable value
What is a tenancy at will?
where the tenant occupies the property with landlords consent without a formal lease agreement.
Either the landlord or tenant can terminate the arrangement at any time.
What is the O’May v City of London case (1982) about?
Any departure from the terms of the current lease must be ‘fair and reasonable’
The burden of persuading the court to change the terms of the current lease is on the party proposing the change
Changes will not be accepted if they are not reasonable
What is a section 38 notice? What are the declarations?
Served by the Landlord on the Tenant Contracting outside the Act
Simple Declaration - 14 days or more before committing to the lease.
Statutory Declaration - Less than 14 days prior to committing to lease (must be signed in front of an independent solicitor)
Does the additional of internal partition walls have a bearing on value?
No, I think these were easily removable and were to be removed at the end of the term.
If anything, they reduced the value as they were for tailored for that individual occupier (Luxottica Retail UK Limited)
Could you rentalise the works? i.e internal partition walls
You could. I discussed this as an option with the Landlord and they did not wish to do so.
Can you tell me about the approach you have now when dealing with projects like this?
Assess tenants needs and align them with landlords goals
I evaluate costs and study leases in depth.
If you had the same case again, what would you change?
I would conduct more comprehensive local market research on lease trends, vacancies, tenant demand to provide stronger recommendations to my client.
How did you act ethically?
I remained transparent throughout
Followed the RICS Rules of Conduct
Conducted COI and AML Checks
Provided well reasoned advice to my client
What were your key achievements of your case study
Managing the risk around the ongoing occupation of the subtenant
Ensuring the premises were being let at the current market rent
Advising on undocumented alterations
What were the tenants lease terms
Landlord
Endurance Land LLP
Tenant
Bank of Scotland PLC
Premises
Ground Floor and Basement, Unit 6, 138 Cheapside, EC2V 6BJ
Lease Term:
10 years (24/06/2013 – 23/06/2023)
Rent:
£133,000 per annum
Rent Review:
Open market rent review on 24/06/2018
Break Option:
Tenant only, with 6 months’ notice, effective 23/06/2018
Rent Free Period:
None
Security of Tenure:
Yes (inside the Landlord and Tenant Act 1954)
What were the subtenants lease terms?
Landlord:
Endurance Land LLP
Tenant:
Bank of Scotland PLC
Subtenant:
Luxottica Retail UK Limited
Premises:
Ground Floor, Unit 6, 138 Cheapside, EC2V 6BJ
Sublease Term:
08/11/2014 – 20/06/2023
Rent:
£130,000 per annum
Rent Review:
Open market rent review on 24/06/2018
Break Option:
Mutual, with 6 months’ notice, effective 23/06/2018
Rent Free Period:
4 months
Security of Tenure:
No (outside the Landlord and Tenant Act 1954)
When did the tenant serve the section 26 notice?
18th May 2023
Key Issue 1,2 and 3?
KI 1 - Advising on the tenant’s Section 26 Notice
KI 2 - Advising on the new lease terms to the subtenant
KI 3 - Undocumented Alterations
My role? 3 points
Advising my client on the options when I received a Section 26 Notice from the tenant.
Advising my client to agree a new lease with the subtenant when their sublease expired.
Advising my client to document unauthorised alterations by way of a Licence for Alterations.
My objectives
- Objective 1: Manage the risk around the ongoing occupation of the subtenant.
- Objective 2: Ensure that the premises was let at the current market rent.
- Objective 3: Regularising the works that had been completed by the subtenant
Talk me through the O’May vs City of London Real Property Case 1983
Went through the high court and eventually the house of Lords
The Landlord argued that the new lease should have full repairing obligations as they offered a reduced rent
The Court found that the old lease didn’t have full repairing obligations so the new lease shouldn’t either
What happened to RBS and their occupation of the basement?
Since RBS still wanted to use the basement, they could not continue under the original lease and instead would need a new agreement.
RBS surrendered the original lease to agree a new lease for the basement.
The landlord could then grant them a licence to use the basement separately, as a licence is a more flexible arrangement and would not give them security of tenure
Case Study
What date was included in the Section 26 Notice?
24th June 2023
Case study
What happened with the Section 26 Notice? Was it valid? Why not?
Because there wasn’t the correct notice period and the tenant didn’t occupy as a business tenancy (the intention was for them to use the property for storage but they didn’t).
