Case Study Questions Flashcards

1
Q

Did you note any defects in the building onsite? What would you be looking for with this type of building?

A
  • Damp
  • Roof leaks
  • Condensation / poor ventilation
  • Structural movement
  • Defective materials -> that degrade with age
  • Hazardous materials
  • Defective floors / Defective ceilings
  • Defective bathroom fittings
  • Defective gutters, down pipes and external drainage
  • Defective windows / doors
  • Invasive species around car park
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2
Q

Do you know why the tenant had fallen into arrears or why they were paying late?

A

Did not get a handover and could not contact tenant

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3
Q

Why did you measure in NIA and GIA if it is an office?

A

As its mixed use office and industrial and the total property sq ft is in GIA, I therefore also measured in GIA.

I understand this is not the standard and NIA and IPMS 3 are required as per RICS Property Measurement 2018

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3
Q

Why did you measure in NIA and GIA if it is an office?

A

As its mixed use office and industrial and the total property sq ft is in GIA, I therefore also measured in GIA.

I understand this is not the standard and NIA and IPMS 3 are required as per RICS Property Measurement 2018

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4
Q

Why was the later objective introduced and how did it affect the other objectives?

A

Was introduced as it became evident the tenant was not occupying the premises for the use set out in the lease. Other tenants also complaining.

This led to us recommending that we forfeit the lease and seek to regain possession of the unit. This became the main priority and the recovering of arrears became less important.

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5
Q

What is a section 146 notice and what legislation does it relate to?

A

Section 146 Law and Property Act 1925.

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

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6
Q

Why would entering the premises on the second inspection waive the right to forfeit?

A

The bed was no longer visible through the window, however, could not determine if it was removed without entering the premises. Entering the premises in accordance with the lease would arguably be acknowledging the continuance of the lease and may waive the right to forfeit.
- Aired on the side of caution.

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7
Q

How did the COVID moratorium affect your options?

A

Could not CRAR or serve stat demand (stat demand was available from October 2021, however not for COVID affected arrears).

  • best option would be payment plan in this time if tenant was responsive
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8
Q

How did you consider business rates during COVID 19 moratorium and after?

A

Unsure how tenant was dealing with their business rates as had no contact.
Once the lease was forfeited, we did not consider rates relief due to redecoration of the unit and the Clients desire to get the unit let.

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9
Q

When are rates payable for a landlord

A
  • After property is vacant for 3 months (industrial is 6 months)
  • For listed buildings, nothing payable until occupied
  • Buildings with RV below £2,900, nothing payable until occupied
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9
Q

When are rates payable for a landlord

A
  • After property is vacant for 3 months (industrial is 6 months)
  • For listed buildings, nothing payable until occupied
  • Buildings with RV below £2,900, nothing payable until occupied
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10
Q

Were dilapidations considered as part of your recommendations?

A

No as only painting and carpet cleaning was required. This cost £4,000 and the Client was happy to cover this cost in order to get the unit marketed as soon as possible

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11
Q

What was your conclusion of market rent for the property and on what lease terms? were there any incentives?

A

£15.00 per square foot hypothetical term of 5 years and no incentives

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12
Q

What is the typical size of an office in that location?

A

Roughly 2,000 sq ft

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13
Q

How much rent did you recover?

A

nothing beyond the rent deposit

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14
Q

What were your key achievements?

A

Regaining possession of the unit and avoiding disputs with other tenants on the estate who were unhappy with the occupier

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15
Q

What is a TORT notice and what are the timescales

A

a legal document alerting the owner of items that have been abandoned on private land or property
- 14 days to respond/collect items

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16
Q

Had the tenant responded and offered to pay some arrears how would that change your approach?

A

I would have contacted them to discuss their financial position and agree a way forward, most likely with a payment plan

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17
Q

What is FRI?

A

Fully Repairing and Insuring Lease

  • The tenant is responsible for the cost of all the repairs and upkeep of the property and also the cost of buildings insurance
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18
Q

What is IRI?

A

Internal Repairing and Insuring Lease
- Tenants have less repairing and maintaining obligations - only the cost of internal repairs falls on the tenant

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19
Q

What is an effective FRI lease?

A

The tenant is not directly resposible for all repairs but the landlord is able to recover the cost of repairs from the tenant
i.e to the common structure

  • common for offices
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20
Q

I can see on your lease terms you have said the tenant is on an IRI lease, is this normal for an office in this location?

A

Yes they are on an IRI lease and therefore don’t contribute to works requried to the exterior of the building structure/roof

  • Not normal, common for it to be effective FRI whereby the landlord can recover these costs
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21
Q

What effect might an IRI lease have and why do you think this lease is IRI?

A

IRI lease might have increased rent

Stated in the lease, potentially to attract the letting (i.e as an incentive)

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22
Q

What is CRAR and what legislation does it fall under?

A

Commercial Rent Arrears Recovery

  • Tribunals Court and Enforcment Act 2007
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23
Q

When did CRAR restrictions get lifted following COVID-19?

A

25th March 2022, however the government introduced ‘protected rent’

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24
Q

What is protected rent and what legislation is it under?

A

protected rent is rent that cannot be pursued if there was forced closure between 21st March 2020 and 19th July 2021.

Commercial Rent (Coronavirus) Act 2022

  • Arbitration for protected rent - if application made
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25
Q

What legislation was CRAR not permitted during covid

A

Coronavirus Act 2020

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26
Q

When was protected rent restrictions lifted?

A

Moratorium period ended on 23rd September 2022. All restrictions now lifted

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27
Q

When did statutory demands become available?

A

1st October 2021 but cannot present a winding up petition in respect of commercial rent which is unpaid because of the financial effects of COVID-19

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28
Q

When did statutory demand procedures return to normal?

A

1st April 2022

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29
Q

What use class would selling/repairing cars fall under?

A

Town and Country Planning (Use Classes) Order 1987 – B2 (general industrial). Car show rooms are Sui Generis

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30
Q

When did the use classes change?

A

Came into force on 1st September 2020

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31
Q

What changed in the most recent use class update?

A

Introduced Use Class E – brings together A1, A2, A3, B1 and D1, D2
Introduced use class F1 and F2

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32
Q

What additional clause did the tenant breach?

A

User clause – not to allow anyone to sleep on the premises
User clause – not permit or do anything which shall be a nuisance to the estate or to the occupiers of any part of the estate
User clause – not to use the Premises otherwise for the purpose of offices falling within Use Class B1(a), now E(g)

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33
Q

What makes a S.146 notice invalid?

A

It must:
Specify the exact breach of the covenant
Require the Tenant to remedy the breach, if it is capable of being remedied
Require the tenant to monetarily compensate for the breach
Give the tenant reasonable time to remedy the breach

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34
Q

What types of breach were there?

A

Breach of rent payment – once and for all
Breach of use clause – continuous

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35
Q

What use class legislation is there?

A

Town and Country Planning (Use Classes) Order 1987

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36
Q

What section of the Coronavirus Act is the rent moratorium defined in?

A

Section 82

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37
Q

What period does the coronavirus moratorium cover?

A

21st March 2020 to 25th March 2022

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38
Q

What is protected rent?

A

Rent that is unpaid and accrued as a direct result from closures due to COVID-19

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39
Q

What section of the coronavirus act is protected rent defined in?

A

Part 1

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40
Q

How can protected rent be collected according to the coronavirus act?

A

Tenants have 6 months to apply for arbitration. This ended on 24th September 2022 after which there are no restrictions on collecting protected rent.

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41
Q

When the planning class change?

A

1st September 2020

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42
Q

Can you confirm what other uses fall under Use Class E?

A

Use class E brings together A1(shops), A2 (financial and professional services), A3 (restaurants and café) and B1 (business) as well as parts of D1 and D2
Allows for changes of use without need for planning permission (more flexibility)

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43
Q

Did you put anyone else on notice that you were concerned the use of residential was potentially happening in the building?

A

Insurers

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44
Q

Can you explain to me the service charge of the site and what this is running at?

A

Split into 2 Schedules – whole estate and office only
Total psf £1.60
Total Psf for Lincoln House: £8.50

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45
Q

Did you have any other vacant units in the building?

A

2 in Lincoln House and 2 rest of estate

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46
Q

How big is Lincoln House in comparison to the estate

A
  • Lincoln house is 14,622 sqft and the estate is 136,000
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47
Q
  • What were the void costs for 9 months?
A

Roughly £15,000 for 1 year, so £11,250,000 for 9 months.
Although rates relief for 3 months post forfeit date so around £9,000 total

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48
Q

What was the RV and rate payable

A

RV: £11,750. Rates payable £5,900

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49
Q

What is the SC for that unit?

A

£8.50 psf. £8,400

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50
Q

Is the lease inside or outside the act?

A

Outside

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51
Q

Were your comparable inside or outside the act?

A

Outside

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52
Q

How would you have changed it if it they were inside the act?

A

Less weight applied to inside the act comparable

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53
Q

Why did you want to obtain vacant possession? You’ve gone from a tenant paying £15.49 psf, to increased vacant costs and no recovery of rent. Why was this your recommendation?

A

Tenant was being a nuisance to other tenants on the estate
We did not believe funds would be recovered and therefore decided to aim at getting a new tenant in to secure some income

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54
Q

How long does the tenant have to dispute forefeiture and what would they need to do?

A

Make an application to court and it would be granted if they pay all arrears.

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55
Q

Did you consider dilapidations liability i.e removing kit from site?

A

Yes but Landlord willing to cover cost of redecoration and removal of goods. Total was £4,000.

TORT notice on the unit prior to removing goods

56
Q

Could you not CRAR during covid?

A

554 days rent outstanding requied on or after June 2021 to CRAR. Therefore we may have CRAR’d although determined that we would not achieve a good value from what was in the unit and forfeiture was preferred.

From removing goods and having them valued, total value was only £500.

57
Q

What was the passing rent of the tenant?

A

£14,535 = 15.50psf

58
Q

Its now been 6 months, what’s the latest with the unit?

A

Heads of terms are currently being agreed. Rent at £15.00 psf, but letting agents still negotiating other details.

59
Q

What is an RD often used for and why is it a method of last resort?

A

As stated in RD deed, once drawn down, tenant is required to top it up. If in financial difficulty, likely won’t be able to top up.

60
Q

Was your landlord break conditional?

A

Yes, condition on written notice being served 6 months prior

61
Q

Was there a tenant break?

A

Yes, also conditional

62
Q

What does high risk in a credit report mean?

A

It means they are likely to fail / default – opinion based on computer modelling of accounts

63
Q

What did you do upon taking over the property?

A

I did not get a proper hand-over with the previous managing agent. I arranged an on-site meeting with the Client to discuss site issues and the property.

64
Q

What are the vacant holding costs for the property

A

Roughly £8,500 for 9 months (including 3 month rates relief). £14,000 a year
Rates payable of £5,900 and SC of £8,400 (£8.50psf)

65
Q

What are the rates for the property

A

RV = £11,750
Rates payable = £5,900

66
Q

What is the SC for the unit?

A

£8,400 - £8.50psf

67
Q

What is the SC for the estate

A

£190,000 - £1.40 psf

68
Q

What is the Sq ft of the property in NIA and IPMS 3

A

NIA = 938 sq ft
IPMS 3 = 955 sq ft

69
Q

What is the sq ft in GIA of the unit?

A

969 sq ft

70
Q

What is the Sq ft of the estate

A

136,000 sq ft

71
Q

What’s the size of Lincoln House?

A

14,000

72
Q

What was the £50,000 arrears made up from?

A

Mostly rent, but also service charge and insurance dating back to March 2020

73
Q

Why did you not advise CRAR was it not available?

A

CRAR was available if 554 days’ rent outstanding from 24 June 2021 however we decided value of goods within the unit was not sufficient and did not want to waive the right to forfeit

74
Q

What was the passing rent in psf?

A

£15.50 (£14,535)

75
Q

What was the market rent ascertained?

A

£15.00 psf

76
Q

How much RD did you hold?

A

£3,600

77
Q

Was the landlord happy to go from £15.50psf to £15.00 psf?

A

The landlords aim was to re-let the unit and start receiving income from the unit. Not averse to risk and believed that we would not be successful with the current tenant. Wanted a new tenant who would not disturb the estate.

78
Q

What were rates payable on the unit? Did you consider void costs?

A

Yes, but 3 months rates relief following forfeiture.
Yes void costs £14,000 for 1 year vacant. With rates relief and for the assumed vacant period of 9 months, we estimated £8,500.
Including works to make the unit marketable, total landlord costs would be £12,500. Proportionally, this was a small cost that the landlord was happy with.

79
Q

Why did you advise against CRAR?

A

Not to waive right to forfeit
Value of goods in the unit were assumed to be low (turned out to be roughly £500)

80
Q

Why did you advise against a stat demand?

A

As we did not want to waive the right to forfeit and no guarantee the tenant would be in a financial position to pay.
Also a long process which would have ignored other goals

81
Q

What is the process for serving a stat demand?

A

Served (delivered) to the individual who owes you money by leaving it at registered office or main place of business
Keep postage receipt or confirmation from your process server
Debtor has 21 days to pay or agree payment
Can then start winding-up proceedings – 4 months to action this

82
Q

What are the traditional and English quarter days?

A

Traditional:
25 March, 24 June, 29 September, 25 December

English:
1 April, 1 July, 1 October, 1 January

83
Q

What is the cost of serving a S.146 notice / What was the cost?

A

No set cost, varies depending on solicitors. £90+VAT in this case

84
Q

What is the EPC for the unit?

A

D -77

85
Q

Did the tenant qualify for any measures as a result of COVID-19?

A

Furlough
VAT deferred due to coronavirus
Business rates relief
Recovery loan scheme (for small to medium sized businesses)

86
Q

Why was the tenant part of the moratorium? Was this not just for businesses who were forced to close?

A

Tenants rent was not protected, however winding up petitions were not available for COVID-19 affected rent until 25 march 2022

87
Q

In your case study you outlined you assessed the covenant strength of the Tenant by carrying out a check please can you confirm what factor this credit rating assessment is based on?

A

Balance Sheet
Financial Performance – including a financial stress test
Perceived risk level of your business
Trade References
Outstanding Debt
Payment History

88
Q

Can you please advise what the void costs were/are for the property to your Client?

A

Utilities, rates, insurance and service charge if applicable

89
Q

Would your client have got any business rate relief? Wat would this be? How would this be different if it was an industrial unit?

A

Yes rates relief for 3 months after vacanacy and 6 months for industrial

No rate on vacant units under £2,900 RV and listed buildings

90
Q

You mention that the tenant was in breach of their covenants (due to the sleeping within the unit), could you advise of other breaches which tend to appear in commercial leases;

A
  • Non-payment of rent
  • Disrepair of property
91
Q

If the forfeited was due to disrepair would action would you have taken?

A

Repair notice,
s.146 notice,
specific performance,
undertake the works if there is a Jervis v Harris clause.

92
Q
  1. You mention the Paddocks is made up of 16 light industrial units, what other types of industrial are there and how do they differ?
A

Manufacturing
Distribution & storage
inciniration

  • may fall under different use class (i.e B8 storage and distribution, B4-5 smelting / inciniration)
93
Q

What is use class E?

A

Commercial, Business and service

94
Q

What was use class B1?

A

Business
Uses which can be carried out in a residential area without detriment to its amenity

95
Q

Thinking about the Coronavirus Act, what changes came into place on the 25 March 2022?

A
  • On 25 March 2022, the restrictions introduced by Section 82 Coronavirus Act 2020 and amendments to the Taking Control of Goods Regulations 2013 ceased.
  • The Government consulted and announced earlier this year that it will introduce binding Arbitration for some ringfenced arrears resulting from tenants impacted by Covid 19 compulsory business closures during lockdown periods.
  • The Commercial Rent (Coronavirus) Act 2022 has created new Arbitration laws relating to remaining commercial rent arrears which will operate in conjunction with a new Code of Practice for Commercial Property Relationships following the COVID-19 pandemic (effective from 9 November 2021) to guide commercial landlords and tenants in their negotiations.
96
Q

What does the new Government guidance say?

A
  • Tenants should pay rent and arrears if they are able
  • Landlords should waive some or all rent arrears where they are able
  • Negotiations should be held between the parties
  • Parties will be encouraged to find means of dispute resolution before Arbitration
  • Binding Arbitration will not be compulsory
  • Either party may refer the dispute to Arbitration
  • There will be a 6 month window for an application for Arbitration to be made
  • There will be a maximum 24 month period to pay arrears in an Award
97
Q

When and how will this new government guidance come into force?

A
  • The Act came into effect on 25 March 2022
  • It applies in England & Wales
  • The new Code of Practice applies throughout the UK
98
Q

How long does the Tenant have to apply for relief of forfeiture from the court?

A

6 months

99
Q

Under what law is the provision for section 146 notice provided?

A

Law of Property Act 1925.

100
Q

Thinking about your case study, now the property is vacant, what actions do you need to take from an insurance perspective?

A
  • Void inspection;
  • Informing insurers
  • Key holding
101
Q

Again, now the property is vacant, can you tell me how many months rates relief your client will obtain?

A

3 months

102
Q

What is the current standard multiplier?

A

51.2 pence iover £51k – small business under £51k RV 49.9

103
Q

You visited premises in March 2022 but were unable to inspect as it would arguably waive right to forfeit, what was purpose of visiting and what would constitute waiving rights of forfeiture?

A

Too ascertain if the tenant was in occupation / if the bed had been removed / if there was any evidence of other breaches

Acknowledging the continuance of the lease would waive the rght to forfeit - so demanding rent, contacting the tenant etc

104
Q

Could the rent deposit have been drawn down sooner?

A

Potentially yes, however this was a last resort as the RD deed requires the rent deposit to be topped back up.

Client has control of RD so would not effect ability to recover

105
Q

You refer to the mandatory closure of certain businesses as part of section 3 of the 2022 Coronavirus Act, which period is relevant here and what are the others?

A

Relevant period is 21st March 2020 to 18th July 2021 (or 7 august for Wales)
or
until the last day the premises was subject to closure requirement

106
Q

You mentioned Surveying Safely, can you outline the recommendations contained within the guide? Is it mandatory?

A

No it is guidance note
- carry out RA
- Plan site visit - i.e diary, colleagues, charge phone, ppe

Firms:
- Have H&S olicy
- Provide training
- Outline clear H&S responsibilities

107
Q

How frequently do you inspect the property? What determines how frequently you should inspect?

A

KPI is once every 6 months however we aim to visit once a month or once every other month

PMA determines frequency

108
Q

You mention one of the aims and objectives was to minimise void costs, what sort of void cost would you expect in a unit like this and are there any other initiatives that could be considered to reduce void costs?

A
  • Insurance, rates, SC
  • Rates relief following vacancy for 3 months
  • If struggling to let, could get rates relief tenant
109
Q

You measured the property on GIA, NIA and IPMS 3, what is GIA?

A

The area of a building measured to the internal face of the perimeter wall at each floor level

110
Q

What is NIA?

A

The useable area within a building measured to the internal dominant face of the perimeter wall at each floor level

111
Q

What is IMPS3?

A

Used for measuring the occupation of floor areas in exclusive use, excluding standard facilities and shared circulation areas

112
Q

What did you take out of GIA to arrive at NIA?

A

Walls and pillars
Protrusions over 0.25m from the wall (heating protrusions)
Areas under 1.5m in headroom

113
Q

What was the floor area of IPMS 3? Was it greater than or smaller than NIA?

A

960 sq ft – larger than NIA as it included internal walls and pillars

114
Q

Why was IPMS 3 greater than NIA?

A

Included internal walls and pillars
Reveals of windows

115
Q

Generally, what are the differences between NIA and IPMS 3

A

Includes reveals of windows as measured to the internal dominant face of the perimeter wall
Walls and pillars included
Generally accessible roof terrace, balconies and covered ways in exclusive use included but stated separately
Areas under 1.5m in headroom included but stated separately

116
Q

What do you understand the internal dominant face to be

A

Inside surface finish comprising of 50% or more of a vertical section of the perimeter wall

117
Q

What is IRI?

A

Internal repairing and insuring – Tenant responsible for insuring and internal repairs only

118
Q

The tenant insured directly?

A

No the landlord recharged

119
Q

What about external repairs, was the landlord responsible for this?

A

Yes

120
Q

What is effective FRI?

A

Landlord is responsible for external but can recharge the cost to the tenant

121
Q

You tenancy was excluded from the security of tenure provisions of the Landlord and Tenant act 1954, how does this come about?

A

Under section 38 – Landlord serves a simple or statutory notice. Simple if over 14 days from the lease start and statutory if within 14 days (must then be witnessed by a solicitor)

122
Q

You mention tenants covenant strength, did you look at the tenants accounts?

A

No – minimal info on companies house and tenant unresponsive

123
Q

Had you been able to obtain tenants accounts, what would you have been looking at to determine the covenant strength of the tenant?

A

Income statement
Balance sheet
Profits test

124
Q

What would a balance sheet show you

A

Assets
Liabilities
Shareholders equity

125
Q

You determined the market rent by comparison, what makes a property transaction comparable with the property you are valuing?

A

Similar in size, construction, design, location, lease terms, lease length, transaction

126
Q

Your comparable table doesn’t tell me repairing liability?

A

All comaprables were IRI and outside the act same with the subject property

127
Q

You say the tenant was a persistent late payer of rent. What steps had been taken previously as far as this tenant was concerned and the rent arrears that had accumulated?

A

Did not get a handover but as I understand from the Client no debt collection procedures had been initiated – simply chasing and investigating site

128
Q

You refer in your second key issue the covid-19 moratorium and the subsequent commercial rent coronavirus act 2022, what did that permit landlords to do as far as tenants were concerned when arrears were accumulating?

A

Removal of CRAR moratorium
Introduced protected rent and arbitration for Tenants who applied

129
Q

Looking at your market demand and market rent, you say to determine market rent you obtained comparable evidence. How would you define market rent?

A

Estimated amount real interest in property will lease for on the valuation date between a willing lessee and a willing lessor in an arms length transaction on appropriate lease terms after proper marketing and with both parts acting knowledgably, prudently and without compulsion

130
Q

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

A

In accordance with the Landlord and Tenants covenants act 1995

131
Q

What does section 17 say in terms of timescales of pursuing a guarantor?

A

Within 6 months of the debt arising

132
Q

You refer to the landlord and tenants covenants act 1995, what did that replace?

A

Privity of contract

133
Q

If you had pursued the guarantor and they had cleared the arrears, what right would it have given the guarantor in respect of this property?

A

Overriding lease

134
Q

Explain the process of regaining possession for non-payment of rent

A

Check forfeiture clause
21 days no payment whether formally demanded or not
Change locks

135
Q

Who did the goods belong to that were abandoned?

A

The tenant

136
Q

Was the tenant able to regain entry to reclaim their goods?

A

Yes TORT notice gave a 14 day period

137
Q

Can you use the proceeds of the goods to pay back the arrears?

A

Yes

138
Q

How do you go about proving that the bed was not for the reason given of ‘allowing employees to rest’

A

Difficult but if there were other signs of the unit being used as a residence

139
Q

If there had been an alternative breach of repairing obligation, how would you forfeit the lease in that case?

A

S.146 notice

140
Q

How long does the tenant have to remedy the breach when they receive a s.146 notice?

A

6 months for breach in repair