L& L revision - L& L revision

Question 1

What is the key RICS Professional Statement on leasing/letting practices?

Answer 1

RICS Code for leasing business premises, 2020

Question 2

When does RICS Code for leasing business premises, 2020 become effective?

Answer 2

1st September 2020

Question 3

What is the aim of RICS Code for leasing business premises, 2020?

Answer 3

Improve the quality and fairness of negotiations on lease terms Promote the issue of comprehensive heads of terms to make the legal drafting process more efficient

Question 4

What are the FOUR sections of the RICS Code for leasing business premises, 2020?

Answer 4

Part 1: Introduction Part 2: Mandatory requirements (Negotiations and heads of terms) Part 3: Lease negotiation best practice Part 4: Appendices (Appendix A - Template heads of terms and checklist; Appendix B - Guide for landlords and tenants)

Question 5

What does the RICS Code for leasing business premises, 2020 say with regards to the negotiations of heads of terms?

Answer 5

• Must be approached in a constructive and collaborative manner• An unrepresented party must be advised about this code and must be recommended to obtain professional advice• The agreed terms of a lease must be recorded in written heads of terms and must summarise the position on a number of aspects• Negotiations should produce letting terms that achieve a fair balance between the parties commercial interests

Question 6

What items must be addressed in the heads of terms according to the RICS Code for leasing business premises, 2020?

Answer 6

• Identity and extent of the premises • Length of term and whether it is outside or inside the Landlord and Tenant Act 1954 • Options for renewal or break rights • Requirements for a guarantor and/or rent deposit• Amount of rent, frequency of payment and whether exclusive of business rates • Whether the landlord intends to charge VAT on the rent • Any rent-free period or other incentive • Any rent reviews including frequency and basis of review • Liability to pay service charge and/or insurance premiums • Right to assign, sublet, charge or share the premises • Repairing obligation • Initial permitted use and whether any changes of use will be allowed • Rights to make alterations and any particular reinstatement obligations • Any initial alterations or fit-out (if known) • Any condition of the letting, such as subject to surveys, boards approvals or planning permission

Question 7

What is contained within Appendix A of RICS Code for leasing business premises, 2020?

Answer 7

Template head of terms and a checklist, which can be used should the landlord wish to use their own form of heads of terms document

Question 8

What is contained within Appendix B of RICS Code for leasing business premises, 2020?

Answer 8

• Guide for landlords and tenants • Supplemental to the professional statement and does not hold mandatory status

Question 9

What is a lease?

Answer 9

A binding contract in law that sets out the terms and conditions of the tenancy between parties and defined their rights and obligations

Question 10

What do rental guarantees typically cover?

Answer 10

Usually make the guarantor liable for the rent and the tenant’s other obligations, including service charge payments and repairs

Question 11

Do tenants have to pay VAT on rental payments?

Answer 11

Depends if the property is ‘opted for VAT’ by the landlord

Question 12

What does it mean to ‘assign’ a lease?

Answer 12

Transfer the lease to another party who takes over occupation and responsibility for the lease obligations

Question 13

What does it mean to ‘sublet’ a property?

Answer 13

Existing tenant continues to hold the lease and pay rent to the landlord but sublets the space to another party, from whom the tenant will in turn collect rent

Question 14

What is an AGA?

Answer 14

Introduced under the Landlord & Tenant (Covenants) Act 1995 Authorised guarantee agreement • Requires the tenant who assigns a lease to guarantee the performance of the lease obligations by the party to whom the lease is assigned

Question 15

What provisions can there be in the lease to mean that a tenant does not require an AGA to assign a property?

Answer 15

• If the new tenant is financially strong enough• If the new tenant pays an appropriate rent deposit and/or provides suitable guarantor

Question 16

What is a ‘schedule of condition’?

Answer 16

• Record of the condition of the property • Written description of the property or a set of photographs or both • Referred to in the lease and attached to it or kept with it

Question 17

What should be the only condition on a tenant being able to exercise a break option, according to the RICS Code for leasing business premises, 2020?

Answer 17

Should only be conditional on the rent having been paid

Question 18

What details with regards to the rent deposit should be included in the lease, according to the RICS Code for leasing business premises, 2020?

Answer 18

• Amount (including whether it will include VAT) • Time it will be held • Whether it will be security for only the rent or all the tenant’s obligations under the lease • Circumstances under which the deposit will be returned to the tenant with any accrued interest

Question 19

What details with regards to the rent review should included in the lease, according to the RICS Code for leasing business premises, 2020?

Answer 19

• Proposed frequency of rent review • Method of rent review • Definitions of market rent should not result in a “headline rent” being adopted

Question 20

What details with regard to the service charge and insurance payments should the landlord provide an indication of, according to the RICS Code for leasing business premises, 2020?

Answer 20

Should provide an estimate of service charges and other insurance payments

Question 21

What is said with regards to assignment in RICS Code for leasing business premises, 2020?

Answer 21

Leases should allow tenant to assign the whole of the premises with the landlord’s consent, which is not to be unreasonably withheld or delayed

Question 22

If a tenant’s repairing obligation are to be limited to the initial condition of the premises, what is required according to the RICS Code for leasing business premises, 2020?

Answer 22

Schedule of condition

Question 23

Depending on the prevailing market conditions and strength of the tenant covenant, what can the landlord request for additional security if there is a tenant with a weak covenant strength?

Answer 23

• Rent deposit• Guarantor/personal guarantee

Question 24

What should the landlord do when holding a rent deposit?

Answer 24

• Personal to the tenant and attached to the lease as a separate deed • Legally documented in a rent deposit deed • Money held in a separate bank account • Interest retained by the tenant • Agreed terms for the release of the monies • Details of the release mechanism to be stated in the deed • Can include top up mechanisms for rent review uplift

Question 25

What information would you typically request from a tenant when looking to assess their suitability?

Answer 25

• Bank, accountant and two trade references • Previous/existing landlord’s reference • 3 years audited accounts • Business plan • Credit rating

Question 26

What test can you use to assess the financial suitability of a tenant?

Answer 26

Profits test: net profit for the proposed tenant’s business must be 3 times the rent for 3 consecutive years (or the net asset value of the business must be more than 5 times the rent)

Question 27

What are the main lease terms that impact on the value of a property?

Answer 27

• Lease length / term certain • Break clauses • Alienation • Repairing obligations • User clauses • Rent review pattern and mechanism • Security of tenure provisions (whether lease is inside or outside the Landlord and Tenant Act 1954) • Restrictive lease clauses • Planning use

Question 28

What are the key things to consider when it comes to break clauses in a lease?

Answer 28

• Whether it is mutual or in favour of one party • Whether time is of the essence • What the required notice period is • Whether there is a penalty to be paid if the lease is terminated • Whether the right to break the lease is dependent on preconditions being met

Question 29

What are the typical conditions that are required to be met for a tenant to have the option to break their lease?

Answer 29

• Compliance with their covenants • Payment of all rent and other sums due • Vacant possession

Question 30

When is an occupier going to be more willing to consider a pre-let?

Answer 30

• If there is a market shortage• They need specific facilities

Question 31

What is the main advantage of a tenant pre-letting?

Answer 31

They can have a bespoke building designed to suit their needs

Question 32

What is the main disadvantage of a tenant pre-letting?

Answer 32

There is a level of risk in the event of the developer or contractor not performing

Question 33

When a tenant pre-lets a building, what documents would typically be attached to an Agreement to Lease?

Answer 33

• The Lease in a pre-agreed form, which shall be executed once the developer has fulfilled its obligations - usually Practical Completion of the work • Licence for Alterations - to allow the tenant to undertake fitting out works • Specification and plans of the proposed scheme • Developer’s guarantee/bond if dealing with a weak covenant • Warranties - any tenant taking an FRI lease will want collateral warranties form the professional team, main contractor and any sub contractors

Question 34

If a landlord is seeking to limit a tenant making changes to the property, what will they typically require?

Answer 34

Licence to Alter

Question 35

What did the changes in 2020 to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations require letting agents to do?

Answer 35

• Letting agents have to register with HMRC within 12 months of May 2020 if they let individual properties for more than the equivalent of €10,000 per month • Where they undertake lettings of properties for more than €10,000 per month, they will have to undertake CDD check on landlords and tenants on any new letting or subletting • EDD will have to be undertake when any red flags occur

Question 36

Why might a freeholder not be supportive of a tenant subletting the property?

Answer 36

• If they let it below market rent, it could set a new rental tone for the area. Leaseholder is simply trying to reduce their liability and so may accept below market rent • Sub-tenant may not perform the covenants of the lease e.g. repairing obligations

Question 37

What different types of alienation provisions can there be in the lease?

Answer 37

Assignment: transfer the lease Sublet: under-let the premises Sharing occupation: share occupation of the premises with a third party e.g. concession stand within a retail store Charging: charging the lease to a lender i.e. used as security for a debtor

Question 38

When calculating what a property should be let for, would you do this on a headline basis or net effective basis?

Answer 38

Typically would calculate it on a headline basis but having regard to the tenant incentive granted

Question 39

On what grounds can a landlord reasonably refuse permission for a tenant to sublet or assign their interest?

Answer 39

• Landlord must be satisfied that the assignee is able to pay the rent and comply with the lease covenants in the case of an assignment • Where a landlord owns numerous units, they are entitled to consider the type of business of the proposed tenant and whether it complies with their tenant mix policy • A landlord can refuse consent if the tenant will adversely affect the landlords existing rights and interest in the property

Question 40

After you have instructed solicitors, is there anything you would do to ensure that the leasing completes?

Answer 40

• Ensure that conditions are met e.g. planning permission • Offer firms other services e.g. a building surveyor to conduct a schedule of condition • Answer any queries which the solicitor may have e.g. CPSEs

Question 41

What is an engrossment?

Answer 41

An engrossment is the final printed version of a lease that is then executed by the parties

Question 42

What typically occurs with the engrossment of the lease?

Answer 42

There will an engrossment of the lease and an engrossment of the counterpart lease. The tenant ends up with the lease executed by the landlord and the landlord ends up with the counterpart executed by the tenant

Question 43

What RICS guidance is there on Leasing and Letting?

Answer 43

RICS Real Estate Agency and Brokerage, 2016 (3rd edition) UK Commerical Real Estate Agency (2019)

Question 44

What principles should be followed for agents involved in leasing/letting?

Answer 44

1) Conduct business in an honest, fair, transparent and professional manner 2) carry out work with due skill, care and diligence, and ensure that any staff employed have the necessary skills to carry out their tasks 3) Ensure that clients are provide with terms that are fair and clear. These should meet all legal requirements and relevant codes of practice, including reference to complaints handling procedures and, where it exists, appropriate redress schemes. 4) Do the utmost to avoid conflicts of interest and, where they do arise, to deal with them openly, fairly and promptly. 5) Not discriminate unfairly in any dealings. 6. In all dealings with clients, ensure that all communications (both financial and non-financial subject matters) are fair, clear, timely and transparent. 7. Ensure that all advertising and marketing material is honest, decent and truthful. 8. Ensure that all client money is held separately from other monies in appropriately designated accounts and is covered by adequate insurance. 9. Have adequate and appropriate professional indemnity insurance or equivalent in place that complies with the RICS Rules of Conduct. Having proper cover is a key part of managing your risk. 10. Ensure that it is made clear to all parties with whom you are dealing the scope of your obligations to each party. 11. Where provided as part of the service, give a realistic assessment of the likely selling, buying or rental price, associated cost of occupancy or of the likely financial outcome of any issues, using best professional judgment. 12. Ensure that all meetings, inspections and viewings are carried out in accordance with the client’s lawful and reasonable wishes, having due regard for the security and personal safety of all parties.

Question 45

What checks should you undertake prior to taking on an instruction?

Answer 45

Conflict of interest check and confirm the identity of your client in compliance with Money Laudering Regulations

Question 46

What should your terms or engagement include?

Answer 46

UK Commercial Real Estate Agency Set our scope of work, details of fees and expenses, business terms and duration estimation, copy of complaints handling procedure and appropriate ADR redress scheme. This should be given to the client before they have any liability towards you Property address Full name and contact details of the client Type of agency Sub-agents Type of disposal Deposits Commission Method of, and trigger for, payment Expenses/abortive fees Marketing programme Viewing arrangements Sales boards Sale or leasing particulars Basis for reporting floor areas EPC Complaints handling Right to cancel Acceptance of terms

Question 47

What does the professional statement Real Estate Agency and Brokerage 2016 provide specific advice on?

Answer 47

Ethics Securing instructions Acting for the seller: marketing Acting for the seller: agreeing the sale or lease Acting for the buyer Ending the instruction Safety and security Agency management

Question 48

What are consumer protection regulations?

Answer 48

These are regulations which are in place to protect customers against unfair contracts.

Question 49

What is a profits test?

Answer 49

A profits test might be undertaken by a Landlord to assess covenant strength Principles are - net profit for a business must be 3 x the rent for 3 consecutive years or NWR asset value of a business should be 5 times rent

Question 50

What are the key headings under RICS Real Estate Agency and Brokerage 2016?

Answer 50

Ethics Securing instructions Acting for the seller: Marketing Acting for the seller:purchase/sale Acting for the buying Ending the instruction Safety and security Agency management

Question 51

What are the key headings under UK Commercial Real Estate Agency?

Answer 51

Scope Standards and ethics Securing instructions Disposals: marketing the property Implementing the disposal Acquisitions Ending the instruction

Question 52

What should you include in marketing particulars?

Answer 52

Reference RICS Commercial Real Estate Agency Property address Availability and nature of services, facilities or amenities Proximity to any services, facilities and amenities Accommodation and sizes Fixtures and fittings Physical or structural characteristics The grant or giving of any awards for construction Price Business rates Leases and licences and liability for service charge costs/common repairs

Question 53

RICS UK Commercial Estate Agency Professional Statement, 2016

Answer 53

similar to RICS Global Real Estate Agency and Brokerage Professional Statement, 2016- mandatory professional statement provides set of mandatory standards for RICS for members involved in agency and real estate mgmt work, supported by detailed guidance- replaced RICS Purple Book 2014 12 core principles agents must observe: 1. act in honest fair transparent manner 2. carry out work with skill 3. ensure clients have terms of business that are fair and clear (with complaints handling procedure) 4. do utmost to avoid conflicts of interest and where they do arise, deal with them openly and fairly 5. dont discriminate unfairly 6. good communication 7. honest marketing 8. client money held separately with adequate insurance 9. hold appropriate PI to ensure customer doesn’t suffer loss due to negligent act 10. identify client and ensure all parties are clear of obligations to each party 11. give realistic assessments of selling prices/rent, giving regard to market evidence and using best professional judgement 12. ensure all meetings, inspections and viewings are carried out in accordance with clients wishes and have due regard to security and safety- act ethically- securing (duty of care, gifts, conflict of interest)- instructions (legal requirements, AML checks, H&S)- marketing the property (legal requirement, marketing particular)

Question 54

Estate Agents (Undesirable Practices) (No 2) Order 1991

Answer 54

Order made under Estate Agents Act 1979- estate agents must inform their clients at the same time as they are informed about their terms of business, as to any services to be offered to prospective purchasers unless offered free of charge.

Question 55

Estate Agents (Provision of Information) Regulations 1991

Answer 55

Regulations relate to the provision of information which should be supplied to a client- this information must provide info in writing regarding the service to be provided and renumeration- a cooling off period of up to 14 days is allowed for clients who change their minds and do not want to instruct the agent in accordance with current consumer protection regulation

Question 56

Public Register of Overseas Property Ownership in the UK

Answer 56

Prevent money laundering in property sector and make the UK a world leader on corporate transparency: -Require overseas companies to provide details of their ultimate owners to make the UK property market more transparent and to declare the beneficial owner of properties purchased by non-UK parties -Information to be placed on public register -Currently unexplained wealth orders (UWOs) can be applied to the owner of any property asset over £50,000 where the Government has reasonable grounds for suspecting criminal funds have been used

Question 57

Consumer Protection from Unfair Trading Regulations 2008 (CP

Answer 57

Property Misdescriptions Act 1991 was repealed in Oct 2013 replaced with the new Consumer Protection Regulations under Unfair Trading Regulations 2008 for estate agency work and business protection from the Misleading Marketing Regulations (Business Protection Regulations) which have been in force since 2008 under Enterprise Act 2002- Consumer Protection Regulations relate to Business to Consumer

Question 58

Business Protection from the Misleading Marketing Regulation

Answer 58

BPRs relate to business to business activities and mirror CPRs- regulations prohibit misleading business-to-business advertising- they impose restrictions on how businesses compare their products from other companies

Question 59

Caveat Emptor

Answer 59

Let the buyer beware- the starting point when discussing who has responsibility of the disclosure of information- the overriding common law principle means that the buyer should satisfy itself on all matters relating to the property

Question 60

Consumer Rights Act 2015

Answer 60

Act amends existing consumer protection law and gives consumers new rights and remedies - consolidates the law relating to unfair terms and contracts between businesses and consumers- Since Oct 2015 letting agents must clearly display summary of their charges both in their office and on their website for letting and management of property- information must be provided based on calculation of the charges and who is responsible for payment- if a residential agent holds any clients money, then the firm is required to also publish a statement as to whether they are a member of a client money scheme and details of the scheme- policed by local authority and penalty is a fine up to £5k for each breach.

Question 61

Misrepresentation Act 1967

Answer 61

Act relates to misrepresentation or false statement of fact made by a party during pre-contractual enquiries, which has effect of inducing the party to purchase- the vendor and/or agency can be sued for damages and/or contract rescinded- civil offence, actionable as tort (not criminal). Leading case is Hedley Byrne v Heller and partner 1964 (relates to liability to negligent statements. Test of reasonableness, case created 3 tests to decide agents liability for negligent statements: 1. forseeability - the damage is reasonably forseeable 2. proximity - the relationship can be characterised in law as being sufficiently proximate 3. fairness - it is regarded as fair, just and reasonable for such a duty of care to arise)- applies also to professional opinions and 3rd party advice Court held that no duty of care was owed by a bark to the plantiff relying on advice as to the customers creditworthiness because there was no special relationship involving the undertaking of responsibility.

Question 62

Tenant Fees Act 2019

Answer 62

Act came into force on 1st june 2019 and aims to improve transparency and affordability in the resi letting markets- bans various fees often charge to resi tenants for new lettings.

Question 63

Marketing signage - The Town and Country Planning (Control of Advertisements) (England) Regulations 2007

Answer 63

Planning consent is required for non-residential boards over 2sqm (flat) and 2.3 sqm (V Board) Only one board per building- different sizes for residential boards with a maximum size allowed of 0.5sqm (flat) and 0.6sqm (V board)- must not project more than 1m from face of building and not above 4.5m from ground in a safe condition. Needs planning consent for illuminated board, remote boards, boards erected on listed buildings and conservation areas- must be removed 14 days after completion of transaction. Must have owners approval- policed by local planning authority who can remove boards and issues fines and order costs

Question 64

Summary of Key Estate Agency Legislation

Answer 64

MISREPRESENTATION ACT 1967- applies to misstatements/false statement or misrepresentations made during a contractual enquiries by the vendor or the agent to the proposed purchaser, freehold and lease hold transactions- civil offence actionable by tort, action can be limited by an effective disclaimer clause- penalty for non-compliance is sue for financial damages and/or contract rescinded ESTATE AGENTS 1979- applies during sales or purchase of freehold or leasehold properties with a capital value- s18 = terms of business- s21 = declaration of personal interests- offence is acting dishonestly, not providing clarity to terms of engagement or disclosing a personal interest, not telling client about offers received- penalty is warning order or prohibition order or fine CONSUMER PROTECTION REGULATIONS 2008- applies during entire agency sales and lettings process- offence is criminal offence, not treating customers fairly and/or providing misleading marketing information- penalty is unlimited fine, prohibition order and prison up to 2 years.

Question 65

VAT

Answer 65

Sspecialist advice always recommended- some occupiers cannot register for VAT such as financial institutions, charities and medical practicioners- landlord can choose to elect a property to charge VAT, to recover VAT on costs expended. When this happens rent (and any service charge) is charged subject to VAT.

Question 66

Capital allowances

Answer 66

These are an important form of tax relief upon capital expenditure for the construction or purchase of commercial property or business assets - they can generate substantial tax savings/relief on the value of plant and machinery fixtures such as air conditioning and lifts - the allowances can be offset against taxable profit - specialist advice is always required - The Finance Act 2019 includes some significant changes, including to Enhanced Capital Allowances, Structures and Building Allowance and the Annual Investment Allowance

Question 67

Land Registration Act 2002

Answer 67

Act provides frameworks for electronic property conveyancing, by allowing formal documents to be executed electronically- all freeholds and new leases grants for terms over 7 years or existing leases sold or assigned with 7 years left to run must now be registered with the Land Registry with a complaint lease plan - it also introduced a new regime for adverse possession making a claimant prove 10 years of use - the land registry is aiming to achieve comprehensive registration of all property and land by 2030 - all freehold transactions must have compliant plan with following 7 details 1. drawn to metric scale (1:100 or 1:200) 2. have scale measurement bar 3. have scale noted on plan 4. include 1:1250 sales location map 5. full address including post code 6. north point 7. demise in red outlined on inside edge of property

Question 68

Chancel Repairs Liability

Answer 68

Act also gave churches 10 years to register chancel repair liability against a property in their parish until Oct 2013

Question 69

Tenant selection

Answer 69

• important relationship between quality of tenants convenant and investment value of property- request for additional devices for additional security such as rent deposit or guarantee can depend upon market conditions and strength of tenants covenant- use of rental deposits (personal to tenant, must be legally documented in a rent deposit deed and money held separate bank account, interest to tenant, agreed terms for the release of the monies, details of the release mechanism to be stated in the deed, can include top up mechanism for rent review uplifts, rent deposit deed attached to lease as it is a separate deed, personal to the tenant)- usual request is for following minimum info (bank/accountant and 2 trade references, previous/existing landlord ref, 3 years audited accounts/business plan/credit rating)- can add to quality of covenant by requesting sureties/personal guarantee or rent deposit- profits test commonly used is that the net profit for proposed tenants business must be 3 times rent for 3 consecutive years or net asset value of the business must be more than 5 times rent - but consider level of demand for property and current market conditions

Question 70

Break clauses

Answer 70

>- these clauses are time of the essence with a strict timetable for serving the notice- if an option to terminate is included in the lease check the following:1. is it mutual or is it only in the favour of one party?2. do you need to serve a notice if the lease is granted inside the 1954 act?3. what is the required notice period? is time of the essence?4. is there a penalty rent to be paid, if the lease is terminated?5. is the clause personal to the original tenant?6. are they any pre-conditions for the option or is it an open break clause? these pre-conditions can include full payment of rent and returning premises in good order7. a tenants right to break is often conditional upon having complied with certain lease obligations, such as compliance with tenants covenants, payments of all rent and other sums due, vacant possession

Question 71

Pre-lettings

Answer 71

>occupiers may consider the pre-letting of premises, particularly if there is a market shortage or they need specific facilities, to satisfy their needs. The main advantage to the tenant is the delivery of a bespoke building designed to suit their needs. There disadvantages include entering a lengthy and complex process and level of risk in the events of the developer and contractor not performing

Question 72

Agreement to lease

Answer 72

Legal framework requires the following docs to be attached to agreement for lease:- the lease, in pre-agreed form, which shall be executed once the developer has fulfilled its obligations under the agreement for lease - usually at practical completion of the works - licence for alterations, to allow tenant to undertake fitting out works - spec and plans of proposed scheme - developers guarantee/bond if dealing with weak covenant - warranties (any tenant taking an FRI lease will want collateral warranties from the professional team, main contractors and any sub-contractors with any design input) - a collateral warranty gives tenants a direct contract with construction team (privity of contact) 3rd party rights are increasingly popular as cheaper, quicker and more certain way to give tenants potential recourse - most developers are unwilling or unable to give guarantees for latent defects, and may be decennial insurance in place to cover this risk

Question 73

What are the characteristics of a license?

Answer 73

Confers right to enter a property - Personal arrangement between licencor and licensee - Acquires no interest in the property - Merely a personal right that can be terminated by either party.

Question 74

What are the penalties for non-compliance of the Estate Agents Act 1979

Answer 74

� Under EA Act 1979 o HMRC can either serve a warning order or a prohibitive order. o The latter will take away the right to practise as an estate agent. o A fine can also be issued.

Question 75

What are the penalties for non-compliance of the Property Misrepresentations Act 1967?

Answer 75

� Under the Misrepresentation Act 1967 o If guilty of making a false or misleading statement the agent can be sued for damages and the contract can be rescinded. o It is a civil offence � policed by

Question 76

What are the penalties for non-compliance of the Consumer Protection Regulations 2008 ?

Answer 76

o Duty of care owed to all consumers throughout the agency process o It is a criminal offence � policed by Trading Standards of local council.

Question 77

What are the main principles of the Estate Agents Act 1979?

Answer 77

� EA 1979 � relates to the disposal or acquisition of freeholds and leaseholds with a capital value. The Act promotes 7 key points: 1) Clarity of terms of engagement under S18 2) Honesty 3) Accuracy 4) Costs agreement and liability 5) Interests - openness regarding personal interests 6) Discrimination (no) 7) Offers to be notified promptly in writing to the client 8) Clients� money to be kept separate

Question 78

What are the main principles of the Misrepresentation Act 1967

Answer 78

� EA 1979 � relates to a misrepresentation or false statement of fact made by a party during pre-contractual enquiries which has the effect of inducing the party to purchase: 1) Can be sued for damages and/ or contract rescinded 2) Agent has duty of care to check that advice is reliable May be protected by a disclaimer clause.

Question 79

What are the main principles of the Consumer Protection Regulations 2008?

Answer 79

� Broadened consumer protection regulations � relates to all sales and lettings � Businesses must comply with Misleading Marketing Regulations (BPR) � Prohibits unfair business practice � Applies to online agency � Unfair includes � giving false information, hiding or failing to provide info and exerting undue pressure. � Average consumer � reasonably well informed person.

Question 80

What are the differences between Consumer Protection Regulations 2008 and Misdescriptions 1991 (Repealed October 2013)?

Answer 80

� Covers all lettings and sales. � Agents have a duty of care to clients and all interested parties � Must declare everything known about the property (good & bad) � no longer 33 specified matters � If any info is discovered during agency process it must be passed on to all interested parties

Question 81

What does �without prejudice� mean on correspondence.

Answer 81

� Generally it means that the document is privileged � Inadmissible in court proceedings. � Prevents a party from proving a contract, document or a proper notice exists. � The label goes right to the heart of the rules of evidence as no fact can be presented in court unless it is proven.

Question 82

What does �Subject to Contract� mean

Answer 82

� The document is subject to contract!!! � This relates to the law of contract. � Means that the contract is conditional

Question 83

If a property has a restrictive covenant can you remove it?

Answer 83

� Yes it can be removed by a deed � Must be demonstrable reason for removal � Advise my client to seek advice from a solicitor.

Question 84

What are the advantages and disadvantages of an RPI linked rent review clause?

Answer 84

� An RPI linked rent review clause is hedge against inflation � It doesn�t necessarily keep the rent in line with market rent � Investors and supermarkets like � Allows you to keep track of increase in income.

Question 85

Why is the Misrepresentation Act 1967 disclaimer included on property particulars? What does your company�s clause state?

Answer 85

� Limits liability of negligent statements providing it is an effective disclaimer. (ie. Fair and reasonable) � My company disclaimer states that the marketing particulars are produced in good faith � A general guide only � Interested parties should make their own investigations. � Caveat Emptor

Question 86

What is the specification of a Grade A office building?

Answer 86

� Specification of a Grade A office building includes - Suspended ceilings with a ceiling void of 350 mm - Fully accessible raised floors with a void of 150 mm - Double glazed windows - LG7 compliant lighting - Passenger Lifts - Car parking � 1 per 200 sq m (but will depend on local planning authority) - Air conditioning (VAV, VRV, Fan Coil, Static Cooling) - Floor loading of 3-5 KN per sq m and an additional 1 KN per sq m of partitioning. - Floor to ceiling height of 2.6m

Question 87

What are the specification for an institutional industrial building.

Answer 87

� Industrial building - Minimum floor to eaves height of 6 m - Floor loading of 30 KN / sq m - Full height loading door electronically operated - 5-10% office content - 10% roof lights - Phase 3 electricity power

Question 88

What are agents fees?

Answer 88

� For letting � 10% sole agent, 15% joint � For selling � 1% sole, 1.5% joint

Question 89

What is a capital allowance?

Answer 89

� Take expert advice � Form a tax relief upon capital expenditure for the construction or purchase of commercial property and assets � Can gain good tax relief (offset against) on the value of fixture and fittings such as lifts.

Question 90

How can you mitigate paying VAT for a property?

Answer 90

� Use a Transfer of an Ongoing Concern � Sale note treated as a supply of goods or services � sale of business including assets.

Question 91

When would a purchaser or tenant pay VAT for a property?

Answer 91

� Always take professional advice � If the owner has registered for VAT.

Question 92

When does a plan have to be provided to the Land Registry upon the grant of a new lease? Land Registration Act 2002.

Answer 92

� If lease is over 7 years must register with the Land Registry � Must have : o Scale o Scale Bar o Scale on Plan o 1:1250 scale location map o Full address and post code o North point o Red demise line

Question 93

How much does it cost have an EPC?

Answer 93

� It varies depending on the size of the property but usually between �200 - �800.

Question 94

What legislation covers marketing brochures?

Answer 94

� Consumer Protection Regulation 2008 � Misrepresentations Act 1967.

Question 95

When is valuation work excluded from the requirements of the RICS Red Book when undertaking agency work?

Answer 95

� When providing advice as to the rental price, or when making an offer. � A purchase report however will be subject to the Valuation Standards.

Question 96

What are the advantages and disadvantages of an RPI linked rent review clause?

Answer 96

� An RPI linked rent review clause is hedge against inflation � It doesn�t necessarily keep the rent in line with market rent � Investors and supermarkets like � Allows you to keep track of increase in income.

Question 97

What are the main lease terms which affect market value?

Answer 97

� User clause, � Repairing obligations, � Alienation, � Rent review provisions, � Security of tenure. � In assessing whether there was any negative impact on market value would need to relate the terms back to the market, location and building.

Question 98

Duty of care

Answer 98

� Owe a duty of care to clients and third parties relying on our advice � We are held negligent if we breach that duty. � Established in Hedley Bryne v Heller & Partners o Liability of negligent statements can apply to professional opinions and 3rd party advice.

Question 99

What are the planning controls in place in respect of agents� signboards?

Answer 99

� Town and Country Planning (Control of Advertisement) Regulations 2007 � Planning permission is required if the signboard is greater than 2 sq m or if the v board is greater than 2.3 sq m. � Cannot project more than 1m � Also permission will be required for any signage on listed buildings or if the signage is illuminated or remote. � They must be taken down within 14 days of the transaction. � There are stricter conditions in some boroughs like Westminster where marketing signboards must be in black and white.

Question 100

What are the advantages to a landlord of granting a new lease outside the Act?

Answer 100

� On expiry of the term the tenant has no right to remain in the premises and the landlord can easily regain possession without having a valid reason or having to pay compensation.

Question 101

How do you devalue incentives?

Answer 101

� UKGN6 � Analysis of commercial lease transactions. � My experience of devaluing incentives has been on a straight line method.