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L&T Flashcards

1
Q

What is the difference between a lease and a licence?

A

a lease grants exclusive possession where as a licence gives permission to do something that would otherwise be trespass.

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2
Q

What is the leading case in the matter of lease or licence?

A

Street v. Mountford (1985)

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3
Q

In what circumstances have you granted (or would you consider granting) a licence?

A

if I did not want to grant exclusive possession, for example an advertising hoarding.

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4
Q

You are managing property that is going to be redeveloped at some unknown date in the future. What letting options do you have to generate some rental income without giving the tenant security of tenure?

A

grant a licence, grant a lease contracted out of the 1954 Act.

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5
Q

What is the basic difference between a lease renewal and a rent review

A

a lease renewal is a statutory procedure (governed by LTA 1954), a rent review is governed by the lease itself.

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6
Q

To what tenancies does the 1954 Act apply?

A

tenancies where at least part of the premises are occupied for the purposes of running a business and for 6 months or more.

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7
Q

When was the Landlord and Tenant Act last amended?

A

2003 (Regulatory Reform Order).

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8
Q

Name the tenancies to which the 1954 Act does not apply

A

– tenancies of less than 6 months, residential tenancies, agricultural tenancies, mining tenancies.

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9
Q

What is a Section 25 notice?

A

landlord’s notice to terminate a less upon expiry.

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10
Q

When can a landlord service a section 25 notice?

A

No more than 12 months prior to contractual expiry of the lease, or anything after giving no more than 12 / no less than 6 months notice.

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11
Q

What must a section 25 notice contain?

A

the premises, the date of proposed termination and the landlord’s ground for refusing the grant of a new lease.

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12
Q

What advice would you give to a landlord client in respect to a lease renewal when the property is significantly over-rented?

A

do not serve a notice and let the tenant continue to hold over at the passing rent if possible. Other option is to serve the section 25 and agree a new lease, even if on less advantageous terms in order to retain the tenant (good covenant strength, re-letting likely to be difficult).

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13
Q

When is the best time to serve a section 25 notice?

A

it depends on the landlord’s intention. 12 months may give landlord an idea of tenant motives sooner, and more time to find alternative tenant if needed.

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14
Q

Why would a landlord give 12 months notice when he could give 6 months notice?

A

to try and have an early understanding of the tenant’s intention. If property is overrented, it may give him the upper hand to get his notice in first.

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15
Q

What action should a landlord take if he/she requires possession of a property at the end of a lease?

A

– serve a section 25 notice stating their grounds for refusing the grant of a new lease.

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16
Q

What can a landlord do if he cannot get a response from the tenant to his friendly section 25 notice?

A

make time of the essence by applying to court for a new lease, with tenant responsible for costs if no response within defined period.

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17
Q

What advice would you give to a tenant when a landlord’s section 25 notice is due to expire in two weeks’ times and an agreement for a new lease has not yet been agreed?

A

depends on the tenant’s intention. If they intend to leave then they can hand the keys back in on expiry or serve a section 27 notice no less than 3 months prior to expiry. If they intend to renew the lease then they should respond to the landlord’s notice stating their acceptance or proposing alternative terms or request an extension under section 29.

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18
Q

Name the grounds under section 30 (1) of the LTA 1954 under which a landlord can obtain possession

A

a) persistent non-payment of rent;
b) breach of the repair clause;
c) material breach of another clause;
d) landlord can offer appropriate alternative accommodation;
e) landlord can generate more income from the premises by letting as a whole if currently a series of underlettings;
f) landlord wishes to redevelop;
g) landlord wishes to occupy himself

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19
Q

A lease of a shop property is due to expire in 12 months time. You are instructed for the first time by the landlord to negotiate a new lease with the tenant. Explain how you would deal with this instruction.

A

– I would firstly review the lease to establish if the premises is within the 1954 Act. Issue Terms of Engagement. I would then inspect the premises and then ascertain if the premises is market, under or over rented and report to the client. I would also look for other potential breaches. If the client wishes to negotiate a new lease with the tenant, I would propose serving a section 25 notice with the new terms contained within.

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20
Q

In what circumstances is a tenant entitled to compensation when a landlord successfully opposes a new lease under the 1954 Act?

A

grounds e, f and g contained within section 30.

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21
Q

How is tenant’s compensation assessed under the 1954 Act?

A

1x rateable value if the lease is 14 years or less; 2x rateable value if the lease length is 14+ years.

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22
Q

Explain the power that the court has in ordering a new lease.

A

the courts have the power to grant a new lease (section 29) and agree the terms as sections 32 – 35.

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23
Q

What do you understand a section 34 rent to be?

A

market rent after expiry of rent-free period, with usual disregards.

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24
Q

What do you understand an interim rent to be?

A

rent payable whilst landlord and tenant are negotiating (or court) a new lease. Either party can apply for interim rent (RRO 2003).

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25
How is interim rent assessed?
Usually the rent payable under the new lease / open market rent as s34.
26
In what circumstances would you recommend a tenant to serve a section 26 notice?
if the landlord has not served a s25 notice and the tenant wants to renew the lease, especially if arguing for more tenant-friendly terms than the existing lease (ie, overrented). Also if tenant needs security of knowing.
27
Explain when tenant’s improvements are disregarded at lease renewal.
if the improvements have been carried out in accordance with the lease (landlord’s permission) by the current tenant or a predecessor in title within 21 years.
28
Explain what action a tenant should take if there are 6 months of the lease remaining and he/she wants to vacate at expiry. The landlord has not served a section 25 notice.
Tenant can hand keys in on expiry, or send 27 notice no later than 3 months prior to expiry.
29
What are the key elements of the rent review clause?
– machinery, basis of valuation and dispute resolution options.
30
What is a trigger notice?
notice from either party to inform the other that they intend to action the rent review.
31
What do you understand by the expression time of the essence?
time is the essence of the contract and so therefore the rent review must be concluded by a certain point as stated in the lease.
32
What are the two landmark cases in respect of time of the essence
Burnley Borough vs. United Scientific Holdings and Cheapside.
33
In what circumstances is it likely that time is of the essence?
if the lease explicitly says so.
34
What are deeming provisions?
wording in the lease to state that if a certain party has not replied to a rent review notice by a certain point, they are ‘deemed’ to have accepted.
35
What lease terms affect the rent at rent review?
all of them can have an effect.
36
What assumptions are usually made in determining the rent at review?
open market letting, willing parties, tenant has had benefit of market rent-free period, all lease terms have been complied with, demise fit for immediate occupation.
37
What is the hypothetical term?
lease term remaining for the purposes of rent review. Often the actual unexpired term or sometimes the original term.
38
Is the hypothetical term more advantageous to the landlord or the tenant?
usually the landlord (the shorter the lease, the higher the rent) but can depend.
39
What are the usual disregards?
effect of tenant occupancy, tenant goodwill, tenant improvements.
40
Where do the usual disregards originate from?
section 34 LTA 1954.
41
How may a rent review be resolved in L & T cannot reach agreement?
third party determination (arbitrator or independent expert).
42
What are the differences between an independent expert and an arbtrator?
Cost; Appeal (arbitrator can be appealed against, IE cannot); Negligence (arbitrator cannot be subject to a negligence claim, IE can); Disclosure (arbitrator has power to order disclosure; IE cannot); Legislation (arbitrator governed by Arbitration Act 1996; IE governed by lease and RICS guidance); Evidence (arbitrator uses evidence presented; IE is able to conduct own investigation); Outcome (arbitrator issues a determination; IE gives an outcome).
43
What must a Calderbank offer/letter contain?
WITHOUT PREJUDICE SAVE AS TO COSTS. Also needs the date, an offer and a timescale for acceptance (usually 21 days).
44
A tenant has entered into a full repairing and insuring lease of a property in disrepair. The landlord now requires the tenant to remedy this disrepair. What advice would you give to the tenant?
if the tenant has yet to enter into the lease, I would advise a schedule of condition to minimise the repairing liability. If the tenant has already entered into the lease, he would commission a dilapidations survey and negotiate.
45
What advice would you give to a tenant wanting to take a full repairing and insuring lease of a property in disrepair but suiting his business?
Get a schedule of condition
46
What action can a landlord take when a tenant is in breach of repairing covenant?
require tenant to remedy the breach, otherwise the landlord can repair the premises himself and recover costs. Also forfeiture or injunction compelling the work to be carried out.
47
What action can a tenant take when a landlord is in breach of repairing covenant?
require landlord to remedy the breach, otherwise the tenant can repair the premises himself and recover costs.
48
What does the Jervis v. Harris case mean to you?
Landlord can enter, carry out work and recover costs as a debt, not as damages
49
How are damages assessed when a tenant is in breach of a repairing covenant?
diminution in value of landlord’s interest.
50
How are damages assessed when a landlord is in breach of a repairing covenant?
diminution in value of tenant’s interest.
51
Explain the provisions of section 18 (1) of the Landlord and Tenant Act 1927
Statutory cap on damages = diminution in value of landlord's interest
52
Explain the difference between a schedule of condition and a schedule of dilapidations.
schedule of condition is at the start of the lease to objectively state tenants requirement to yield up/repair. Dilapidations are done partway through or on expiry and are the basis of a landlord’s requirement for tenant to repair or a landlord’s claim against the tenant for breach of repair/yielding up clause.
53
Explain the difference between an interim and a terminal schedule of dilapidations.
interim schedule is partway; terminal is within last 3 years of lease.
54
What is a Scott schedule?
recommended format for presenting a dilapidations claim to court; includes tenant's surveyor's comments.
55
Your tenant client wishes to extend an industrial property. Explain the factors that need to be considered and the action that needs to be taken.
the tenant should check the lease as to whether there is a prohibition on alterations or whether it is permitted subject to landlord’s consent. If consent, an application should be submitted to the landlord with the proposals (and planning / building reg approval should be sought).
56
You are managing a property for your landlord client and have received a request from a tenant wishing to carry out improvements. The tenant has requested that the improvements are registered under the 1927 Act. What advice would you give to your client?
does the work add to market rent/market value? Landlord has 3 months to offer to do the work himself and add rent, or can compensate tenant.
57
How is compensation for tenant’s improvements calculated?
smaller of the value added or cost of works.
58
What lease terms are implied under section 19 of LTA 1927?
landlord consent not to be unreasonably withheld.
59
Explain the legislation that needs to be considered in an assignment of the lease.
section 19, LTA 1927 – landlord cannot be unreasonable in refusal of consent; LTA 1988 adds without delay. LT©A 1995 abolishes privity of contract and introduces AGA.
60
In what circumstances could no restrictions on assignment and subletting be appropriate?
large premises where the only way to let it might be to allow an occupier to sub-divide into smaller units.
61
What are reasonable grounds for refusing consent to assign?
assignee of insufficient covenant strength, refusal on tenant mix grounds, ethical grounds (brothel or similar).
62
What is the usual amount of an assignee’s business profit that a landlord will look for before giving consent to assign?
3x rent, s/c, rates and insurance.
63
What do you understand by the expression ‘authorised guarantee agreement’ / AGA?
assignor (outgoing tenant) guarantees assignees performance of lease covenants. LT©A1995
64
In what circumstances is it appropriate to have restrictive user clauses in leases?
taking tenant mix into account and protecting value.
65
What do you understand a conditional break to be?
a break clause which is only activated if certain conditions are met.
66
What conditions are usually attached to break clauses?
rent paid fully up to date; vacant possession.
67
Can you give two examples of situations when it was held in Court that a break notice was invalid/ineffective?
NHS (partition walls); three coats of paint case.
68
What is a rent review?
“Mechanism in a lease intended to set a market rent at a defined review date”.
69
Is it sufficient to just read the rent review clause?
No. Each lease clause has the potentially to affect the market rent. The rent review clause will also often state that the new lease is to be on the same terms as this lease, save as to rent.
70
What other documents (other than the lease) should be considered?
Deed of variation, licence to alter, original lease (if this is reversionary).
71
What is a reversionary lease?
A lease that takes effect when the existing lease has expired.
72
How do you ensure that you identify all the relevant rent review provisions?
Read the lease! Run through a checklist also to ensure that any clauses which may impact value are not missing.
73
When is the rent review date?
Whenever the lease says it is.
74
What is a ‘last day’ rent review, and what is its’ purpose?
Some leases provide for a rent review on the last day of the term. It is a good way of establishing what the current rent is for the upcoming lease renewal – however, the terms to be assumed may well be different (ie, not on a s34 basis).
75
What is a ‘first day’ rent review and when would it be used?
In a reversionary lease – to set the rent for the new lease which is an extension of the old/existing lease.
76
What is the rent review period?
Depends on the lease. 3 or 5 year intervals are common. The frequency of rent reviews may affect rental value. -> ie, if your lease is 3 yearly reviews but the comparables are all 5 years, apply a small discount (2%?).
77
What are the assumptions made?
Depends on the lease. Usual assumptions are vacant possession, open market letting (MR definition in Red Book), tenant has benefited from market rent free period, property is fit for immediate occupation (this is valuation neutral – L cannot value fixtures and fittings / T cannot argue for rent-free), all lease obligations have been complied with, willing L and willing T
78
Why is a lease renewal more complicated and potentially more costly than a rent review?
Potential for the tenant to leave (loss of rent, rates liability, letting costs, dilaps (etc.) cost); if the tenant wants to renew then all lease terms may be up for discussion (including rent reduction). Cost of solicitors serving notices under LTA1954.
79
What is the valuation date for a lease renewal?
Can be the lease expiry date, or any date after that, or date of a court hearing (if it goes to court). All have potential valuation implications (+ or -) depending on the market.
80
Is the tenant entitled to a rent-free period at renewal?
Not necessarily, although L might grant one as incentive to sign new lease.
81
What did the RRO 2003 bring in?
Declaration needed to contract out of 1954 Act (rather than court) – simple declaration if 14+ days prior to lease beginning, stat dec. if 14 or less. Maximum term of 15 years can be granted by the court. Either party can apply for interim rent.
82
What are the 4 requirements of a lease?
Exclusive occupation; payment of rent; specific term; in writing/signed/registered as a deed if 3+ years.
83
What are the 3 differences between leases and licences?
Leases provide an interest in land; licences just a permission. Leases can be assigned; licence is a personal right. Lease cannot be terminated except for break clause/forfeiture/surrender; licence can be terminated at any time.
84
What is a tenancy at will?
Licence for an unspecified time in which the landlord can evict the occupier at any time. Perhaps used for allowing early entry.
85
What is an easement?
A permanent right enjoyed by one party over the land of another. Capable of being registered at the land registry.
86
What does 'without prejudice' mean?
The information is privileged and cannot be used as evidence in litigation.
87
How did the wording of rent review clauses evolve?
From s34 of the LTA 1954.
88
Is it sufficient to read just the rent review clause?
No - the rent review clause will likely state that the rent review is based on all of the terms of the lease and these terms can affect value.
89
When can an application for interim rent be made?
At any time after the service of a valid landlord's Section 25 or tenant's Section 26 notice and no later than 6 months after the relevant tenancy has terminated, i.e. it can be determined after the fact.
90
When does interim rent commence?
Interim rent kicks in from the earliest date on which the tenancy could have been brought to an end. This means that the termination date specified in the notice is not necessarily the commencement date for interim rent, e.g. if 12 months notice was stated. Legal advice should be sought to ensure that the parties' positions remain protected in terms of future cost liabilities.
91
What tactical considerations are important when considering interim rent?
Interim rent will not be payable until a valid Section 25 or Section 26 notice is served. In a falling market, the tenant may decide to serve a Section 26 notice at the earliest possible moment to take advantage of a potentially lower interim rent. In a rising market, the tenant may wish to hold off serving a Section 26 notice to allow the lower level of existing rent to continue for as long as possible. The opposite may apply when a landlord is considering their position on interim rent.
92
What are the exceptions to interim rent being the same as the rent under the new lease?
- Gap between interim rent application and new lease commencement is so large that the market changes. - New lease is on different terms which affect the rent.
93
If no interim rent had been requested on a lease renewal instruction, why is it still important to mention in the HOTS of the new lease?
Either party can apply for a rebate within 6 months of old lease termination so expressly agree in HOTS that no repayment of interim rent is due.
94
In a rising market, which party is likely to serve a 25/26 notice quicker?
Landlord - trigger interim rent liability and benefit from uplift
95
What is the LTA 1954?
Protected lease continues indefinitely unless terminated in accordance with the act. Tenant compensation may be payable.
96
What is security of tenure?
Tenant’s right to a new lease unless L proves one of 7 grounds opposing new lease.
97
What do section 25-27 notices do, and what timescales are associated?
25 – landlord termination, 26 – tenant request for new lease, 27 – tenant 3 months notice to leave no earlier than expiry
98
What is section 30?
L grounds opposing new lease. 1) Repair 2) persistent delay in paying rent 3) material breach of other clause 4) whole vs underlets 5) alternative accommodation 6) redevelopment 7) landlord occupation
99
What is compensation for disturbance?
For grounds e-g; multiplier of rateable value (section 37)
100
What is the process from contracting out, and how has it changed over time?
Lease excluded from SOT provisions. Used to have to be in court, now simple/stat dec (RRO 2003)
101
What are some of the main clauses within leases that can affect value?
All of them. Particularly RR clause in RR.
102
What is typical in the machinery element of a RR clause?
L to serve trigger notice, time not of the essence, no deeming provisions
103
What does the basis of valuation in an RR clause look like?
Market rent with assumptions and disregards.
104
What does the dispute resolution element of an RR clause say?
Usually either arbitrator or independent expert. Parties can apply to president of RICS for appointment. May say provision for costs.
105
What was in your TOE for the RR at Ann Street? How did you quote a fee?
Property, client, overview of the instruction (rent review date etc), scope of work (inc. third party if required), fee basis (extra for third party if required). Fee was 7.5% of new rent.
106
What other documentation did you request alongside the lease?
Licence for alterations (anything we can’t value?), deed of variation (anything changed since occupational lease completed?).
107
What were the assumptions and disregards for Ann Street?
Upward only, VP, willing parties, if damaged reinstated, after expiry of any rent-free, 10 year term. Goodwill, occupation, improvements.
108
Is upwards only common in rent reviews?
Yes in my experience.
109
What did the LFA at Congleton say at lease expiry?
Tenant had to remove mezzanine unless other arrangement by negotiation at the time.
110
How would you value a mezzanine if it was not disregarded?
Debateable - some apply small % of ground floor value, some nil as it limits the height.
111
What are the benefits of mezzanines in industrial properties? What are the drawbacks of mezzanines in industrial properties?
Benefits - additional floorspace if height is not required. Drawback - limits height.
112
What was the full height of the warehouse?
6m
113
What was the difference at Wilmslow Road, Didsbury between the passing rent and the market rent? How much room for negotiation did you leave?
c.£3,000 per annum (10% ish). Proposed going in £1,000 uplift.
114
How far ahead of the lease expiry did you advise your client?
9 months prior. Could have served notice with expiry as per contractual expiry.
115
Why did you propose writing informally to the tenant rather than serving notices?
Maintain the L&T relationship, keep costs down. Serving notices triggers interim rent.
116
What is interim rent?
Rent payable (if different from passing) whilst new lease is negotiated.
117
How is interim rent triggered?
Either party can apply once 25/26 notices have been served. Comes in from earliest date that 25/26 could have stated.
118
How is interim rent valued?
Usually the rent under new lease, unless market changes during that time or the lease terms change which affects new rent.
119
What would the counter argument to your advice to the client for Didsbury have been?
Serve 25, understand tenant intentions early (if they engage) and then have as much time to find new tenant as possible.
120
What would you have done if you were the tenant in Didsbury?
Serve 26 ASAP (if wanted a new lease), trigger interim rent. If wanted to leave, serve 27 or just leave on expiry.
121
What is DRS 1 form?
Request third party from RICS.
122
What is the cost of submitting a DRS 1 form?
£425
123
Why did you recommend an independent expert?
Lease stipulated.
124
What is the different between an arbitrator and an independent expert?
Main difference is that expert does own investigation whereas arbitrator relies on submissions and finds between them.
125
What are the advantages of an arbitrator over an IE, and vice versa?
Arbitrator if you don’t want them finding other evidence (ie, you think you have the best comps as they have been carefully massaged, etc).
126
What is a Calderbank offer?
Unconditional offer to settle on specified terms. Shown to arbitrator after award but before cost decision. WITHOUT PREJUDICE SAVE AS TO COSTS
127
How are costs usually determined at third party?
Depends what the lease says, but IE has no power too determine unless lease says. Arbitrator can decide.
128
Why was a memorandum used to document the reviewed rent?
Formalise the agreement and attach to lease. Both parties sign.
129
How can a tenant exit a leasehold interest (5 options)?
Leave on lease expiry, surrender, break clause, assign, sublet
130
How does a landlord terminate a protected tenancy?
Serve section 25 notice with grounds for opposition
131
How many grounds for opposition can be stated in a section 25?
Multiple but you cannot add more post-notice.
132
What are usual break conditions?
Vacant possession (includes chattels), rent paid up to date
133
Is a tenant entitled to a refund of rent if they have overpaid prior to a break date?
Not unless lease expressly states (M&S case)
134
How would you advise a tenant in lockdown who wants to break?
Can you provide VP? If not, seek a surrender, or offer break clause with simultaneous licence to occupy in order to deliver VP ASAP.
135
What is the vaulation date for a lease renewal that goes to court?
3mo + 21 days from the trial.
136
Is post dated rent review evidence admissible?
(almost always) No

APC JB (17 decks)

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