L&T and Leasing/Letting Flashcards
what is the difference between a lease and a licence
A lease grants a tenant exclusive possession of a property for a set period of time, while a licence gives a licensee permission to use a property for a specific purpose.
Lease:
Leases offer security of tenure, which means the tenant can’t be evicted without cause.
Licence:
Licences offer no security of tenure, and the landlord can end the agreement at any time.
What is the Landlord and Tenant Act 1927?
The Landlord and Tenant Act 1927 (LTA 1927) is a law that amends landlord and tenant law and provides compensation for tenants who improve business premises. It also gives landlords the right to be reimbursed for increased taxes, rates, and insurance premiums.
What is the Landlord and Tenant Act 1954?
The Landlord and Tenant Act 1954 is a law that gives business tenants the right to renew their tenancies. The Act also provides security of tenure for residential tenants and sub-tenants.
What is the Landlord and Tenant (Covenants) Act 1995?
Covered assignment of leases and introduced Authorized Guarantee Agreement (AGA).
S17 notice – allowing landlord to chase assignor for assignee’s debts.
What is the Landlord and Tenant Act 1988?
The Landlord and Tenant Act 1988 is a UK law that primarily focuses on imposing statutory duties on landlords regarding their obligation to reasonably respond to tenant requests for consent to assign (transfer) or sublet (underlet) a leased property, essentially requiring landlords to act within a reasonable timeframe when considering such requests from tenants
Tenancy at will
A form of licence created by written agreement for an unspecified time in which the landlord may evict the tenant at any time. Not a legal interest in the land, with no renewal right.
What is Grade A office space? what are 7 things that classify it as Grade A?
A “Grade A” office space is considered the highest quality commercial office space.
- Full access raised floors with floor boxes
- Carpeting
- Approximate ceiling height of 2.6m
- Suspended ceiling
- Airconditioning
- Double glazed windows
- passenger lifts
- maximum depht of 12-15m to allow for natural light
- Typical car parking ratios of approx 1 space per 200sqft
What is security of tenure?
Security of tenure is a legal right that gives tenants the right to stay in their property after their lease ends. It’s a statutory right in the UK, granted by the Landlord and Tenant Act 1954
What is a Section 23?
Business tenancy meaning (BOT): business purposes, occupation, formal tenancy
What is a Section 24?
Known as continuation of tenancy, Security of tenure (applies unless S38/outside Act agreement is made, always specified). Tenant is said to be holding over under the expired lease.
What is a Section 25?
Landlord termination (6 months notice)
What is a Hostile S25 notice?
A standard “S25 notice” is a formal notification from a landlord to a tenant regarding the renewal of a lease, potentially proposing new terms, while a “hostile S25 notice” is a specific type of S25 notice where the landlord explicitly states their intention to not renew the lease and actively oppose the tenant’s continued occupancy
What is typically included in a S25 Notice?
- Name and address of landlord and tenant
- Address of the property
- Notice of the date to end the tenancy (A “hostile” or “friendly” notice)
- Confirmation whether a new lease is to be opposed or granted
- Confirmation of date by which the tenant must ask the court for a new tenancy
- Landlords proposals for the new tenancy to include proposed rent if friendly notice
- If the landlord opposes the new tenancy, the grounds for opposition must be stated, which cannot be later amended.
What is a Section 26?
Tenant notice to seek new lease, (renewal) (6 months notice, cannot be served if S25 already done by LL), must state the tenants proposals for a new lease to include proposed rent.
*if the landlord opposes this, a counter notice must be served within 2 months
What is a Section 27?
Tenant termination (3 months notice) (Cannot vacate before lease end)
What is a Section 28?
Renewal by agreement (unprotected until new lease is in place)
What is a Section 29?
court order to grant new/terminate tenancy
What is a Section 30?
Landlord grounds for opposition (response within 2 months of S26 notice, if objecting):
a. Failure to repair
b. Persistent delay in rent payments
c. Other substantial breach – refusing access, planning breaches, unauthorized alterations
d. Suitable alternative accommodation
e. Uneconomic subdivision (sub-letting part at lower than market rent)
f. Demolition and/or reconstruction/redevelopment - If for redevelopment, landlord must provide firm proof i.e. funding, planning etc.
g. Intention to re-occupy (5 years ownership minimum)
What is Section 38A of the Act
S38A sets out the procedure which must be followed to contract outside the Act
What are some reasons a letting would be contracted outside the security of tenure provisions of the Landlord and Tenant Act 1954?
- A requirement of a headlease to grant any subletting outside the Act
- The landlord will want to re-occupy the property in due course
- The landlord wishes to redevelop the property at the lease end
- the rent may be lower
- The landlord wants future flexibility
What is the process to have a lease contracted outside of the Act?
- The landlord is required to serve notice on the prospective tenant, warning them that the proposed lease will not be protected. This is known as a health warning.
- The proposed tenant must then make a declaration in response, confirming that they have recieved the notice and accepts its terms.
- There is then a 14 day cooling off period before then committing to the lease
- This process must be completed before the lease is signed
What is a Section 40
Landlord request for information (last two years of the term)
What is a section 17 Notice?
Notice served upon a guarantor within 6 months of the tenant defaulting, to require the tenant who entered into the Authorised Guarantee Agreement (AGA) to pay the arrears.
What is the difference between and assignment and a sub-lease?
Upon assignment the new tenant (T2) has a direct relationship with the landlord. Where as when sub-letting, the new sub-tenant has a direct relationship with the original tenant, and pays them rent who in turn pays the landlord.
What are 4 key requirements of a lease?
- Exclusive occupation
- Payment of rent
- Duration for a specified term
- If more than 3 years, the terms must be in writing, signed as a deed.
What is a Wayleave?
A wayleave is a temporary right and receives and annual payment. it is personal to the company and cannot be automatically transferred to a new owner.
What is an Easement?
An easement is a permanent right and receives a capital payment
What are the four usual assumptions of a Rental Review?
- The property is available to let on open market by willing tenant to a willing landlord for a term of years as stated.
- Property is fit and available for immediate occupation and use.
- All covenants observed by landlord and tenant
- Property may be used for purpose set out in lease
What is the Hierarchy of Evidence?
The Hierarchy of Evidence refers to the relative weight attached to comparable evidence. The weighting is as follows:
1. Open market lettings
2. Lease renewals
3. Rent reviews
4. Independent expert determinations
5. Arbitrator awards
6. Court Determinations
7. Hearsay evidence
How do you determine the appropriate dispute resolution method for a rent review?
The dispute resolution options for rent reviews will be identified in the lease, the lease will outline the procedure for appointment and the role of the dispute resolver.
Typically, the lease will identify two options for dispute resolution - The appointment of an arbitrator or the appointment of an Independent expert
What are the contents of a Rent Review Memorandum?
- Name of Lanlord and tenant
- Address of the property
- Date of the lease and rent review
- Confirmation of new rent agreed
- signed and dated by both parties
What is alienation?
Alienation in a lease is the act of a tenant transferring their leasehold interest to another party. This can include assigning the lease, underletting the property, or giving up possession of the premises.
What is the Code for Leasing Business Premises, 2020?
The objectives of the new code are stated to improve the quality and fairness of negotiations on lease terms and promote the use of a new set of comprehensive heads of terms to make legal drafting of leases more efficient. (essentially more detailed heads of terms before letting)
What is other information one could request when deciding between potential tenants?
- References from Bank, accountant and 2 trade references.
- Previous/existing landlords reference
- 3 years audited accounts/business plan/credit rating (such as from Dun & Bradstreet)
What are some ways landlords can get more security if they are unsure about tenants?
- Landlord can ask for a larger deposit
- Landlord can request for a guarantor
- include a landlord break in the lease should they want to exit the agreements?
- Lease could be agreed outside of the 1954 Act
With reference to the Landlord and Tenant Act 1954, what happens when a lease is contracted outside of the Act?
Sections 24-28 of the act are excluded from the lease.
If the landlord successfully opposes a business tenancy renewal on grounds (e), (f) or (g), what compensation would the tenant be able to claim.
The tenant may be liable to compensation depending on the period of occupation prior to the tenancy. note there is no compensation for grounds (a) to (d). the compensation is as follows:
14 years or more = Rateable value x2
Less than 14 years = Rateable value x1
Who would you consult with if you were unsure about Legal situations
Thomas Reuters
What are the types of rent reviews? and what are the differences
- Open Market Rent Review: This is the most common type, where the rent is reassessed based on the current market value of comparable properties. The aim is to align the rent with prevailing market rates.
- Index-Linked Rent Review: The rent is adjusted in line with a specific index, such as the Retail Price Index (RPI) or the Consumer Price Index (CPI). This provides a more predictable and formulaic approach to rent adjustments.
- Stepped Rent Review: The rent increases by a predetermined amount at set intervals. This offers certainty for both landlord and tenant but may not reflect changes in the market.
- Turnover Rent Review: The rent is linked to the tenant’s business turnover, often used in retail or leisure properties. This allows the landlord to share in the tenant’s success.
The key differences lie in how the new rent is determined: open market relies on comparable properties, index-linked uses a specific index, stepped rent involves pre-agreed increases, and turnover rent is based on the tenant’s business performance.
What are the principles of the Estate Agents Act 1979?
- Clarity as to the terms of Agency (Section 18)
- Honesty and Accuracy
- Agreement and Liability for costs
- Openess regarding personal interests (Section 21)
- Abscence of discrimination
- Legal obligation to tell client about offers received
- Keep clients money separate
What are the core principles of the RICS Professional Statement - UK Commercial Real Estate Agency 2016
- Act in an honest, fair manner
- Carry out work with due skill
- Ensure clients are provided with terms of business that are fair and clear
- Do utmost to avoid conflicts of interest
- Not to discriminate unfairly
- All communications with clients are fair
- All advertising and marketing material is honest and fair
- Any client money is held seperately
- Hold appropriate PII
- Make it clear the identity of you client, and make sure your obligations to each party if clear
11.Give realistic assessments of selling prices/rents/financial costs having regard to market evidence - Ensure all meetings and site visits are carried out in accordance with your clients best wishes.
What are the remedies for rental default?
- Court Proceedings
- Use a rent deposit
- Pursue former tenants and guarantors
- Serve Statutory demand
- Commercial rent arrears recovery scheme
- Forfeit the lease
- Negotiate a payment plan
- Agree another mutually acceptable arrangement
What does the term CRAR mean? and when can it be used?
Commercial Rent Arrears Recovery Scheme (CRARS) .
Can only be used to collect rent plus VAT and interest payable.
The timeline is as follows:
- Minimum of 7 Days unpaid rent
- Minimum of 7 clear days warning notice
- Enforcement agents visit
- 2 clear days to follow
- Re-entry by enforcement agent to seize goods
- Allow 7 clear days before sale of goods
- Fees must be specified on the entry notice
What are the principles of the Estate Agents Act 1979?
- Clarity as to term sof agency (Section 18)
- Honesty and accuracy
- Agreement and liability for costs
- Openess regarding personal interests (Section 21)
- Absence of discrimination
- legal obligation to tell the client about offers received
- Keep clients’ money separate
What governs Arbitration?
Arbitration Act 1996 (UK)
Summary: UK legislation governing arbitration and Aims for fair, efficient, and reliable dispute resolution outside of court.
Core Principles: Emphasizes party autonomy (freedom to agree on process), limited court intervention (supports but doesn’t control), and fairness/impartiality (equal opportunity for both sides).
What is a calderbank?
Calderbank offers are written settlement offers made “without prejudice save as to costs” to encourage pre-trial resolution by potentially shifting legal cost burdens to the rejecting party if they achieve no better outcome at trial.
What are the key elements of a Heads of Terms?
Premises, Term, Security of Tenure, Break Rights, Rent, Rent Review, Service Charge, Insurance, Use, Alienation, Repairs, Alterations, Costs, Conditions
What are the primary regulations governing dispute resolution?
Arbitration Act 1996: It governs the process, enforcement of awards, and limits court intervention.
Additionally, The RICS Dispute Resolution Services
