L&T Level 1 2023

Question 1

LTA 1954

Answer 1

The Landlord and Tenant Act 1954, part II gives business teants the right to a lease renewal at the end of the contractoral term of the lease and the ability to remain in occupation.

Question 2

LTA 1927

Answer 2

An Act to provide for the payment of compensation for improvements and goodwill to tenants of premises used for business purposes, or the grant of a new lease in lieu thereof; and to amend the law of landlord and tenant.

Question 3

L&T (Covenants) Act 1995

Answer 3

Assignment
An Act to make provision for persons bound by covenants of a tenancy to be released from such covenants on the assignment of the tenancy, and to make other provision with respect to rights and liabilities arising under such covenants; to restrict in certain circumstances the operation of rights of re-entry, forfeiture and disclaimer; and for connected purposes.

Question 4

LTA 1988

Answer 4

Assigning or subletting consent
An Act to make new provision for imposing statutory duties in connection with covenants in tenancies against assigning, underletting, charging or parting with the possession of premises without consent.

Question 5

Tell me about a key lease clause you are aware of?

Answer 5

Alienation, the ability or restriction on transferring or subletting of the whole or part of the property to another. If the lease is silint on this point the tenant has the ability to transfer or sublet.

Question 6

What is alienation?

Answer 6

A covenant in a lease determining whether the tenant can alienate the land, that is, whether there is any absolute prohibition or restriction against the tenant charging, assigning, underletting or parting with possession of the demised premises.

Question 7

Tell me about your understanding of the Code for Leasing Business Premises.

Answer 7

Its now a professional standard.
The objective is to improve the quality and fairness of negotiations on lease terms and to promote the issue of comprehensive heads of terms that should make the legal drafting process more efficient.

Question 8

Tell me about how you would summarise a lease and what terms you would be looking out for.

Answer 8

If I was summerising a lease I would be looking at;
- Secuirty of Tenure
- Length of Term
- Rent review Provisions
- Alienation
- Assumptions and disregards in the rent review clause
- Allowed Use
- Service charges
- Deposit or guarantor
- Date of the lease
- Repairing obligations (FRI or other)
- Strength of Covenant
- Break Clauses

Question 9

What is the Regulatory Reform (Business Tenancies) (England & Wales) Order 2003?

Answer 9

The Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 sets the procedure for the Landlord and Tenant to contract out of the security of tenure provisions of the LTA 1954.

Question 10

What is the role of an expert witness?

Answer 10

An expert witness’s primary duty is to help the Court or tribunal reach an informed decision by providing an impartial expert opinion on matters which are in dispute. An expert witness is not an adviser for any party to proceedings.

Question 11

How does an advocate differ from an expert witness?

Answer 11

Your primary duty as an expert witness is not to a client but to the tribunal, the Advocate represents their client

Question 12

What is an arbitrator?

Answer 12

A RICS arbitrator is a chartered surveyor or another qualified professional who is appointed by RICS to act as an arbitrator in disputes related to the built environment.

Question 13

What is an independant expert?

Answer 13

Appointed by the president of the RICS and has a detailed knowledge of the market as a valuer. Details in RICS GN Independent Expert Determination 2016.

Question 14

How does an arbitrator and expert’s roles differ?

Answer 14

The Arbitrator and Experts roles differ as the arbitrator is there to conduct the arbitration and are trained as such. The expert is there to give impartial expert opinion.

Question 15

How would you establish the relevant third party procedure for a rent review?

Answer 15

Read the lease and the relevant rent review clause within.

Question 16

How much does it cost to submit an RICS DRS application?

Answer 16

£425

Question 17

What is the difference between the hypothetical lease at a rent review and lease renewal?

Answer 17

Modern leases generally set out the meaning of market rent in detail, by means of the theory of the grant of a hypothetical lease taking place in the open market. Under this type of clause, the valuer is required to assess the rent that hypothetically would be obtained if the premises were being let to a new tenant at the review date.

Question 18

What is PACT?

Answer 18

PACT is a process where the determination of all or some of the terms of a renewal lease is (with the consent of both parties) ‘delegated’ to an independent third party who may act either as an arbitrator or as an independent expert.

Question 19

What is a Calderbank offer?

Answer 19

A Calderbank offer which is made without prejudice save as to costs is an attemt to settle the dipute that cannot be disclosed until the dispute has been resolved but can be used to acertain if some or all of the costs should be awarded to one of the parties. This would be the case if an arbitrators decision was less that the offer then the party who didnt accept the offer could be liable for all or some of the costs. It comes from the case of Calderbank v Calderbank 1976.

Question 20

What is a break clause?

Answer 20

A break clause is a set time in which a lease can be terminated which would be included within the terms of the lease.

Question 21

Tell me about your understanding of notices under the LTA 1954.

Answer 21

The landlord and Tenant Act 1954 has specific forms by which notices are to be served.
S.25 Notice - Opposing or offering a new lease.
S. 26 Request - by tenant wanting a new lease.
S.27 - Notice the tenant wanting to end the lease
S.40 Notice - parties wanting information on the parties to the lease

Question 22

Tell me about the method of serving the notice?

Answer 22

The Landlord and Tenant Act 1954 (LTA 1954), section 66(4), provides that section 23 of the Landlord and Tenant Act 1927 (LTA 1927) shall apply to any notices required to be served under the LTA 1954. Section 23(1) of the LTA 1927 provides that a notice may be served in a number of ways, including:

personal service
leaving it at the recipient’s last known place of abode
sending it by registered post or recorded delivery
Although section 23 of the LTA 1927 expressly refers to the above modes of service, it is widely accepted that the provision is permissive, rather than mandatory; a notice may be served by one of the three methods detailed in section 23(1), it does not say a notice shall be served by those methods.
It is common in commercial leases to see the express incorporation of Section 196 of the Law of Property Act 1925 (“s196”).

Question 23

Tell me about your understanding of interim rent.

Answer 23

An interim rent is usually made in the course of a lease renewal proceedings in court.

Question 24

Tell me about your understanding of the Court procedure at lease renewal.

Answer 24

If the landlord agrees to a new lease, either party can apply to the court for an order granting a new lease under section 24 of the landlord and tenant act 1954. The application must be made within the time limit specified in the section 25 notice or the section 26 request.
If the landlord opposes the grant of a new lease, they must serve a counter notice on the tenant within two months of receiving a section 26 request stating the grounds for their opposition under section 30 of the act. If landlord opposes, either party can apply to the court for determination under section 29.

Question 25

What are the Civil Procedure Rules?

Answer 25

If either party applies to court for a new lease or for termination of tenancy, they must follow Civil Procedure Rule 56 (CPR 56), which sets out the requirements for starting and conducting such claims. The claim form must contain certain information and be accompanied by evidence. The defendant must file an acknowledgment of service and a defence within specified time limits. The court may order a trial or a hearing to decide on any disputed issues.

Question 26

What are the Jackson Reforms?

Answer 26

The Jackson reforms are a set of changes to the civil litigation costs system in England and Wales, which were implemented in April 2013. One of the reforms was the new test of proportionality for costs, which means that costs incurred in litigation must be proportionate to the value, importance and complexity of the case, and not just reasonable and necessary.

Question 27

What is a Part 36 offer?

Answer 27

A Part 36 offer is a form of offer used to settle all or part of a dispute between parties to civil litigation, which is governed by Part 36 of the Civil Procedure Rules (CPR). It is a method by which claimants and defendants can settle their claim without need for a trial or for the court to be involved.

Question 28

Can you serve a Calderbank offer at a lease renewal?

Answer 28

Yes a Calderbank save as to costs offer is typical when wither party has applied to court to determin the terms of the new lease.

Question 29

What does Section 34 relate to in a lease renewal?

Answer 29

Section 34 gives the court the power to determine the level of rent when the parties have not been able to reach an agreement on that aspect of a renewal lease.

Question 30

What is compensation for disturbance?

Answer 30

Under section 37 of the 1954 Act, the tenant is entitled to statutory financial compensation for the disturbance to their security of tenure rights where the landlord relies on one or more of the no-fault grounds of opposition including: Ground (e) – where the landlord requires possession of the holding for the purpose of letting or otherwise disposing of the property as a whole. Ground (f) – where the landlord intends to demolish or reconstruct the premises comprised in the holding, or a substantial part of them, or to carry out substantial work of construction. Ground (g) – where the landlord intends to occupy the holding for the purposes, or partly for the purposes of, a business to be carried on by him, or as his residence. The statutory compensation is paid when the tenant vacates the property, whether it is voluntarily or following a Court order. The amount payable is dependent on the rateable value of the property and the length of time the tenant (and any predecessor in title carrying on the same business) has been in occupation of the property. The date that a landlord serves its opposed section 25 notice or serves a counternotice to a section 26 request (opposing renewal) fixes the date on which the rateable value is determined for calculating statutory compensation.

Question 31

What does Section 18 mean in relation to the LTA 1927?

Answer 31

Section 18 of the Landlord and tenant Act 1927 relates to dilapidations claims and the amount of damages that can be awarded for breach of repairing obligations.

Question 32

Why would you contract out a lease?

Answer 32

To contract out of sections 24 to 28 of the Landlord and Tenant Act 1954 is a way of not giving the business tenant security of tenure and therefore the lease can be ended without following the statutory provisions in the act.

Question 33

How would you contract out a lease?

Answer 33

A lease can be contracted out of sections 24 to 28 of the Landlord and Tenant Act 1954 by serving a warning notice on the tenant stating that the lease they are about to enter into is contracted out of those sections of the act. They would then either have 14 days cooling off period before the lease is entered into or a statutory decleration can be signed by a solicitor who will advise them of what they are signing up to.

Question 34

Tell me about the LTA 1954 in relation to contracting out a lease.

Answer 34

The 1954 Act does not apply to tenancies that have been 'contracted out'. That is, under section 38A, the landlord and tenant can agree to exclude the tenancy (provided that it is not a periodic tenancy) from the security of tenure provisions of the 1954 Act.

Question 35

What are the Section 30 grounds under the LTA 1954?

Answer 35

The grounds are: paragraph (a): failure to comply with obligations to repair and maintain paragraph (b): persistent delay in paying rent paragraph (c): other substantial breaches or other reasons paragraph (d): provision of suitable alternative accommodation paragraph (e): landlord wishes to let the property as a whole paragraph (f): landlord intends to demolish or reconstruct and paragraph (g): landlord intends to occupy the premises.

Question 36

What time limits apply in relation to lease renewal notices?

Answer 36

A lease renewal notice and request must be no more than 12 months and no less than 6 months before the lease end date.

Question 37

When would you recommend that a landlord/tenant serves notice in a LTA 1954 renewal?

Answer 37

A lease renewal notice and request must be no more than 12 months and no less than 6 months before the lease end date.

Question 38

What does Section 40 of the LTA 1954?

Answer 38

Section 40 of the landlord and tenant act 1954 is a provision allowing the request by either party to request informaiton about their interests in the property, a section 40 notice.

Question 39

What tenancies are covered by the LTA 1954?

Answer 39

Business tenancies

Question 40

What is the difference between a lease and a licence?

Answer 40

The main differences between a lease and a licence are; 1. A lease provides an estate in land, a licnece is a permission to use the land. 2. A lease can be assigned, a licence is a personal right and cannot be assigned. 3. A lease can only be terminated under a break clause, a licence can be terminated at any time. 4. A lease is exclusive posession, a licence is not. Case: Street v Mountford 1985

Question 41

Tell me about the terms of a new lease in relation to a contracted in lease renewal? (e.g. lease length)

Answer 41

The new terms should follow those in the previous rent subject to modernisation as in O'May v City of London Real Property Co 1982.

Question 42

How can a tenant quit a contracted in lease?

Answer 42

If a tenant wanted to end a lease which was inside the provisions of sections 24 to 28 of the landlord and tenant act 1954, if allowed under the lease terms at the appropriate time it would serve a section 27 notice on the landlord 3 months before the lease end date.

Question 43

What does subject to contract/without prejudice/without prejudice save as to costs mean?

Answer 43

Subject to contract means that the details of the document are in negotiation only and will only become legal under contract. Without Prejudice means that the details of the document or communication cannot be relied upon or presented at court proceedings. Save as to costs means that the contents of the document or communication cannot be relied upon or presented to the court apart from any decision as it related to the costs for bringing the matter to the court.

Question 44

What does time of the essence mean?

Answer 44

Time of the essence means that for instance if the rent review stated that it was to be reviewed every 3rd year, the rent review notice would have to be served before the next review date and could not be reviewed after the review date. This would need to be checked in lease terms as if the lease is silent on this matter then English law states that it is implied. United Scientific Holdings Ltd v Burnley Borough Council 1977.

Question 45

When do notices need to be served at rent review?

Answer 45

The rent review clause would need to be checked within the lease to check when notices should be served.

Question 46

What is the valuation date at lease renewal?

Answer 46

The valuation dat is the date of the commencement of the new lease as stated on the notice but this is fluid if agreed by both parties. If the matter goes to court then the valuation date will be 3 months and 21 days after the hearing or if more practicle the date of the hearing or the expert witness reports .

Question 47

What are the different types of rent review?

Answer 47

The different types of rent review are: - Upward only to market rent. - Indexed usually to RPI. - Turnover rents - Stepped increases

Question 48

What is a hypothetical lease?

Answer 48

A hypothetical lease is a term used in rent reviews to describe the basis on which the market rent is assessed. It is not a real lease, but a set of assumptions and disregards that are specified in the actual lease to define the conditions of the hypothetical letting. The hypothetical lease may have the same or different terms as the actual lease, depending on how the rent review clause is drafted. The purpose of the hypothetical lease is to provide a consistent and objective framework for valuing the premises, without being influenced by the circumstances of the actual landlord and tenant.

Question 49

What is a rent review assumption/disregard?

Answer 49

The assumptions and disregards are things that are to be considered when undertaking the valuation and form part of the make up of the hypothetical lease.

Question 50

Give me an example of a typical assumption/disregard?

Answer 50

A typical disregard would be tenants approved alterations. An assumption would be that the property was fit for immediate occupation.

Question 51

Can you challenge an arbitrator’s award and, if so, under what grounds?

Answer 51

An arbitrator’s award can be challenged under certain grounds, depending on the applicable law and the arbitration agreement between the parties. In general, there are two types of challenges: one based on the lack of jurisdiction of the arbitrator, and the other based on the serious irregularity or error of law in the award.

Question 52

Can you challenge an expert’s determination?

Answer 52

The only circumstances in which a determination may be challenged are (a) where it is evident that the independent expert has departed from their instructions in a material respect (as opposed to carrying out that task in a deficient way, in which case although the independent expert may be sued for negligence, the determination will stand); (b) where the dispute resolution clause allows a challenge in the case of manifest error, and the determination displays such an error; or (c) in the cases of fraud, collusion or partiality.

Question 53

What is the presumption of reality?

Answer 53

The presumption of reality is a principle of interpretation that applies to rent review clauses in commercial leases. It means that the rent review should be based on the actual state of affairs that exists on the valuation date, not on some hypothetical or artificial scenario. The presumption of reality reflects the commercial purpose of rent review clauses, which is to update the rent according to changes in market conditions and the value of money over time.

Question 54

Tell me about one example of rent review/break option/lease renewal case law you are aware of.

Answer 54

In S Francis Ltd v The Caverdish Hotel (London ) Ltd 2017 - And appeal 2018 the Supreme court found in favour of the tenant which meant that the landlord could not refuse the grant of a new business tenancy on redevelopment grounds unless they could prove a firm and settled intention to carry out the works.

Question 55

What is a turnover rent?

Answer 55

Turnover rent is based on the turnover of the business operatiing in the premises and the landlord would take a share of the turnover, usually a percentage of the profit made.

Question 56

What is a geared rent?

Answer 56

A geared rent is a type of rent review clause that links the rent payable by the tenant to a percentage of the open market rental value of the property. This means that the rent will increase or decrease in line with the changes in the market, but at a lower or higher rate than the actual market value.

Question 57

Tell me about your understanding of fitted assumptions?

Answer 57

Fitted assumptions are a type of assumption that a valuer may use when valuing a property. They are defined as assumptions that are made to reflect the characteristics of the property as if it were fitted or refurbished to a specific standard or specification.

Question 58

Tell me about your understanding of a fitting out rent free period?

Answer 58

The fitting out rent free period is given to a tenant who needs to fit out the property to begin trading, normally 3 or 6 months.

Question 59

What RICS guidance relates to the use of comparables?

Answer 59

Comparable Evidence in Real Estate Valuation 1st Ed, re-issued in April 2023 as a professional standard.

Question 60

What does the RICS say about conditional fee agreements when proceeding to third party as an expert witness?

Answer 60

Expert witnesses are expressly prohibited from undertaking an expert witness appointment on any form of conditional or other success-based arrangement (CFA), under which the surveyor’s fees are associated with the outcome of the case. Surveyors acting as expert wittness 4th edition as ammended Feb 2023

Question 61

What does disclosure mean in relation to a lease renewal?

Answer 61

Disclosure in relation to a lease renewal means the provision of relevant and accurate information by the parties involved in the negotiation of the lease terms.

Question 62

How would you deal with post-dated rent review evidence?

Answer 62

The valuer should be aware of any legal or contractual restrictions on the use of post-dated evidence and should exercise caution in its use.

Question 63

How do you treat tenant’s improvements at rent review?

Answer 63

Tenant’s improvements are alterations or additions made by the tenant to the property, usually with the landlord’s consent. They can affect the rent review process in different ways, depending on the terms of the lease and the nature of the improvements. If the tenants improvements had landlords consent these would normally be disregarded.

Question 64

How would this differ at lease renewal?

Answer 64

If the lease was contracted out the tenants improvements could be rentalised. If it was an inside the act renewal they could not.

Question 65

Talk me through your understanding of the RICS guidance on dilapidations.

Answer 65

The guidance note seeks to advise members on the factors they should take into consideration when producing Schedules of Dilapidations, Quantified Demands, Responses, Scott Schedules and Diminution Valuations for reference to or use by the client, the other party to the lease, third parties and tribunals.

Question 66

What is the dilapidations protocol?

Answer 66

Pre-Action Protocol for Claims for Damages in Relation to the Physical State of Commercial Property at Termination of a Tenancy (the 'Dilapidations Protocol')

Question 67

What timings apply to a dilapidations claim?

Answer 67

According to the Dilapidations Protocol, the landlord should serve the Schedule of Dilapidations and Quantified Demand within 56 days of the end of the lease. The tenant then has another 56 days to respond. The landlord has at least 6 years from the end of the lease to commence a dilapidations claim.

Question 68

What is PDPAC?

Answer 68

Practice direction pre-action conduct and protocols (applicable to dilapidations disputes unless the Protocol applies.

Question 69

What is quantified demand?

Answer 69

A Quantified Demand is a document that provides further details about allegations related to a property lease. It is prepared by, or on behalf of, the landlord and is issued after the end of the lease. The document includes details of what the landlord considers to be their likely loss as a consequence of the alleged breaches. This loss may be different from the cost of the works that will be in the Schedule of Dilapidations.

Question 70

What is a Scott Schedule?

Answer 70

A Schedule of Dilapidations with additional columns to enable the parties to set out their respective views. The document is usually prepared by a building surveyor.

Question 71

What is a diminution valuation?

Answer 71

A valuation prepared in order to calculate the diminution in value of a landlord’s property incurred as a result of alleged breaches. The document is usually prepared by a specialist valuation surveyor.

Question 72

What legislation relates to diminution valuations?

Answer 72

Section 18 of the Landlord and Tenant Act 1927 This section provides a statutory cap for damages by calculating the difference by which the value of the landlord’s interest has been reduced on account of the breaches of lease covenant. This is otherwise known as the ‘diminution in value’ of the landlord’s interest.

Question 73

What would you find in a schedule of dilapidations?

Answer 73

Schedules of Dilapidations would normally contain: • details of documents relied upon • an itemised numbered reference • the relevant clause of the lease or other document • the alleged breach • the remedy required (when relevant) and • the cost of the remedy (when relevant).

Question 74

What type of landlord’s schedules exist?

Answer 74

* Interim Dilapidations - During the course of the lease term. * Terminal Dilapidations - Towards the end of the lease, usually last 18 months. * Final Schedule of Dilapidations - After lease has expired.

Question 75

What documentation do you need to consider in relation to a dilapidations claim?

Answer 75

A - Lease: This is the legal agreement between the landlord and tenant, outlining the terms and conditions of the property rental2. - Schedule of Dilapidations: This document details the breaches of covenant, usually disrepairs, that the landlord considers to be the responsibility of the tenant1. - Quantified Demand: This document outlines the landlord’s monetary claim for damages1. - Response: This is the tenant’s reply to the Quantified Demand1. - Scott Schedule: This document is used in dilapidations disputes to compare and contrast the landlord’s and tenant’s positions1.

Question 76

What remedies exist for dilapidations during the lease term?

Answer 76

An interim schedule of dilapidation can be produced during the term.

Question 77

Why and when would you recommend one/each of these?

Answer 77

An interim schedule of dilapidations could be served on the tenant 2 years before the lease expiry date.

Question 78

What is supersession?

Answer 78

It applies to claimed items that would be overridden or removed by works required to bring the property up to modern market condition by the landlord.

Question 79

How should you respond to a dilapidations claim?

Answer 79

You have 56 days to respond to a dilapidations claim and usually with a Scott Schedule.

Question 80

How can you settle a dilapidations dispute?

Answer 80

The RICS Dilapidations Scheme

Question 81

When would you consider ADR or litigation?

Answer 81

If the parties cannot agree to the details or figures.

Question 82

What is an offer to settle?

Answer 82

An offer to settle during the dilapidations negotiations by either party to bring the matter to an end in relations to the dilapidations costs.

Question 83

Can you use a Part 36 offer in a dilapidations claim?

Answer 83

Yes, if the offer is not accepted within 21 days and the opposing party fails to beat the offer at trial they could be liable for costs and penalties.

Question 84

What is included on a settlement agreement?

Answer 84

A -Settlement Amount - Claims - Schedule - Dialigue between parties

Question 85

Why are turnover rents becoming increasingly popular? How might this affect future rent reviews and lease renewals?

Answer 85

Turnover rents are becoming popular with tenants as this is based mainly on their sales (unless with an added Minimum Ground Rent) and therefore if the business is not doing well the rent they pay will be lower. For landlords the turnover rent model will normally drive shorter leases and therefore the landlord will have more opportunity to break the leases if the tenant is not performing.

Question 86

Explain the precedent set in WH Smith Retail Holdings v Commerz RI mbH (2021) relating to pandemic rent suspension clauses.

Answer 86

This case set a precedent for how pandemic rent suspension clauses are considered in lease renewals. It shows that such clauses are now something that all tenants want and that the market has priced them in.

Question 87

What was the outcome of the W (No. 3) GP (Nominee A) Ltd & W (No. 3) GP (Nominee B) Ltd v JD Sports Fashion Plc case in relation to turnover rents at a contracted in lease renewal?

Answer 87

The judgement as to when parties cannot agree in regards to a turnover rent, the court can order on a turnover rent. In this case the judge ordered that the 8% turnover rent was too high and did not reflect market value and therefore ordered a valuation based on ITZA calculation.

Question 88

How would you advise on the SDLT liability between a surrender and regrant and a reversionary lease?

Answer 88

If the parties to the lease do not change there is no SDLT liability for a surrender a re-grant. There would be for a reversionary lease.

Question 89

What recent county court cases have there been on Covid lease renewals?

Answer 89

In Poundland Ltd v Toplain Ltd 2021 the county court refused the tenents request for the rent to be reduced by half 'use prevention measure' if there was another covid outbreak. The judge used O'may v City of London to stat that the proposal was not a reasonable and fair modernisation. This was different to the WH Smith Holdings Ltd v Commerz Real Investmentsfesellschaft mbH (March 2021) as the parties had already agreed to the pandemic rent suspension clause and the court was only asked to determin the mechanism of that being triggered.

Question 90

What is the ‘Chartbrook’ principle on index linked rent reviews?

Answer 90

The Chartbrook principle is a legal principle that allows for the correction of mistakes in rent review clauses. It was established in the case of Chartbrook Ltd v Persimmon Homes Ltd

Question 91

Following the Chartbrook case, what was the outcome of the Monsolar IQ Ltd v Woden Park Ltd case?

Answer 91

The case of Monsolar IQ Ltd v Woden Park Ltd [2021] EWCA Civ 961 was about a dispute over the interpretation of an indexation clause in the rent review provisions of a lease. The clause, when read literally, repeatedly applied the inflation in subsequent years which had already been applied in earlier years. This would have led to an exponential increase in rent, reaching more than £76 million per annum by year 25 of the term. The court held that there was a clear mistake in the lease which not reflect the intentions of the parties.