L&T Subs Flashcards
What does Without Prejudice mean?
Any statements made during the process of negotiations cannot be put before a third party
What does without Prejudice Save as to Costs mean?
Statements made during the course of negotiations cannot be put before a third party apart from when determining costs.
You say you understand the process of serving notices, What is the process of serving notices?
The main notices that a landlord would serve are section 25 non-hostile and a section 25 hostile. These would be served when the tenant wanted to renew the lease or get the tenant out.
A tenant would serve a section 26 notice in order to renew their tenancy.
What are the grounds that a landlord must satisfy?
S30 LTA 1954: 7 grounds
a) persistent delay in paying rent
b) breach of a repair cov
c) breach of any covenant
d) suitable accommodation
e) uneconomic subdivision
f) demolition
g) re-occupation
Talk me through your rent review in Borough
- Instructed by client (tenant) to conduct RR
- CIT
- Requested the lease - time not of the essence.
- Objectives - nil increase
- Inspection - secondary stock, carpeted floors, 1,000 sq ft
- Measured on both an NIA and IMPS basis.
- Researched Market Rent on a net effective basis.
- Produced a report
- Commenced negotiations
- Rent review memo drafted and signed.
Why did you do it on a Net effective basis?
Borough
To see what Tenants are actually paying in the market.
Tells you in RR Clause:
‘Assumed the T has had benefit of rent free period, minus fitout.’
How do you calculated a Net Effective Rent?
Borough Market
[ Rent * (Term-rent free)] / term
Taking into consideration 3 months for fitout
What was the hypothetical term? And how much rent free did you adopt? (borough)
5 year term, Rent Free of 9 months
What was your headline rent? (borough)
£45 for the space
What was your net effective rent (borough)
[45 * (5-0.5)] / 5
£40.5 to 5 years
Break at 3
£37.5
What does Time of Essence Mean?
If the rent review is not agreed in that period of time the landlord and tenant loses the right to review the rent.
What was in your section s26 notice you served in Edmonton?
Date of Letter: 1 March 2019
Name of Tenant & Landlord:
Address of Property
Date of New tenancy: 1 September 2019
If you wish to ask the court to grant a new tenancy you must do so by the date of 1 September
If landlord opposes: 2 months and on grounds
section 30.
Name of correspondence: Solicitors
Signed & Dated
Terms: Attached in Appendix
Demise: As per existing lease
Term: 5 years
Break: 3 years
Rent: £30 psf (£60,000)
Other terms: AS per existing lease.
What were the timings, how much notice did you give in your section 26 ?
12 months
What are the standard notice periods for a section 26?
Landlord to respond in 2 months
Did the Landlord agree for you to stay? (Edmonton)
Yes, but disputed the rent and term so ended up negotiating on those points.
Did you think the rents in the area were going up or down? (edmonton)
Rents going down
Why did you serve a section 26 on 12 months notice?
edmonton
As rents were going down so I felt the T should serve a section 26 at the latest possible time.
What was in the Heads of Terms? (edmonton)
- Subject to Contract
- Date of the old lease
- Date of the new lease
- Term (5 years)
- Break (3 years)
- Other Terms (As per Existing lease)
- Inside LTA
- Landlord and Tenants Solicitors
- Rates
- Service Charge
- User Clause
- Alienation
- Repair
What would have happened if you could not agree on this with the landlord?
(lease renewal edmonton)
2 choices:
- PACT (Professional Arbitration on Court Terms)
- Arbitrator is nominated by RICS President
- Advantages - faster, less expensive, decision by a
surveyor
- County Court - Following the Civil Procedures Rules 1998
- used when court proceedings are anticipated
- Part 36 offer - used to induce other party to settle
(similar to a Calderbank) - Offer open for 21 days - after this time period it can
be accepted but can be withdrawn
For your Lease Renewal in Bedford, how much of an increase did they propose?
If you are inside the Act and you go to Court, the court can only award a Net Effective Rent, not allowed to award a Headline and Rent Free.
HR of £85 psf ZONE A (£10 increase) 5 year term 6 months rent free Do not take into account fit out!!!! In court they dont.
Passing Rent : £70 ZONE A
MR: £65 ZONE A
L Proposed: £85
Net Effective L proposed: £77
What are the differences between Arbitrators and Independent Experts?
7 main differences:
C osts A ppeal N egligence D isclosure E vidence L aw O utcome
What is a Calderbank?
An offer with your final position on rent and its:
- an attempt to achieve a resolution of a dispute
- protect your clients costs if it goes to 3rd party
What did you Calderbank contain?
RR City of London
- Without Prejudice Save as to Costs
- Rent
- Time limit in which to respond - 21 days
If you had the choice, would you have preferred an Arbitrator or an Independent Expert?
Market was rising so I would have preferred an Independent Expert as I was acting for the Landlord.
If you were acting for the client, would you have gone as an advocate or an expert witness?
Expert Witness:
- trying to find the correct market rent
- duty of care to the court
- Statement of Truth
- Not immune from civil action - Jones v Kaney.
Advocate
- acting for the client (so miss out evidence)
- but must uphold integrity
Real life - everyone says they’re going as an expert witness as they are looking to find the ‘correct MV’
Describe office in Borough
- 1,500 sq ft
- First Floor Office space
- Dated
- Carpeted floors
- Wall mounted aircon
- lack of natural light
- period building brick construction
- above retail
- single glazing
- good location
What was your opinion of MR for your rent review in City of London?
HR: £50 psf
RFP: 9 months
Term: 5 year term
What was your net effective rent for your RR in city of london?
[50x (5-0.5) / 5]
NET EFFECTIVE RENT WAS £45
What was the negotiations saying for your RR in City of London?
Tenant: NIL INCREASE
Landlord: £50
Why did you request licences for alteration?
RR City
Because you had to disregard T fit out in the lease
Why did you request any deeds of variation?
RR City
In order to obtain the latest legal documents.
If the lease had been varied then I would need to know
What is an example of deed of variation?
A deed of variation is when there has been a change in one of the terms of the lease.
eg. deleting a clause, rewording a clause.
What is the hierarchy of evidence?
- OML
- LR / RR
- Independent Experts
- Arbitration
- Hearsay
- Lease re-gearing
What recommendations did you make to the client?
RR city of London
- Advised MR was £50
- Net Effective rent was £45
- PR: £42
I advised the client:
- My opinion of MR
- lease terms and RFPs
- Start negotiations on £50 to hopefully get a rent of £45
What was in your trigger letter to the Tenant for your rent review?
- Address and Name of C
- Rent Review Date
- Proposed Rent £50
- Lease Date
- My contact details
What was included in your rent review memordandum?
- Name of L&T
- Rent agreed
- RR Date
- Date of Memo
- Date of lease
- Signatures
Describe the office for your RR in City of London?
- 1960s building
- 7,500 sq ft
- Good condition
- Raised Floors
- Suspended ceilings
- WCs separate
- Good natural light
- 3rd floor
What was in the RR clause for your rent review in City of London?
ASSUMPTIONS:
- OML
- VP
- Willing leasor / Leasee
- Term 5 years (as break in 5th year)
- Ready for fitout
- L&T complied with obligations
DISREGARDS:
- Good will of property
- Goodwill of T
- T improvements
How did you know it was contracted inside the LTA?
LR Bedford
Lease was silent
What was contained in section 25 Notice from L?
- NAME L&T
- ADDRESS OF PROPERTY
- DATE TO END TENANCY (no less than 6 months, no more than 12 months) (served 6 months prior to lease expiry)
- CONFIRMATION OF A NEW LEASE TO BE PROPOSED
- RESPONSE DATE
- Proposal for a New Tenancy in Annex.
- term 5 years
- Rent £85 psf
- Recommendation to get PROFESSIONAL ADVICE
HR of £85 psf ZONE A (£10 increase)
5 year term
6 months rent free
Passing Rent : £70 ZONE A
MR: £65 ZONE A
L Proposed: £85
What were the clients objectives?
LR Bedford
- Reduce rent
- Negotiate a 3 year term with annual breaks
Describe property in Bedford
- Retail unit over Ground and First Floor
- 800 sq ft Zone A
- 1,800 overall
- Period building of brick construction beneath a pitched roof
- Good retail pitch
What is the RICS GN on Comparable Evidence in RE Valuation 2019
Category A - direct comparable evidence
Category B - general market data
Category C - other sources
What was included in your H of T for your lease renewal in Bedford?
- Date of Lease
- Date of HofT
- Subject to Contract
- Rent £65
- RFP (2 months)
- Term - 3 years
- Break option - annual breaks
- Inside Act
- Repair Clause
- Alienation Clause
- T Solicitors and agents
- L solicitors and agent
What are rents in Borough
Grade A space - £60-£70
Secondary stock £45-£50
What were the RR provisions that affected value?
ASSUMPTIONS
- OML
- Willing L&T
- Term 5 years
- Fit and Available for immediate occupation
- All covs observed by both L&T
- Property used for purpose set out in lease
DISREGARDS
- goodwill of T
- goodwill of Property
- T improvements
What did your report contain?
RR Borough
- My opinion of MR - HR £45 but Net Effective £37
- Negotiate a Nil increase
- Passing at £35
- Area 1,500 sq ft
- comparable evidence
- terms of 5 years normal, break at year 3
- RFP of 9 months normal
What is holding over?
when the occupier remains in the property even after expiry of the lease.
s24 LTA
Describe retail unit in Edmonton
- 4,000 sq ft overall
- 2,000 ZONE A
- Frontage
- Brick construction
For your LR in Edmonton, what did you think MR was?
ZONE A £30 psf
Passing Rent £40
What is contained in your Terms of Engagement for a LR/ RR?
xxx
What two areas have the highest amount of litigation for Rent Reviews?
- Hypothetical Term
2. Net Effective Rents
Tell me about a time you provided advice in your time with lease advisory?
Calderbank
What would happen if you had not negotiated a new lease by the time of the date specified in the notice what happens?
TENANT LOSES SECURITY OF TENURE UNLESS….
- new lease in place
- either party has applied to court
- parties have agreed to an extension of their statutory period
If Time is of The Essence is not in lease what do you assume?
Time is not of the essence
Why is determining competence important?
RULES OF CONDUCT FOR MEMBERS AND FIRMS
For your rent review in the city you established it was under-rented? Talk me through how you reached that conclusion?
I analysed the market to find comparable properties that were of a similar age, specification, location, term etc and analysed what I felt the MR would be.
I then allowed for rent free periods (discounting 3 months for fit out) to arrive at a net effective rent which was higher than the passing rent.
What was the time scale specified in your Calderbank?
21 days
What is that time limit in a Calderbank based on? market norm?
It is based on giving the other party enough time to process it and respond.
Most of the section 25 notices I have seen during my time in lease advisory gave around 21 days regardless of different markets etc.
Was the Calderbank accepted within the 21 days?
If it wasn’t what would happen in relation to costs
Yes it was.
If it was accepted after the 21 days then the party which accepts it would be liable for the costs from that expiry of the calderbank
How much is an application and how much is it? Is it inclusive or exclusive of VAT?
£425 INCLUSIVE of VAT
Why did you write up a memorandum when you had an acceptance of the Calderbank?
Despite acceptance of a Calderbank being sufficient, for record purposes I drafted a RR memo and had it signed by both parties for completeness.
How did the other party accept the Calderbank?
THERE WILL BE NO SUBJECT TO CONTRACT / WITHOUT PREJUDICE
Via email but they can also respond with a letter
What are the ways you can document a rent review?
- Acceptance of a Calderbank - email or letter
- Rent Review memo
- Award
- Determination
All sufficient documentation
How would your role change if you went to 3rd party?
EXPERT WITNESS - duty to court
ADVOCATE - duty to client
What fee basis can you go to 3rd party as an expert witness?
Not an incentivised fee.
Fixed fee basis based on an hourly rate
If you are negotiating against an unrepresented tenant is there anything you should consider?
CODE FOR LEASING BUSINESS PREMISES 2020
Recommend them to get professional advice
What happens if a lease is not agreed before the date of the new lease?
T will lose their security of tenure unless:
- New lease is agreed
- One party has applied to court
- Parties have a written agreement to extend their negotiations
How do you check if a notice is valid?
Solicitors do but must be:
- in the prescribed form in accordance with Act
- upon the correctly named party.
What was in your report and what were your recommendations to your client for your LR in Bedford?
- My opinion of MR was £65 ZONE A
- Passing Rent £70
- Property was over-rented
- In a strong position to negotiate a rental reduction and flexibility due to the high number of vacant units.
- Included comps
- There was one comparable that had accepted a 3 year lease with annual breaks
During your LR in Bedford, talk me through the various ways you gave your client advice?
- Researched the MR to advise my client of the Market Rent and informed them the property was over-rented.
- Advised my client that due to the high number of units they were in a strong position to negotiate more flexible lease terms.
Why did you serve a section 26 Notice when the T was holding over?
- Risk of LL serving a hostile section 25 notice when you are holding over
- If you serve a s26 notice you can secure T’s occupation if a L serves a counter notice within 2 months
Why was the T holding over?
The T was holding over and expressed interest in staying so recommended to serve a section 26 straight away.
How can a T terminate a lease?
- Forfeiture (if there is one in the lease)
- Surrender and negotiation
- Break clauses
- Lease expiry
- service of notices under LTA 1954
Process of Arbitration?
- Arbitrator appointed
- Arbitrator dictates timetable
- Statement of Agreed Facts
- Expert Witness reports
- Rebuttals
- New rent and costs awarded
What costs are associated with 3rd party?
- Cost of application
- Surveyors costs
- independent expert costs
What are the other ways a rent review can be linked?
- RPI (Most common)
RPI and CPI reflect the monthly change in the cost of a “basket” of goods and services but they differ, sometimes by a percentage point, as they track the costs of different items
- CPI
- Stepped
- Turnover
