Landlord and tenant Flashcards
What is the difference between a lease renewal and a rent review?
Lease renewal is a statutory procedure laid down by the Landlord and Tenant Act 1954 Part II (as amended)
Rent reveiw is a contractual procedure contained within a lease
To what tenancies does the Act apply?
- It is a tenancy
- The premises must be used for a business
- There must be occupation of at least part of the premisis by the tenant
- There must be occupancy of more than 6 months
- It must not be an exempted or excluded tenancy
- There must be a competent landlord
To what tenancies does the Act not apply?
- Agricultural holdings
- Mining leases
- Residential tenancies
- Tenancies granted as a condition of emplyment
- Tenancies not exceeding 6 months unless there is a provision for extension or, tenant has been in occupation for more than 12 months
What are the four ways a tenancy under the 1954 Act may end?
- Landlord serves a notice of termination under Section 25
- Tenant requests a new tenancy under Section 26
- Tenant serves notice of termination under Section 27
- Landlord and Tenant agree terms for a new tenancy under Section 28
When can a landlord service a Section 25 notice?
between 12 and 6 months prior to the contractual end of the tenancy
As of June 2004 what would a friendly notice need to state?
- Property comprised
- The rent
- Other terms
What can a Section 26 propose?
- The commencement date of the new tenancy which may be any time up to 12 months after the date of the notice
- The property comprised
- The rent payable
- The other terms
Under Section 29(1) that Court has the power to determine what?
- The property comprised
- The length of lease
- The rent
- The other terms
- An interim rent
Under Section 33 how long can a Court grant a lease?
Maximum 15 years (14 years before 1st June 2004)
What are the four tests of the O’May case?
- Good reason
- Adequately compensated
- Impairment of the Tenants business
- Fair and reasonable
What are the implied Landlord covenants under a lease?
Quiet enjoyment for the Tenant
What is a modern form lease?
A lease that reflects new legislation
EPCs needed for marketing so Landlord has ability to gain access to carry out EPC
What is an old lease?
A lease pre 1st January 1996 with privity of contract
Landlord and Tenant (Covenant) Act 1995
Rent review types?
- Open Market
- RPI/KPI
- Turnover
When you conduct a rent review, what documents do you want to see?
- Existing lease and any plans
- Any Licence for Alterations, improvements, subletting or assignment
- Any deeds of variation
- Contact details for tenant
- Copy of the property file for any relevant background information which could assist your negotiation
How can you tell if time is of the essence?
- Time is of the essence if expressly stated in the lease
- Connected lease event. E.g break clause can make time of the essence
- Deeming provision → such as need to respond to a notice by a certain time
- The tenant serves notice making time of the essence
What is a deeming provision?
Assumption of acceptance
What is the hypothetical term?
Usually the term left at review is at the start of the lease
What are the standard assumptions in a Rent Review?
- Vacant possession
- Available for immediate occupation and use
- Covenants in lease have been observed
- Willing tenant and willing Landlord
What are the standard disregards in a Rent Review
- Goodwill
- Improvements → if no disregard, value what you see
- Previous occupation
- Any licence to sell intoxicating liquor if it appears that the licence belongs to the tenant
What would happen if you had a rent review you couldn’t agree?
- Serve a Calderbank letter
- 3rd Party determination (IE or Arbitrator)
Stated within the lease
What should you include within a Calderbank letter?
- Without prejudice save as to costs
- Unconditional offer to settle
- Time frame
- A reasonable proposal regarding costs incurred up the date of the offer
When would you use a Calderbank?
- Genuine offer to settle
- Use at any stage of negotiation, usually once other avenues exhausted and considering 3rd party
- An offer to settle, aim to prompt settlement from other side and protect Client from costs
How do you appoint an Arbitrator?
Apply to President of RICS - £425 fee
How would you adjust for a restrictive clause?
- Rent reductions
- Depends on state of the Market - look to comparable evidence
How do you adjust rent if you have a longer rent review pattern than 5 years?
Need higher rent at start of rent review period to recoup inflation - add 1% to rent for each extra year
Advantageous to Tenant to have longer rent review period
What options are there at lease expiry?
- Qualified tenancy continues under S.24 after expiry until terminated under the Act → same terms / holding over
On lease expiry:
- Tenant vacates by expiry
- Landlord serves S.25 hostile and they lease by expiry (6-12 months prior)
- Tenant stays after expiry and serves S.27 (3 month notice of leaving)
- Tenant serves S.26 to start new lease negotiations
What is a Tenancy at Will?
Grants temporary occupation of business premises
What is the Land Registration Act 2022?
Formal documents to be executed electronically
Leases over 7 years must be registered with Land Registry
What determines terms for a new lease?
Sections 32-35 Landlord and Tenant Act 1954
S.32 - Demise (same property as before)
S.33 - Term (max 15 years)
S.34 - Consider disregards
S.35 - Any other terms
O’May v City of London (1983) → tests to be satisfied before amending terms of old lease
What sections of the Landlord and Tenant 1954 Act are there?
S.23 - Meaning of business tenancy
S.24 - Continuation tenancy unless terminated (security of tenure)
S.24a - Interim rent
S.25 - Landlord to terminate or review
S.26 - Tenant to review
S.27 - Tenant notice to vacate (3 months)
S.28 - Freedom to agree new lease
S.29 - Court applications
S.30 - Landlord grounds for possession
S.37 - Disturbance compensation
S.38 - Contracting out
What is the valuation date for a lease renewal?
Set by when you apply to court
Otherwise, the day after lease end
On what grounds can a 1954 Act protected lease be terminated?
Section 30, grounds A-G
A- breach of repair covenant
B- Persistent delay in rent payment
C- Other substantial breach
D- Suitable alternative accomodation
E- Uneconomic subdivision
F- Redevelopment/demolition
G- Owner occupation
Can a tenant lose their 1954 Act rights?
If no new lease terms have been agreed by the lease end date, or tenant hasn’t applied to court to agree terms or extension, they can lose their rights
What is the process for contracting out of Section 24-28 of the 1954 Act?
Regulatory reform order 2003 simplified the process so that it rarely requires a court influence
Landlord serves health warning stating consequences of contracting out
Simple declaration if Tenant waits 14+ days
Statutory declaration if less than 14 days
What would you find in a Section 25 notice?
- Name and address of Landlord and Tenant
- Property address
- Notice of date to end tenancy
- Confirmation as to whether a new lease is granted (favourable or hostile)
- Landlords proposal for new tenancy or grounds for opposition
- Strong recommendation for Tenant to seek professional advice
- Signed by Landlord representative
When is the date of receipt of a Section 25 notice?
Posted and recieved same day - statutory notice
Can a Landlord serve a Section 25 notice after Tenant has served Section 26 notice?
No, they are mutually exclusive
Where might Section 25 notice go wrong?
- Wrong name,
- Not signed,
- Not dated
What is the Tenant objects to the terms in the notice?
Serve counter notice, negotiate or through Court
What if the tenant wants to renew but it gets to date of new tenancy and terms have not been agreed?
- Extend time if agreed by both parties
- Application made to court
If the Tenant wanted to vacate lease halfway through negotiations, what would they need to do?
- Serve Section 27 and give 3 months notice
- If already in Court, withdraw application and negotiate notice period with Landlord and back rent
What is an interim rent?
Rent the tenant pays while the tenancy is continued under Section 24A
How would you calculate the Interim Rent?
Same as new rent
Court may vary this if there is substantial difference between the Market Rent at the date of the new tenancy and date of Interim Rent being payable
Who is the competent landlord?
Party that is entitled to serve notice on tenants
Section 44 - Freeholder or Superior Tenant with unexpired term in excess of 14 months
What is a Section 40 notice?
Requests information from either Landlord or Tenant
If acting for an external Client, how would you have acted differently for a lease renewal?
Conflicts of Interest Check
Served formal Terms of Engagement, agreeing fees etc
If a tenant approaches you 18 months before lease expiry, what can you advise them?
- Establish needs of Client
- Check if contracted out
2, Can wait until lease expiry and hand back keys with vacant possession
- Serve Section 27 notice giving 3 month notice to vacate
- Serve Section 26 if over-rented 6/12 months prior
- Under-rented do nothing - continuation tenancy created under S.24
- Do nothing and wait for hostile Section 25 notice
When can the value of improvements be captured?
Rent Review → usually disregarded. May be rentalised if works were a condition of Landlord granting the lease
If disregarded, disregard whether works were licences or not
Lease renewal:
Can never capture value of improvements at first lease renewal (L&T Act 1954)
21 year rule applies on subsequent renewals (if undertaken more than 21 years ago)
Can you capture improvements done in 1948?
Yes, as this is before the Landlord and Tenant Act 1954
Might a tenant receive compensation for improvements if the lease renewal is opposed?
Yes - governed by the Landlord and Tenant Act 1927, Section 1
Improvements must add value to the property at termination, compensation if the value added as a result of improvements
Usually offset against dilapidations
What are the main issues of Landlord and Tenant Act 1927?
Section19 Alienation, assignment - turns qualified covenants into fully qualified covenants
If tenant has contracted in lease but you find out they aren’t in occupation for business purposes, what do you do?
They have no security of tenure, so no renewal rights
What type of break clauses are there?
- Tenant only
- Landlord only
- Mutual
- Rolling
- Fixed
- Linked to other clauses
If you want to insert a landlord break for redevelopment, can you contract inside the Act?
Yes, but you have to serve Section 30 and break on grounds
Tenant entitled to compensation
What is administration?
An administrator is appointed to rescue an insolvent company protecting it from any legal action
Creates period of protection for administrator to deal with assets and achieve best returns for creditors before going into liquidation
What is re-pack administration?
Allows the directors of a company to buy out and retain elements of the business which are trading well and placing the remainder in administration
What is receivership?
Receiver is appointed by creditors to realise assets and to repay debt whilst administrators are being appointed by Court
Occurs when a company defaults on payments to a lender who has charge over all or most of the assets of a company
What is Company Voluntary Arrangement?
Contract between company and its creditors for when a company is insolvent but the directors believe it has a viable future
Creates agreement to pay back debt over period of time
Insolvency practitioner overseas implementation strategy
Must be approved by at least 75% of creditors in terms of value of debt
What is liquidation?
Company brought to an end and assets sold and distributed to creditors
Compulsory - creditors liquidation
Voluntary - tenants liquidation
What is bankruptcy?
Court procedure for an individual
What does the Landlord & Tenant (Covenants) Act 1995 say?
- Act abolishes privity of contract for new leases automatically - ends liability of Tenant once lease is assigned
- Includes AGA (Authorised Guarantee Agreement)
What does Landlord and Tenant Act 1988 say?
Must demonstrate refusal of consent or consent with conditions is reasonable
Burden of proof for reasonableness is on Landlord
Can you use a drop in Capital Value as a reason to refuse assignment?
No, proof would take too long - landlord and Tenant Act 1988 says respond in a reasonable time for applications to assign/sublet
When would you recommend assignment and when a sublet?
Depends on Clients interests
- Sublet if they wish to keep interest and reoccupy or occupy part
- Assignment if in financial difficulty and struggle with payment - note AGA may be requested
What types of breach are there?
Continuing breach: failure to repair, illegal use
Once and for all: Non-payment of rent / service charge, failure to carry out works within a specific period
To what tenancies does the 1954 Act apply?
Business tenancies
Name the tenancies to which the 1954 Act does not apply?
- Agricultural holdings
- Mining leases
- Residential tenancies
- Tenancies granted as condition of employment
- Tenancies not exceeding 6 months unless - there is a provision for - extension, or - Tenant has been in occupation for more than 12 months
What is a Section 25 notice?
Landlord notice served to terminate the business tenancy
When can a landlord service a Section 25 notice?
Between 12 and 6 months prior to:
a) The contractual end of the tenancy
b) The date specified in the notice
What must a landlords Section 25 contain?
If landlord does not oppose new tenancy:
- The property comprised
- The rent
- The other terms
- That landlords proposals are for the purposes of negotiation
If landlord opposes new tenancy:
- The ground(s) under section 30(1) upon which he would opposed the tenants application for a new tenancy
What advice would you give to a landlord client in respect of a lease renewal where a property is significantly over rented?
Serve a Section 25 suggesting new tenancy on the same terms
What action should the landlord take if he/she requires possession of a property at the end of a lease?
Serve a Section 25 notice to oppose the new tenancy on grounds stated in Section 30(1) of the Landlord and Tenant Act 1954
What can a landlord do if he cannot get a response from the tenant to his friendly section 25 notice?
Tenancy will continue at the Landlords new proposal terms
What advice would you give to a tenant when a landlords section 25 notice is due to expire in two weeks time, and an agreement for a new lease has not yet been agreed?
Request an extension under which an interim rent is agreed
Make an application to court → court will direct the terms of the new tenancy
Under what circumstances is a tenant entitled to compensation when a landlord successfully opposes a new lease under the 1954 Act?
If the landlord opposes under Section 30(1) e, f or g (no fault grounds)
How is tenants compensation assessed under the 1954 Act?
In the form of a Rateable Value Multiplier
Twice x RV for occupation of 14 years or more: can be more than one tenant if there is business succession
Once x RV for occupation of less than 14 years
Additional: Court can award compensation for damage or loss sustained by Tenant because of Landlords misrepresentation or concealment
Explain the power that a court has in ordering a new lease.
If tenancy terminated in accordance with the Act and application made to court under section 24(i)
→ the court has power under section 29(1) to grant a new tenancy and may determine:
- The property comprised
- The length of the lease
- The rent
- The other terms
- An interim rent
What do you understand a Section 34 rent to be?
The rent the property might reasonably be expected to let at in the open market by a willing lessor, disregarding:
- Tenants previous occupation
- Any goodwill
- Certain improvements carried out by the tenant
- Any licence to sell intoxicating liquor if the licence belongs to a tenant
In what circumstances would you recommend to a tenant to serve a Section 26 notice?
If they wish to remain in occupation and enter a new lease agreement
Explain when tenant’s improvements are disregarded at lease renewal
Improvements are to be disregarded if they were carried out by the tenant other than as a lease obligation and
- During the old tenancy or
- Less than 2 years before the application for a new tenancy was made
What are the key elements of a rent review clause?
- The machinery for effecting the rent review (procedure)
- The basis of valuation
- The means of settling disputes where parties cannot agree on the revised rent
What is a trigger notice?
The landlords proposal of a new rent by a certain date
What do you understand about the term time of the essence?
Provision of the contract must be completed by the stated time
Stated time for completion of an obligation in a contract is a condition of the contract
What are the two landmark cases in respect of time of the essence?
United Scientific Holdings Ltd vs Burnley Borough Council (1977)
Cheapside Land & Development Co Ltd vs Messels Services Ltd (1977)
What lease terms affect the rent at review?
Most significantly - Rent Review clause itself: Definition of rent, assumptions, disregards
also:
- Rent review frequency
- Repairing liability
- Insurance liability
- Alienation
- User
- LTA 1954 Provision
How may a rent review be resolved if a landlord and tenant cannot reach an agreement?
Lease should state the matter will be determined by a third party
- Arbitrator or independent expert
- if can’t agree on third party, President of RICS appoints
What are the differences between an Arbitrator and an independent expert?
- Arbitrator cannot decide without receiving evidence
- Expert base decision on own knowledge and investigation
- Arbitrator is regulation by Arbitration Act 1996
- Expert is not governed by legislation
- Arbitrator cannot delegate duties
- Expert can seek assistance
- Arbitrator is not liable for negligence
- Expert is liable for damages through negligence
What is the difference between a lease and licence?
Lease - gives the Tenant exclusive right of possession
Licence - permission to do something on the owners land that would otherwise constitue a trespass
What is the leading case in the matter of lease or licence?
Street v Mountford (1985)
In what circumstances have you granted (or would consider granting) a licence?
Tenancy at will
Written agreement for an unspecified time in which the landlord can evict any time
Not a legal interest in land with no renewal right
Early access for fit-out works
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?
Tenant must put in repair if agreed to keep in repair in the lease
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?
Reflect the expense of repair in the rent
Agree a specific state of repair e.g. good, habitable, tenantable
Agree a specification of works (ideal)
What action can a tenant take when a landlord is in breach of a repairing covenant?
- Claim damages
- Specific performance - injunction compelling landlord to do works
- Declaration - declaration from court if injunction refused
- Set-off against rent
What action can a landlord take if a tenant is in breach of repairing covenant?
- Damages
- Forfeiture → S.146 (tenant may apply for relief under leasehold property repairs act 1938 section 1)
- Exercise Right of Entry to Repair
What does the Jervis v Harris case mean to you?
Allows the landlord to reclaim the cost of the works from the tenant as debt
Not subject to Leasehold Property Repairs Act 1938 → usually requires court permission to seek damages
Not subject to Section 18(1) of LTA 1927 → this is used to cap landlords damages claim to loss in value
How are damages assessed when a tenant is in breach of repairing covenant?
Under Landlord and Tenant Act 1927 Section 18(1)
Damages limited to the loss in value to Landlords interest assumed by the Tenants breach
How are damages assessed when a landlord is in breach of repairing covenant?
The difference in value to Tenant between the premises in their condition at the time of assessment and their value if the Landlord had fulfilled his repairing obligations
Explain the provisions of Section 18(1) of the Landlord and Tenant Act 1927
Statutory cap on damages
Damages for breach by the Tenant of its repairing covenants cannot be more than the reduction in value of the landlords reversionary interest
No damages are payable if the Landlord is going to make structural alterations which would render the repairs valueless
Explain the different between a schedule of condition and a schedule of dilapidations
A schedule of condition is a statement describing the current physical state of a building
A schedule of dilapidations is a record of alleged breaches of repairing covenant - where appropriate includes reinstatement provisions
Explain the difference between an Interim and a Terminal Schedule of dilapidations
Interim - served when more than 3 years left on lease
Terminal - served within last 3 years of the term
What is a Scott Schedule?
A table - extended version of Schedule of Dilapidations which enables the Tenant to respond to the content of the Schedule of Dilapidations
What is the difference between an alteration and an improvement?
An alteration is making physical changes to a property
An improvement is an alteration that adds value
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?
Review lease and check wording
Shall not make any alterations, additions or improvements to the demised premises?
Without prior written consent?
Is consent required to comply with lease?
Also consider: unexpired term of lease and rent review clause wording
You are managing property for your landlord client and have received a request from a tenant to carry out improvements. The tenant has requested that improvements are registered under the 1927 Act. What advice would you give to your client?
For improvements to qualify for compensation the procedure in the 1927 Act must be followed:
- Tenant must serve notice on Landlord before works start, with details and plans
- Landlord has 3 months to object or offer to do works himself in return for a reasonable increase in rent
- If Landlord does not object or offer to do the works himself, Tenant can proceed and must complete the works within an agreed period
If rejecting, can only reject if works do not add value, diminish value, or unreasonable/unsuitable
How is tenants compensation for improvements calculated?
Payable when tenancy come to an end
The net addition of the value of the property as a whole which is a direct result of the improvement
The reasonable cost of carrying out the improvement at the end of the lease less the cost of putting the improvement into reasonable state of repair
What lease terms are implied under Section 19 of the Landlord and Tenant Act 1927?
Section 19(1)(a) of the Landlord and Tenant Act 1927 implies that where consent can be given by Landlord such consent cannot be unreasonably withheld
What lease terms are implied under the Landlord and Tenant Act 1988?
Where consent can be given by the Landlord, consent must be given within a reasonable time
Explain the Legislation that needs to be considered in an assignment of a lease
Landlord and Tenant (covenants) Act 1995 → Privity of Contract
Landlord and Tenant Act 1927 & Landlord and Tenant Act 1988 → Consent and reasonableness
Landlord and Tenant Act 1954 → Security of Tenure
In what circumstance could no restrictions on assignment and sub-letting be appropriate?
If expressly stated in the lease
Proposed tenant is of higher covenant strength and same user clause that doesn’t diminish value of interest
What are reasonable grounds for refusing consent?
Character of the proposed assignee
Effect on rental or capital values
What is the amount of an assignees business profit that a landlord will look for before giving consent to assign?
3x annual rent and other payments due under the lease
What do you understand about the expression Authorised Guarantee Agreement or AGA?
AN AGA is an agreement which places an obligation on an outgoing tenant to guarantee the performance by the new tenant of covenants contained within the lease
In what circumstances is it appropriate to have restrictive use clauses in leases?
- To protect the value of the investment
- Protect the value of other premises under ownership
What do you understand a conditional break clause to be?
Usually all break clauses are conditional as if the conditions are not satisfied, the break notice will not be valid
What conditions are usually attached to break clauses?
- Vacant possession
- 6 month prior written notice
- All sums due under the lease are paid prior to break date
- Repairs and decorations carried out prior to break date
Can you give two examples of situations where it was held in court that a break notice was invalid / ineffective?
Osborn Assets Ltd v Britannia Life Ltd (1997) → Tenant coveted to paint internally with 3 coats of paint every 5 years → invoices showed only 2 coats → break ineffective
NYK Logistics (UK) Ltd v Ibrend Estates BC (2011) → Tenant had not completed Terminal Schedule of Dilapidations work prior to expiry date and workmen stayed in the unit for an additional week → no vacant possession provided → break ineffective
What is Alienation?
Alienation is the right granted in a lease to assign, sub-let, or share occupation / interest of the property
Tell me about your understanding of the Code for Leasing Business Premises
Code for leasing business premises (2020) - professional statement
- Objective is to improve the quality and fairness in negotiating lease terms
- Promote the issue of comprehensive HOTs making legal drafting process more efficient
Tell me how you would summarise a lease and what terms you would be looking out for?
A lease gives a Tenant exclusive right of possession in return for rent or periodic payments
Legally binding contract
What is the Regulatory Reform (Business Tenancies) (England & Wales) order 2003?
Amends part 2 of the Landlord and Tenant Act 1954 and alters the procedures for renewal and termination of business tenancies
Also introduced new procedures for contracting out of sections 24-28
What is the role of an expert witness?
A person who is a specialist in a subject and provides impartial professional opinion where a dispute has arisen
How does an advocate differ from an expert witness?
Sometimes referred to as a party representative
- Advocate must do for the Client all that the Client might properly do for themselves - spokesperson for the Client
- Presents to the tribunal a Clients properly arguable case as best as possible
What is an Arbitrator?
An Arbitrator fulfils a role similar to a judge - involved in Arbitration process whereby parties in a dispute agree to be bound by the decision of an Arbitrator
What is an expert?
A surveyor appointed either by President of RICS or by the agreement of parties to determine a dispute
How would you establish the relevant third party procedure for a rent review?
Either agreed to by both parties or appointed by President of RICS if no agreement can be made
What is PACT?
Professional Arbitration on Court Terms - alternative to going to court
Arbitrator handles instead of Court
How does PACT differ from court?
- Expert decision - judges in court not always experts
- Quicker, more cost effective solution to court
- PACT is flexible and adaptable
What is the difference between In-court PACT and out-of-court PACT?
In-court PACT used for an unopposed new tenancy whereby an application to court to fix new terms has already been made
Out-of-court PACT used when no application has been made and agree to postpone application until the out-of-court PACT resolution is determined
What are the Civil Procedure Rules?
- Civil Procedure Rules 1998
- Ensures cases are dealt with fairly and parties are on equal footing
What are the Jackson Reforms?
Reforms that impact areas of Civil Litigation, including:
- Costs
- Funding
- Case management
- Disclosure
- Part 36
What is a Part 36 offer?
Similar procedure as a Calderbank offer to induce a party to settle - if offer is genuine
Offer is open for 21 days, after which it can still be accepted, but also possible to be withdrawn
Can you serve a Calderbank offer at lease renewal?
No you would serve a Part 36 offer under the Civil Procedure Rules, 1998
What does Section 34 relate to in a lease renewal?
Section 34 (L&T Act 1954) gives the court power to determine the level of rent when the parties have not been able to reach an agreement on that aspect of lease renewal
What is compensation for disturbance?
If Landlord opposes new tenancy under grounds e, f, g (no fault grounds), section 37 of the L&T Act 1954 provides the Tenant with compensation
1x Rateable Value
2x Rateable value (if in occupation for 14+ years)
Why would you contract out a lease?
- Requirement in the head lease to grant any subletting outside the act
- The landlord wants to re-occupy in due course
- The landlord wishes to redevelop at lease end
- The rent may be lower
- Landlord wants future flexibility
What does subject to contract mean?
Agreement is not binding and is subject to contract
What does without prejudice mean?
Offers / words cannot be used against them in court if negotiations fail
What does without prejudice save as to costs mean?
The standard without prejudice applies until court delivers judgement
Court will then turn to the question of awarding costs
What is the presumption of reality?
Assumption in a Rent Review that the rental value is to be the whole of the demised premises as they exist at the review date
Tell me about a Rent Review case law you are aware of.
Norwich Union Life Insurance Society v British Railway Board (1987)
Wider than usual repairing liability resulted in Arbitrator discounting market rent by 27.5% on the basis it was more onerous than usual for the tenant
What is geared rent?
Rent that is linked to the rent obtained or obtainable by the tenant from its under-tenants
How would you deal with post-dated rent review evidence?
No set way
If an event was wholly unforeseeable at the review date, then it should not have been taken into account
The longer the period between the valuation date and transaction date, the less weight the evidence should carry
If an event had its roots in the market at the review date, it should be relevant
Talk me through your understanding of the RICS guidance on dilapidations.
RICS Dilapidations in England and Wales, 7th Edition, 2016 - Guidance note
Provides practical guidance to RICS members when instructed in connection with dilapidation matters
What is the dilapidations protocol?
Pre-action protocol for claims for damages in relation to the physical state of commercial property at the termination of a tenancy (applicable to terminal dilapidation disputes)
What timings apply to a dilapidations claim?
Schedule of Dilapidations served any time - response expected within reasonable time or 56 days
12 year limit on bringing a dilapidations claim
What is PDPAC?
Practice Direction Pre-Action Conduct and Protocols
(applicable to dilapidation disputes unless the Protocol applies)
What is quantified demand?
A document prepared for the purpose of and complying with part 4 of the protocol, typically incorporating a Terminal Schedule of Dilapidations
Usually prepared by a building surveyor
What is diminution valuations?
A valuation prepared in order to calculate the diminution in value of a Landlords property incurred as a result of alleged breaches
Document is usually prepared by a specialist valuation surveyor
What would you find in a Schedule of Dilapidations?
- Relevant lease / tenancy obligations
- Alleged breach of those obligations
- Remedial works that have been completed or are proposed to rectify breach
- The estimated or actual cost incurred in rectifying those breaches
What documents do you need to consider in relation to a dilapidations?
- Leases
- Licences (licence to alter)
- Deed of variation
- Side letter
What remedies exist for dilapidations during the lease term?
- Damages
- Forfeiture
- Specific performance
- Entry to carry out works
What is supersession?
Undefined legal concept - Landlord should not claim for remedy of a tenants breach if they are proposing to do something else to the building which would supersede the need for the tenant to remedy the breach
How should you respond to a dilapidations claim?
- Provide a formal response within a reasonable time or 56 days from receipt
- Cover every point set out in the claim
- Dispute costs or state that you will carry out yourself
How can you settle a dilapidations dispute?
Ideal: negotiation (settled privately)
Through ADR:
- Independent expert determination
- Mediation
- Arbitration
- Early neutral evaluation
What is included on a dilapidations settlement agreement?
In writing and identifying:
- The parties involved
- The relevant lease
- The Schedule of Dilapidations and quantified demand to when the settlement applies
- Be open (not marked ‘without prejudice’)
- Stated to be in full and final settlement of the dilapidation claim
- Deal with every part of the dilapidations claim
- State payment date / or date works are to be completed
- Signature of both parties
- Current date
What is the hierarchy of evidence?
The relative weight attached to comparable evidence
- Open market lettings
- Rent reviews / lease renewals
- Independent experts determinations
- Arbitrators determination
- Court determinations under L&T Act 1954
