Landlord and Tenant Flashcards
At Park Lane, please can you outline 5 of the Heads of Terms which you agreed?
Rent, rent review mechanism and timescale, break clause, lift and shift. redevelopment break clause and fees
At Park Lane, what Rent review mechanism was agreed and why that was appropriate?
5 yearly RPI review and appropriate as the rent would increase inline with inflation
At Park Lane, how did agreeing to a 5-yearly RPI review put your client in a better place than another type of review?
It ensured the rent would only increase in line with inflation opposed to an Open Market Review
Under the lease renewal at Beaumont House, you provided some valuation advice. What was the approach to valuation?
The code was introduced at the end of 2017 and since then there has been a number of legal disputes since then. A number of disputes have related to valuation and the courts have made awards on different site types; rural greenfield, residential rooftops, commercial rooftops. They summarised all these decisions in the Affinity Water vs EE decision and thereafter has been referred to as the Affinity Water Table which summarises those rent awards.
At Beaumont House, you have referenced it is a renewal under the Landlord and Tenant Act 1954 but gone on to say it was a Paragraph 33 notice, why is that?
Initially my advice was based on the lease being protected by the Landlord and Tenant Act but as the instruction transpired it was a Paragraph 33 notice served correctly under the Digital Economy Act. Therefore, this was an accidental typo.
Regarding the rent review at London Kings Cross, you provided advice based on the best rent the site could achieve. How did you formulate that advice?
I used comparable evidence and advised my client on the rent that the site could likely achieve at the rent review
What guidance or practice statements are available from the RICS in respect of comparable evidence?
Comparable evidence in real estate valuation 2019 and referencing to the Red Book Global Standards 2022
At Castle Quay Close, why did you advise to restrict pets?
This was my clients request to ensure they maintained control of the property
What is being implemented which has changed rights for Tenants to keep pets?
Renters (Reform) Bill 2022/23
What rights does a Tenant have to keep pets under the Renters (Reform) Bill 2022/23?
The landlord has 42 days to accept or refuse request for pets
What protections are given to the Landlord regarding pets under the Renters (Reform) Bill 2022/23?
The Tenant must provide in writing confirmation they have acquired insurance for their pet, or they are willing to pay Landlord reasonable costs to cover the Landlord’s insurance in case of pet damage.
What other changes have been brought in under the Renters (Reform) Bill 2022/23?
Section 21, no fault evictions have been abolished. A single system of periodic tenancies, whereby tenancies are a rolling one-month tenancy without a end date. Tenants need to give 2 months notice to a Landlord. Landlords need to give 2 months notice on an AST for an increase in rent opposed to 1 month.
What was the purpose of the Renters (Reform) Bill 2022/23?
Aims to deliver ‘safer, fairer and higher quality homes’
You have given advise to renew the terms at Park Lane, what were you renewing here?
It was a renewal for an electricity sub-station
What was your clients position at Park Lane?
The lease had expired and my client wanted to renew the agreement
Could you have renewed the agreement in any other way given it was a substation?
The renewal could have fallen under the electricity act but as it was a Landlord and Tenant protected agreement, it had to be renewed under the act.
At Park Lane, what advise did you give on the clauses?
I advised on the rent, rent reviews, lift and shift and break clause
At London Kings X, you advised on a rent review - how did you use comparable evidence to build a case for the rent review?
Using our internal comparable database to gather the comparable evidence and referring to the RICS Guidance Note on Comparable Evidence in Real Estate Valuations
Please can you talk me through some of the basic terms you would find in a Heads of Terms?
Landlord, Tenant, Landlord/Tenant solicitors, Landlord/Tenants agents, site name, demise, rent, incentive payments, rent review, rights, termination clauses, forfeiture, lift and shift, alienation, start date/end date and fees
What is the difference between a lease and a license?
A lease grants exclusive possession for a term of years, in exchange for a rent. A license grants the right to do something which would otherwise be trespass.
What are the different characteristics of a lease and a license?
A license has no fee/rent, no exclusive possession and can’t be terminated
- How did you assess the various comparable evidence that you had for your rent review at Kings Cross? What is the definition of realistic rent? How did you arrive at realistic rent from maximum increase?
I referred to the hierachy of comparable evidence and used our comparison database to give me an idea of the maximum rent that could be achieved. A realistic rent is a rent that could look to be agreed at renewal
- What was the significance of paragraph 33 of the Digital Economy Act 2017 at Beaumont House? How did you determine what an appropriate rent is? What is the definition of market rent?
It gave 6 months to agree terms. An appropriate rent was based on the Upper Tribunal CTIL vs London and Quadrant Housing case
- What type of lease did you agree at Heaton Road? How did you exercise it? Any pre-notices?
A commercial lease, executed via a signed lease agreement and no notices
- What information did you provide to the tenant when completing the AST at Castle Quay? What legislation governs at AST? What is the default legislative position on allowing pets?
Gas safety cert., electricity safety cert., how to rent guide, tenancy agreement, EPC and deposit prescribed information
What must you do with a deposit for a residential letting?
must be registered and protected in a tenancy deposit scheme
What is included in an EPC?
The address, letter of which the property is now, potential EPC rating, recommendations for improvements with costs bands and savings
What concerns did you have with the lights not working in the property?
The power in the building not working, potential issues with the electrics themselves but there was an up-to-date electricity safety certificate which indicated the electrics were in good working order
How long is an electricity safety certificate valid?
5 years
How long is an gas safety certificate valid?
1 year
What did you include in Heads of Terms?
Landlord, Tenant, Solicitor details, Agent details, property, demise, term, rent, rent reviews, use of land, rights, break clauses, indemnity and insurance, fees, ADR
What are the differences between arbitration and mediation?
Arbitration is legally binding, they can only rely on the evidence presented to them, they can be sued for negligence. Mediators are instructed by both parties and do not make a decision but instead try and help parties come to a decision.
You negotiated terms at Beaumont House, please can you tell me what you advised in regards to valuation?
I advised my client that the rent being offered by the Tenant fell below the market value and that it was worth negotiating based on the case law in the CTIL vs M&S case, I advised a figure of closer to £3,850 pa was more in line with the market rent and negotiated the terms based on this level.
You mentioned use of comparable evidence in your rent review, what was the purpose of comparable evidence?
To present the market evidence to obtain the highest rental increase
How did you determine the best comparable evidence?
I had note of the hierarchy of comparable evidence and weighted the comps based on the location, type of transaction, timing and general rights the Tenant had in each comparable to formulate my evidence.
Please can you summarise the hierarchy of comparable evidence?
Direct transactional evidence is the strongest weight, publicly available information, published databases, asking prices, historic evidence
E1: Talk me through your advice with regards to the telecoms rent review
I had reference to the hierachy of comparable evidence and advised my client based on completed transactions for sites within a similar area and at a similar time to the review.
E1: How often can you review the rent?
As per the lease agreement but in a commercial lease either every 3 or 5 years
E1: Do you need to serve notice? If so, is there a timescale?
Yes, a trigger notice and unless the lease states time is of the essence then there is no timeframe
E1: How did you calculate the new rent?
I used comparable evidence
E1: How did you agree and document the rent increase?
Through a rent review memorandum
E2: Explain your advice for drafting HOT for the 1954 Act tenancy whilst considering the Digital Economy Act 2017
I advised that as the lease is being renewed under the code, as soon as the lease is renewed it will no longer be LL and Tenant protected but will have similar protections to that act
E1: What were your clients expectations?
I advised my client of a range of where the rent would be at renewal and managed to achieve a rent within that range
E2: Talk me through your HOT
Tenant, Landlord, sols, agents, term, rent, reviews, termination, alienation, rights, fees
E2: What is the valuation methodology and how did it determine the rent
Based on the key case law in this example
E2: Explain your advice regarding the redevelopment clause?
I advised my client will be able to serve 18 months notice not to expire before the 5th with settled intention for development
E2: What do you understand by the term contracting out?
The process of the landlord serving a notice 14 days after completion to exclude sections 24-28 of the Landlord and Tenant Act
E2: How would you end this type of tenancy?
Under the LL+T Act as per Section 30 of the agreement
E3: Please explain your advice with regards to the type of property that the tenancy was for?
Telecoms site and therefore advised the client on the key clauses within the agreement and ensured they had the necessary protections in place
E3: What type of tenancy?
Electricity substation commercial agreement
E3: How did your advice with your HOTs meet your clients objectives?
I advised my client that they had rights to renew under the LL and Tenant act due to the agreement being protected
E3: What is a consensual renewal?
When an agreement is reached without the intervention of the courts
L2 E1: What is RPI? Why was this the basis for your rent calculation?
A rent review calculation based on the Retail Price Index and it is inline with inflation
L2 E1: Talk me through the rent formula?
Based on the lease but rent x new rate / beginning of the term rate
L2 E1: How did you come to your final rent?
By carrying out the calculation
L2 E2: Did you ask for anything from the prospective tenants prior to the viewings?
I requested basic information such as site specific interest
L2 E2: What was the necessary information?
I requested information such as ID and proof of address
L2 E2: How did you decide on the tenant? Or provide your recommendations to the Client?
I checked companies accounts, the rent was at asking price and the terms matched my clients requirements
L2 E3: What did you ensure with regards to compliance of the property before marketing the property?
I ensured the property had an EPC, Gas safety cert and electricity safety cert
L2 E3: What did you provide the tenant with prior to the start date of the tenancy?
The statutory information and a how to rent guide
L2 E3: Talk me through the HOT?
Rent, deposit, term, rights in the property, forfeiture, info on the landlord and tenant, solicitors, agents, payment frequency
L2 E3: What is the minimum term for an AST? Maximum?
6 months
L2 E3: What is the minimum rent for AST? Maximum?
£250 pa min and £100,000 pa max
L2 E3: What is the max deposit for an AST?
5 weeks rent
Standard assumptions in a rent review?
The subject property is fit for immediate occupation and use
The property is available to let on the open market by a willing landlord to a willing tenant at the market rent
All covenants in the lease have been observed by the tenant
The property may be permitted for use for any purpose permitted under the lease
Standard disregards in a rent review?
Any effect on the rent of the tenants occupation
Goodwill
Increase in rental value caused by tenants improvements
Any licenses such as alcohol which is personal to the tenant
What does without prejudice mean?
cannot be used in court as evidence of admissions against the party that made them
What is a lease renewal?
A statutory procedure
How are lease renewals settled?
In court or PACT
RICS guidance on lease renewals?
Surveyors and lawyers involved in lease renewals under PACT 1st Edition 2009
What is a rent review?
A contractual procedure and settled in accordance with the lease
Section 24A of 54 Act
Application to court for an interim rent and either the landlord or tenant can apply to court to determine the rent
Section 25 of 54 Act
Landlords notice of termination
2 types of section 25 notices?
Hostile or friendly
Section 26 of 54 act
Tenants request for a new tenancy
What can a tenant do if a section 25 is served?
A counter notice and not a section 26
If section 26 is served what can LL do?
Serve a counter notice within 2 months
Section 27 of the 54 act
Tenants notice of termination and served at least 3 months before end of the lease
Section 28 of the 54 act
Agreement of a new tenancy
Section 29 of the 54 Act
time scales for application to court
Section 30 of the 54 Act
7 grounds upon which LL may object to a new tenancy
What are the fault grounds of section 30?
Tenant failed to carry out repairs, persistent delays in paying rent, other substantial breach and landlord offers suitable alternative accommodation
What are the no fault grounds of section 30?
Uneconomic sub-letting, wishes to redevelop or reconstruct or LL wishes to occupy (must have been LL for at least 5 years)
Section 31 of the 54 act?
court will dismiss tenants application
Section 32 of the 54 act?
property comprised in the new tenancy
Section 33 of the 54 act?
court has power to grant new tenancy for a term not more than 15 years
Compensation paid for no fault grounds termination
1 x Rateable value if less than 14 years and 2 x rateable value if 14 years or more
Section 34 of the 54 act?
rent, assumptions and disregards
Section 35 of the 54 act?
New terms of the new tenancy
Section 36 of the 54 act?
carrying out of order for new tenancy
Section 37 of the 54 act?
compensation where new tenancy not granted
Section 38 of the 54 act?
Contracting out of sections 24-28
When does the notice need to be served?
14 days before the new tenancy starts and tenant must sign declaration
Section 40 of the 54 act?
Duty to give information
3 basic factors in a rent review clause?
Machinery, basis of valuation and settling disputes
Machinery for rent review clause
Timescales and what is contained
What is the case for time of the essence?
Burnley and Cheapside
What is time of the essence
States the notice needs to be served on a specific date and interrelationship with other clauses
Definition of rent?
Open market rent or market rent on a certain date and assuming property is vacant and to let for a specified term (hypothetical term)
What is a hypothetical term
The term of which we are valuing the rent review based on
Assumptions in a rent review
The premises is fit for immediate occupation and use, rent payable after expiry of any rent free periods and tenants fitting out works, no work carried out by T that has reduced the rental value, if premises has been destroyed or damaged, it has been reinstated and T has complied with covenants in existing lease
Disregards in rent review
Ts previous occupation, any goodwill, improvements carried out by T and any licenses (alcohol license)
Means for settling disputes
At Park Lane what did you do?
I negotiated a Landlord and Tenant 54 Act lease renewal. My client wanted to renew the lease and within the agreement to have more flexible access rights and therefore was willing to pay slightly more than a peppercorn rent for a 99 Yr term. The Landlord wanted the lease contracted out and was willing to agree to the terms provided as long as the agreement was contracted out.
Rent act 1977?
Gives rights to remain in the property post lease expiring and unfair rents can not be charged
