Landlord and Tenant - L1

Question 1

Tell me about your understanding of the LTA 1927/LTA 1954/Landlord & Tenant (Covenants) Act 1995/LTA 1988?

Answer 1

The LTA 1927 - primarily deals with tenants rights to compensation for improvements to commercial property

LTA 1954 - provides business tenants with security of tenure, allowing them to renew their lease at the end of the term

LTA (Covenants) 1995 - addresses the transfer of leas obligations when a tenant assigns their lease to a new tenant

LTA 1988 - relates to the landlord consent for assigning leases or subletting

Question 2

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

Answer 2

A key clause could be the rent review clause which outlines, when, on what basis a review of the rent will take place

Question 3

What is alienation?

Answer 3

Alienation refers to a tenant’s ability to transfer their leasehold interest to another party, typically through assignment, subletting, or sharing occupation with another entity, subject to the landlord’s consent.

Question 4

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

Answer 4

The Code for Leasing Business Premises is a voluntary code of practice in the UK aimed at promoting fairness in lease negotiations. It provides guidelines on key lease terms, encourages transparency, and aims to ensure that leases are clear, balanced, and consider both landlord and tenant interests

Question 5

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

Answer 5

To summarise a lease I would draft the outline terms in Heads of Terms. Key terms would include - lease term, rent amount, review dates, basis of review, landlord and tenant covenants, repairing obligations, break clauses and specific conditions or restrictions

Question 6

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

Answer 6

This order amended the Landlord and Tenant Act 1954, simplifying the procedure for contracting out of security of tenure for business tenancies. It introduced the requirement for a statutory declaration or simple declaration by the tenant when agreeing to exclude their right to renew the lease.

Question 7

What is the role of an expert witness?

Answer 7

An expert witness provides independent, impartial, and specialized knowledge to assist a court or tribunal in understanding complex issues within their expertise. Their primary duty is to the court rather than to the party who instructs them.

Question 8

How does the role of an expert witness change from when you are negotiating?

Answer 8

When negotiating, a surveyor acts as an advocate for their client, aiming to achieve the best possible outcome. As an expert witness, their role shifts to providing an unbiased opinion based on factual evidence, regardless of how it affects the client’s position.

Question 9

How does an advocate differ from an expert witness?

Answer 9

An advocate represents and argues on behalf of a client, aiming to persuade others to adopt their client’s position. An expert witness, however, provides an objective opinion based on expertise, with their primary duty to the court rather than to the client.

Question 10

What is an arbitrator?

Answer 10

An independent third party appointed to resolve a dispute outside of court. They consider the evidence and arguments from both sides and make a binding decision based on the facts and applicable law.

Question 11

What is an expert?

Answer 11

An expert is a person with specialized knowledge or expertise in a particular field. In legal contexts, an expert may be called upon to provide an opinion or analysis on matters within their expertise.

Question 12

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

Answer 12

I would first refer to the lease terms to determine the agreed method, whether it involves arbitration or an independent expert. Then, I would follow the lease’s stipulations for appointing the third party, often involving contacting an appointing body like the RICS.

Question 13

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

Answer 13

The cost to submit an RICS Dispute Resolution Service (DRS) application can vary depending on the nature of the dispute and the service required. It typically involves a fee, which can be checked on the RICS website for the most current rates.

Question 14

What is PACT?

Answer 14

PACT (Professional Arbitration on Court Terms) is a process where parties to a lease renewal under the Landlord and Tenant Act 1954 can agree to have the terms of the new lease settled by an arbitrator or independent expert instead of going to court.

Question 15

What is a Calderbank offer?

Answer 15

A Calderbank offer is a settlement offer made “without prejudice save as to costs,” meaning it cannot be disclosed during trial but can be shown after judgment to influence the decision on costs. It’s used to encourage settlement by putting pressure on the opposing party to accept a reasonable offer.

Question 16

What is a break clause?

Answer 16

A break clause in a lease allows either the landlord or the tenant (or both) to terminate the lease early, on a specified date, provided certain conditions are met and notice is given within the specified time frame.

Question 17

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

Answer 17

both landlords and tenants must serve specific notices to either end or renew a business tenancy. For example, a landlord may serve a Section 25 notice to end the tenancy, while a tenant may serve a Section 26 notice to request a new tenancy. These notices have strict deadlines and must include prescribed information.

Question 18

Tell me about your understanding of interim rent?

Answer 18

Interim rent is a temporary rent amount payable from the end of the original lease until the commencement of the new lease under the LTA 1954. It is usually determined by the court or agreed between the parties, and is typically based on the market rent.

Question 19

Tell me about your understanding of the Court procedure at lease renewal. What are the Civil Procedure Rules?

Answer 19

In lease renewals under the LTA 1954, if parties cannot agree on terms, they may apply to the court to determine the new lease terms. The Civil Procedure Rules (CPR) govern the process, including the steps for issuing proceedings, disclosure of evidence, and hearings. The CPR ensures the process is fair, efficient, and timely.

Question 20

What is a Part 36 offer?

Answer 20

A Part 36 offer is a formal offer to settle a dispute, made under Part 36 of the Civil Procedure Rules. It has specific cost consequences if not accepted, encouraging parties to settle out of court.

Question 21

What does Section 34 relate to in a lease renewal?

Answer 21

Section 34 of the LTA 1954 relates to the determination of the rent for a new lease when a business tenancy is renewed. The rent is usually based on the open market value, taking into account the terms of the lease and any relevant factors.

Question 22

What is compensation for disturbance?

Answer 22

Compensation for disturbance is a payment made to a tenant under the LTA 1954 when their lease is not renewed due to certain grounds (e.g., the landlord intends to redevelop the property). It compensates for the disruption and loss incurred by the tenant.

Question 23

Why would you contract out a lease?

Answer 23

A lease might be contracted out to avoid the tenant gaining security of tenure under the LTA 1954, allowing the landlord to regain possession of the property at the end of the lease term without the tenant having a right to renew.

Question 24

How would you contract out a lease?

Answer 24

The landlord must serve a warning notice on the tenant before the lease is granted, and the tenant must then sign a simple declaration or statutory declaration acknowledging they understand they are giving up their right to a new lease under the LTA 1954.

Question 25

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

Answer 25

The LTA 1954 provides business tenants with the right to renew their lease unless it is “contracted out” before the lease is granted. This process must be done formally, as outlined in the Act, to prevent the tenant from having security of tenure.

Question 26

What are the Section 30 grounds under the LTA 1954?

Answer 26

Grounds on which a landlord may oppose the renewal of a business tenancy and may be stated in the section 25 landlords notice;
a) tenant had obligations to maintain but failed
b) persistent delay in tenant paying rent
c) breached of obligations or management of the holding
d) landlord offering to provide alternative accommodation
e) where current tenancy was created through sub letting or part only of the property and that a new rent would not be reasonable for the remainder of the property
f) landlord intends to demolish or reconstrut the premises
g) landlord intends to occupy the holding

Question 27

What time limits apply in relation to lease renewal notices?

Answer 27

Lease renewal notices under the LTA 1954 must be served within specific timeframes, such as a Section 25 or Section 26 notice, typically not less than six months and not more than twelve months before the proposed lease end date or renewal date.

Question 28

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

Answer 28

Notices should be served when there is a clear intention to either renew or terminate the lease, allowing ample time for negotiations or preparations for moving out, typically around 6-12 months before the lease expiry.

Question 29

What does Section 40 of the LTA 1954 cover?

Answer 29

Section 40 of the LTA 1954 allows either the landlord or tenant to request information from the other party regarding their intentions for the lease, such as whether they plan to renew or terminate the tenancy.

Question 30

What is the difference between a lease and a licence?

Answer 30

A lease grants exclusive possession of a property for a term, giving the tenant rights under the LTA 1954. A licence allows a party to occupy the property without exclusive possession and without security of tenure.

Question 31

Tell me about the terms of a new lease in relation to a contracted-in lease renewal?

Answer 31

In a contracted-in lease renewal under the LTA 1954, the terms of the new lease are often based on market conditions, including lease length, rent, and covenants. Common terms might include a lease length similar to the original, updated rent, and the inclusion of any necessary repair or maintenance obligations.

Question 32

How can a tenant quit a contracted-in lease?

Answer 32

A tenant can quit a contracted-in lease by serving notice to the landlord under the terms of the lease, such as exercising a break clause if available or by negotiating an early termination, which may require the landlord’s agreement.

Question 33

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

Answer 33

Subject to contract: Indicates that negotiations are ongoing, and no binding agreement is in place until formal contracts are exchanged.

Without prejudice: Communications are protected from being presented in court as evidence of admissions or concessions.

Without prejudice save as to costs: Communications are without prejudice but can be disclosed to the court when deciding costs after a judgment.

Question 34

When do notices need to be served at rent review?

Answer 34

Rent review notices must be served according to the terms of the lease, often with a specific notice period (e.g., 6 months before the review date) to initiate the review process.

Question 35

What is the valuation date at lease renewal?

Answer 35

The valuation date at lease renewal is typically the date when the new lease terms are agreed upon or, if disputed, the date determined by the court or arbitrator, reflecting the market conditions at that time.

Question 36

What are the different types of rent review?

Answer 36

Open market rent review
RPI rent review
Turnover rent - profits method

Question 37

What is a hypothetical lease? What is a rent review assumption/disregard?

Answer 37

A hypothetical lease is an imagined lease used as a basis for determining rent in a rent review. Assumptions are conditions that are presumed to exist (e.g., the property is in good repair), while disregards are factors that are ignored (e.g., the tenant’s improvements) when determining the rent.

Question 38

Give me an example of a typical assumption/disregard?

Answer 38

An example of an assumption: The property is let with vacant possession. An example of a disregard: The tenant’s goodwill and improvements are ignored in setting the rent.

Question 39

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

Answer 39

Case: O’May v. City of London Real Property Co. Ltd (1983). This case established that when renewing a lease under the LTA 1954, the terms of the new lease should generally reflect the terms of the existing lease unless there is a compelling reason to change them.

Question 40

What is a turnover rent?

Answer 40

Turnover rent is a type of rent that is calculated based on a percentage of the tenant’s turnover or revenue, often combined with a base rent.

Question 41

Tell me about your understanding of fitted assumptions?

Answer 41

Fitted assumptions refer to the assumptions made in lease agreements regarding the condition of the premises, such as assuming it is fully fitted out for the tenant’s use, which can impact the rent assessment or obligations during the lease.

Question 42

Fitting Out Rent-Free Period:

Answer 42

A fitting out rent-free period is a duration at the start of a lease where the tenant is not required to pay rent, allowing them time to fit out or prepare the premises for their business. It compensates for the time and cost involved in making the space operational.

Question 43

What is the RICS Guidance on Comparables

Answer 43

The RICS Valuation – Global Standards (Red Book) and RICS Code of Measuring Practice provide guidance on using comparables. The guidance emphasizes accuracy, relevance, and transparency when selecting and adjusting comparables in property valuations.

Question 44

What does disclosure mean in relation to a lease renewal?

Answer 44

Disclosure in lease renewal refers to the exchange of relevant documents and evidence between the landlord and tenant, such as lease agreements and rent review information, to support their respective positions.

Question 45

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

Answer 45

Post-dated rent review evidence should be considered cautiously and in context with market conditions at the valuation date, ensuring relevance to the period being reviewed.

Question 46

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

Answer 46

Tenant’s improvements are typically disregarded at rent review to ensure the rent reflects the property’s value without the tenant’s enhancements.

Question 47

How would this differ at lease renewal? (tenants improvements)

Answer 47

At lease renewal, tenant’s improvements are also disregarded, similar to rent review, to prevent the landlord from benefiting from the tenant’s investments when setting the new rent.

Question 48

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

Answer 48

There is the RICS Professional Standard on Dilapidations in England and Wales - RICS guidance on dilapidations provides best practices for handling dilapidations claims, emphasizing accurate assessment, appropriate claims, and fair negotiations to resolve disputes.

Question 49

What is the dilapidations protocol?

Answer 49

The dilapidations protocol is a pre-action procedure that encourages parties to settle dilapidations claims without litigation, outlining steps for exchanging information and negotiating settlements.

Question 50

What is quantified demand?

Answer 50

A quantified demand is a detailed statement from the landlord specifying the cost of dilapidations, usually included with the schedule of dilapidations as part of the protocol.

Question 51

What is a Scott Schedule?

Answer 51

A Scott Schedule is a table used in dilapidations disputes to list claims, tenant responses, and financial implications, helping clarify the issues for negotiation or court.

Question 52

What is a diminution valuation?

Answer 52

A diminution valuation assesses the reduction in the property’s value due to the tenant’s dilapidations, which can limit the landlord’s claim for damages under Section 18(1) of the LTA 1927.

Question 53

What legislation relates to diminution valuations?

Answer 53

Section 18(1) of the Landlord and Tenant Act 1927 relates to diminution valuations, capping the landlord’s damages to the amount the property value has diminished due to dilapidations.

Question 54

What would you find in a schedule of dilapidations?

Answer 54

A schedule of dilapidations includes a list of the tenant’s breaches, required remedial works, associated costs, and a demand for compliance or compensation.

Question 55

What is supersession?

Answer 55

Supersession occurs when the landlord’s planned works render the tenant’s repairs unnecessary, which can reduce or eliminate the tenant’s liability for dilapidations.

Question 56

How should you respond to a dilapidations claim?

Answer 56

Respond by carefully reviewing the schedule, seeking expert advice, and submitting a counter-schedule if disputing the landlord’s claims, followed by negotiation.

Question 57

How can you settle a dilapidations dispute?

Answer 57

Disputes can be settled through negotiation, mediation, or ADR, and if necessary, by litigation as a last resort

Question 58

When would you consider ADR or litigation?

Answer 58

ADR is considered when seeking a cost-effective, quicker resolution, while litigation is pursued when a binding decision is necessary or ADR fails.

Question 59

Why are turnover rents becoming increasingly popular?

Answer 59

Turnover rents are popular because they align rent payments with the tenant’s sales performance, offering flexibility in uncertain markets and sharing business success between landlords and tenants.

Question 60

How might this affect future rent reviews and lease renewals?

Answer 60

This trend may lead to more complex rent reviews focused on turnover data and lease renewals with negotiations centered on turnover rent structures, reflecting the evolving relationship between market conditions and rental agreements.