Landlord and Tenant Level 1 Flashcards
What are the main commercial details that are necessary in a lease renewal?
- Inside the Act?
- Term (break clauses)
- Rent
- timing
- amount - Use class
- Dispute resolution
What is necessary to understand wen undertaking a rent review?
What is stated in the rent review clause
1. RR date
2. Bases of rent review
3. Assumptions and disregards
4. Is time of the essence?
5. Third party?
What did you detail in a lease summary?
- Name/Address
- Landlord and Tenant
- Lease date
- Lease term
- Security of Tenure
- Rent review clause
- Current rent
- Repairs and Redecoration
- User
- Assignments and
What clauses impact value?
- Restrictive use class
- V long/ v short lease length
- Restrictive alienation clause - restrictive would decrease the value
- Break clauses
What is the significance of Section 24-28 of the Landlord and Tenant Act?
It establishes “security of tenure” for tenants
which gives them the right to remain in their premises after their original tenancy ends
What does security of tenure give a tenant?
- Protection
Tenants are protected from being evicted by their landlord - Renewal
Tenants have the right to renew their lease unless the landlord has a valid reason to oppose
How does security of tenure impact landlords?
- Grounds for s.25
- Can negotiate new lease terms
- Less control
What does S.24 cover?
Continuation tenancies/holding over
- Business tenancy does not expire by effluxion of time but when one party serves notice
- No notice served= holding over until landlord or T serves
What is a S.25 and the timeframes?
Served by landlord
- hostile or non-hostile depending on whether or not landlord is opposing renewal
* Cannot serve if s.26 has been served
* Must be served not more than 12 months and not less than 6 months before the termination date
What is a non hostile 25 notice and what must it contain?
- Landlord is not opposing a lease renewal.
- Must set out proposals for new tenancy and new rent
What is a hostile 25 notice?
Landlord opposes renewal and must include grounds of opposing
What must be in a S.25?
- Name and address of landlord and tenant
- Address of property
- Notice of date to end the tenancy
- Confirmation whether new lease is opposed or granted
- If non-hostile: include landlords proposal
- If hostile: Grounds of opposition
- Recommendation to seek professional advice
What is a S.26, what is in it and what are the timeframes to oppose?
- Tenant serves notice requesting a new tenancy
- Must state tenants proposal and proposed rent, property details, date of new tenancy
- If landlord opposes, a counter notice must be served within 2 months
What are the time periods of serving a S.26?
Beginning with a date not more than 12 months and not less than 6 months after making of a request.
If a S.26 is opposed how long do you have to serve a counter notice?
2 months
What is a S.26 counter notice?
Document that a landlord can serve to a tenant to oppose a request for a new tenancy
What must be included in a s.26 counter notice?
The counter notice must state the grounds for opposing the new tenancy
What is a S.27?
When the tenant does not want the lease to continue beyond the original fixed term.
What are the time periods of serving a s.27?
A least 3 month’s Notice, expiring at the lease end, that they are intending to vacate
Does a tenant have to serve a s.27?
No, they can simply vacate by contractual expiry of the original lease
What is S.28?
Tenant can serve a S.28 to contract themselves out of the Act after a lease renewal
- The current tenancy will come to an end and new tenancy outside Act will start
What different bases of Rent Reviews are there?
Indexation (cap/collar)
Turnover
Stepped increases
OMRV (upwards only)
What are FOUR usual assumptions?
- Assumed Term
- Property available to let on the open market by willing landlord and a willing tenant
- Covenants observed by LL and T
- Vacant possession
How do rent review assumptions impact value?
Special purchaser is not a willing tenant - different value attached to the property
What are THREE usual disregards?
- Tenant in occupation
- Goodwill - no special relationship between L&T that would impact valuation of ERV
- Tenants’ improvements
- Goodwill attached to property
How do rent review disregards impact value?
- Tenant improvements
- Tenant could have installed a mezzanine that could increase the floor area
What would not be classed as a willing purchaser?
Special purchaser
What is a special purchaser?
Someone who is willing to pay a premium for a property because of unique advantages that are not available to the general market
What else would you find in a rent review clause?
- Review date
- Review frequency
- Type of review
- Assumptions/Disregards
- Dispute resolution
What is time of the essence?
- Means a contract’s stated completion time is a condition of the contract.
- Parties must complete their obligations on time.
What is the case law on time of the essence?
United Scientific Holdings Ltd vs Burnley Borough Council
What did the case law set out for Time of the Essence?
Provides that the general assumption is that time is not of the essence unless there is sufficient contradictions that indicate otherwise
What is a Calderbank?
Calderbank offer can achieve early resolution of a disputed rent reviews and prevents costs escalating
How can Calderbanks influence costs?
- losing party will have to pay the other side’s recoverable costs
- ie it can avoid the equal awarding of costs
What has to be included in a Calderbank?
- Proposed rents
- Timeframe to respond – usually 21 days
- ‘without prejudice save as to costs’ – cannot be shown to a third party until resolution has been determined/awarded
What must a Calderbank letter be headed with?
‘Without prejudice save as to costs’
What does ‘Without prejudice save as to costs’ mean?
Means that the communication is confidential for the purposes of proving or disproving the facts of the case, but it can be used by the court to determine who should pay the legal costs.
Why does a Calderbank offer need to have pre-client approval?
Because the terms are potentially binding if accepted by the receiving party
It must be a genuine offer to settle, not simply a mechanism to influence costs/and or pressure the other party
What is are Part 36 offers?
Mechanism similar to a calderbank which aims to settle a dispute for lease renewals inside the act.
Must be made in writing and remain open for acceptance for a minimum of 21 days
Calderbank for lease renewals of protected tenancies
Calderbank offer can be used (but is best drafted by solicitors because the terms being offered will contain rent and non-rent terms)
Are schedules classed within a hypothetical lease?
No
What is the basis of value for a Rent Review?
Rent review provisions
What is the basis of value for a Lease Renewal?
The lease
What are the SEVEN grounds for refusal?
a) Breach of repairing covenant
b) Persistent delay in paying rent
c) Other substantial breach
d) Provide suitable alternative accommodation
e) Uneconomic subdivision – landlord intends to let the whole property and the lease was created by sub-letting
f) Redevelopment
g) Owner occupation
What are the fault based grounds?
a - c
because they involve breaches of the existing lease by the tenant.
How long must a LL own the property to refuse for owner occupation?
- landlord must have owned the property for 5 years and
- prove intention to occupy and or the business
What are the terms for grounds for refusal for development?
Landlord must prove
* firm intention,
* proof of funding and planning,
* substantial work and necessity to gain vacant possession and
* an ability to redevelop provided vacant possession is secured
What grounds of refusal can a tenant gain compensation?
- Uneconomic subdivision
- Redevelopment
- Owner occupation
What is the compensation for 14 years plus in occupation?
Rateable value x2
(RV as at the date of a hostile s.25 or s.26 counter notice)
What is the compensation for les than 14 years in occupation?
Rateable value x1
what is rateable value?
- An estimate of the annual rent it could command if it were available to let on the open market
- Determined by the VOA
What other considerations does the tenant need to have to be entitled to compensation on the grounds for refusal?
- The tenant needs to be in occupation at the end of the current tenancy
- The right to compensation could be lost if the tenant vacates well ahead of the end of the tenancy
Who is likely to serve a notice first in a rising market?
Landlord
- to capture increased rent as soon as lease expiry
eg if they serve a notice and it falls after expiry, they will have to continue paying the rent until the proposed renewal date
Who is likely to serve a notice first in a falling market?
Tenant
- to capture reduced rent as soon as lease expiry
Time of the essence for a rent review?
Must be conducted within a specific time frame.
If they don’t, they might miss the opportunity to review the rent.
What does S.24a L&T Act state?
Interim rents
- Rent paid after the expiry of the contractual term and before a formal renewal has been completed
- it can be paid from the earliest date specified in the s.25/s.26 notice
- usually the same rent as agreed for the new tenancy
Standard HOT for retail
- services we will provide
- fee basis
- CBRE standard ToB
How do you undertake a conflict of interest check?
- Check the street
- check the property (colleague may be acting for a landlord)
Example of a conflict?
- Lloyds LR
- CBRE value the building (which includes the bank) for accounts purposes
- Gained written consent from Landsec and Lloyds and information barriers were in place)
