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Tilly Rees SoE > Landlord and Tenant Level 3 > Flashcards

Landlord and Tenant Level 3 Flashcards

1
Q

What was the High Street Bank Lease Renewal, Bexleyheath example?

A

Lloyds bank

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2
Q

Bexleyheath bank

A
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3
Q

What were the existing terms of Bexleyheath?

A

5 years
A1 use
assign/sublet whole with LL consent
No break or RR

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4
Q

What was the passing rent at Bexleyheath?

A

£140,000 - £64 ZA

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5
Q

Why did you serve a S.26?

A
  • Crystalise the expiry
  • Wanted to show an intention to renew
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6
Q

Why didn’t you just confirm the renewal with the Landlord’s agent?

A
  • More than 6 months from expiry
  • And I wanted to protect my clients position
  • Proved to the LL that we wanted to review
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7
Q

Is a S.26 legally binding?

A
  • Protected by the Landlord and Tenant Act 1954
  • But it is not legally binding until signed lease
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8
Q

What were the terms in the Bexleyheath S.26?

A

Term: 5 years
Rent: £110,000 pa (20%) discount
Break clause: TOB at 3rd

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9
Q

Describe the inspection of Bexleyheath

A

Location: western end of the prime pitch

Demise: GF, kitchen, ancillary space

Demand: Historically strong retail take up in Bexleyheath, with few vacant units

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10
Q

Describe the zoning of Bexleyheath

A

A/1
A/2
A/4
Ancillary Space
Kitchen
(no allowance or discount)

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11
Q

What was your key comparable for Bexleyheath?

A

Boots (£65 ZA)
- LR
- 3 months prior
- same terms
- opposite

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12
Q

What was the rental tone of Bexleyheath?

A

£60-£70 ZA

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13
Q

What was the general demand for Bexleyheath?

A

Historically strong retail take up in Bexleyheath, with few vacant units

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14
Q

What is rack rented?

A

Market Rent

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15
Q

Why did you advise the property was rack rented?

A

The ERV was in and around the passing rent at the time of reporting

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16
Q

What negotiations did you undergo?

A
  1. Areas - joint inspection
  2. Term and rent
    - negotiated 5 year term with TOB at 3rd in exchange for passing rent (in line with comps)
  3. Negotiated ZA with evidence
  4. Pitch
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17
Q

How did the details in the S.26 differ to what was actually agreed?

A
  • S.26 is form of trigger to issue a lease renewal and to set the valuation date
  • Proposed rent was c.20% below my ERV (negotiation tactic)
  • After LL receipt of S.26 we entered into negotiations
  • Revealed new evidence where Zone A increased
  • Agreed rent at £60 ZA (in line with passing) slightly higher than our S.26
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18
Q

Did any other terms change on renewal other than term and rent?

A
  • Yes we agreed a TOB at 3rd
  • All other clauses remained as existing lease (subject to modernization)
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19
Q

What were the salient points of the HoT?

A

Term: 5 years with TOB at 3rd
L&T Act: Inclusive
Rent: £140,000 pa
Rent review: n/a
Break clause: TOB at 3rd
Repair/decoration: As per existing
Use: within class E
Alienation: As per existing
Alterations: as per existing

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20
Q

When were solicitors instructed?

A

After HoT were agreed

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21
Q

What was the agreed rent and ZA for bexleyheath?

A

£140,000
£65 ZA

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22
Q

Talk me through an example of RR

A
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23
Q

Talk me through how you got to Market Rent?

A

Gathered evidence and applied it to your areas

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24
Q

Assumptions for devaluing

A

Always in line with comps

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25
Q

What general types of things did you negotiate?

A
  • Negotiated Zone A - THIRD PARTY / EVIDENCE
  • Negotiated areas - JOINT INSPECTION
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26
Q

Talk me through a lease renewal example

A
  1. Read the lease
  2. Understand client objectives
  3. Inspect and measure
  4. Gather comps and create schedule
  5. Advise client on Market Rent achievable
  6. Client approval approach LL with proposal
    - WP and Subject to Contract
  7. Negotiate
  8. Client approval of agreed lease terms
  9. HoT
  10. Instruct solicitors
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27
Q

Where was the third party report?

A

Tottenham

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28
Q

Tottenham Halifax

A
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29
Q

What initial advise did you give for the third party report?

A
  • Disputed rent review
  • It was going to third party
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30
Q

How did you know the third party determination was an Independent expert?

A

It was stated in the Rent Review clause of the lease

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31
Q

When could a third party be either IE or arbitrator?

A

Sometimes lease states that LL can choose

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32
Q

What is the guidance for acting as an Arbitrator?

A

RICS Professional Standard – ‘surveyors acting as arbitrators in commercial property rent reviews’ 2013

States how to deal with conflicts

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33
Q

How should the dispute resolver be determined?

A

Via an application to the Dispute Resolution Service of RICS – the current cost is £425 (inclusive of VAT)

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34
Q

What is the basic process of a third party?

A
  1. Agree on appointment or apply to RICS DRS (get client approval)
  2. Appointed party to issue directions (timelines and deadlines)
  3. Duty of surveyor to act as Expert Witness
  4. Both submit statement of agreed facts
  5. Both submit 1st report
  6. reports swapped
  7. Points of reply (2nd report)
  8. Award/determination - Final award on costs
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35
Q

What is the guidance on independent experts?

A

RICS Professional Standard: Independent Expert determination, 2016

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36
Q

What are characteristics of an IE?

A
  1. Detailed knowledge of the market
  2. Not bound by judicial rules
  3. Bound my terms of lease
  4. Makes own enquiries
  5. No appeal against decision
  6. No power to disclose
  7. Only determine costs stated in lease
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37
Q

When is it good to use an IE?

A

When comparable evidence is scarce

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38
Q

IE and Arbitration decision?

A

IE = Determination
Arbitrator = Award

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39
Q

Case law on Independent expert?

A

Level Properties Ltd v Balls Brothers Ltd (2007)

  • example of an experts determination of a rent review case not being held to be binding
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40
Q

What are characteristics of an Arbitrator?

A
  1. Usually appointed by RICS DRS
  2. Flexibility to agree procedural matters
  3. Decision based on submitted evidence only
  4. Arbitrator can order disclosure
  5. Has the power to award costs of the arbitrator of both parties
  6. Governed by statute
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41
Q

How are Arbitrators governed?

A

Arbitration Act 1996 for disputes in England and Wales

42
Q

Key differences between IE and Arbitrator?

A
  1. Evidence
  2. Appeal
  3. Negligence
  4. Dislcosure
  5. Law
  6. Outcome
  7. Costs
  8. RICS Guidance
43
Q

What is the guidance on surveyors acting as Independent Experts?

A

RICS Guidance note: Surveyors acting as independent experts in commercial property rent reviews, 2014

44
Q

IE or Arbitrator?

A
45
Q

When would an Arbitrator be preferable?

A

In a rising market when acting for a tenant - can only look at facts presented

46
Q

When would an Independent expert be preferabble?

A

In a falling market when acting for a tenant

47
Q

Did you act as an Expert Witness or an advocate?

A

Expert witness with my supervisor - drafted with my supervisor

48
Q

Who acted as an expert witness and what are the characteristics?

A

My supervisor (RICS surveyor)
1. Primary duty is to the tribunal
2. Only accept if sufficient knowledge and experience and qualifications
3. Must make a declaration
4. Must give a statement of truth
5. Evidence must be:
- Unbiased
- Truthful
- Recognize alternative views

49
Q

What are the characteristics of an advocate?

A
  1. Owes a duty to their client
  2. Duty to tribunal to act properly and fairly
  3. Adhere to guidance
  4. Fair and proper means
  5. Not mislead the tribunal
  6. Provide a valuation not an opinion
50
Q

What is the guidance on surveyors acting as advocates?

A

RICS Professional Statement & Guidance Note: Surveyors acting as advocate, 2017

51
Q

How did you gather evidence and prepare the case?

A
  1. Read the lease and RR clause
  2. Analysed comparables
  3. Provided opinion of Market Rent
  4. liased with Expert Witness
52
Q

How did you represent your client in proceedings?

A
  1. Challenged opposing party in Points of Reply
  2. Acted fairly
53
Q

How did you advise your client on the outcome?

A

Determination = Rental uplift and increase will be accrued

Rent to be accrued from the RR date - 4% interest

54
Q

What was in the statement of agreed facts?

A

Floor areas - signed by both parties

55
Q

What was within the report?

A
  1. Introduction
  2. The Dispute
  3. Location
  4. Description
  5. Lease terms
  6. Comparable evidence
  7. Valuation
  8. Conclusion
  9. Declaration
56
Q

What was the RR clause for the report?

A

5 yearly OMRV (upwards only)

57
Q

Why did it go to third party?

A

We felt the property was under rented and RR should be documented at Nil Increase

58
Q

What comparables did you consider?

A
  • GDK is the top of the hierarchy of evidence
  • However, it is in a superior location and therefore commands higher ZA
  • Therefore, appropriate Zone A = £60
59
Q

What did you think the ZA should be for the report?

A

£60

60
Q

What other advice did you provide in the report?

A

1. Assumed term
* RR provision assumes hypothetical term of 10 years
* Current market is seeing 5 years with 3rd TOB so we attributed -2.5% for the assumed term

2. Retail market conditions
- Not back to pre-pandemic levels

61
Q

How did location impact value in the report?

A
  • Mix of local and multiple retailers
  • Multiple retailers occupy stronger position (higher footfall)
  • Subject in weaker pitch (more independent)
62
Q

How did the demise impact value in the report?

A
  • Agreed areas
    2.5% allowance for return frontage (GF areas)
63
Q

What was the demise of the report?

A

GF
FF - meeting rooms, WC
SF - storage, staff room

64
Q

What was the rental tone at time of report?

A

Evidence was between £45 and £70 ZA

65
Q

What is double frontage?

A

The additional display space a property gains due to its corner location

66
Q

How did the lease terms impact value?

A
  • Terms not to have material impact on value
  • Onerous assumed term is 10 years - typically 5 yrs
    SO -2.5% discount on whole area
  • Standard assumptions/disregards
  • Assume permitted use as A1/A2
67
Q

What were the RR assumptions and disregards of the report?

A

Assumptions
A1 use
Fit for immediate occupation
No works carried out to reduce the rental value
Willing tenant has had the benefit of rent free

Disregards
Any goodwill
Tenant in occupation
Improvements carried out by the tenant

68
Q

In the report what zones were agreed for FF and SF?

A

A/10 and A/15

69
Q

What was your opinion of market rent in the report?

A

£56,500 pa (nil increase)

70
Q

What advice did you provide on the Zone A rate for the report?

A
  • GDK was an OML however superior position (£68 ZA)
    3 independent retailers directly opposite
  • closer transaction date
  • £43 - £45
  • Inferior side of road
71
Q

What was in the submission of replies?

A
  • Disputed comparables
  • Assumed term discount
  • Signed by supervisor
72
Q

What was the determination?

A
  • £74 Zone A
  • 2.5% return frontage
  • less 5.00% for assumed term
    = £68,600 pa
73
Q

What did you advise your client following the determination?

A
  • Following receipt of payment of the experts fee, the IE gave their determination
  • The outcome was a rental increase of £8,000
    The implications were:
  • Not the outcome we wanted for our client
  • Rental uplift (interest due), which meant back rent was due to the rent review date (29/12/21 + interest) banks base rate
  • Informed my client that the increase amount was closer to the landlords calderbank (£9,500 uplift)
  • ultimately resulted in my client having to cover their side of the costs (£4,500)
74
Q

What fees were paid to the IE initally?

A
  • half their costs to release their determination
  • we had to cover their half of the costs (£9,000 in total)
75
Q

Was time of the essence for report?

A

No

76
Q

What was stated in terms of costs for determination in the lease?

A

‘the fees and costs of appointing the expert will be borne and paid by the Landlord and the Tenant in such shares and in such manner as he decides or failing such decision in equal shares’

77
Q

How long was the RR outstanding for?

A

RR date: 29/12/2021
CBRE Calderbank served: 7/12/2021
LL Calderbank served: 25/01/2023

78
Q

When was the expert appointed?

A

16/03/2023

79
Q

What was the passing/proposed/agreed rent of the report?

A

Passing: £60,000
LL: £80,000
Us: £56,000
Determination: £68,000

80
Q

How were the costs determined?

A

Expert decides fee and costs
‘I therefore invite the parties to agree how such costs are to be borne.’
- we agreed 50% of time based fee with the LL

81
Q

What is a letter to parties?

A

Letter to parties from Independent expert setting out proceedings

82
Q

What were the procedural instructions of the Independent expert?

A
  • 6 weeks to prepare report
  • 2 weeks to provide points of reply
83
Q

What did the expert witness do that you didn’t?

A

Signed the declaration

84
Q

Dan went through the draft report and amended it

A

Declaration signed by Dan

85
Q

I drafted!!!!

A
86
Q

What advise did you give in the report?

A
  1. Advised to go to third party
  2. Zone A rate - MV
  3. Implications of the determination
87
Q

Why did you advise to go to third party?

A
  • disputed rent review
  • protect my client
  • limited evidence for uplift
88
Q

What are the grounds to dispute third party?

A
  1. Fraud
  2. manifest error - clear error
  3. negligence
89
Q

What are the 3 counts you can appeal an arbitration award?

A

Appeal to the High Court within 28 days:
1. A challenge to the tribunal’s jurisdiction
2. On a point of law
3. Serious irregularity

90
Q

What is the cost of DRS application?

A

£425 inclusive of VAT

91
Q

Were you acting as an expert witness for an expert report?

A

I prepared with my supervisor to ensure that we were acting as an expert witness and not an advocate?

92
Q

What is the case law on Calderbank v Calderbank?

A
  • The case established that a losing party can use a settlement offer to argue about costs, even if the offer was made before the court hearing.
  • This can result in the losing party paying less in costs than they would normally if the winning party’s damages are less than the settlement offer
93
Q

Did you agree on how costs could be split?

A

Yes we did
If we did not we would go back the expert on his view as to how they would be split

94
Q

What advise did you give the client after the determination?

A
  • Rent had gone up
  • LL and IE uncovered evidence that we had not obtained
  • From independent retailers which are typically harder to find
  • LL report showed new evidence that we had not seen
  • despite the rent going up - we were better off going to third party rather than accepting LL calderbank
  • Back rent of 1 year 9 months + interest)
  • Shouldn’t be disappointed
95
Q

What was the RR date and when was the determination date?

A

RR: 29/12/21
Determination: 29/09/23
1 year and 9 months of back rent (21 months)

96
Q

Why did you issue a calderbank if it was rack rented?

A
  • Good practice
  • Engage the landlord and enter into negotiations
  • Wanted to show the LL intention to stay
97
Q

What happens if the Landlord does not respond to the calderbank in time?

A
  • if they do not engage they may be liable for costs
98
Q

Why did you issue the calderbank at Tottenham in the first place?

A
  • No evidence of uplift
  • LL agent wasn’t engaging
99
Q

What were the lease terms at Tottenham?

A
100
Q

What was the rental tone?

A
101
Q

Know the property well!!! and valuation breakdown

A

Tilly Rees SoE (46 decks)

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