Leasing and Letting Flashcards
What are the 2 key RICS policies relating to Estate Agency?
RICS Global Real Estate Agency and Brokerage Professional Statement, 2016
RICS UK Commercial Estate Agency Professional Statement 2016
What are the 12 key principles in the RICS UK Commercial Estate Agency Professional Statement 2018?
1) Act in an honest, fair, transparent and professional manner
2) Carry out work with due skill, care and diligence
3) Ensure clients are provided with clear terms of business and details of the CHP
4) Do the upmost to avoid conflicts of interest
5) Don’t discriminate unfairly
6) All communications with clients are fair, decent, clear, timely and transparent.
7) All advertising is honest and truthful
8) Client money is held separately and covered with insurance
9) Hold appropriate PII
10) Make it clear the obligation to your client
11) Give realistic assessments of prices/rents/cost regarding market evidence and professional judgement
12) Ensure all meetings, inspections and viewings are carried out in accordance with the clients wishes and safety
What are the key areas covered by the RICS UK Commercial Estate Agency Professional Statement 2018?
- Acting ethically
- Securing instructions (legal requirements, AML checks, types of agency and H+S)
- Marketing the property
- Implementing the disposal
- Acquisition of property
When does the Estate Agency Act 1979 apply?
- Disposal or acquisition of an interest in land
- Freehold property or Leasehold property with a capital value
- Land as well as buildings
What are the main principles in the Estate Agency Act 1979?
1) Clarity as to the terms of the agency
2) Honesty and Accuracy
3) Agreement and Liability for costs
4) Openness regarding personal interests
5) Absence of discrimination
6) Legal obligation to tell the client about offers received
7) Keep clients money separate
What are some of the most important points in the Estate Agency Act 1979?
- Specify all costs/fees in advance in writing in the TOB
- Itemise all payments
- Specify nature of agency (e.g. joint agency/ sole agency)
- Advise client of any services available
- Disclosure of personal interests
- Handling clients money
What are some penalties in the Estate Agency Act 1979?
The Act allows for a prohibition or warning order to be made against an agent, stopping the agent practicing. Only around 10-12 given each year.
What is the Regulation of Property Agents report?
Government report proposing that all property agents be regulated by an independent regulator with mandatory requirements for agents and a code of practice
A new regulator would take responsibility for redress schemes and client money protection schemes
What is the Town + Country Planning (Control of Advetisement) (England) Regulations 2007?
Planning consent is required for non-residential boards over 2 sq. m (flat) and 2.3 sq. m (V board).
Also, illuminated boards, remote boards, boards erected on listed buildings and in conservation areas
- Only 1 board per building
- Must not project more than 1m from the face of the building and not above 4.6m from ground in a safe condition.
- Must be removed 14 days after completion of transaction
- London has more restrictive requirements
What is the Misrepresentation Act 1967?
Misstatements made during the pre-contractual enquiries by the vendor or their agent.
It’s a civil offence
Can be sued for financial damages and/or contract rescinded
Whats the Consumer Protection Regulations 2008?
Applies during the whole process
It’s a criminal offence not treating customers fairly and providing misleading marketing information
Can get an unlimited fine, a prohibition order and up to 2yrs prison
What is the Land Registration Act 2002?
All freeholds and leaseholds granted for terms over 7 years must be registered with the Land Registry with a compliant lease plan
Adverse possession for more than 10 years
What should be included in a Compliant Lease Plan?
- Drawn to metric scale
- Have a scale measurement bar
- Have scale noted on the plan
- Include a 1:1250 location map
- Full address including post code
- North Point
- Demise outlined in red on inside edge of property
What is the RICS Professional Statement Code for Leasing Business Premises 2020?
Mandatory professional statement
Objective: to improve the quality and fairness of negotiations on lease terms and promote the use of a new set of comprehensive HOT to make legal drafting more efficient
What is the structure of the Code for Leasing Business Premises 2020?
1) Introduction
2) Mandatory Requirements
3) Lease negotiation best practice
4) Appendices
What are the mandatory requirements in the Code for Leasing Business Premises 2020?
Negotiations must be approached in a constructive and collaborative manner
A party that is not represented by a RICS member must be advised about the existence of the Code
The agreement for a lease must be recorded in written terms stating that it is ‘subject to contract’.
At lease renewal or extension the HOT should comply with the above except for any terms that are the same as the existing lease (save for reasonable modernisation)
Negotiations should aim to produce terms that achieve a fair balance between the parties with regard to their respective commercial interests.
What should HOT contain?
- Identity and extent of the premises
- Any special rights to be granted
- Length of the term
- Whether the lease is inside or outside the 1954 Act
- Any options for renewal or break caluse
- Any requirements for guarantor or rent deposit
- Amount of rent, frequency of payment
- Any rent free period or incentive
- Any rent reviews and the basis of the review
- Any repairing obligations
- Initial permitted use
- Any conditions (e.g. subject to survey)
- Rights to assign, sublet etc.
What is in Part 3 of the Code for Leasing Premises?
- Includes specific advice on lease terms e.g. rent reviews, service charges, repairs and alienation clauses.
What is in Part 4 of the Code for Leasing Premises?
- Includes specific advice on lease terms e.g. rent reviews, service charges, repairs and alienation clauses.
What should you consider re. tenant selection of a property?
There is a relationship between the quality of the tenants covenant and the investment value of a property
What is some usual information to request from a potential tenant?
- Bank, Accountant and 2 trade references
- Previous/existing landlord reference
- 3 years audited accounts
What is the profits test?
Net profit should be 3 times the rent for 3 consecutive years
What do you need to consider when requesting a rent deposit?
- Personal to the tenant
- Should be legally documented
- Must be held in a separate bank account
- Interest paid to the tenant
- Agreed terms for the release of the monies
- Can include a top up mechanism for RR
What should a letting agent consider about a break clause?
- Strict timetable
- Is it mutual?
- What conditions need to be met?
- Is there a penalty rent?
Why would you need to consider a pre-letting?
Occupiers may consider the pre-letting of premises, particularly if there is a market shortage or if they need specific facilities to statisfy their needs
What should an agreement for lease contain?
- The lease
- Licence for Alterations
- Plans and specifications
- Developer’s guarantee
- Warranties
What are some lease terms that affect value?
- Lease length
- Break clause
- Alienation
- User clause
- Repairing obligations
- Security of tenure
- Planning use
What are schedules of Condition?
They limit the tenants repairing obligation in respect of agreed items of disrepair for the duration of the lease
It is agreed by negotiation between the landlord and tenant and attached to the lease
What are Service Charges?
Charges to tenants of multi-tenanted properties or estates to reflect costs incurred by a landlord to maintain and manage a property
What is the Professional Statement covering Service Charges?
RICS Professional Statement – Service Charges in Commercial Property
What do you need to consider first about Dilapidations?
Read the Lease!
What are Dilapidations?
Negotiations take place at lease expiry to bring property back into its condition at the start of the lease
Tenant can do the works themselves or give the landlord money to undertake the works
What Statute governs Dilapidations?
Section 18 in L&T Act 1927 sets out claim for diminution in value
What should you consider in regards to Empty Buildings?
- Insurance
- Fire safety
- Security
- Asbestos register
- Utilities
- Rates liability
- Disposal strategy
What is normally required for Alterations in a lease?
Must be approved by a landlord and usually subject to reinstatement at expiry (Licence for Alterations required)
Normally non-structural
What is an Assignment?
Assignment gives new tenant direct relationship with LL
What is a sublease?
A sublease gives new T direct relationship with original T
