Leasing and letting

Question 1

What is the main piece of legislation that covers agency?

Answer 1

Estate Agents Act 1979
- s.18 terms of business / fees
- s.21 COI

Consumer Business Protection

(they only apply to agencies and consultancies BUT acting in-house, I comply fully with legislation)

A breach is a criminal offense - fine or prison

Question 2

Tell me about the Misrepresentation Act 1967

Answer 2

Making sure the information is honest and not twisting the truth

this is a CIVIL offense (not criminal) as you add a disclaimer on the documents.

Question 3

What are RICS regulations relating to Leasing and Letting?

Answer 3

P/S Code for Leasing Business Premises 2020 (fairness)
P/S UK Commercial Estate Agency 2016 (12 principles)

P/S Money Laundering, Bribery, Corruption…
P/S COI 2017

Question 4

What are the different types of agency?

Answer 4

Joint agency…

Question 5

What are the ways the client pays fees

Question 6

What are the different categories of fit out?

Answer 6

4 categories of fit out:
Shell and core
Cat A
Cat A+
Cat B

–

A shell and core fit out includes:
* Lobbies
* Lift shafts
* Concrete and metal frame
* Structural elements

A Cat A fit out includes:
* Lighting
* Air conditioning
* Toilets
* Raised access flooring
* Grid ceilings
* Basic fire detection systems

A Cat A+ fit out includes:
* Meeting rooms and breakout spaces
* Furniture and workstations
* Fitted kitchens
* Power
* IT infrastructure
* WCs

A Cat B fit out includes:
* Partitions and doors
* Floor finishes
* Specialist lighting and facilities
* Cafés, tea points and kitchen areas
* Furniture
* Branded material and décor

–

Cat A = whitebox

Cat A+ = typically conducted by landlords as a way of attracting tenants into their space rather than leaving the space as Cat A which would require the tenant to spend money on designing (aka Plug and Play space)

Cat B = fully operational workplace that has been designed to a client’s unique specifications

Question 7

What are the different grades of spaces?

Answer 7

A = pinnacle quality that can be achieved. Brand new or recent complete redevelopment with a high-specification renovation, it will be well-located with good access and be professionally managed.
(over time, Grade A office spaces will become Grade B)

B = property that has been previously occupied and is not quite to the level of quality expected of a grade A office. Grade B office space is considered ‘average’ and perfectly usable.
(can be because of state, location, etc)

C = lowest specification available. 20+ yo and in less desirable areas. These buildings are not aesthetically pleasing, technology is out-dated, and infrastructure is lacking, therefore they offer the lowest yields and are often targeted by developers and utilised by smaller companies.

Question 8

What’s the difference between a Grade A space and a Cat A space?

Answer 8

Grade refers to the quality of a space (good location, new development, good amenities)
vs
Category refers to fit out (Grade A features some fit out elements above Shell and Core, such as AC, raised access flooring, etc)

Question 9

What rent psf could you expect for an office space?

Answer 9

Depends on grade of office space (pic is from 2018)

Question 10

Why did you agree on a Day 1 Rent Review at Heston?

Answer 10

My client (tenant) was looking to confirm occupation immediately, but the lease would start in 3 months’ time

The landlord did not want to agree a rent per square foot as market was rising

To complete the lease agreement, day 1 RR was agreed as a compromise

Question 11

What are the current rules for EPCs?

Answer 11

EPC = Energy Performance Certificate.
MEES = Min Energy Efficiency Regulations 2015

As of April 2023, all leases (new and existing) need an EPC rating achieving E

Proposed changes:
- 2027, all leases will need an EPC rating achieving C
- 2030, all leases will need an EPC rating achieving B

Question 12

What are exemptions from EPCs?

Answer 12

Buildings with no heating, listed buildings, buildings due to be demolished

(Arches do not have heating)

Question 13

Which firm do you use to conduct credit checks?

Answer 13

Creditsafe
or Dun & Bradstreet

Question 14

What are the checks you require from tenants?

Answer 14

• Identity checks
• Profits check

Question 15

What are the business rates?

Answer 15

A fee that businesses must pay. It is set by the Valuation Office Agency using a multiplier of the Rateable Value of the property

For vacant properties, landlord can apply for 3 months’ relief for offices & retail, or 6 months’ relief for industrial before full empty rates are charged (100% of rates payable)

London multiplier = £0.532
Small business multiplier = £0.499

Question 16

How would you advise your client on marketing signage?

Answer 16

Follow the Control of Advertisement Regulations 2007

Planning consent required for:
- boards over 2 x 2.6 sqm. Only one board per building
- illuminated boards
- remote boards
- boards on listed buildings or conservation areas

Policed by local planning authorities. Some have stricter rules than others

Must be removed 14 days after completion

Question 17

How did you report your offers to your clients?

Answer 17

As per the lettings policy:

4.1 We will outline to all customers looking to bid, that they need to complete a mandatory offer template and checklist of items we expect them to provide us.
4.2 We will make available an affordable calculator on our website, so customers can check the
affordability of their bid.
4.3 A schedule of offers will be reviewed by Commercial Development. Offers are to include a cash
flow analysis so we can check rent is affordable to ensure working liquidity.
4.4 We will commit to reviewing and confirming successful bids with 2 weeks of the closing date.
4.5 The property manager will conduct a sensitivity analysis on all bids so the impact of any new letting on the current customer base is known and can be managed.
4.6 Our agents will keep a database of all bids received so we can conduct ‘loss-leader’ analysis on offers, reviewing potential future customers.
4.7 If the property isn’t under offer within 3 months, we will review the asset plan, price and use
class.
4.8 All customers need to adhere to our eligibility criteria – see appendix 1.
4.9 In all cases the following apply as mandatory items for each letting and we are conveying this to
customers in advance.
- Monthly rent paid in advance by DD
- 6 months’ rent deposit or
- Personal guarantee for new business only
- If an existing business, a credit check will be completed, to show a well-run and profitable business with a good covenant for us to grant a lease. This check will be completed again if the lease is not granted after 12 months
- During the current environment we would expect them to explain how their business is dealing with Covid-19
- Any existing customers – a dispute check will be completed

Question 18

Difference between FRI and IRI?

Answer 18

FRI is a term used to describe a lease where the customer is responsible for all repairs (external and internal) and for insuring the property. However, a lease can also be referred to as an effective FRI, there are leases where the landlord pays for external and insurance and recovers the cost via separate charge

Answer 19

Liquidity is important for loan sec valuations because if the borrower defaults: is there any chance that the property will be easily sold (/at least rented) on the market?
(deleterious materials, flood zone…)

Answer 20

Liquidity is important for loan sec valuations because if the borrower defaults: is there any chance that the property will be easily sold (/at least rented) on the market?
(deleterious materials, flood zone…)

Question 21

What legislation covers agency?

Answer 21

Estate Agents Act 1979:
s.18 TOE and clarity of fees
s.21 declaration of personal interest

CPR and BPR:
Refer to misleading information during the course of marketing

Misrepresentation Act 1967:
False or misleading fact in the course of negotiations (saying the wrong thing when you know the truth)
Civil wrong under the law of tort and the contract can be rescinded

=> BUT you are under no obligation to find out information that you do not know, concept of “caveat emptor”