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Commercial Real Estate 2023 > Leasing and Letting > Flashcards

Leasing and Letting Flashcards

1
Q

what use class is general industrial?

A

B2

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2
Q

what use class is open storage?

A

B8

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3
Q

Why was the use class order changed?

A

to help revitalise the high street, and widen uses for vacant units.

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4
Q

what do rental guarantees usually cover?

A

Usually for rent, and can be for other tenant obligations such as service charge and repairing.

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5
Q

Do tenants need to pay VAT?

A

If the property is VAT opted.

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6
Q

What is said with regards to assignment in RICS Code for leasing business premises, 2020?

A

Leases should be allowed to be assigned, subject to landlord consent NTBUWOD.

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7
Q

What is an agreement for lease?

A

When signed, an AFL is a legally binding document which requires both parties to enter into a lease on a fixed date, or upon satisfaction of certain conditions.

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8
Q

what is difference between lease and license?

A
  • lease is legal interest, license makes legal what would otherwise be illegal.
    -lease has specific demise and plan, red line boundary.
  • term.
    -rent.
  • EXCLUSIVE OCCUPATION.
    -assignable, and to applies to succesors in title.
  • License is personal.
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9
Q

what is privity of contract?

A

for leases pre 1996, original tenant remained on the hook.

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10
Q

What checks should be undertaken before accepting an instruction to let a unit?

A
  • First ensure competence to do instruction, ie is it in your patch.
  • Second conflict of interest.
  • Third AML checks on the lessor or lessee, if property rent is over 10k euro pcm.
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11
Q

If a property does not have an EPC certificate, how long do you have after marketing it to obtain one?

A

the latest by 28 days after going to market

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12
Q

what is included in Class E use?

A

-shops
- offices
-cafes
-gyms
-restaurants, GPS
-post offices

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13
Q

what documents would you ask your client for when you have received an instruction?

A
  • EPC CERTIFICATE
  • floorplans
    -tenure of property, terms of headlease?
  • Planning use?
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14
Q

What does it mean to assign a lease?

A

this is when a tenant disposes of their leasehold interest and passes it to another tenant.

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15
Q

What does it mean to sublet?

A

sublet is when tenant themselves lets the property to another tenant, they are still the tenant to the landlord

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16
Q

why might a tenant assign their lease?

A

wants to upsize/ downsize, needs to relocate. Can’t afford rental payments going forward.

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17
Q

why might a tenant want to sublet over assigning?

A
  • PROFIT RENT
  • take back possession at future date.
  • only wants part of their demise.
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18
Q

what is a schedule of condition?

A

photographic/ text record of the property that limits the tenants repairing liability.

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19
Q

what should be the only condition according to RICS Code for leasing business premises in relation to break clauses?

A

should only be conditional on rent being paid.

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20
Q

what provisions of a rent review should be included in lease according to RICS Code for leasing business premises?

A

-Proposed frequency of rent review
-Method of rent review
-Definitions of market rent should not result in a “headline rent” being adopted

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21
Q

What are rents/ market doing in Stratford?

A

**Office **
- Take up is slowing down. Most demand for small office units. Prime rents at £45 psf, secondary rents at £20 psf.

**Industrial **
- Take up in the industrial market has also eased.
-Market is driven by smaller lettings of under 25k sq ft.
-Demand is still relatively healthy.
-32psf prime, 27psf secondary.

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22
Q

according to code of leasing business premises what is required to limit tenants repairing obligation?

A

schedule of condition

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23
Q

What can a landlord request as additional security when letting a property to a new tenant?

A

rent deposit
guarantor

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24
Q

What must be included in a set of marketing particulars?

A
  • EPC rating
  • floor area
  • photographs
  • description
  • BUSINESS RATES
  • DISCLAIMER
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25
Q

when would you recommend an assignment and when would you recommend subletting?

A

This would depend on the tenants desires.
- if they wanted to retain space or take back in future I would recommend subletting.
- if they wanted no more involvement, needed to relocate or struggling to pay rent I would recommend assigning.
- they may need to consider an AGA being demanded.

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26
Q

what is your companies disclaimer in relation to marketing particulars?

A

-information to best of our knowledge.
-information not to be relied upon.
-subject to contract.
-No person at this organisation has authority to make representation or warranty on this property

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27
Q

How big can commercial letting boards be?

A

Planning consent is required for boards of
- over 2m if FLAT
over2.3 sq m if V BOARD

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28
Q

what is the timeline for a lettings disposal?

A
  • check no conflicts of interest.
  • do AML checks.
    -check competent to do instruction.
    -sign TOE.
    -Inspect in accordance with surveying safely.
    -measure in accordance with code of measuring practice/ IPMS.
    -gather comps, do market appraisal.
    -report to client with value and market particulars.
    -launch property.
    -report any offers to client and help do HOTS.
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29
Q

What size is a LR compliant lease plan?

A

1:200

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30
Q

can you name the Use Classes Order

A

Planning Uses Classes Order 1987 as amended.

31
Q

Why would a landlord opt their property for VAT?

A

to recover VAT on their expenditure

32
Q

**Mentioned in submission **

You mentioned disposing of a ‘Class E’ unit, what properties are Class E?

A
  • shops, cafes, restaurants, GPS, offices, research and development, light industrial.
33
Q

Mentioned in submission

At what rental value are you required to undertake AML checks?

A

a rental value of over 10,000 euro per month.

34
Q

**mentioned in submission **

Where did you find the comparable evidence for the new letting?

A

this agency had co star subscription, and were active in the local area.

35
Q

mentioned in submission

you mention in the lease assignment the landlords legal fees needed to be covered, why?

A

This was because that is what the tenant asked, seems unfair for landlord to have to pick up cost.

36
Q

mentioned in submission

You mentioned reporting offers to the client, what details did you include in this?

A
  • RENT
    -TERM
  • USE with business plan ‘landlord pack’
  • requested rent free period.
    -any break clause.
    -any rent review.
37
Q

How would you assess tenants covenant strength?

A

Could use profit test.
Net profit 3x the annual rent for last 3-5 years.
OR
net assets being 5x the annual rent

38
Q

What regulations govern Lettings Boards?

A

Town and Country Planning (Control of Advertisements) Regulations 2007

39
Q

Tell me about MEES?

A

MEES came into effect in 2018.

From April 2023, any buildings with an EPC of E or less is prohibited to be let out.

40
Q

how is turnover rent usually calculated?

A

Base rent of typically 80% of full market rent + top up with 10% of turnover (gross but net of VAT

41
Q

when would a landlord not want to serve a non hostile s.25 notice?

A

In a falling market, as rent will lower.

42
Q

Which buildings does MEES apply to?

A

buildings that are let with leases over 6 months to a max of 99 years.

43
Q

what due diligence would you do when you receive an instruction?

A

FIRSTLY
-conflict of interest
-aml
-then issue TOE

-look at demand.
-what has recently let in the area.
-asking rents.
-let rents.

44
Q

How are agency fees typically calculated?

A

10% of first years rent.

45
Q

when may you pre let something?

A

-if there is a market shortage.
- requires an Agreement for Lease.
- advantage is you get a bespoke building.

46
Q

if you wanted to access the building before the AFL started what would you put in place?

A

Tenancy at Will

47
Q

Can you explain the different types of agency and what the fee basis is?

A

sole- 10% of first years rent
joint - 7.5% EACH of first years rent
multiple- typically winner takes all but that depends on TOE.

48
Q

What would you request from a tenant to ensure their covenant strength?

A
  • 3 years of audited accounts.
  • credit check report (Dunn and Bradstreet)
    -previous/ or existing landlords reference.
49
Q

how is stamp duty for leases calculated?

A

it is calculated on the net present value of rents as follows

NPV up to 150k - 0%
150k to 5 million - 1%
above 5 million - 2%

50
Q

name some buildings exempt from MEES?

A

low energy use warehouses
places of worship
some listed buildings

51
Q

mentioned in submission

Can you talk me through this example?

Letting class E office

A
52
Q

mentioned in submission

How did you measure the accommodation?

former office

A

to IPMS 3 as the facilities such as kitchen/ toilet were shared.

53
Q

mentioned in submission

How did you report offers to the client?

Class E office

A
54
Q

Mentioned in submission

can you talk me through this example?

Bermondsey bike shop

A
55
Q

mentioned in submission

How did you measure this unit?

Class E - bike shop

A

GIA, this is the measurement for agency in code of measuring practice for everything except office

56
Q

mentioned in submission

What is an assignment?

A

when a tenant legally transfers their leasehold interest in a property to someone else.

57
Q

mentioned in submission

why did the tenant want to assign?

A

they wanted to downsize

58
Q

mentioned in submission

How did you report offers on the lease assignment?

Bike shop assignment

A

I reported them all to the tenant, for the tenant to take to the landlord. I didn’t get involved in negotiations between landlord and tenant.

59
Q

Mentioned in submission

Can you talk me through this example?

Make it Bromley by Bow

A
60
Q

Mentioned in example

How did you advise your client in relation to the local industrial market?

Make it Example

A
  • The demand and take up of mid size units in east london was slowing down.
  • there was a lot of supply, of significantly better stock.
  • Unlikely that any tenant would be interested in 38,000 sq ft for 18 months term certain.
  • Unit next door had not let out.
61
Q

mentioned in submission

How did you advise your client in relation to void costs?

Make It

A
  • 6 months rates relief, after that there would be rates.
  • 12k insurance.
  • If secuirty was needed this would be about 12k also.
62
Q

mentioned in submission

How did you advise your client in relation to void costs?

Make It

A
  • 6 months rates relief, after that there would be rates.
  • 12k insurance.
  • If secuirty was needed this would be about 12k also.
63
Q

Mentioned in submission

Why did you advise your client not to collect rent?

Storage Land/ Kings Yard

A

As this could have created a periodic tenancy. The TAW was verbal so problems could have arisen

64
Q

What is the RICS PS on Leasing/ Letting?

A

RICS Professional Statement Code for Leasing Business Premises, 2020

65
Q

When did the RICS Code for Leasing Business Premises become effective?

A

Sept 2020

66
Q

What is the aim of the code of leasing business premises 2020

A

-Improve the quality and fairness of negotiations on terms.

-encourage use of new HOTs to make drafting more efficient.

67
Q

Can you tell me about the Misrepresentations Act of 1967?

A

it is a civil procedure by which an agent could be sued by tort in common law for an act of misrepresentation that causes a party to purchase.

68
Q

how do you mitigate risk of being sued?

A

I write disclaimers on all particulars

69
Q

what one area is a ‘must’ in the code for leasing business premises?

A

negotiation and heads of terms.

70
Q

what is the estate agent act?

A

it regulates the estate agent sector in the UK, setting out the purpose of estate agents, and defines who is an estate agent.

71
Q

what are the macro economic trends that affect the lettings market?

A

-economic uncertainty = slow down in growth
- high inflation, eroding values.

72
Q

who polices the estate agent act?

A

trading standards of local authority.

73
Q

principles of estate agent act?

A

-clarity as to fees
- report all offers to client
-keep client money separate.

74
Q

how long do you report the offer to a client

A

within 1 working day

Commercial Real Estate 2023 (13 decks)

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