Leasing and Letting Flashcards
what use class is general industrial?
B2
what use class is open storage?
B8
Why was the use class order changed?
to help revitalise the high street, and widen uses for vacant units.
what do rental guarantees usually cover?
Usually for rent, and can be for other tenant obligations such as service charge and repairing.
Do tenants need to pay VAT?
If the property is VAT opted.
What is said with regards to assignment in RICS Code for leasing business premises, 2020?
Leases should be allowed to be assigned, subject to landlord consent NTBUWOD.
What is an agreement for lease?
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.
what is difference between lease and license?
- 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.
what is privity of contract?
for leases pre 1996, original tenant remained on the hook.
What checks should be undertaken before accepting an instruction to let a unit?
- 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.
If a property does not have an EPC certificate, how long do you have after marketing it to obtain one?
the latest by 28 days after going to market
what is included in Class E use?
-shops
- offices
-cafes
-gyms
-restaurants, GPS
-post offices
what documents would you ask your client for when you have received an instruction?
- EPC CERTIFICATE
- floorplans
-tenure of property, terms of headlease? - Planning use?
What does it mean to assign a lease?
this is when a tenant disposes of their leasehold interest and passes it to another tenant.
What does it mean to sublet?
sublet is when tenant themselves lets the property to another tenant, they are still the tenant to the landlord
why might a tenant assign their lease?
wants to upsize/ downsize, needs to relocate. Can’t afford rental payments going forward.
why might a tenant want to sublet over assigning?
- PROFIT RENT
- take back possession at future date.
- only wants part of their demise.
what is a schedule of condition?
photographic/ text record of the property that limits the tenants repairing liability.
what should be the only condition according to RICS Code for leasing business premises in relation to break clauses?
should only be conditional on rent being paid.
what provisions of a rent review should be included in lease according to RICS Code for leasing business premises?
-Proposed frequency of rent review
-Method of rent review
-Definitions of market rent should not result in a “headline rent” being adopted
What are rents/ market doing in Stratford?
**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.
according to code of leasing business premises what is required to limit tenants repairing obligation?
schedule of condition
What can a landlord request as additional security when letting a property to a new tenant?
rent deposit
guarantor
What must be included in a set of marketing particulars?
- EPC rating
- floor area
- photographs
- description
- BUSINESS RATES
- DISCLAIMER
when would you recommend an assignment and when would you recommend subletting?
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.
what is your companies disclaimer in relation to marketing particulars?
-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
How big can commercial letting boards be?
Planning consent is required for boards of
- over 2m if FLAT
over2.3 sq m if V BOARD
what is the timeline for a lettings disposal?
- 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.
What size is a LR compliant lease plan?
1:200
can you name the Use Classes Order
Planning Uses Classes Order 1987 as amended.
Why would a landlord opt their property for VAT?
to recover VAT on their expenditure
**Mentioned in submission **
You mentioned disposing of a ‘Class E’ unit, what properties are Class E?
- shops, cafes, restaurants, GPS, offices, research and development, light industrial.
Mentioned in submission
At what rental value are you required to undertake AML checks?
a rental value of over 10,000 euro per month.
**mentioned in submission **
Where did you find the comparable evidence for the new letting?
this agency had co star subscription, and were active in the local area.
mentioned in submission
you mention in the lease assignment the landlords legal fees needed to be covered, why?
This was because that is what the tenant asked, seems unfair for landlord to have to pick up cost.
mentioned in submission
You mentioned reporting offers to the client, what details did you include in this?
- RENT
-TERM - USE with business plan ‘landlord pack’
- requested rent free period.
-any break clause.
-any rent review.
How would you assess tenants covenant strength?
Could use profit test.
Net profit 3x the annual rent for last 3-5 years.
OR
net assets being 5x the annual rent
What regulations govern Lettings Boards?
Town and Country Planning (Control of Advertisements) Regulations 2007
Tell me about MEES?
MEES came into effect in 2018.
From April 2023, any buildings with an EPC of E or less is prohibited to be let out.
how is turnover rent usually calculated?
Base rent of typically 80% of full market rent + top up with 10% of turnover (gross but net of VAT
when would a landlord not want to serve a non hostile s.25 notice?
In a falling market, as rent will lower.
Which buildings does MEES apply to?
buildings that are let with leases over 6 months to a max of 99 years.
what due diligence would you do when you receive an instruction?
FIRSTLY
-conflict of interest
-aml
-then issue TOE
-look at demand.
-what has recently let in the area.
-asking rents.
-let rents.
How are agency fees typically calculated?
10% of first years rent.
when may you pre let something?
-if there is a market shortage.
- requires an Agreement for Lease.
- advantage is you get a bespoke building.
if you wanted to access the building before the AFL started what would you put in place?
Tenancy at Will
Can you explain the different types of agency and what the fee basis is?
sole- 10% of first years rent
joint - 7.5% EACH of first years rent
multiple- typically winner takes all but that depends on TOE.
What would you request from a tenant to ensure their covenant strength?
- 3 years of audited accounts.
- credit check report (Dunn and Bradstreet)
-previous/ or existing landlords reference.
how is stamp duty for leases calculated?
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%
name some buildings exempt from MEES?
low energy use warehouses
places of worship
some listed buildings
mentioned in submission
Can you talk me through this example?
Letting class E office
mentioned in submission
How did you measure the accommodation?
former office
to IPMS 3 as the facilities such as kitchen/ toilet were shared.
mentioned in submission
How did you report offers to the client?
Class E office
Mentioned in submission
can you talk me through this example?
Bermondsey bike shop
mentioned in submission
How did you measure this unit?
Class E - bike shop
GIA, this is the measurement for agency in code of measuring practice for everything except office
mentioned in submission
What is an assignment?
when a tenant legally transfers their leasehold interest in a property to someone else.
mentioned in submission
why did the tenant want to assign?
they wanted to downsize
mentioned in submission
How did you report offers on the lease assignment?
Bike shop assignment
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.
Mentioned in submission
Can you talk me through this example?
Make it Bromley by Bow
Mentioned in example
How did you advise your client in relation to the local industrial market?
Make it Example
- 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.
mentioned in submission
How did you advise your client in relation to void costs?
Make It
- 6 months rates relief, after that there would be rates.
- 12k insurance.
- If secuirty was needed this would be about 12k also.
mentioned in submission
How did you advise your client in relation to void costs?
Make It
- 6 months rates relief, after that there would be rates.
- 12k insurance.
- If secuirty was needed this would be about 12k also.
Mentioned in submission
Why did you advise your client not to collect rent?
Storage Land/ Kings Yard
As this could have created a periodic tenancy. The TAW was verbal so problems could have arisen
What is the RICS PS on Leasing/ Letting?
RICS Professional Statement Code for Leasing Business Premises, 2020
When did the RICS Code for Leasing Business Premises become effective?
Sept 2020
What is the aim of the code of leasing business premises 2020
-Improve the quality and fairness of negotiations on terms.
-encourage use of new HOTs to make drafting more efficient.
Can you tell me about the Misrepresentations Act of 1967?
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.
how do you mitigate risk of being sued?
I write disclaimers on all particulars
what one area is a ‘must’ in the code for leasing business premises?
negotiation and heads of terms.
what is the estate agent act?
it regulates the estate agent sector in the UK, setting out the purpose of estate agents, and defines who is an estate agent.
what are the macro economic trends that affect the lettings market?
-economic uncertainty = slow down in growth
- high inflation, eroding values.
who polices the estate agent act?
trading standards of local authority.
principles of estate agent act?
-clarity as to fees
- report all offers to client
-keep client money separate.
how long do you report the offer to a client
within 1 working day
