Leasing and Letting Flashcards
What are the mandatory requirements of the RICS Code for leasing business premises 2020?
- Negotiations over the lease must be approached in a constructive and collaborative manner.
- A party that is not represented by an RICS member or other property professional must be advised by the other party or its agents about the existence of this code and its supplemental guide and must be recommended to obtain professional advice.
- The agreement as to the terms of the lease on a vacant possession letting must be recorded in written heads of terms, stating that it is ‘subject to contract’ and summarising, as a minimum, the position on each of the aspects outlined in the RICS Code for leasing business premises 2020.
- At a lease renewal or extension, the heads of terms must comply with the above except for any terms that are stated to follow the tenant’s existing lease subject to reasonable modernisation.
- Negotiations should aim to produce letting terms that achieve a fair balance between the parties having regard to their respective commercial interests.
The landlord, or its letting agent where relevant, will be responsible for ensuring that heads of terms complying with those provisions are in place before the initial draft lease is circulated.
What is in the appendix of the RICS Code for leasing business premises?
- Template heads of terms and checklist
- Guide for landlords and tenants (includes guidance on negotiations and heads of terms, length of term, renewal rights and break rights, rent deposits and guarantees).
What is the difference between dual and joint agency?
Joint agency is where two different property agents are instructed to sell the same property on agreed terms.
Dual agency is where an agent acts and collects fees from both sides of the same transaction. The RICS banned dual agency in 2018.
How do security of tenure provisions benefit a Tenant?
- provides the tenant with the automatic right to remain in possession of leasehold business premises after the lease term reaches its natural end
- Tenant can apply to the Court to determine a Tenancy
- Tenant may be entitled to compensation if the Landlord refuses a Tenancy on certain Grounds (E,F or G)
What would you consider to be best practice when it comes to letting a commercial property?
- Provide details of the Council for the Tenant to notify for business rates purposes.
- Provide details to the Tenant of the utilities providers to allow them to complete a change of tenancy.
- Take outgoing meter readings etc.
What is the best practice advice in the RICS Code for Leasing Business Premises 2020?
Includes things like:
- Tenants may want to consider commissioning a surveyor to check the accuracy of lease plans.
- make tenants aware at an early stage of any limitation of hours of use and restrictions in the type of use.
- Landlords should check the financial ability of the proposed tenant to pay the rent and meet the other obligations under the lease.
If one of your Tenants wanted to assign their lease, how would you advise your Landlord Client?
- Check the assignment clause in the lease.
- Ensure that I promptly report to the Landlord and advise the client that consent should not be unreasonably withheld or delayed.
- Check that the Tenant is complying with the terms of their lease, e.g. rent payments, service charge, insurance etc.
- Check that the proposed assignee has sufficient financial strength.
- Check the guarantee provisions in the lease, advise the landlord to ensure the Tenant provides an authorised guarantee agreement (AGA) if the lease allows and/or the
assignee is to procure a new guarantor and/or rent deposit.
Talk me through how you would put a property on the market and deal with a letting through to completion.
- Establish detail of the instruction (address, type of property details of vendor and tenant if applicable)
- COI check
- Inspection (take photographs, consider what is to be included and excluded, use appropriate inspection proforma)
- carry out checks - planning, Land Registry, services, review market evidence, asbestos report, EPC, is VAT to be charged?
- marketing advice, asking price, lease terms to be sought, set out marketing costs, disbursements, fees, market conditions, details of what you anticipate a property being let for
- undertake AML checks
- obtain signed terms of engagement
- draft particulars and obtain clients approval
- commence marketing - launch to Rightmove, Brown & Co’s website etc and mail shot to selected targets
- report all offers received to the client
- negotiate the deal with the preferred party
- undertake references and credit checks etc.
- agree heads of terms and comply with the RICS Code for Leasing Business Premises 2020.
- circulate HoT’s to client for their approval
- mark as under offer
- instruct solicitors to draft lease and monitor through to completion.
What would you include in your marketing report to the client?
- make it clear that it is not a red book valuation, and prepared solely for the purpose of marketing the property, and must not be used for any other purpose.
- description of the property
- current market conditions
- asking rent
- lease terms to be sought
- timing
- marketing and publicity
- viewing arrangements
- details of any commissions, disbursements and expenses
- EPC requirements
- Asbestos requirements
- confirmation that a COI check has been undertaken
- details of any connected persons
- requirements for approval of marketing particulars
- money laundering regulations
- details of Consumer Protection Regulation Requirements (all clients to complete a Consumer Protection and Business Protection from Misleading Marketing 2008 questionnaire)
- confirmation of instructions
- requirement for signed TOE
What are the key principles of the Consumer Protection from Unfair Trading Regulations 2008?
Means you cannot mislead or harass consumers by, for example:
- including false or deceptive messages
- leaving out important information
- using aggressive sales techniques
What are the key principles of the Business Protection from Misleading Marketing Regulations 2008?
Advertising to businesses is covered by the Business Protection from Misleading Marketing Regulations. As well as being accurate and honest, you must not make misleading comparisons with competitors, that includes:
- using a competitor’s logo or trademark, or something very similar
- comparing your product with a competitor’s product that’s not the same
- Using Misleading advertisements aimed at businesses (e.g. putting a let agreed board up when this is not the case)
What are the key principles of the Estate Agents Act 1979?
It sets out duties and responsibilities regarding:
- The information an estate agent must provide to clients before agreeing to act, including details regarding the payment the estate agent will receive
- The keeping of clients’ money and interest and insurance cover relating to those monies
- Standards of competence
- An agent has to disclose any conflict/personal of interest in the land subject to the transaction and to refrain from discriminating against potential buyers who do not want to use their services
- must also comply with the The Money Laundering and Terrorist Financing Regulations 2019
- must not mislead buyers or sellers
- must report all offers to the client
What happens if an EPC is not available?
Must be obtained at the latest by 28 days after going to market, unless exemptions apply. Must be provider to any potential Tenant/interested party on request, failure to do so will result in a fine.
What is the difference between an assignment and subletting?
Assignment = The legal transfer of the lease to a third party. Once the lease is assigned, the original tenant is not liable under the original lease, and responsibility is legally transferred as of the assignment date. The assignee then pays rent to the Landlord directly.
Subletting = Tenant finds another person to occupy the premises (sub-tenant) who pays rent to the Tenant. The Tenant remains the original tenant and responsible for the lease.
Sub-lettings should not be at a rent less than the market rent. Subleases should be required to be on terms consistent with the tenant’s own lease, except that subleases which are to be excluded from statutory renewal rights and subleases of only part of the premises may be granted on different terms where appropriate.
How would you deal with arrears where a lease has been assigned?
Where there is an Authorised Guarantee Agreement, serve a Section 17 Notice of the Landlord and Tenants Covenants Act within 6 months of the charge becoming due. Serve the Notice even if you have agreed a payment plan with the assignee as it protects your right to demand payment in the future.
Upon receipt of a Section 17 notice, the former tenant or guarantor is bound by the covenant to pay any outstanding rent and fixed charges in place of the current tenant.
If the recipient of a Section 17 Notice pays all sums due they can have the right to call for an overriding lease which could result in the former Tenant regaining control of the premises.
If a Section 17 Notice is not served it releases the former tenant and their guarantor from liability unless the Landlord has served a s.17 notice.
