Leasing and letting Flashcards
1
Q
What factors affect Market Rent of an industrial?
A
- location/ accessibility to transport links
- age
- size
- specification (loading doors, floor loading, office accommodation, LED lighting)
- Eaves height
- ESG credentials
2
Q
What are the 7 principals of the Estate Agent Act 1979?
A
- Clarity as to the terms of the agency (Section 18)
- Honesty and accuracy
- Agreement and liability for costs
- Openness regarding personal interests (Section 21)
- A bsence of discrimination
- Legal obligations to tell clients about offers received
- Keep clients money separate
3
Q
What are the most important points of the estate Agents Act 1979?
A
- Specify all costs fees in advance in the Terms of Engagement
- Itemise all payments
- Specify nature of agency selling rights to be agreed
-Disclose personal conflicts (if continue to act conflict must be disclosed on HOT) - Not misrepresenting interest or offers
- Follow RICS rules on client money handling
- reporting an offer
4
Q
What are the 12 core principals of RICS UK Commercial Real Estate Agency Professional Statement 2016?
A
- Act in an honest, fair, transparent and professional manner
- Carry out work with due skill, care and diligence and ensure all staff employed have the necessary skills to carry out their tasks
- Ensure that clients are provided with Terms of Business that are fair and clear and detail the firms complaints handling procedure
- Do the utmost to avoid conflicts of interest and where they do arise, deal with openly and fairly
- Not to discriminate unfairly with any dealings
- All communications with clients are fair, decent, clear and timely and transparent
- All advertising and marketing material is honest and truthful
- Any client money is held separately and covered by adequate insurance
- Hold appropriate PII/errors or omissions insurance to ensure a customer does not suffer loss because of a negligent act
- Make it clear the identity of your client and ensure all parties are clear of your obligations to each party
- Give realistic assessments of selling prices/rent/financial costs having regards to market evidence and using best professional judgment
- Ensure all meetings, inspections and viewings are carried out in accordance with the clients wishes having due regard to security and personal safety
5
Q
Structure of the RICS Professional Statement: Code for Leasing Business Premises, 2020
A
- Introduction
- Mandatory Requirements
- Lease negotiation best practice
- Appendices
6
Q
What are the minimum requirements for heads of terms and document?
A
RICS Professional Statement: Code for Leasing Business Premises 2020 Part 2
- Identity and extent of the premises (landlord must provide a land registry plan if the lease is registerable)
- Any special rights to be granted (parking/telecom/data access)
- The length of term and weather the Landlord and Tenant act 1954 will be excluded
- Any options for renewal or break rights
- The amount of rent, frequency of payment and weather it includes business rates
- Any requirement for a guarantor and/or a rent deposit
- whether the landlord intends to charge VAT on the rent
- Any rent free period
- Any rent reviews including frequency and basis of review
- Liability to pay service charge and/or insurance premium
- Rights to assign, sublet, charge or share the premises
- Repairing obligations
- Internal permitted use and whether any changes of use will be allowed
- Rights to make alterations and any particular reinstatement obligations
- Any alterations or fit out
- Any conditions of the letting such as subject to survey, board approvals or planning permissions
7
Q
What makes a poor coventant?
Letting an industrial unit in Avonmouth
A
- Poor finacials
- Newly started business without accounts
8
Q
What is an assignment?
A
Where the rights and benefits of one contractual party are transferred to a third party thereby creating a direct relationship between an incoming party and the landlord
The previous tenant is no longer liable (unless AGA is required)
9
Q
What are the key details to include on particulars?
A
- Picture
- Description
- Location
- Floor areas
- The EPC
- Contact details
- Date prepared
- Company disclaimer
- Rating Assessment
10
Q
What is the proffits test?
A
Net profit x3 the annual rent for 3 years
If profit is low, can be net assets x5 of the annual rent
11
Q
How could you obtain financial security from an incoming tnenat?
A
- Obtaining a rent deposit
- Obbtaining a guarantee
- Half rent rather than rent free
12
Q
What is a sublease?
A
A lease whereby a tenant grants a lease on part or all of their leased premises to another occupier but remain contractuly liable for the property under the original lease
The new tenant has no direct relationship with the superior landlord and pays rent to the original tenant
13
Q
What is the CDD threshold?
A
10,000 euros monthly
14
Q
Before undertaking a leashold disposal instruction, what due dilligiance do you carry out?
A
- tenant demand
- supply of competing space
- tenure held by the client and any terms of the head lease
- location
- specification
- accomodation
- planning history
- asbestos
- EPC
- Health and saftey risk assesments
15
Q
What is an AGA?
A
Authorised Guarentee Agreement
Requires the outgoing tenant in an assingment to guarentee the lease obligations of the immediate assignee (fall away upon futre lease assignment)
16
Q
What would you include in a marketing report?
A
- Address of the property
- Client
- Date of the report
- Market commenty
- Curent market trends
- Description of the property
- Works recomended
- Market rent of the proeprty (after looking at comparables and using proffesional judgment)
- Marketing stratagy
- If instructed what your fee structure would be
17
Q
What are the different types of alientation clause in a lease?
A
Open - allowing alienation
Qualified - some conditons
Absolute - not allowing sub-letting or assignment
18
Q
What are the reasons to sub-let rather than assign?
A
- Requirment of the lease
- Only for part of the demise
- if the market rent is higher than the passing rent then there will be a profit rent
- If the tenant wants to re-occupy in future
- The new party is of a lesser covenant
19
Q
Why would you chose to assign rather than sublet?
A
- Requirment of the lease
- It is for the whole demise
- The market rent and passing rent are the same
- Wish to remove yourself from lease liabilities
- New tenant has a superior covenent strength
20
Q
What must you do when dealing with an application for consent to assign or sublet a lease? (10)
A
- Read the lease
- Will the tenant give an undertaking for the surveyor and legal costs
- Is the proposed rent the market rent and/or the same as the passing rent
- What will the effect on the investment value of the property be?
- What terms to the lease state regarding grant of constent for assingment/sub-letting? Are there reasonable grounds for witholding consent?
- What is the strength of the covenant of the new tenant? Are there accounts and references to consider?
- Has a rent deposit been agreed? Is there an AGA clause?
- The client will need to be provided with a report setting out surveyros recomendations
- Obtain the clients approval to procced
- If consent is granted a licence for assingment or sub-letting will be required
21
Q
What remedies are available to landlords for illegal alienation?
A
Forfiture, damages or an injunction
22
Q
AGA legislation and clause - Check
A
Landlord & Tenant (Covenenants) Act 1995
Section 17 Notice must be served upon a guarentor within 6 months of the tenant defulting to require the former tenant who entered into an AGA to pay arrears
23
Q
What would you advise a client who was assinging their lease?
A
- Not to enter into an AGA
- The new tenant should be financially stong enough, pay an appripriote rent deposit or provide a sutible guarentor
24
Q
What must Agency Instruction Agreements include?
A
- Agency Basis (sole/joint)
- Agency rights (sole selling or sole agency rights)
- Proposed fee
- Marketing costs and disimbursments
- Conflirmation of no clonflicts of interst
- Money Laundering Regualtion requirmetns
- Timescale for payment of fees &disembursments
- Details of complaints handeling
Must be signed and returned before marketing can commence
25
How did you negotiate with the tenant to increase their offer?
| Industrial letting, Yate
- Explained the reasons for the rent
(lack of supply of units that size and high demand, cost of refurbishment, level of rents in other units on the same estate)
- conducted a second viewing so they could see the space again
26
Why was it important to your client to have a tenancy outside of the 1954 Act?
| Industrial letting, North Bristol
- The tenant does not have secutity of tenure
- Prevents the landlord from potentially having to pay statutory compensation if they wish to take posession back
27
Why did you provide the tenants with a break option in year 5?
| Industrial letting, North Bristol
- As the landlord rejected their offer for security of tenure they wanted more flexibility
- Instead of xxx months rent free they received 3 months as an incentive for not breaking the lease.
28
What works had the landlord carried out?
| Industrial letting, Yate
- Upgrading lighting to LED
- repainting of the warehouse walls and floors
- replacing the kitchenette
- replacing of the bathroom
- electricication of the roller shutter door
- replacing the carpet floor in the office
29
What are the different types of agency and selling rights that can be agreed?
- Selling rights: fee will be owed regardless of whether the agent introduced the buyer
- Agency rights: fee will only be owed if the agent introduced the buyer
- Sole: exclusive rights appointed to one agent
- Joint: two agents are appointed to act together and the fee is split on a pre-agreed basis
- Multiple: more than one agent is appointed but only the agent who finds the buyer is paid a fee
30
What is a ready willing and able purchaser clause?
When an applicant who is ready and able to proceed with a purchase but the client decides to withdraw, an abortive fee may be charged by the agent
31
What is the difference between an old lease and a new lease?
Am old lease was signed before 1st Jan 1996.
Privity of contract has been replaced by AGA
32
What act are you required to have regard to when receiving offers, and what time scale?
Estate Agents Act 1979 - report offers to your client within a timley manner
KF this is within 24 hours
33
What would you consider when advising a client with multiple offers?
- Proffits method ( 3 years audited acount , Net Proffit for 3 years is 3 times annual rent or 5 times net assets)
- What is there covenent strength
- Is there a guarentor
- Will there be a rent deposit
- Will the use fit in with the estate
34
What level is considered normal for rent deposits?
Between 3 and 6 months
35
What is included in HOT?
- Identity and extent of premesis (if lease over 7 years landlord must provide a landregistery complient plan)
- Parties involved
- Special rights to be granted (parking/telecom/data access)
- Term length and security of tenrure
- Break or renewal rights
- Any guarentor and/ or rent depost
- Rent and freequecy of payment
- Payment of business rates and VAT
- Incentrives (Rent Free)
- Rent reviews, freequency and basis
- Service Charge
- Insurance
- Alienation rights
- Repairing obligations
- Permitted use and changes of use
- Alterations and reinstatment
- Initial alteraltions or fit-out
- Conditions - subject to survey, board approval or planning consent
36
What legislation regulates marketing signage?
Town & Country Planning (Control of Advertisment) (England) Regulations 2007
37
What are the limits/requirments for marketing signage?
- Planning consent is required for non-residential boars over 2 sq m (flat) and 2.3 sq m (v board)
- only one board per building
- must not project more than 1m from face of building
- must not be above 4.6 m from fround
- must be in a safe conditon
Planning permission also needed for - - Illuminated, remote, boards on listed buildings and in conservation areas
- boards must be removed within 14 days of completion of transaction
- some local authorites have restrictive requriments (Londong Boughoughs)
- Must have owners approval
Policed bu Local Planning authority who can remove boards and issue fines and order costs
38
What was the review basis for the unit in North Bristol?
Open Market Rent Review in year five
Upwards only
39
Tell me about the lease that was being assinged in Avonmouth?
- 10 year lease with 9 years remaining
- Tenant break option in year 5 (4 years from now) 6 months notice
- Effective FRI with a service charge
- Alienation allowed for assingment (with AGA) or subletting as a whole
- No serveice charge cap
- Rent review in year 5 (4 years from now) - open market upwards only
40
On what grounds can a landlord refuse a new lease under 54 Act?
* Serve a s. 30 notice
* Breach of repairing covenant
* Persistent delay in paying rent
* Other substantial breach
* Provide suitable alternative accommodation
* Uneconomic subdivision (compensation payable)
* Demolition or reconstruction (compensation payable)
* Owner occupation (compensation payable)
41
What compensation does the landlord have to pay for S. 30 notice?
1 x Rateable value if tenant has been in occupation less than 14 years
2 x Rateable value if the tenant has been in occupation over 14 years
42
