Leasing and letting Flashcards
Tell me about your understanding of legislation relevant to your leasing and letting practice?
The legislation related to commercial property let includes:
The Landlord and Tenant Act 1954 (LTA) gives tenants of commercial properties rights of occupancy known as ‘security of tenure’ and sets out the leasing rules that both landlords and tenants of commercial properties must follow.
The Minimum Energy Efficiency Standards (MEES) Regulations make it unlawful to grant a new lease of residential or commercial premises in England and Wales with an EPC rating of less than E.
The 2007 Code for Leasing Business Premises in England and Wales lays out clearly what your responsibilities as a commercial landlord are.
From 1 April 2023, it will be an offence to continue to let or rent out a property if it does not have a rating of at least E.
Tell me about your understanding of the Estate Agents Act 1979.
The Estate Agents Act (EAA) 1979 regulates the estate agent sector in the UK. It lays out the duties and responsibilities of estate agents, including standards for competence, the information that must be provided to clients, and handling clients’ money. The Act’s purpose is to make sure that estate agents act in the best interests of their clients, and that both buyers and sellers are treated honestly, fairly and promptly.
How does Section 18 relate to your letting practice?
Section 18 of the Estate Agents Act 1979 is a provision that requires estate agents to provide clients with specific information before entering into a contract for estate agency work 1. This information includes:
Circumstances under which the client will become liable to pay costs to the agent for carrying out estate agency work. and how those costs are calculated
If an estate agent fails to comply with this obligation, their contract with the client may not be enforceable unless permitted by a court
what is a ready and willing buyer
A ready, willing and able purchaser is a term used in real estate to describe a buyer who is prepared to adhere to the terms described in a purchase contract and has the financial ability and resources to complete the transaction 123. This term is often used in estate agent contracts to describe the type of buyer that the real estate broker is seeking to find
what are the six key principles of the estate agency act 1979
The six key principles of the Estate Agents Act 1979 are:
Honesty and accuracy
Clarity as to the agency terms of engagement - specify all costs and fees in advance, in writing in terms of business (Section 18)
Absent of discrimination
Client money kept separately
Declaration of regarding personal interests (Section 21)
All offers must be reported
How does Section 21 relate to your letting practice?
Section 21 of the Estate Agents Act 1979 is a provision that regulates transactions in which an estate agent has a personal interest. According to the legislation, a person who is engaged in estate agency work and has a personal interest in any land shall not enter into negotiations with any person with respect to the acquisition or disposal by that person of any interest in that land until the estate agent has disclosed to that person the nature and extent of his personal interest in it 1. The act also specifies that an estate agent may not seek or receive a contract or pre-contract deposit in respect of the acquisition or proposed acquisition of a personal interest of his in land in the United Kingdom or any other interest in any such land in which he has a personal interest
tell me about the code for leasing business premises in england and wales
The Code for Leasing Business Premises in England & Wales is a professional standard that provides guidance on best practices for commercial leases to ensure that leases are fair for both landlords and tenants . It was first published in February 2020 as a professional statement and was reissued in September 2023 as a professional standard . The regulatory requirements remain the same, and no material changes have been made to the document .
The standard is the result of pan-industry discussion between representatives of landlords, tenants, and other trade bodies. Its objective is to improve the quality and fairness of negotiations on lease terms and to promote the issue of comprehensive heads of terms that should make the legal drafting process more efficient . The standard and code do not prescribe the outcome but seek to make it fair and balanced by identifying the terms that are usually important and encouraging both parties to obtain advice from property professionals . This enables negotiations to proceed properly so that each party can make an informed decision about whether to proceed on the terms that they negotiate .
The professional standard applies to lettings of premises in England and Wales to tenants who will carry on trade, professional or other business activities in them, but it does not apply to agricultural lettings, premises that will only be used for housing plant and equipment (such as electricity transformers or telecoms) or advertising media (such as hoardings), premises that are intended to be wholly sublet by the tenant, or to premises being let for a period of not more than six months .
The code should be used as a reminder for negotiations before the grant of a new lease and at the time of any lease renewal. It should assist RICS members in ensuring that landlords, tenants, and guarantors who they are advising have a clear understanding of the commitments that they are entering into .
Tell me three key issues raised in the RICS Real Estate Agency and Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book).
Stop Responding
The RICS Real Estate Agency and Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book) is a professional statement that outlines the responsibilities of commercial property agents to ensure they are working to the highest ethical and professional standards 1. The document sets out the standards of performance and service the general public can expect to receive from a professional real estate agent 2.
Here are three key issues raised in the RICS Real Estate Agency and Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book):
Transparency: The document emphasizes the need for transparency in the commercial property market 1. It outlines the principles that shape the culture of fairness and transparency that underpin all activities undertaken by real estate agents within whichever country of practice 1.
Ethical practice: The professional statement sets out clearly the responsibilities of commercial property agents to ensure they are working to the highest ethical and professional standards 1. It also outlines the principles that shape the culture of fairness and transparency that underpin all activities undertaken by real estate agents within whichever country of practice 1.
Responsibilities of commercial property agents: The document sets out clearly the responsibilities of commercial property agents to ensure they are working to the highest ethical and professional standards 1. It also outlines the principles that shape the culture of fairness and transparency that underpin all activities undertaken by real estate agents within whichever country of practice 1.
Explain what alienation is.
In commercial leases, alienation refers to the tenant’s ability to assign, sublet, charge, part with possession, or otherwise deal with the tenant’s interest in the property 1. Alienation provisions are typically included in most commercial leases
What happens if there is no alienation clause in a lease?
What happens if there is no alienation clause in a lease?
Explain your understanding of the Landlord & Tenant (Covenants) Act 1995 and how it affects your leasing work.
The Landlord and Tenant (Covenants) Act 1995 is a UK law that regulates the relationship between landlords and tenants in commercial leases . The act applies to tenancies granted on or after January 1, 1996 .
The act has several provisions that affect commercial leases. One of the most significant provisions is that it allows tenants to be released from covenants in a lease when they assign the lease to a new tenant . This means that if a tenant assigns their lease to someone else, they will no longer be responsible for the covenants in the lease. Instead, the new tenant will be responsible for them .
Another provision of the act is that it restricts the operation of rights of re-entry, forfeiture, and disclaimer in certain circumstances . This means that landlords cannot take back possession of the property or forfeit the lease if the tenant breaches a covenant in certain circumstances .
The act also deals with third-party covenants, joint liability under covenants, and enforcement of covenants . It is important to note that the act only applies to commercial leases and not residential leases .
What is an Authorised Guarantee Agreement and when might one be given?
An Authorised Guarantee Agreement (AGA) is a special form of guarantee that specifically applies to leases granted from 1996 onwards12. It is a document that a landlord may require the existing tenant to sign during a lease assignment, to safeguard the landlord’s position should the incoming tenant fail to comply with the terms of the lease. An AGA is a guarantee by a commercial tenant assigning a lease that the new tenant will perform the obligations under the lease, such as paying rent and undertaking repairs and maintenance2.
Can a tenant assign a lease to it’s guarantor?
According to a guide by Pinsent Masons, when a lease is assigned to a third party, the outgoing tenant’s guarantor can guarantee the outgoing tenant’s liabilities under an authorised guarantee agreement (AGA). In doing so, the guarantor can indirectly guarantee the incoming tenant’s obligations . However, Walker Morris states that a tenant is precluded from assigning a lease to its guarantor and an agreement that sought to effect such an arrangement would be void . The High Court followed the suggestion by the Court of Appeal in K/S Victoria Street, and held that an assignment of a lease, which is within the 1995 Act, by a tenant to its guarantor is void. It held that the purpose of the 1995 Act is to ensure that a tenant and its guarantor are released from the tenant covenants in the lease on assignment
Tell me about the planning considerations you are aware of if you want to install a marketing board.
you are planning to install a marketing board, you may need to apply for advertisement consent to display an advertisement bigger than 0.3 square metres (or any size if illuminated) on the front of, or outside, your property (be it a house or business premises). However, you are unlikely to need consent for a small sign with your house/building name or number on it, or even a sign saying ‘Beware of the dog’. Temporary notices up to 0.6 square metres relating to local events, such as street parties and concerts, may also be displayed for a short period. There are different rules for estate agents’ boards, but, in general, these should not be bigger than 0.5 square metres. The planning regime for larger, professional adverts, signs for businesses and so on is complex though all outdoor advertisements must comply with five ‘standard conditions’. They must: be kept clean and tidy; be kept in a safe condition; have the permission of the owner of the site on which they are displayed (this includes the Highway Authority if the sign is to be placed on highway land); not obscure, or hinder the interpretation of, official road, rail, waterway or aircraft signs, or otherwise make hazardous the use of these types of transport; be removed carefully where so required by the planning authority 1.
Tell me about the requirement surrounding letting property and EPCs.
An Energy Performance Certificate (EPC) is a legally required document when selling, letting or building a property in England and Wales. Since April 2020, a valid EPC is required for all rental properties, including existing tenancies, and the rating of the EPC must be at least at E. The Minimum Energy Efficiency Standards (MEES) require all properties being let or sold in England and Wales to have a minimum EPC rating of ‘E’ or above
