Leasing and letting Flashcards
What is the main RICS Docs that provides guidance in this (l&l ) competency
RICS Professional standard: Code for Leasing business premises 2020
Mandatory. Outlines code for leasing premises.
RICS UK Commercial Estate Agency Pro Statement- 2016
Mandatory - outlines 12 key principles
What are included within Heads of terms (leasing and letting)
-Name on lease
-Contact details
-Term
-Rent
-Rent Free / incentives
-Rent Review
-Repairing Obligations
- Alterations
-Alienation
-Timescales
-Conditions
What are some of the mandatory requirements in the Code for Leasing
-Negotiations must be undertaken in a collaborative manner
-If a party is not represented by a RICS member or other professional. They must be advised of the code and recommended to obtain professional advice.
-terms must be recorded in HOTs
-negotiations to produce terms that achieve fair balance for both parties objectives.
What factors affect tenant selection?
Covenant strength vs investment value.
Use of guarantor or deposit can increase tenant covenant strength
What do you need to request from a prospective tenant prior to letting?
Need to request:
-last 3 years accounts
-references
Undertake credit check and profits test.
What factors relate to receiving a deposit from a tenant?
-Deposit is personal to the tenant
-has to be legally documented
-money held in separate account
-details of release mechanism
What are the lease terms that can effect value?
-length and term certain
-Break clauses
-repairing obligations
-alienation
-repairing obligations
-RR
-Security of tenure
-planning use
-restrictive clauses
What are some key issues surrounding break clauses?
-Whether time is of the essence
-mutual or in favour of one party
-notice period
-conditional on certain obligations, i.e. compliance with covenants or payment of all monies due
What are the factors surrounding a pre-let
May be considered if market shortage or have a requirement for certain facilities.
Advatge is that you can develop bespoke facilities,
Disad - lengthy process and risks of developer not preforming
Legal req:
-A lease in pre-let form
-specifications and plans
- guarantee& warrenties
What are the regulations around signage?
Planning req for boards over 2sm
must not project more than 1m from the face of building and not above 4.6m above ground
Planning needed for illuminated signs
-signs on listed buildings
What are the factors detailed within the code of leasing and letting?
The mandatory requirements include:
approaching lease negotiations in a constructive and collaborative manner;
advising unrepresented parties about the existence of the Code and recommending them to obtain professional advice;
providing detailed written heads of terms, covering a variety of matters including: length of term; whether the lease is to be contracted out; break rights and options to renew; requirements for guarantors and/or rent deposits; basis of rent review; liability to pay service charge/insurance; alienation rights; repairing obligations; and rights to make alterations.
The Code includes a template set of heads of terms, which reflect the Code.
LL: What and how do lease terms effect value and rent?
The longer the term certain could reflect a greater value depending the the current level of passing rent. Similarly the provision of a break could decrease value with the reduced term certain.
The shorter the term certain though the increased level of rent to reflect the lack of term certain on the Landlord.
Rent review pattern - , the more rent revies could have a discount on rent due to their upward only nature.
repairing obligations - of the tenant, the more that are obliged to the tenant the greater discount on rental value.
alienation - can affect value as they can prohibit a tenant from assigning or subletting therefore this may reduce the value and rental value as it provides the tenant with less flexibility.
Use - this restricts the tenant so therefore rent is usually discounted due to demand.
L&T Act - if contracted out usually discount on rental value due to the less term certain on the tenant and greater flexibility for landlord.
LL: How does supply and demand effect value?
In generally if demand is high the landlord can be more particular with their terms and are less likely to accept lower offers and incentivise the potential tenants due to the increase in demand.
If demand is low the landlord is more likely to negotiate and greater incentivise their unit.
LL: What is a property launch?
When a property is launched it is fully available on the open market. Web links, portals, advertising, social media and possibly PR – bid to reach the widest possible audience
LL: Offices Bris: How was the property refurbished?
What are the benefits of a refurbished office?
The property was refurbished to a Grade B spec
Grade B offices are typically in buildings constructed 10 to 20 years ago.
Due to their age, design and décor may appear slightly outdated
This office grade is usually suitable for small to medium-sized companies who require a professional setting that meets basic operational needs without the premium price tag. Rental prices for many Grade B offices typically hover around the area average.
Benefits are a better product,, higher quality of tenant, increased rent and investment value also to be in line with EPC and MEES requirements.
