Leasing and Letting Flashcards
Tell me about your understanding of legislation relevant to your leasing
and letting practice?
there is theEstate Agents Act 1979 and Misrepresentation Act 1967, adhering to these Acts ensures you act in the client’s best interest while treating all parties fairly and avoiding disputes.
Tell me about your understanding of the Estate Agents Act 1979
makes sure you comply with the duties of transparency and fairness, including disclosure, fees and fair marketing
What are the 6 key principles of the Estate Agents Act 1979?
- Disclosure of Personal Interests
- Transparency in Fees and Charges
- Duty to Avoid Misrepresentation
- Handling of Clients’ Money
- Provision of Terms of Business
- Proper Handling of Offers
How does Section 18 relate to your letting practice?
Section 18 of the Landlord and Tenant Act 1927 is all about dilapidations. It caps the value on dilaps - so has impact on lease negotiations and also a end of lease dilaps review
What are the various agency bases?
- Sole Agency
- Joint Agency
- Mulitple Agency
What are the differences between the agency bases?
- sole agency – only one agent
- joint agency – two or more agents sharing a fee on a pre-agreed basis
- multiple agency – any number of agents but only the successful agent gets a fee
Where is agency base defined?
Estate Agents Act 1979
What is a ready, willing and able purchaser?
Ready: Prepared to proceed.
Willing: Agrees to the terms.
Able: Has the financial means.
How does Section 21 relate to your letting practice?
Section 21 of the Landlord and Tenant Act 1985 requires landlords to provide service charge information that is reasonable and for costs properly incurred.
Tell me about key points of the Consumer Protection / Business
Protection Regulations
The Consumer Protection from Unfair Trading Regulations 2008 and Business Protection from Unfair Trading Regulations 2008 are designed to protect consumers and businesses from unfair practices. Key points include:
Prohibition of Unfair Practices: Bans misleading actions and omissions, false advertising, and aggressive sales tactics.
Transparency: Requires clear and truthful information in marketing, especially regarding prices and terms.
No Misleading Actions: Agents must not misrepresent property details or lease terms.
Fairness in Business: Protects businesses from misleading practices that could damage their reputation or cause unfair competition.
What is an average consumer?
A typical person who is reasonably informed, observant, and circumspect, but not necessarily an expert. This concept is used to assess whether information or actions are misleading or unfair to a general consumer.
What is material information?
Information that a reasonable consumer would consider important when making a decision, such as property details, lease terms, or fees. Misleading or omitting material information is prohibited under the Consumer Protection Regulations.
What are considered to be unfair practices under this legislation?
-Misleading Actions
-Misleading Omissions
-Aggressive Commercial Practices
-Bait Advertising
-False Claims
How does the Misrepresentation Act 1967 relate to your agency practice?
1) Preventing false or misleading statements about property.
2) Ensuring accurate information in marketing and negotiations.
3) Allowing damages or rescission of agreements if misrepresentation occurs.
4) Holding agents accountable for negligent or fraudulent misrepresentation.
What does the Unfair Contract Terms Act 1977 say?
1) Limits the ability to exclude or limit liability in contracts.
2) Prohibits terms that unreasonably limit a party’s liability for breaches or damages.
3) Requires reasonable terms in contracts for consumers and businesses.
4) Ensures transparency and fairness in contract negotiations.
Do you need to inform your client if you offer a service to a prospective
tenant?
Yes, you must inform your client if you offer a service to a prospective tenant. This ensures transparency and avoids conflicts of interest, as required by the Estate Agents Act 1979
Tell me about your understanding of the Code for Leasing Business
Premises in England & Wales.
- Clear and Transparent Terms
- Balanced Obligations
- No Unfair Terms
- Pre-lease Negotiations
- Reasonable Costs
When and how was it last updated? (Code of Leasing Business Premises)
First Published: February 2020
Effective Date: 1 September 2020
Amended: January 2022 to update references to RICS Rules of Conduct
Reissued as RICS Professional Standard: September 2023
Explain the key principles of the RICS Professional Standard Property
Agency and Management Principles to me.
Integrity
Competence
Accountability
Confidentiality
Transparency
Professionalism
Tell me three key issues raised in the RICS Real Estate Agency and
Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book).
- Conflict of Interest
- Transparncy in Fees
- Marketing and advertising
Explain what alienation is?
alienation refers to the transfer of rights or interest in a property, typically through assignment or subletting of a lease. It allows a tenant to transfer their lease to another party, subject to the landlord’s consent, which may not be unreasonably withheld.
What happens if there is no alienation clause in a lease?
If there is no alienation clause in a lease, the tenant cannot assign or sublet the property without the landlord’s consent. In such cases, the tenant must seek the landlord’s approval, and the landlord may have the right to refuse the request, depending on the lease terms.
What is subletting?
Subletting is when a tenant leases part or all of their leased property to a third party (the sub-tenant) while retaining their original lease agreement with the landlord. The tenant remains responsible for the lease obligations to the landlord.
What is assignment?
Assignment is the transfer of the tenant’s entire interest in the lease to a third party (the assignee). The assignee takes over the lease, assuming all rights and obligations, and the original tenant is usually released from further liability.
Explain your understanding of the Landlord & Tenant (Covenants) Act
1995 and how it affects your leasing work.
- Tenant not automatically liable after assignment.
- Landlord’s covenants bind new tenant.
- Original tenant may remain liable unless released.
What does S19 1a of the Act say?
Section 19(1A) of the Landlord and Tenant Act 1927 states that a landlord cannot unreasonably withhold consent to an assignment, subletting, or charging of the lease. The landlord must give written consent if the tenant requests it, and if consent is refused, it must be based on reasonable grounds.
What is an Authorised Guarantee Agreement and when might one be
given?
- Original tenant guarantees assignee’s lease obligations.
- Given during assignments for additional security.
- Ensures compliance with lease terms by assignee.
Can a tenant assign a lease to it’s guarantor?
No, a tenant cannot assign a lease to its guarantor unless the landlord specifically agrees. The guarantor is typically a party providing security for the tenant’s obligations, not someone who assumes the lease itself.
What is a pre-letting?
A pre-letting is an agreement where a tenant commits to lease a property before it is fully constructed or available for occupation. It often occurs in new developments, with terms agreed in advance of the property’s completion.
What is an Agreement for Lease?
An Agreement for Lease is a contract between a landlord and tenant that sets out the terms and conditions for a lease, to be signed at a future date. It typically occurs when the tenant agrees to lease the property once it is ready for occupation or certain conditions are met
Why would AFL be used?
-Secures tenant before property is ready.
-Sets out future lease terms and conditions.
-Provides financial security to landlord.
-Allocates responsibilities for pre-lease works.
What is a collateral warranty?
A collateral warranty is a legal agreement where a third party (such as a contractor or consultant) provides a warranty directly to a party (e.g., tenant or purchaser) who is not a party to the original contract.
Tell me about the planning considerations you are aware of if you want to install a marketing board.
1) Check if planning permission is required.
2) Ensure compliance with size and location restrictions.
3) Avoid obstructing highways or pedestrian areas (consider Highways Act).
4) Follow advertising regulations (e.g., illumination, content).
5) Adhere to local authority guidelines (e.g., duration, placement).
6) Obtain tenant/property consent before installation.
Do you need planning consent to install a marketing board?
You may need planning consent to install a marketing board, depending on factors such as:
- Size of the board.
- Location (e.g., conservation areas, listed buildings).
- Whether it’s in a highway or public space.
- Type of advertisement (illuminated, digital, etc.).
tell me about the requirement surrounding letting property and EPCs.
- Property must have an E rating or above.
- Landlord must provide valid EPC before lease signing.
- Exemptions for listed buildings or short leases (<6 months).
- EPC is valid for 10 years.
- Non-compliance can lead to fines up to £5,000.
What buildings are exempt from having an EPC?
- Listed buildings or those in a conservation area (if works affect character).
- Temporary buildings with leases under 6 months.
- Buildings due for demolition.
- Non-domestic buildings under 50m².
- Places of worship and certain religious buildings
Can you charge a tenant for a copy of an EPC?
No, you cannot charge a tenant for a copy of the EPC. The cost of providing the EPC should be covered by the landlord, and it must be given to the tenant free of charge before the lease agreement is signed.
Where does the EPC have to be shown?
On the EPC Register. Marketing particulars. Given to solictors during conveyancing
How long do you have to produce the EPC after a property is put on the
market?
An EPC must be produced within 7 days of a property being put on the market for sale or rent. If the EPC is not available within this time frame, the landlord or agent may face a penalty.
Tell me about how MEES affects your leasing practice.
- Property must have an EPC rating of E or above to be let.
- Properties below E rating cannot be let unless exempt.
- Landlord obligations to improve energy efficiency.
- Non-compliance can result in fines up to £150,000.
- Possible exemptions (e.g., cost-effectiveness, third-party consent).
What are the key compliance dates?
April 1, 2018: Commercial properties must have an EPC rating of E or above for new or renewed leases.
April 1, 2023: All commercial properties must have an EPC rating of at least E to continue being let, sold, or occupied under existing leases (unless exempt).
2030 - maybe a B.
How can MEES risk be reduced?
1) Conduct regular EPC assessments.
2) Upgrade energy efficiency (e.g., insulation, lighting, heating).
3) Apply for exemptions if necessary.
4) Include energy efficiency clauses in leases.
5) Monitor compliance with MEES regulations.
6) Engage professionals (e.g., energy assessors, contractors).
What would you do if you were asked to let an F or G rated property?
1) Advise landlord on MEES regulations.
2) Recommend improvements to EPC rating.
3) Check for exemptions (e.g., cost-effectiveness, third-party consent).
4) Negotiate lease terms or adjust rent if improvements aren’t feasible.
5) Monitor compliance with MEES deadlines.
How can you improve an EPC rating?
- Upgrade insulation (walls, roof, floors).
- Install energy-efficient lighting (LEDs).
- Upgrade to modern, efficient heating systems.
- Install double-glazing windows.
- Consider renewable energy (e.g., solar panels).
- Ensure proper ventilation.
- Install smart energy systems
How could onerous lease clauses / macro / micro economic conditions impact upon tenant confidence and demand?
Impact of Onerous Lease Clauses / Economic Conditions on Tenant Confidence:
- Onerous Lease Clauses:
- Increased costs (service charges, repair obligations).
- Reduced flexibility in lease terms.
- Creates tenant uncertainty and reduced demand.
- Macro-Economic Conditions:
- Recession or inflation reduces demand.
- Interest rate hikes increase borrowing costs.
- Economic uncertainty lowers tenant confidence.
- Micro-Economic Conditions:
- Local market conditions (e.g., vacancy rates) affect demand.
- Sector-specific challenges reduce demand in affected industries.
How does VAT affect lettings?
- Rent: Commercial property rent is usually VAT-exempt.
- Option to Tax: Landlords can opt to tax and charge VAT (20%) on rent.
- Service Charges: Subject to VAT if landlord has opted to tax.
- New Leases: VAT can be charged on rent if opted to tax.
- Exemptions: Residential lettings or small-scale commercial leases may be VAT-exempt.
- Impact on Tenants: Tenants may pay VAT but can reclaim it if VAT-registered
What type of operator might be affected by a rent which is subject to
VAT?
- Retailers: Can reclaim VAT if VAT-registered.
- Hospitality: Hotels, restaurants, and bars can reclaim VAT if VAT-registered.
- Offices: Tenants can reclaim VAT if VAT-registered.
- Warehousing/Storage: Can reclaim VAT if VAT-registered.
- Professional Services: Law firms, accountants, etc., can reclaim VAT if VAT-registered.
What health checks apply to contracting out?
- Assess financial viability of the contractor.
- Ensure appropriate insurance coverage (e.g., liability).
- Verify experience and expertise of the contractor.
- Confirm compliance with laws (e.g., health and safety).
- Check references and reputation.
Review contract terms
When did contracting out procedures last change?
Landlord and Tenant (Covenants) Act 1995: Amended procedures for contracting out of lease protections.
Explain what you understand by the planning use classes.
- Class A: Retail and food services (e.g., shops, cafes, restaurants).
- Class B: Business and industrial uses (e.g., offices, light industry, warehouses).
- Class C: Residential (e.g., houses, flats, care homes).
- Class D: Non-residential institutions (e.g., schools, medical clinics, places of worship).
- Class E: Commercial, business, and service uses (e.g., gyms, offices, retail, medical uses, cafes).
- Class F: Local community uses
When was Use Class last amended and what changes were made?
Use Classes Order 2020. Merged most commerical business into Use Class E
How do you assess tenant covenant strength and what security might you
request as a result?
Use CreditSafe, can request a deposit or guarantor as secuirty
What money laundering checks do you undertake during agency work?
- Client identification (e.g., passports, driving licenses).
- Verify source of funds (e.g., bank statements).
- Enhanced due diligence for high-risk clients.
- Ongoing monitoring of transactions for suspicious activity.
- Record keeping for at least five years.
- Report suspicious activity via Suspicious Activity Report (SAR).
What is the profits test and how would you apply it?
The profits test is used to determine if a business or tenant is financially viable and able to meet their financial obligations.
1) Review financial statements (income, balance sheet, cash flow).
2) Calculate net profit and ensure it covers liabilities (e.g., rent).
3) Compare performance to industry benchmarks.
4) Consider financial forecasts for future profitability.
5) Assess financial risk based on profit stability.
In a new leasing deal, how might you include a pandemic rent suspension
clause?
- Define trigger events (e.g., lockdowns, restrictions).
- Set a clear duration for rent suspension.
- Specify percentage reduction or full suspension of rent.
