Leasing and Letting Flashcards

1
Q

RICS Professional Standard: Code for leasing business premises, 2020

A
  • The objectives of the Code are stated to improve the quality and fairness of negotiations on lease terms and promote the use of a new set of comprehensive heads of terms to make legal drafting of leases more efficient
  • A second edition of the Code is currently being considered by RICS
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2
Q

RICS Professional Standard: Code for leasing business premises, 2020

Part 2: Mandatory requirements of the Code include

A
  • 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
  • Negotiations should aim to produce letting terms that achieve a fair balance betweent the parties having regard to their respective commercial interests
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3
Q

RICS Professional Standard: Code for leasing business premises, 2020

Part 3: Lease negotiation best practice advice

A

Includes specific advice on lease terms to include rent deposits, rent reviews, service charges, repairs and alienation clauses

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4
Q

Lease negotiation best practice advice

EPCs

A
  • Energy Performance Certificates (EPCs) are used to assess the energy efficiency of a building
  • These are required by law in the course of a sale or letting and are developing an increased level of importance due to the introduction of Minimum Energy Efficiency Standards in April 2018
  • These prohibit the letting of properties with EPC ratings lower than E
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5
Q

What is a lease?

A

A lease is a legally binding contract that sets out the terms and conditions of the tenancy between the parties and it defines their rights and obligations

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6
Q

Definition of a Landlord

A

The person or company who will grant the lease and who may be a freeholder or leaseholder

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7
Q

Definition of a Tenant

A

The person or company who will rent the property from the landlord

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8
Q

Definition of a Guarantor

A

A person or company who will guarantee to the landlord the obligations of the tenant

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9
Q

Definition of Heads of Terms

A
  • A summary of the agreement between the parties, used to instruct lawyers to produce the actual lease
  • Once the lease has been signed the heads of terms fall away
  • Not legally binding
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10
Q

Length of term

A
  • A landlord owning a modern high value building will often want to grant leases in the building for quite long terms in order to secure a flow of rental income, except where the landlord’s business model is to offer mobility to tenants as in the case of serviced offices or start-up accommodation
  • Where a building is of lower grade or is being let pending redevelopment, the landlord may actually want to grant, or be content to accept, shorter term lettings
  • The tenant’s requirements for the length of term will depend on the tenant’s business plans
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11
Q

Break clause

A
  • Giving the right for one party, or either party, to end the lease sooner by giving a notice either at any time or on or between specified dates
  • An advantage of this approach over a short term lease is that it avoids having to negotiate the renewal that would be needed if the tenant wanted to stay on after the short term expires
  • A disadvantage for the tenant could be that the longer term attracts a larger amount of stamp duty land tax, which is not refundable if the lease is ended early under the break clause
  • Legal advice should be obtained in order to weigh up the advantages and disadvantages
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12
Q

Security of tenure under the L&T Act 1954

A
  • At the end of the lease term the tenant, if still using the property to carry on business, will be entitled to claim a new lease, on terms that the parties agree or that a court will decide if they cannot
  • There are only limited grounds under the 1954 Act on which landlords can oppose a tenant’s claim for renewal, such as where the landlord intends to redevelop the property or offers the tenant suitable alternative accommodation or where the tenant has been persistently late in paying rent
  • If the landlord opposes a renewal, the tenant can ask the court to rule on the validity of the landlord’s ground or grounds of opposition
  • A landlord who succeeds in opposing a renewal may in some cases have to pay the tenant an amount of compensation calculated in accordance with the 1954 Act
  • Landlords insist that the lease exlcudes security of tenure for short term leases
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13
Q

Interest on the deposit

A
  • Interest on the deposit should normally accrue to the tenant and be at a normal rate for
    money on deposit
  • Deposits should be held in separate bank accounts not used for the landlord’s own monies and the bank accounts should be designated as tenants’ deposits to protect the funds in case the landlord becomes insolvent
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14
Q

Rent deposit deed

A

All agreed arrangements for landlords refunding any deposit based on certain conditions should be recorded in a detailed rent deposit deed

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15
Q

Guarantees

A
  • Where an individual or company is required to give the landlord a guarantee for the rent and other obligations under the lease, the parties need to agree whether the guarantee will be of an unlimited amount or capped at a specified sum
  • Guarantees usually make the guarantor liable not only for rent but also for the tenant’s other obligations, including service charge payments and repairs, and often require the guarantor itself to take a replacement lease if the tenant becomes insolvent and the lease is ended under insolvency law
  • The deed of guarantee may contain provisions making the guarantor responsible even after the tenant has assigned the lease
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16
Q

Payment of rent

A
  • This will often be quarterly or monthly and usually in advance
  • Leases normally impose a charge of interest where rent is not paid on its due date
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17
Q

Rent to be reviewed at set intervals

A
  • Traditionally the most usual method has been to the open market rental value that the property has at the review date - particularly used for leases with terms over 7 years
  • One alternative is indexation, where the rent increases in line with increases in a published index such as the Retail Prices Index (RPI) or Consumer Prices Index (CPI)
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18
Q

Rent reviews

A
  • Reviews under leases with terms of ten years or more are usually at intervals of five years
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19
Q

Open market rent reviews

A
  • Open market rent reviews can be costly to operate since the parties will normally need to engage surveyors to advise on and negotiate the amount of new rent, so that particular type of review should not apply at very frequent intervals
  • The formula for assessing the rent should require the disregarding of any added value from improvements the tenant makes
  • If the parties cannot agree on what the open market rent is, either party refers this to an independent expert or arbitrator to settle
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20
Q

Indexed rents

A

More appropriate for short term leases and do not normally involve incurring significant costs at each review

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21
Q

‘Upwards Only’ rent review provisions

A
  • Allow the rent to be increased but never decreased
  • The rent will not reduce even if there is a fall in the market rent or inflation index by the review date
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22
Q

Retail or leisure premises rents

A
  • Let on rents that are linked to the tenant’s turnover at the property
  • More prevalent in shopping centres
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23
Q

Rent-free period

A

This is often intended to cover the period during which the tenant is fitting-out the property, so the tenant is not paying rent before it is able to trade

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24
Q

Definition of service charge

A

Service charge will be a proportion of the cost of maintaining and decorating the exterior and common parts of the building, and the cost of matters such as structural repairs and the repair or renewal of communal boilers, lifts and other plant and equipment serving the building

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25
Q

Business rates

A

Businesses are liable to pay the ‘uniform business rate’ (UBR) and it is usually the tenant who will be responsible

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26
Q

Stamp Duty Land Tax

A
  • The tenant may have to pay SDLT on the lease, depending on the amount of rent and the duration of the lease term
  • Any such payment will be due within 14 days on completion of the lease
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27
Q

Definition of assignment

A

‘Assign’ the lease to another party who will take over occupation of the property and responsibility for the lease obligations including paying the rent to the landlord

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28
Q

Definition of subletting

A

Continue to hold the lease and pay the rent to the landlord but sublet the space to another party (a subtenant) from whom the tenant will in turn collect rent

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29
Q

FRI leases

A

Tenant reponsible for repairing and maintaining the entire building

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30
Q

IRI leases

A

Tenant directly responsible for repairing the internal non-structural parts of the area within their demise (and sometimes windows and shopfronts) with the tenant contributing to communal repairs through service charge

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31
Q

Schedule of condition

A
  • Record the condition of the property in a schedule of condition to be referred to in the lease and attached to it
  • Consists of a written description of the state of the property or a set of photographs
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32
Q

‘Yield up’

A

Many leases contain a provision for the tenant to ‘yield up’ the premises at the end of the term in the state and condition required by the tenant’s repair obligations, although that obligation may exist even if not expressly stated

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33
Q

Alterations

A

Where just part of a building is being let, it is common to prohibit the tenant from making structural and external alterations (apart from altering shop fronts, if appropriate) but to allow internal non-structural alterations with some degree of control by the landlord.

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34
Q

‘Licence to alter’

A
  • A tenant who wishes to make alterations that need the landlord’s consent must expect the landlord to seek the right to require the tenant to remove the alterations and restore the premises at the end of the lease, particularly where the landlord thinks that the alterations may detract from the value of the building
  • In some cases, when obtaining consent to make alterations, tenants may be able to persuade landlords that particular alterations do not need removing at the end of the lease and if so that arrangement should be recorded in the landlord’s consent (or ‘licence’) for the alterations
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35
Q

Insurance

A
  • Tenants should request details of the landlord’s insurance policy before signing the lease and satisfy themselves that the sum insured is sufficient to rebuild the building, that the insurance is on terms giving value for money and that the insurance company is reputable
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36
Q

Breaches

A
  • Landlords should allow tenants enough opportunity to fix any problems they cause (without loss to the landlord) before any legal action is taken
  • If a tenant fails to remedy a breach of the lease, the landlord may have a range of remedies such as suing for arrears or damages, sending in enforcement agents to
    seize goods to the value of the breach, or even taking back the property (‘forfeiture’)
  • Tenants should note that they can still be sued for arrears of rent or for damage caused (including
    failing to carry out repairs) even if the landlord exercises the right of forfeiture
  • Landlords should note that if they forfeit the lease they resume responsibility for the property and its
    outgoings
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37
Q

Forfeiture

A
  • Legislation requires landlords to give formal notice of a breach other than for rent arrears and to allow a reasonable time for the tenant to remedy the breach before the landlord can forfeit the lease by re-entry for that breach of covenant
  • Legislation gives the tenant the right to apply to the court to give the tenant more time to remedy breaches or to pay arrears (called ‘relief from forfeiture’)
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38
Q

Consent for alterations

A
  • If the landlord receives a proposal for alterations that includes a specification and plan, and the landlord fails to object to the proposal within 3 months, the Landlord and Tenant Act 1927 may make the landlord lose the right to object to the alterations

Alterations Protocol RICS guidance

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39
Q

Dilapidations

A
  • The term ‘dilapidations’ is normally used to cover defects and disrepair that the tenant will be required to deal with or pay to have remedied when the tenant vacates the premises at the end of the lease, due to the tenant’s failure to rectify these matters during the term under its repairing obligations
  • Landlords cannot generally make dilapidations claims earlier than 3 years before the end of the lease
  • If the tenant has a statutory or contractual right to a new lease, the landlord will normally not make a dilapidations claim unless the tenant declines to renew the lease
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40
Q

What may the Landlord request if additional security is needed from the tenant?

A

Rent deposit or guarantee (depend upon market conditions and the strength of the tenant’s covenant)

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41
Q

Use of rental deposits

A
  • Personal to the tenant
  • Must be legally documented in a rent deposit deed & money held in a separate bank account
  • Interest to tenant
  • Agreed terms for the release of the monies
  • Details of the release mechanism to be stated in the deed
  • Can include a top up mechanism for rent review uplifts
  • The rent deposit deed is attached to the lease as it is a separate deed, personal to the tenant
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42
Q

Usual request from the Landlord regarding tenant’s covenant

A
  • 3 years audited accounts / credit rating (such as from CreditSafe)
  • Bank, account and 2 trade references
  • Previous / existing landlord’s reference
  • Profits tests commonly used is that the net profit for the proposed tenant’s business must be 3x the rent for 3 consecutive years or the net asset value of the business must be more than 5x the rent
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43
Q

Major lease terms affective value

A
  • Lease length / term certain
  • Break clauses
  • Alienation
  • Repairing obligations
  • User clauses
  • Rent review pattern & basis of valuation
  • Security of tenure provisions
  • Impact of a restrictive lease clause upon value
  • Inside or outside the Act? If there is no mention then it is protected
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44
Q

Break clauses

A

These clauses are time of the essence with a strict timetable for serving the notice

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45
Q

If an option to terminate is included in the lease, check the following:

A
  • Is it mutual?
  • Do you need to serve a notice if the lease is granted inside the 1954 Act?
  • What is the required notice period?
  • Is there a penalty rent to be paid, if the lease is terminated?
  • Are there any pre-conditions for the option or is it an open break clause?
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46
Q

A tenant’s right to break is often condition upon having complied with certain lease obligations. Typical conditions include:

A
  • Compliance with the tenant’s covenants
  • Payment of all rent and other sums due
  • Vacant possession
47
Q

Main advantage of a pre-let

A

Delivery of a bespoke building designed to suit the tenant’s needs

48
Q

Main disadvantage of a pre-let

A

Entering a lengthy and complex process and a level of risk in the event of the developer or contractor not performing

49
Q

The legal framework requires the following documents to be attached to an Agreement to Lease:

A
  • The Lease - in a pre-agreed form, which shall be executed once the developer has fulfilled its obligations under the AtL, usually at practical completion of the work
  • Licence for Alterations - to allow the tenant to undertake fitting out works
  • Specification and plans of the proposed scheme
  • Developer’s guarantee/bond - if dealing with a weak covenant
  • Warranties - any tenant taking an FRI lease will want collateral warranties from the professional team, main contractor and any sub-contractors with any design input
  • Most developers are unwilling or unable to give guarantees for latent defects and may put decennial insurance in place to cover this risk
50
Q

Collateral warranty

A
  • A collateral warranty gives tenants a direct contract with the construction team (privity of contract)
  • Rather than obtaining collateral warranties from the professional team, third party rights are increasingly popular as a cheaper, quicker and more certain way to give tenants potential recourse
51
Q

RICS Professional Standard: Property Agency and Management Principles 2024

A
  • Global RICS document and not UK specific
  • Effective from 1st Jan 2025
  • 2 elements of the publication: Working with clients & Managing businesses and staff
52
Q

RICS Professional Standard: Property Agency and Management Principles 20

Working with clients

A

Advice is given to members and firms:
* Not seek business by methods that are dishonest or involve misrepresentation
* Clearly communicate to clients how their fees will be calculated and provide clear Terms of Business
* Provide suitable, accurate and unbiased advice
* Only provide advice on an appropriate price

53
Q

RICS Professional Standard: Property Agency and Management Principles 20

Managing business and staff

A

Advice includes:
* How to manage their businesses and staff effectively
* Take all reasonable steps to ensure that all business and marketing materials are honest and accurately reflect the services that are provided
* Ensure all advertisements meet the requirements of any relevant local legislation
* Maintain appropriate accounts and records of their business activities
* Protect confidential information
* Firms must have appropriate cyber security in place to protect theirs and their client’s data

54
Q

Alienation

A
  • Always Read the Lease
  • Understand the differences between an assignment and a sub-letting and the impact upon investment value adn the reasons why both are used
  • Landlords’ remedies for illegal allienation include forfeiture, damages or an injunction
55
Q

Assignment

A

The new tenant has a direct relationship (privity of contract) with the landlord

56
Q

Sub-letting

A

The new sub-tenant has a direct relationship with the tenant and pays them the rent, who then pays rent to the landlord

57
Q

Leases can have an absolute, open or restrictive (qualified) alienation clause

A
  • Open - allowing alienation
  • Qualified - subject to some conditions
  • Absolute - not alloing a sub-letting or assignment

The usual clause is that landlord’s consent is not to be unreasonably witheld or delayed

58
Q

Reasons to sub-let, rather than assign the lease include:

A
  • Requirement of the lease
  • For part of the demise and not the whole
  • If the market rent is higher than the passing rent (face rent) then there is a profit rent
  • If the tenant wants to re-occupy in the future
  • The new party is of a lesser covenant strength
59
Q

Landlord & Tenant (Covenants) Act 1995

A
  • Relates to the assignment of the leases
  • It introduced Authorised Guarantee Agreements (AGA’s)
  • There can only be one AGA in place at any time
60
Q

AGA’s

A
  • For the most recent former tenant only to guarantee the lease obligations of the immediate assignee as a voluntary arrangement to be agreed between the landlord and tenant
  • The RICS Code for leasing business premises 2020 states that although AGAs are commonplace expectations by landlords, tenants should seek not to enter into an AGA if, for example, the new tenant is financially strong enough, pays an appropriate rent deposit and/or provides a suitable guarantor
61
Q

RICS Professional Standard: Code for leasing business premises 2020

A
  • Leases should allow tenants to assign the whole of the premises with landlord consent, which is not to be unreasonably withheld or delayed. Landlords may set out circumstances for refusal but these should be reasonable and appropriate. A requirement for an AGA clause should be clearly stated in the lease
  • Leases should allow tenants to sublet the whole of the premises and may allow subleases of parts, if appropriate without security of tenure, and in each case with the landlord’s consent, which is not to be unreasonably withheld or delayed and at rents not less than market rent
  • Subleases should be required to be on terms consistent with the tenant’s own lease
62
Q

Alterations

A
  • Alterations are carried out by a tenant during the lease
  • They must usually be approved in writing by the landlord
  • They are usually subject to reinstatement at the end of the lease
  • Some works such as demountable partitioning or other non-structural works may not require landlord’s formal consent so always Read the Lease
63
Q

Licence for Alterations

A
  • To be completed before the works commence
  • Has 2 useful functions: to protect the parties at rent review and dilapidations at the end of the lease
  • Most licences require the tenant to reinstate the works at the end of the lease
  • The licence must clearly document the works agreed
64
Q

Actions undertaken when dealing with an application for consent for alterations can include:

A
  • Read the Lease
  • Ask for a full set of plans and a specification
  • Obtain an undertaking for the surveyor’s and legal costs
  • All alterations need to be documented in a Licence of Alterations
  • Consider if reinstatement required at the lease expiry
65
Q

Landlord and Tenant Act, 1927

A
  • If a lease prohibits improvements being made to a property without Landlord’s consent, Section 19 of the Act imposes a proviso that such consent cannot be unreasonably withheld
  • If the Section 19 procedures have been followed, the landlord may be obliged to pay compensation for alterations that may constitute improvements
66
Q

Dilapidations

A
  • Always Read the Lease
  • These negotiations take place at the lease expiry to bring the property back to its condition at the start of the lease assuming there is a repairing liability
  • Check the lease terms to understand the repairing responsibilities of both parties and whether there is a schedule of condition
  • Also check to see if any licences for alteration were granted
  • Tenant is usually required to return the building to its original state, or otherwise as stated in the lease
  • If a landlord proposes to demolish or substantially refurbish, the value of the reversion could be nill
67
Q

TWO choices before the lease expiry date:

A
  1. Tenant can do the agreed works
  2. Tenant can pay a sum to the landlord to undertake the works

Breach + Loss + Evidence = Recovery

68
Q

Format of a schedule

A
  • Outline repairing obligations
  • State the remedy and cost of the breach
  • Loss of rent, if appropriate, over period to do the works
  • Fees + VAT for the claim for surveyors and lawyers
  • If agreement not reached, landlord’s surveyor may be required to prepare a Scott Schedule for the Court/ADR
69
Q

Reasons why a settlement is not agreed

A
  1. When the lease is not on full repairing terms
  2. Reinstatement not required by the landlord
  3. If the building is to be demolished or substantially refurbished after the lease expiry
  4. Tenant has gone into administration
70
Q

Insurance

A
  • Usually the responsibility of the landlord to arrange and re-charge the tenant
  • Cover for reinstatement of the building for a range of insurance perils (such as fire, storm, flood etc.)
  • The usual basis of measurement for building reinstatement valuations is to use GIA
  • Insurance Act 2016 is the key law which introduced more accountability for insurers
  • RICS became a Designated Professional Body for insurance matters in 2005 - only registered members can deal with insurance
  • Insurance premium tax (IPT) is levied on premiums
71
Q

Consider the actions of the property manager for an empty building:

A
  • Building insurance - tell the insurers it is empty
  • Obain an EPC and consider MEES
  • Undertake and record regular inspections
  • Undertake a health& safety and fire risk assessment of the building
  • Inform the local rating authority for the payment of empty rates
  • Arrange security
  • Planned maintenance programme to include servicing of plant
  • Agreement of a disposal strategy and marketing initiatives
  • Maintain abestos register
  • Residential squatting is a criminal offence which can be subject to police action
72
Q

Definition of repair

A
  • Liability cannot arise in the absence of repair
  • Tenants may be responsible for inherent defects
  • Repair is not an improvement
  • An effective FRI lease is when the landlord is responsible for repairs & re-charges via the service charge
73
Q

4 main options open to a landlord to deal with a tenant who is not repairing their property:

A
  1. Serve a repair notice
  2. Forfeit the lease
  3. Serve an interim schedule of dilapidations
  4. Do the works and charge the tenant
74
Q

Leasehold Property (Repairs) Act 1938

A
  • Act applies to leases granted for a term of 7 years or more and has at least 3 years until the lease expiry
  • Aims to protect tenants against onerous interim schedules of dilapidations
  • Act requires landlords to serve a repair notice on the tenant
75
Q

Planned Maintenance Programme

A
  • This is planned maintenance activity supervised by a property manager or building surveyor
  • Servicing plant
  • Future repairs such as upgrading facilities
  • Undertaking some remedial works to the building
76
Q

Schedules of Condition

A
  • Limit the tenant’s repairing obligation in respect of agreed items of disrepair for the duration of the lease
  • It is agreed by negotiation between the landlord and tenant prior to the commencement of the lease and attached to the lease
  • Reinstatement at the end of the lease by the tenant will be limited by the terms of the schedule of condition
  • Must be carefully recorded - often with a supporting photographic record and plans
77
Q

Service Charges

A
  • These are charges to tenants of multi-tenanted properties or estates of costs incurred by a landlord to maintain and manage a property
  • Many prospective tenants aim to negotiate service charge caps, fixed increases or link increases to the RPI or CPI to limit their future liability
  • RICS Professional Standard: Service charges in commercial property, 2018 - improve general standards and promote best practice and reduces the causes of disputes
78
Q

User clauses

A
  • Relate to the planning use of the property and/or how the property can be used
  • Two types of clauses - refer to planning use and specific uses
  • Change of use typically subject to landlord’s consent not to be unreasonably withheld
  • A restrictive user clause can depress market rent - e.g. restriction on hours of working for offices
79
Q

Terms of Engagement - these must be agreed in writing at the start of the instruction. You must check:

A
  • That you are competent
  • There is no personal interest or conflict of interest
  • You refer to the standrd Terms of Business that will apply alongside the ToE
80
Q

Actions required by the surveyor when you have a new instruction …

A
  • Undertake a conflict of interest and competency check
  • Agree terms of engagement with the client
  • Obtain an understanding of your client’s objectives
81
Q

Meaning of ‘without prejudice’ and subject to contract

A

During the period of negotiations, the opposing party cannot subsequently rely upon any document or discussions held which are labelled ‘Without Prejudice’

82
Q

4 requirements of a lease:

A
  1. Exclusive occupation
  2. Payment of rent
  3. Duration for a specified term
  4. If more than for 3 years, the terms must be in writing, signed as a deed
83
Q

3 mian differences between a lease and a licence:

A
  1. A lease provides an occupier with an estate in the relevant land - a licence is a permission to make it lawful for them to use the land
  2. A lease can be assigned - a licence is normally a personal right that cannot be assigned
  3. A lease cannot be terminated until it expires (unless there is a break clause) - a licence can usually be revoked at any time
84
Q

Tenancy at will

A
  • Form of licence created by written agreement for an unspecified time in which the landlord may evict the tenant at any time
  • Used for allowing a tenant early entry for fit out works
85
Q

Wayleave

A

This is a temporary right and receives an annual payment - such as it provides a right for an electricity company to install and retain their apparatus

86
Q

Easement

A
  • This is a permanent right and receives a capital payment
  • It is capable of being registered at the Land Registry
  • It allows a right enjoyed by one party over the land of another
87
Q

Prescriptive right of way

A

Can be obtained because of continuous and uninterrupted use being proven over a period of not less than 20 years

88
Q

Permissive right

A
  • Can be granted by a landowner to allow access over the land
  • They are not public rights of way and the public do not have a right to use them
  • Usually signage in place to confirm
89
Q

Adverse Possession

A

The process by which a person who is not the legal owner of the land can become the legal owner through possession of the land for a specified period of time, without the owner’s permission

90
Q

Basis of a rent review valuation

A
  • Normally upwards only to the market rent using standard assumptions
  • Other bases of rent review include indexation, turnover rents and stepped increases
91
Q

Headline rent review clauses

A
  • A headline rent ignores all incentives/concessions granted on a letting
  • Headline rent review clauses are rare in modern commercial leases
92
Q

The assumed term of the lease / hypothetical term

A
  • The length of term to be assumed for rent review purposes can influence rental value
  • Unless the wording is explicit (for example “10 years from the review date”), the assumed term is likely to be the unexpired residue
93
Q

Hierarchy of evidence

A
  • Open market lettings
  • Lease renewals
  • Rent reviews
  • Independent expert determinations
  • Arbitrator awards
  • Court determinations under L&T Act
  • Hearsay evidence
  • Sale & leasebacks
  • Surrender & renewals
  • Inter-company arrangements
94
Q

Lease renewals outside the Act - contracting out

A
  • Section 38A of the Act sets out the procedure which must be followed to contract outside the Act
  • When the lease comes to an end the tenant has no statutory right to remain in occupation
  • No compensation is payable at the end of the lease
95
Q

Reasons why a letting may be contracted outside the security of tenure provisions of the L&T Act:

A
  • A requirement of the head lease to grant any subletting outside the Act
  • The landlord will want to re-occupy the property in due course
  • The landlord wishes to redevelop the property at lease end
  • The rent may be lower
  • The landlord wants future flexibility
96
Q

The procedure to undertake when contracting outside of the Act

A
  • The landlord is required to serve a notice on the prospective tenant, warning that the proposed lease will not be protected. This is known as a ‘health warning’
  • The proposed tenant must then make a declaration in response, confirming that they have received the notice and accepts its terms
  • This procedure must be completed before the lease is signed
97
Q

There are two types of declaration

A
  1. Simple declaration
  2. Statutory declaration
98
Q

What are the various ways to terminate a lease?

A
  • Forfeiture
  • Surrender and negotiation
  • Merger
  • Disclaimer (due to insolvency)
  • Break clauses
  • Lease expiry and service of notices under the L&T Act 1954
99
Q

RICS Professional Statement: UK Commercial Estate Agency 2016

A
  • Provides a set of mandatory standards for RICS members involved in agency
  • Sets out 12 core principles including
  • Act in an honest manner
  • Carry out work with due skill
  • Ensure that clients are provided with terms of business that are fair and clear
  • Avoid conflicts of interest
  • All marketing is honest
100
Q

The Estate Agents Act 1979 is policed by

A

the National Trading Standards Estate & Letting Agency Team (NTSEAT)

Negative licensing - the right to be an estate agent can be taken away and not granted

101
Q

When does it apply?

Misrepresentation Act 1967

A
  • Mis-statements/false/fraudulent statements or misrepresetnations made during the pre-contractual enquiries by the vendor or their agent to the proposed purchaser
  • Freehold and lease transactions
102
Q

The offence

Mispresentation Act 1967

A
  • Civil offence actionable by tort
  • Action can be limited by an effective disclaimer (exclusion) clause
103
Q

Penalties for non-compliance

Mispresentation Act 1967

A

Sued for financial damages and/or contract rescinded

104
Q

When does it apply?

Estate Agents Act 1979

A
  • During the sale or purchase of freehold or leasehold properties with a capital value
  • S18 - Terms of business
  • S21 - Declaration of personal interests
105
Q

The offence

Estate Agents Act 1979

A
  • Acting dishonestly
  • Not providing clarity to the terms of engagement or disclosing a personal interest
  • Not telling the client about offers received
106
Q

Penalties for non-compliance

Estate Agents Act 1979

A

Warning order or Prohibition order and/or fine

107
Q

When does it apply?

Consumer Protection Regulations 2008

A

During the entire agency sales and lettings process

108
Q

The offence

Consumer Protection Regulations 2008

A
  • Criminal offence
  • Not treating ‘customers’ fairly and/or providing misleading marketing information
109
Q

Penalties for non-compliance

Consumer Protection Regulations 2008

A

Unlimited fine, prohibition order and prison up to 2 years

110
Q

Town & Country Planning (Control of Advertisements) Regulations 2007

A
  • Planning consent is required for commercial boards over 2 sqm (flat) and 2.3 sqm (v board) - only one board per building
  • Boards must be removed 14 days after completion of transaction
  • Policed by the LPA
111
Q

Relevant legislation

A
  • Bribery Act 2010
  • Control of Asbestos Regulations 2012
  • General Data Protection Regulation and Data Protection Act 2018
  • Equality Act 2010
  • Health & Safety Act 1974
  • Proceeds of Crime Act 2002
  • Money Laundering, Terroist Financing and Transfer of Funds Regulations 2017
  • Sanctions and Anti-Money Laundering Act 2018
112
Q

VAT

A
  • Specialist advice is always recommended
  • A landlord may choose to elect a property to charge VAT, to recover VAT on costs expended. When this happens any rent and SC is charged subject to VAT. This has implications for occupiers who cannot be VAT registered such as financial institutions, charities and medical practitioners
113
Q

Estate Agents Act 1979 7 key principles

A
  1. Clarity as to the terms of the agency
  2. Honesty and accuracy
  3. Agreement and liability for costs
  4. Openness regarding personal interests
  5. Absence of discrimination
  6. Legal obligation to tell the client about offers received
  7. Keep clients’ money separate