Leasing and Letting Flashcards
0
Q
What is the name of the Purple Book?
A
RICS Commercial Real Estate Agency and Brokerage Standards 2014
1
Q
How close do you have to be for it to become a personal interest?
A
2 steps (i.e. your friends friend)
2
Q
What are the twelve core principals of the RICS UK Commercial Estate Agency Professional Statement, 2016?
A
- Honesty, fairness, transparency, professionalism
- Due skill, care and diligence
- Ensure Terms of business are fair and clear with details of complaints handling procedure
- Avoid conflicts – deal with them openly and fairly
- Don’t discriminate unfairly
- Keep communications fair, decent, clear, timely and transparent
- keep client money separate With adequate insurance
8 . Honest and truthful advertising/marketing - Hold appropriate PII
- Identify client and make clear obligation to all parties
- Give realistic assessments using market evidence and best professional judgment
- Carry out inspections etc. As per the clients wishes with due regard to security and safety
3
Q
What is a tenancy at will?
A
A tenancy for an unspecified length formed by a written agreement. Landlord can evict the tenant at any time.
4
Q
What are the consumer protection regulations 2008?
A
This relates to the duty of care owed to consumers by businesses.
It was designed to protect consumers from businesses who trade unfairly.
It includes a black list of banned training practices.
5
Q
What is a deed?
A
It’s a contract made under a seal
6
Q
How do you apportion service charges?
A
- By floor areas (NIA)
- By weighted floor areas
- By rateable value
7
Q
What are the main lease terms that affect value?
A
Break clauses
Etc
8
Q
What is the most recent case law on break clauses?
A
MNS vs BNP Paribas
9
Q
What are the three tests to decide agents liability for negligent statements?
A
- Foreseeability
- Proximity
- Fairness
Hadley Byrne vs Heller
- test of reasonableness
- liability to negligent statements
10
Q
When should you not undertake an instruction?
A
If you are not competent
If you suspect Money laundering
If there is a Conflict
11
Q
How do the consumer protection regululayions apply to you as an agent?
A
– Full due diligence required for new instructions
– Particulars must be validated by client
– Applies to entire lettings/sales process
– Agents have duty of care to clients and interested parties
– Agents must declare everything good and bad about a property (Omissions = breach)
– Any info discovered must be passed on to interested parties
– Agents must not exert undue pressure on interested parties
– Disclaimers do not apply as it is a criminal offence
12
Q
What are the penalties for non-compliance with the misrepresentation act 1967?
A
Sued for financial damages and/or contract rescinded
13
Q
What are the penalties for non-compliance with the consumer protection regulations 2008?
A
And unlimited fine, a prohibition order and prison of up to 2 years
14
Q
What are business rates?
What is the current multiplier in the city of London?
A
Business rates are a tax on business property is set by the government.
The City of London multipliers are set at 0.471 for small businesses and 0.484 for other businesses.
There is a further addition of 0.02 for crossrail
15
Q
What occupiers cannot register for VAT?
A
Financial institutions, charities and medical practitioners.
16
Q
What is a ‘sui generis’ use?
A
This is where there is no specified use class for the use.
Planning consent is always required for change of use.
17
Q
How do you document an assignment?
A
By deed.
18
Q
When was the antecedent valuation date for the 2017 revaluation?
A
1st April 2015
19
Q
What items are included in the service charge for office properties?
A
Security/commissionaire/receptionist Lifts Common parts Utility charges for common parts Managing agents Maintenance of exterior
20
Q
What user clause is Industrial?
A
B2 - General Industrial
B8 - storage and distribution
21
Q
What is the hierarchy of evidence?
A
Open market lettings Rent reviews Lease renewals Independent expert determinations Arbitrator determinations Court determinations (L&T Act 1954) Sale and leasebacks Surrender and renewals
22
Q
You mention that the lease is inside the act. What does this mean?
A
It means that under the landlord and tenant act 1954, the tenant has the right to renew the lease.
23
Q
How could the landlord refuse to grant a new lease?
A
By serving a hostile section 25 notice.
With in this they would have to set out grounds for refusal under section 30 of the act.
24
What are the grounds for refusal of a new lease?
There are 7 grounds (a-g)
A) repairing covenant breach
B) persistent delay in paying rent
C) other substantial breach
D) provide suitable alternative accommodation
D) uneconomic subdivision
F) demolition or reconstruction
G) owner occupation
25
Can you tell me any professional statements relating to estate agency?
The RICS UK commercial estate agency professional statement, 2016.
26
Can you tell me what the core principles are of the RICS UK commercial estate agency professional statement, 2016?
1. Act with honesty/fairness/transparency/professionalism
2. Carry out work with due skill care and diligence
3. Provide clients with fair and clear terms of business and complaints handling procedure
4. Avoid conflicts – manage them openly and fairly
5. Don’t discriminate unfairly
6. Fair/decent/clear/timely/transparent client communication
7. Honest/truthful marketing/advertising
8. Client money – held separately with adequate insurance
9. Hold appropriate PII
10. Identify client and make obligations clear
11. Give realistic assessments
12. Meetings/inspections/viewings – Regard to clients wishes and security/safety
27
What is a prohibition order?
It stops an agent practising.
28
When does the estate agents act 1979 apply?
During the sale/purchase of Freehold or leasehold properties.
29
When do the consumer protection regulations 2008 apply?
During the entire agency process.
30
When does the misrepresentation act 1967 apply?
It applies to mis-statements, false/fraudulent statements or miss representations made during pre-contractual enquiries.
31
What size letting board do you need planning consent for?
Flat board – 2 SQM
V board – 2.3 SQM
Must not project more than 1 m from facade
Must not be above 4.6 m from ground
32
What is a premium and how would you calculate it?
Premium is a capital payment made by one party to another.
This could be for an assignment of a lease where and ingoing tenant pays a premium to represent the difference between the passing rent and the market rent.
Alternatively this could be for a surrender and regrant where a landlord pays a premium to the tenant to reflect in increase in the capital value.
33
How would you calculate the net effective rent?
This is devaluing the headline rent taking into account rent free periods.
Method of calculation:
1. Straight line method
2. Use of DCF
Allow 3 months for fitting out period
34
Are you aware of any case law which sets out the difference between a license and the lease?
Street vs Mountford
35
What is an alienation clause?
This sets out a tenants right to dispose of their lease, such as by way of assignment or sub-lease.
36
Why would you recommend your client to sublet rather than assign?
If the market rent was higher than the passing rent (profit rent)
If the new party is of lesser covenant strength
If the tenant wants to reoccupy in the future
If the tenant wants to dispose of part of their space
37
What are the different types of alienation clause?
Open
- Allowed
Restricted
- Conditional
Absolute
- Not allowed
38
What act are you aware of that relates to assignments?
Landlord and tenant covenants act 1995
39
What did the landlord and tenant covenants act do?
It abolished privity of contract and introduced aga’s
40
What is an alterations clause?
This sets out the tenants rights with regards to alterations/works to their space.
41
What is a license for alterations?
This details the works to be undertaken by the tenant.
It must be completed prior to works commencing.
Normally requires tenant to reinstate works at end of lease.
42
What are dilapidations?
This is a negotiation between the landlord and the tenant at the end of the lease to put the space back to its condition at the start of the lease.
Two options:
- Tenant does the works
- Tenant pays landlord to do the works
43
What is a schedule of dilapidations?
This sets out the works that must be done by the tenant at the end of the lease in line with the reinstatement clause in the lease
44
What forms of schedule of condition are you aware of?
Interim
Terminal
Final
45
How would you advise your client if they had an empty building?
Inform insurers
Clear the building
Record regular inspections
Empty rates
Seal letterbox
Disposal/marketing strategy
46
Who is responsible for the insurance within the lease?
Usually the landlord.
Re-charged to the tenant pro rata.
47
What are the UK quarter days?
25th March
24th June
29th September
25th December
48
What is forfeiture?
Where a landlord takes back possession from a tenant for breaching their lease.
49
What is an effective FRI lease?
When the landlord is responsible for repairs and re-charges the tenant via the service charge.
50
What is a schedule of condition?
This is a schedule which sets out the limit of the tenants reinstatement obligations and is attached to the lease.
Doesn’t normally include services.
51
What is a service charge?
This is a charge to the tenant for costs incurred by the landlord to maintain the property.
52
How are service charge is normally apportioned?
Normally pro rata by floor area
Or:
Fixed percentages
Rateable value
Weighted floor area
53
What is the sinking fund?
A fund setting aside money for replacement of a wasting asset.
54
What is the user clause?
This relates to the planning use for a property and how it can be used.
55
What is the license?
A right to enter a property
No interest in land
Makes lawful what would be unlawful
Can be terminated by either party at any time
56
What is a lease?
Grants exclusive occupation
There is a payment of rent
For a specified term
(If more than 3 years – must be in writing and registered as a deed)
57
What is the difference between a lease and a license?
The lease provides a tenant with an interest in the land
The lease can be assigned
The lease cannot be terminated until it expires
58
What is a tenancy at will?
A form of license
No specified time
Tenant can be evicted at any time
Normally used for allowing a tenant entry for fit out works.
59
What is a way leave?
Temporary right
Normally used to allow a company to put in a fibre line
60
What is an easement?
A permanent right for enjoyment over land.
i.e. a right of way
61
What does without prejudice mean?
Any information labelled without prejudice cannot be relied upon.
62
What is the hierarchy of evidence?
Establishes the relative weight attached to comparable evidence.
```
Open market lettings
Rent reviews
Lease renewals
Independent expert determinations
Arbitrator determinations
Court determinations
Sale and leasebacks
Surrender and renewals
```
63
What is a Calderbank offer?
It can help to achieve an early resolution of the dispute and prevent costs from escalating or having to go to court.
64
What is section 25 of the L and T act 1954?
Landlords notice to terminate
65
What is section 26 of the L and T act 1954?
Tenants notice requesting a new tenancy
66
What is section 27 of the L and T act 1954?
Notice to terminate served by tenant after expiry of the lease.
67
What are the grounds under section 30 of the L and T act 1954?
A) breach of repairing covenant
B) persistent delay in paying rent
C) other substantial breach
D) provide suitable alternative accommodation
(Compensation)
E) on economic subdivision
F) demolition or reconstruction
G) owner occupation
68
What is section 37 of the L and T at 1954?
Follow up: What is the compensation?
Sets out compensation payable by the landlord due to successful section 25 application.
Compensation payable:
14+ years occupation – RV x 2
Less than 14 years – RV x 1
69
How do you contract a lease outside the act?
Under section 38A of the L and T act 1954.
Landlord must serve notice on the prospective tenant
Tenant must confirm he accepts
Simple or statutory declaration:
- Simple – more than 14 days to commit
- Statutory – Less than 14 days to commit
70
How long does planning permission last?
3 years normally
71
What impact would a return frontage have on the rental value of a retail property?
Typically an increase of 10 to 15%
However as I have limited experience with retail, I would always seek specialist advice.
72
What is the anti-cedant valuation date for the current rateable value yes?
1st April 2015
73
What is the code for leasing business premises?
Not an RICS publication.
A voluntary code considered best practice.
74
What is the aim of the code for leasing business premises?
To achieve efficiency and fairness between the landlord and tenant within the commercial property industry.
75
What does the code for leasing business premises consist of?
It is divided into three sections:
The landlord code:- Sets out recommendations to landlords on negotiation of a business tenancy.
Occupier guide:- Sets out advice in 37 tips for prospective tenants on how to negotiate terms.
Model heads of terms:- Template for good practice.
76
What are the principles of the code of leasing business premises?
Fairness
Accountability
Transparency
77
What do you consider when advising your client on tenant selection?
The covenant strength of the prospective tenant as this has an important relationship with the investment value of a property.
78
How might you improve the covenant strength of a prospective tenant?
By requesting further surety.
This could be through a:
– rent deposit
– parent company guarantee
– Personal guarantee
– bank guarantee
79
Can a rent deposit be assigned or passed on?
No
It is personal to the tenant.
80
How is a rent deposit documented?
In a rent deposit deed attached to the lease.
81
How is a rent deposit held?
Can a separate bank account.
Interest accrued goes to the tenant.
82
What information do you request when seeking to understand the covenant strength of a prospective tenant?
– 3 years audited accounts
– Credit rating (DandB or Experian)
– Landlord’s reference
– Bank/accountant information
– Trade references
83
What is the profits test?
This is typically to establish if the net profit of a prospective tenant is 3x the rent for 3 consecutive years.
Alternatively, you can check if the net asset value is more than 5x the rent.
84
What are the major lease terms which affect value?
Lease length/term certain
Break clause
Alienation clause
Repairing obligations
User clauses
Security of tenure provisions
85
What is a collateral warranty?
This is a warranty that provides a tenant with a direct contract with the construction team.
86
What are the advantages/disadvantages of a pre-let?
Advantages:
– Delivery of a bespoke building designed to suit a tenants needs.
Disadvantages:
– Lengthy and complex process
– Risk of developer/contractor not performing
87
What are typical conditions within a break clause?
Break clause are normally conditional on:
- The tenant complying with their obligations under the lease.
- Payment of rent and any other sums due
- Vacant possession
(Could include a rent penalty)
88
What is time of the essence?
This means there is a strict timetable.
For example, in a break clause, a tenant/landlord will have to serve notice to terminate within a strict set period of time.
89
What would you include in your terms of engagement?
Agency basis
Agency rights
Fee
Marketing costs/disbursements
Timescale for payment of fees/disbursements
Details of complaints handling procedure
90
Who polices the consumer protection regulations, 2008?
Policed by Trading Standards Office
91
Are you aware of any RICS material which governs leasing and letting?
The RICS UK commercial estate agency professional statement, 2016
92
Are you aware of any global RICS material which governs leasing and letting?
The RICS global real estate agency and brokerage professional statement, 2016
93
Are you aware of what the new agency standards updated?
The RICS commercial real estate agency in Brokeridge standards, 2014.
Also known as the purple book
94
What regulations govern marketing signage?
The town and country planning regulations, 2007
95
What do you have regard to when setting out your heads of terms?
The model HOT‘s setbout in Code of leasing business premises, 2007.
96
What does the code of leasing business premises, 2007 set out?
Recommendations for landlords
Guidance for prospective tenants
Model heads of terms
97
I noticed within your disclaimer on your marketing particulars that you refer to the property misdescriptions act 1991. Can you tell me about this?
The property misdescriptions act was replaced by the consumer protection regulations in 2013. I actually drew my company’s attention to this error and our disclaimer has since been changed.
98
What legislation governs alterations in property?
Landlord and tenant act 1927
States landlords can not unreasonably withhold consent.
99
What is a health warning?
This is the what a landlord serves on a prospective tenant when they want to contract outside the 1954 act.
It is set out in S38a of the LTA 1954.
100
How can you contract outside the 1954 act?
By serving a health warning on the prospective tenant under s38a of the LTA 1954.
You can serve a statutory or simple health warning.
Statutory is when you have less than 14 days to complete
Simple is when you have 14 days or more to complete.
101
What is an article 4 direction
This is put in place by some boroughs to stop permitted development.
102
Are you aware of any potential changes with regards guidance on service charges?
The current code which is advisory is being updated and will become mandatory with best practice guidance.
103
Are you aware of any changes with regards to business rates revaluations?
The government has announced that revaluations will change from 5 yearly to 3 yearly.
Next revaluation will be in 2021.
104
What does an experien credit check detail?
It produces a credit assessment and establishes the risk of a company providing a DELPHI score out of 100.
It also shows their credit limit and credit rating and provides their odds of failure in the next 12 months.
105
What are the current UBR multipliers?
0. 493
0. 480 for small businesses < £70k RV
+ 0.02 for Crossrail > £50k RV
+ 0.005 for City of London
106
What act are license for alterations governed by?
L and T act 1927
107
What is the difference between Misrepresentation act 1967 and Consumer Protection Regulations 2008?
Breaching CPR is a criminal offence and has greater punishments including the potential for up to two years in prison.
Breaching Misrep is a civil offence. Liable for damages.
Disclaimers can be used for Misrep but not for CPR.
108
What does the Code for Leasing Business Premises art out?
It aims to achieve Fairness, Accountability and Transparency.
Landlord Code
Occupier Guide
Model HOTs
109
What is a warning order?
It gives an agent a written warning not to repeat the action again.
110
What are the penalties for breaching consumer protection regulations?
Unlimited fine
Prohibition order
Compensation
111
How do you negotiate?
Always adhere to 5 core values
Agree client objectives
Know what is and isn’t negotiable
Method of communication
Know when to walk away
