Leasing and Letting

Question 1

What is the difference between an assignment and a sublet?

Answer 1

Assignment - dispose of a whole lease.
Pros:
- Tenant has no residual liability (unless AGA)
- No need to manage a subtenant.
Cons:
- Forfeits all rights to use of the property and cannot choose to return later.

Sublet - a subsidiary lease is created.
Pros:
- Space sharing for cash poor companies.
- Profit rent if under-rented.
Cons:
- Need to manage subtenant and collect rent.
- Liable to LL for subtenants actions / damages etc.

Question 2

What factors affect value in terms of the property and lease terms?

Answer 2

Rent Review Clause.
Alienation.
Break Clause (affects net effective rent analysis).
Repairing obligations.
Security of Tenure.
Service Charge.

Question 3

What do you understand about the Consumer Protection Regulations 2008?

Answer 3

Replaced the Property Misdescriptions Act.

Protect consumers from unfair or misleading trading practices and ban misleading omissions and aggressive sales tactics.

Members found non-compliant may face criminal action.

Question 4

What do these regulations mean to you in practice?

Answer 4

Property Particulars must be accurate. We must ensure all information is accurate and up to date and no misleading omissions.

Question 5

What is the Landlord and Tenant (Covenants) Act 1995 about?

Answer 5

Landlord and Tenant (Covenants) Act 1995 replaced the abolished Privity of Contracts Act.

Introduced the AGA - a form of guarantee given by the (outgoing) tenant to the landlord that if the assignee does not perform the tenant obligations under the lease, such as paying the rent, repairing the property etc, then the outgoing tenant will.

In other words, the outgoing tenant becomes a guarantor for the assignee.

Question 6

What is happening in the office market and what changing requirements are you noting?

Answer 6

Turbulent market.
Covid led to a lot of business changing working practices.
Adoption of flexible working (from home, part-time etc).
Full effects not yet realised as tenants locked into leases etc.
Expect there will be lots of property coming back to the market.
More requirements for fitted CAT A + inspiring workspaces over traditional corporate.
Future of co-working uncertain - Covid, social distancing etc.

Question 7

What money laundering and identity checks do you undertake when letting a property?

Answer 7

For companies:

• The full name of the organisation, company, partnership, or LLP.
• Registration number at Companies House.
• Registered address.
• Country of Incorporation.
• The names of the directors of the company, or
• The names of other shareholders who own or control over 25% of its shares or voting rights, or
• The names of partners in the partnership or LLP.

Private Individuals:

• A Valid passport or a valid photocard driving licence
• A Utility Bill, Council Tax Bill, Bank or Building Society statement.

Question 8

Explain the process of how you went about disposing of the factory at Clapham?

Answer 8

I met the client to establish his objectives.
I issued Terms of Engagement for signature.
I inspected and measured the property.
I advised on rental value and agreed quoting terms.
I worked with my marketing team to produce property particulars.
I responded to enquiries and carried out viewings with interested parties.
I identified and agreed terms with a prospective tenant.
I issued Heads of Terms and liaised with solicitors throughout the process.
I kept my client updated on all matters throughout.

Question 9

What was the marketing plan? How did you go about preparing particulars?

Answer 9

To prepare the particulars I made sure to acquire all the relevant information.

• Plans and floor areas.
• EPC.
• Service charge budget.
• Rateable value.
• Photographs.
• Agreed terms.

The marketing plan was to regularly circulate the property details across a number of online property portals as well as our own website. We registered enquiries and property requirements on our database.

Question 10

What was the date of this transaction? How did you conduct viewings?

Answer 10

Completed the deal in December 2019 having been on the market for about a year. I arranged viewings via the client who was based on site and who enjoyed taking a hands-on approach in terms of meeting prospective tenants. I’d report back to the client after each viewing with feedback.

Question 11

What incentives did you offer and how did you report this to the client?

Answer 11

Agreed rent at £81,250.
10 w/ break at Y3 and Y6.
Rent-free 3 months.
Rent review 5th year.

I spoke to the client regularly on the telephone, and on receipt of an offer forwarded this by email before talking through it on the phone.

Question 12

Explain how you would go about finding a suitable property for a client as the Lombard Road case?

Answer 12

I would first sit down with the client to establish the brief. I would make notes about the requirement and consider which aspects were most important to fulfil.

I would scour the market for possible options, using databases like Costar (Realla) zoopla, PropertyLink and agents websites etc.

I would create a shortlist and tabulate the key details into a concise format for review with the client.

I would then agree with the client which properties were worth arranging to view, and I would coordinate access accordingly with the relevant agent.

I would continue to communicate with the client as the requirement may evolve or narrow down over time.

Question 13

At Lombard Road explain the schedule of condition that you would prepare and how you would approach this?

Answer 13

Photographic SOC
Attend site to take detailed set of photos paying particular attention to areas of damage or disrepair
Prepare a report annotating each photo & submit to both sets of solicitors for approval
Schedule to be annexed to the lease to evidence condition of the building & be used as a basis for settling tenant dilapidations

Question 14

How did you approach the negotiations? Why in the end did matters not proceed?

Answer 14

Submitted client offer in writing along with Company accounts
Negotiated with landlord’s agent to agree terms that were acceptable for all parties
Worked with client to compromise on various terms
Agreed HoT’s with landlord

Question 15

At Calico Row what marketing strategy did you advise?

Answer 15

Website listing - featured listing.
Circulate property details via targeted local mailing lists.
Window vinyl to increase exposure.

Question 16

What alternatives did you consider and why were they rejected?

Answer 16

Pay for Right Move @ cost of £150pcm for 3 months but client rejected as too expensive

Question 17

What were the statutory responsibilities that you advised the client of?

Answer 17

I advised the client that he needed to have an EPC for the premises and that by law we could not let the unit without one. I referred him to a specialist EPC consultant who was able to produce one which we appended to our marketing details.

Question 18

Why did you advise refurbishment works be carried out?

Answer 18

The unit was very compartmentalised and felt claustrophobic as the ceilings were also low. I had noticed a trend in the market towards open plan so thought this would improve the lettability.

The electrics were very old and I advised the client to upgrade these and ensure that the relevant safety certificates were obtained.

Question 19

What alternatives did you consider and why were these rejected?

Answer 19

I suggested air conditioning would improve the rental value of the unit but due to budget constraints the client decided against this

Question 20

Why did you advise the client to accept an offer of a two year lease when they were looking for a longer term?

Answer 20

The offer was at full quoting rent with no rent-free and the move-in date immediate. I knew that the tenant was a contractor working on a large scale construction site nearby and needed space in close proximity, so in some ways was a “special occupier”.

I knew that we were unlikely to secure more than a 3-year term certain as a best case scenario, and that would involve further void periods, incentives and negotiation on headline rents. Having analysed all these factors I felt that this was the best overall solution for my client.

Question 21

At Balham Hill what were the planning issues?

Answer 21

The premises only had existing planning permission as an A1 Retail unit (prior to class E). The proposed use fell under class D2 (Leisure). The gym operator had to apply to the local authority to secure a change of use to D2 with ancillary A1. Unfortunately on the due date for completion the UK went into lockdown and the deal fell through.

Question 22

Why did you advise your client to look to alternative uses? Who did you advise to pay for such a change of use?

Answer 22

I advised my client to explore alternative uses as this opened up a wider target market than just traditional A1 retailers.

There was an increasing demand at the time for leisure and fitness concepts and I advised my client that being in such close proximity to Clapham Common I felt the demographic would support this type of use.

Furthermore, there was continued evidence that so called “prime covenant” retailers were struggling, with an ongoing trend of high profile administrations, and I advised my client that there was no guarantee of success, even with a household name / national retailer.

I would always advise clients to look to the tenant to cover the cost of a change of use, as was the case with the gym franchise. However, I would assess this on a case by case basis and if a sufficiently attractive proposal was received, then I may have advised my client to consider subsidising the cost if required.

Question 23

What advice did you give around Brexit and COVID and the impact on the market?

Answer 23

Brexit:

I consistently advised clients that Brexit uncertainty and international political events led to unpredictable and somewhat erratic trends in the commercial property sector.

I advised clients to consider being more competitive when agreeing new lease terms on lettings; including longer rent-free periods, flexible break options and negotiating on headline rental levels.

COVID

Similarly I advised clients that COVID restrictions and uncertainty had had a huge impact on the commercial property market. I advised clients to work with their tenants where possible and in some instances to share the burden by offering 50% rent relief for a period of time. I advised clients to consider offering existing tenants incentives to stay in situ as the prospective void periods could have been extensive. This may not have earned me fees in the short-term but showing integrity strengthened my relationship with clients and will hopefully lead to continued business with clients in the future.