Leasing and Letting (Level 3) Flashcards
What are the key pieces of legislation that govern leasing and letting?
- Estate Agents Act 1979
- Misrepresentation Act 1967
- Consumer Protection from Unfair Trading Regulations 2008
- Money Laundering Regulations 2007
- Bribery Act 2010
- GDPR 2016 , Data protection Act 2018
- Proceeds of Crime Act 2002
- Equality Act 2010
- Energy Act 2011
- The Energy Efficiency Regulations 2015
Tell me about the Estate Agents Act 1979?
- Regulates that work of an estate agent.
- Ensures agents act in the best interest of clients, sellers and buyers.
- Treating all fairly and honestly.
- Applies for both Freehold and Leasehold.
- Section 18 - Stipulates what needs to be included within the terms of business including, fees, disbursements and marketing costs.
- Section 21 - states that personal interests must be declared on marketing material and heads of terms. Open and transparent.
Code for Leasing Business Premises 2020 (RICS Pro Statement).
- Replaced the 2007 Code
- Improved quality and fairness of negotiations on lease terms (constructive and collaborative).
- new set of Heads of Terms to make legal drafting more efficient.
- Advises for non-represented parties to be given the Code and to obtain professional advice.
- Know what’s included in the Heads of Terms!!
What is a profit test?
- Net profit of business must be 3 times the annual rent for 3 consecutive years
or - Net asset value of the business must be more than 5 times the rent.
How would you select a tenant?
- Assess covenant strength
- Rent Deposit and Guarantor
- Request Financial information (Bank/Accountant References, 3 years audited accounts).
- Assess demand for property and current market conditions.
What do you know about rent deposits?
- Personal to tenant
- Rent Deposit Deed, held in separate account
- Interest to tenant
- Agreement for when it will be released in Deed.
- Top-Up Mechanism (RR)
What lease terms affect value?
- Lease Term/ Term Certain
- Break Clauses
- Alienation
- Repairing Obligation
- User Clause
- RR Pattern
- Security of Tenure (Inside or Outside)
- Planning Use
What do you know about break clauses?
- Time of the essence (Not less than 6-month prior notice)
- Check the Lease (Mutual? )
- Notice if outside the act? - Yes
- Conditions - Compliance with the tenants covenants
- Payment of all rent and other sums due
- Vacant Possession
Pre-lettings - Advantages and Disadvantages?
- Advantages - Can be made bespoke for tenants needs
- Disadvantages - Lengthy complex process , risk involved with timescales and developers not preforming.
What needs to be attached to an Agreement for Lease?
- The Lease in a pre-agreed form
- Licence for Alterations
- Specification and Plans
- Developers Guarantee (if pre-let)
- Warranties
- Collateral warranty
Explain the timeline of an agency instruction?
- Competence, Conflict
- Terms of Engagement (S18 1979)
- AML
- comply with Consumer Protection from Unfair Trading Regulations 2008 and Business Protection from Misleading Marketing Regulations 2008. This ensures that consumers are treated fairly and to avoid engaging in unfair commercial practices such as giving false information in marketing material.
- Vet Tenant, HoTs, Client Approval, Legal, Completion, Key Release.
What is the regulation regarding marketing boards?
- Town & Country Planning (Control of Advertisement) Regulations 2007.
- Planning consent is required for boards over 2 sq.m (flat) and 2.3 sqm (v-shaped).
- Only one board per building.
- Must not project 1m from face of building and not above 4.6m above ground.
- Planning permission needed if a listed building.
- Boards must be removed 14 days after completing the transaction.
What are the principles of the Estate Agents Act 1979?
- Clarity of terms of agency (Section 18)
- Honesty and accuracy
- Agreement and liability for costs
- Openness regarding personal interests (Section 21)
- Absence of discrimination
- Legal obligation to tell client about offers received
- Keep clients’ money separate
What’s included within a set of Heads of Terms?
- Property (Demise, Outline)
- Lessor and Lessee (Plus Agent and Solicitor details)
- Term
- 1954 Act, In or Out
- Rent (Plus Review mechanism)
- Rent Free/Incentives
- Break Option
- Alienation
- Repairing Obligation
- Permitted Use
- Timescales
What is an agreement for lease?
- A binding contract between parties to enter into a lease.
- Places a contractual obligation on the respective parties to enter a new lease. (on fixed date or following conditions).
Misrepresentation Act 1967?
- Providing false/fraudulent statements during the pre-contractual enquiries by the vendor or their agent to the proposed purchaser. - — For both FH & LH.
- Put in a disclaimer for marketing particulars
Consumer protection from unfair trading Regulations 2008?
- Protect consumers from unfair, misleading and aggressive selling and letting practices.
- Governs offences in mis-marketing
- Replaces Misdescriptions Act 1991 (Repealed in 2013).
What are the basis of Agency?
- Sole Selling Rights - Fee payable even if they did not find the purchaser/ tenant.
- Sole Agency Rights - Fee only payable if the agent introduced the tenant/purchaser. No fee if client found tenant.
- Sole Agency - One Agent
- Joint Agency - Two or more agents sharing a fee on a pre-agreed basis.
- Multiple Agency - Multiple agents but only the successful agent gets a fee.
What’s the difference between a lease and a licence?
Licence - gives permission to use land but they acquire no interest in the property.
Lease: - Exclusive possession
- Payments of Rent for a specified term of 6 months or more.
- Must be in writing and signed if over 3 years.
Differences: A lease can be assigned (licence cannot)
- A lease cannot be terminated until expiry, a licence can be revoked.
- Lease provides an estate to the land.
What is the key piece of case law that governs leases and licences?
Street V Mountford
What is a Tenancy at Will?
- Form of licence agreement for an unspecified time period.
- Can be ended by either party at any time.
- Can be used for early access for tenant to fit-out while lease is being drafted.
What is a wayleave?
- Temporary Right of access for a third party (personal to the party)
What is an Easement?
- Permanent right and receives capital payment.
- Registered with land reg.
- Right of one party over the land of another.
Reasons for sub-letting rather than assignment?
- For part of the demise and not the whole.
- if tenant want to reoccupy in the future
- The new party is of a lesser covenant.
What is an Authorised Guarantee Agreement (AGA)?
- The assignor guarantees the performance of the assignee of the lease terms. The landlord can pursue the assignor if the assignee defaults.
- Section 17 Notice must be served upon guarantor within 6 months of tenant defaulting.
- Landlord and Tenant (Covenants) Act 1995.
What do you know about alterations?
RTL - Read the Lease.
- Usually to be approved by Landlord in writing.
- Subject to reinstatement at the end of the lease.
- Small matters may not need consent.
- Licence for alterations - sets out full plans and spec of works. Helpful for RR and Dilapidations.
Usual quarter days?
25th March
24th June
29th September
25th December
How would you advise a landlord if the tenant is not repairing the property under an FRI lease?
- Serve a S146 Notice (The Law of Property Act 1925).
- Gives 6 months to repair.
- Interim dilapidations claim.
Tell me about dilapidations?
- RICS Guidance Note - Dilapidations 2016
- RTL - Repairing and reinstatement obligations?
- Condition property was in at the start of the lease - Tenant to do.
- Schedule of Condition, Licence for Alterations?
- Tenant can either undertake the works or pay the landlord
- Exceptions include: if the property is to be demolished or substantially refurbished or tenant goes into administration
What are some of the key differences between Scotland and England?
- The Landlord and tenant act 1954 does not apply
- CPSE and not used in Scotland
- Scotland does not have a right to renew past the lease term.
- Scottish missives
Market data? Offices and Industrial?
OFFICE
- Manchester prime rents - £43 psf
- ‘Flight to quality’
- COVID and rise of hybrid working
- People wanting less space but better quality
- Prime yields – 6-7% - investment volumes are down
INDUSTRIAL
- Prime rents - £10.00 - £12.00
- Prime yield 5.5%
- Prime Land values - £750,000 - £1,000,000
- Take up slowed down since Covid-19
- ESG more of a consideration
Are we seeing a green premium?
- Yes – more energy efficient buildings result in lower running costs
- Also cooperate objectives have green policies and need to be in a green building
What is security of tenure?
- If within the LTA 54 then the tenant has the right to renew the lease at the end of the term. Renewal rights in S24 to S28.
- Landlord can only object under grounds in S30.
- Can exclude at the start of the lease: if a short term lease, if LL wants to redevelop, gives landlord flexibility.
What is included in the Code for Leasing business premises?
- Mandatory Requirements
- Lease negotiation best practice
- Template Heads of Terms
- Guide for Landlords and Tenants
What are the mandatory requirements in the Code for Leasing Business Premises?
- Negotiations over a lease must be approached in a constructive collaborative manner
- Must recommend that unrepresented parties obtain professional advice.
- Agreement of terms must be in written Heads of Terms , marked STC.
- lease renewals - Terms stated to follow existing lease, subject to modernisation
- Heads of Terms , a fair balance between parties.
What is the UK commercial real estate agency 2016 professional statement?
Sets out clearly the responsibilities of commercial property agents to ensure they are working to the highest ethical and professional standards.
Includes: Standards and Ethics, Securing Instructions, Disposals, Acquisitions and Ending the Instruction.
What are sole selling rights?
Where the fee is payable even if you did not find the purchaser or tenant.
What are sole agency rights?
Fee only payable if the agent introduced the tenant/purchaser. No fee if client found tenant.
What is sole agency, joint agency and multiple agency?
- Sole Agency - One Agent
- Joint Agency - Two or more agents sharing a fee on a pre-agreed basis.
- Multiple Agency - Multiple agents but only the successful agent gets a fee.
