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APC ASSESSMENT > Leasing and Letting (Level 3) > Flashcards

Leasing and Letting (Level 3) Flashcards

1
Q

Professional Statement - What is RICS Global Real Estate Agency and Brokerage (2016)

A

Very similar to UK specific statement: RICS UK Commercial Estate Agency (2016) - Professional Statement

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2
Q

Professional Statement - What is RICS UK Commercial Estate Agency (2016) and what are the core principles?

A
  • Mandatory professional statement
  • 12 core principles
  1. Act in an honest, fair and transparent manner
  2. Carry out wortk with due skill, care and dilligence
    3.Ensure client’s are provided with clear Terms of Engagement with details of firms CHP
  3. Avoid Conflicts of Interest
  4. Do not discriminate
  5. All advertising materials are honest and truthful
  6. Client money is held seperately with adequate insurance
  7. Give realistic assessments of selling prices/rents using professional judgement

etc

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3
Q

Professional Statement - What is the structure of RICS UK Commercial Estate Agency (2016)?

A
  • acting ethically - duty of care, gifts, incentives, conflicts of interest
  • securing instructions - AML checks, H&S
  • marketting - preparing particulars, market appraisal
  • disposal - methods of sale
  • acquisition of property - conflict of interest, client comms
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4
Q

Legislation - What is the Estate Agents Act 1979?

A

Application: during the sale or purchase of freehold or leasehold properties with a capital value.
S.18 - Terms of business
S.21 - Declaration of personal interests

Offence: Acting dishonestly. Not providing clarity to the terms of engagement or disclosing persons interests. Not telling the client about offers received.

Penalties: warning order, prohibition order, removal of estate agent right, fine.

Policed by National Trading Standards and Local Authority

firm or individual

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5
Q

Legislation - What are the key principles of the Estate Agents Act 1979?

A

7 key points:

  • clarity as to terms of agency
  • honesty and accuracy
  • agreement and liability for costs
  • opennes regarding personal interests
  • abscence of discrimination
  • legal obligation to tell client about offers received
  • keep clients money seperately
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6
Q

Legislation - How have you had regard to main estate agency laws when drafting a set of property partculars?

A
  • Pay close attention to Estate Agents Act 1979
  • ensure particulars are accurate and honest
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7
Q

Legislation - What is the Estate Agents Order 1991?

A
  • Made under Estate Agents Act 1979
  • Agents must inform clients at same time they are informed about their terms of business, as to any served to be offered to prospective purchasers unless offered free of charge
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8
Q

Legislation - What is the Estate Agents Regulations 1991?

A
  • regulates relate to the provision of information that should be supplied to client
  • this information must provide information in writing regarding:

service to be provided
remuneration

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9
Q

What is a cooling off period?

A

A cooling off period of up to 14 days is allowed for clients who change their minds and do not want to instruct the agent in accordance with current consumer protection rewgulation

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10
Q

Legislation - What are the Consumer Protection Regulations, 2008 (CPR Regs)

A

Application: During entire agency sales and lettings process

Offence: Criminal offences. Not treating ‘customers’ (all interested parties) fairly and/or providing misleading marketing information. Agents must declare everything known about a property - good and bad Agents must not exert undue pressure on buyers. If informaiton is discovered during the agency process, this information must be passed onto all interested parties Full DD is required on all new instructions.

Penalties: Unlimited fine, prohibiton order and prison up to 2 years.

Policed by Trading Standards Office of the Local Authority

Disclaimers to not apply to this criminal offence

All agency/systems but be demonstrated with due-dilligence and audit trail. If can demonstrate clear DD process, can defend breach - clear communication, documentation, and client care

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11
Q

Legislation - What is a reasonably well-informed person under Consumer Protection Regulations, 2008 (CPR Regs)

A

average consumer: reasonably well-informed person

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12
Q

Legislation - What are the Business Protection Regulations, 2008 (BPR Regs)

A

Same as CPR but relevant to protecting businesses instead of consumers

  • relate to business to business activities
  • prohibit misleading business-to-business advertising
  • impose restrictions on how businesses compare their products to products of other companies
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13
Q

Legislation - Whats the difference between the Consumer Protection Regulations 2008 and the Misrepresentation Act 1967

A

CPRs: Focuses on wider trading practices, including:

  • Misleading advertisements or descriptions of goods/services.
  • Failure to provide key information.
  • Aggressive sales techniques that pressure consumers into transactions.
  • Regulating unfair commercial practices such as “bait and switch” or false discounts.

Misrepresentation Act: Deals with false statements of fact made during pre-contract negotiations. The misrepresentation must be a key factor in the other party’s decision to enter into the contract. There are three types of misrepresentation:

  • Fraudulent Misrepresentation: Deliberate falsehoods.
  • Negligent Misrepresentation: Statements made without reasonable grounds for belief in their truth.
  • Innocent Misrepresentation: False statements made without fault or intent to deceive.
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14
Q

Legislation - What is meant by Caveat Emptor?

A
  • let the buyer beware
  • the starting point when discussing who has responsiblility for the discolure of informaiton
  • overiding common law principle means that the buyer should satisfy itself on all matters relating to the property
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15
Q

Legislation - What is the Consumer Rights Act (2015)?

A

mainly relates to residential:

  • consumer rights and remedies
  • consolidates law relating to unfair terms and contracts between business and consumers
  • letting agents must clearly display a summary of their charges both in their office and on their website for the letting and management of property
  • tenancy agreements and consumer contracts must have clear and transparent terms e.g. hidden fees or one sided clauses benefitting the landlord
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16
Q

Legislation - Who is the Consumer Rights Act (2015) policied by and what are the penalties

A

Local authority
£5,000 per breach

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17
Q

Legislation - What is the Misrepresentation Act 1967?

A

Application: mis-statements/faulse/fraudulent statements or misrepresentaiton made during the pre-contractual enquiries by the vendor or their agent to the proposed purchaser. Freehold and leaseold transactions

Offence: Civil Offence. Actionable by Tort. Action can be limited by an effective disclaimer (Hedley Byrne v Heller and Partners (1964)).

Penalties: Sued for financial damaged or contract rescinded.

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18
Q

Legislation - Under the Misrepresentation Act 1967 what is the test to decide agents liability for negligent statements?

A
  1. foreseeability - was it foreseeable?
  2. proximity - was there a relationship? doesnt have to be contractual
  3. fairness - reasonable to impose duty of care

applies to all professional opinions and third party advice

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19
Q

Legislation - What is the Regulation of Property Agents (RoPA)

A

proposed set of regulations to ensure higher standards where currently agents / managing agents require no formal qualifications or licences

  • applies to all agents and managing agents
  • all property agents should be regulated by independant regulator, with mandatory qualificaitons for agents and a code of practice
  • transparency of charges, disclosing conflicts of interests and administration of services charges are priorities
  • a new regulator would take responsabilitity for redress scheme, and client money protection schemes
  • no date has been annonced for the proposed new legislation
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20
Q

Marketing Signage - How is marketing signage govered?

A

Town and Country Planning Regulations (2007)

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21
Q

Marketing Signage -Is planning consent required for boards?

A

Yes, over 2 sq m (flat) or 2.3 sq m (V Board) - only one board per building (unless combined area is less than thresholds, then possible to insert 2)

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22
Q

Marketing Signage -How far can a marketing board project from facade?

A

1m

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23
Q

Marketing Signage -How high can a marketing board be placed?

A

Not more than 4.6m from gorund, in safe condition

Pay attention to local planning regulations, pay attention to AONB, Conservation Areas etc

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24
Q

Marketing Signage - When else might you require planning consent for marketing boards?

A
  • illuminated boards
  • remote boards
  • board erected on listed buildings
  • must be removed 14 days after completion of transaction
  • Certain local authorities have FURTHER restrictions such as London Boroughs - always check local planning guidelines and local authorities
  • must have owners approval
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25
Q

Marketing Signage - Who are marketing boards policed by?

A

Local Authority - can issue finds and remove boards

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26
Q

Legislation - What legislation relates to Bribery?

A

Bribery Act 2010

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27
Q

Legislation - What legislation relates to EPC’s?

A

The Energy Efficiency (Amendment) Regulations 2018
Energy Performance of Buildings Regulations 2012
Energy act 2011

28
Q

Legislation - What legislation relates to Asbestos?

A

Control of Asbestos Regulations (2012)

29
Q

Legislation - What legislation relates to Data Management?

A

General Data Protection Regulations
Data Protection Act 2018

30
Q

Legislation - What legislation relates to Health and Safety?

A

Health and Safety Act 1974

31
Q

Legislation - What legislation relates to AML?

A

Proceeds of Crime Act 2002
Money Laundering, Terrorist Financing and Transfer of Funds Regulations (2017)

32
Q

Legislation - What legislation relates to planning?

A

Town and Planning Regulatios (2007)

33
Q

Legislation - What legislation relates to equality?

A

UK Equality Act 2010

34
Q

Tax - What forms of tax applies to agency work?

A

SDLT
Capital Allowances
VAT
Business Rates
Capital Gains Tax

35
Q

Fees - What are typical agency fees?

A

7.5-15% of annual rent

36
Q

Tax - How do you deal with VAT?

A

Always refer to specialist advice regarding tax
- some occupiers cannot register for VAT e.g.financial institutions, charities
- A landlord can opt a property to tax to charge VAT and recover VAT on costs expended - when this happens, rent and service charge is subject to VAT. This has implications for occupiers who cannot register for VAT

37
Q

Tax - What is a transfer of going concern?

A

TOGC
Transfer of Going Concern purchases are not treated as a supply of goods or serves for VAT purposes. This can reduce VAT liability for VAT e.g. in the sale of a property let to a tenant. If the property is registered for VAT, and the rent is subject to VAT, it may not be possible to charge VAT on the sale.

38
Q

Tax - What are Capital Allowances?

A
  • tax relief upon capital expenditure for the constructin or purhase of commercial property or business assets
  • they can generate substantial tax relief on value of plant and machinery fixtures such as AC and Lifts
  • the allowances can be offset against taxable profit
  • SPECIALIST ADVICE always required
39
Q

Legislation - What is the Land Registration Act 2002?

A
  • Act provides framework for electronic property conveyancing, allowing formal documents to be executed electronically
  • all freeholds / leases granted for terms over 7 years or existing leases/assignments with more than 7 years left to run must now be registered wth the Land Registry with a compliant lease plan
  • it also introduced a new regime for adverse posession making a claimant prove 10 years of use
  • the Land Registry is aiming to achieve comprehensive registration of all property and land by 2030
40
Q

Legislation - What must all freehold transactions include on their plan?

A

7 details

  • drawn to a metric scale (1:100 or 1:200)
  • have a scale measrurement bar
    -have the scale noted in the plan
  • include 1:1,250 scale location map (for urban areas)
  • full adress including post code
  • a north point
  • demise outlined on the inside edge of the property
41
Q

Professional Standard - What is the purpose of the Code for Leasing Business Premises (2020)

A
  • mandatory professional standard
  • improve the quality and fairness of negotiations on lease terms and promote the use of a new comprehensive heads of terms to make legal drafting of leases more efficient.
42
Q

Professional Standard - What is the structure of the Code for Leasing Business Premises (2020)

A

Part 1: Introduction
Part 2: Mandatory Requirements
Part 3: Lease Negotiation Best Practice
Part 4: (A) Heads of Terms Template and (B) Guide for Landlords and Tenants

43
Q

Professional Standard - What are the mandatory requirements of the Code for Leasing Business Premises (2020)

A

Part 2

5 manfatory requirements:

  1. negotiations must be constrictive and collaborative
  2. a non-represented party must be advised on the existence of this Code and its supplemental guide and must be recommended to obtain professional advice
  3. agreements on the terms of the lease must be recorded in written heads of terms, stating ‘subject to contract’ and summarising as a mimimum:
  4. identity of premise (provide land registry compliant plan if lease is registerable)
  5. special rights, e.g. parking
  6. length of term (inside or outside the 1954 act)
  7. break clause
  8. requirements for rent deposit/guarantor
  9. amount of rent/frquency of payment and whether exclusive of business rates
  10. VAT on rent
  11. rent free offered
  12. rent review and basis of review
  13. service charge / insurance liability
  14. alienation
  15. repairing obligations
  16. permitted use / any use change permitted
  17. rights to make alterations
  18. any initial alterations or fitout
  19. any further conditions
  20. at a lease renewal or extension, Heads of Terms must comply with the above, exept for any terms stated to follow existing lease, subject to reasonable modernisation
  21. negotiations should achieve a fair balance, and heads of terms agreed before a draft lease produced
44
Q

Professional Standard - What lease negotiation best practice advise is given in the Code for Leasing Business Premises (2020)

A

advice on lease terms:
- rent deposits
- rent reviews
- service charges
- repairs
- alienation clauses

45
Q

Professional Standard - What is best practice for negotiating rent deposits?

A
46
Q

Professional Standard - What is best practice for negotiating rent reviews?

A
47
Q

Professional Standard - What is best practice for negotiating service charges?

A
48
Q

Professional Standard - What is best practice for negotiating repairs?

A
49
Q

Professional Standard - What is best practice for negotiating alienation clauses?

A
50
Q

Professional Standard - What is included in the Appendicies in the Code for Leasing Business Premises (2020)

A
  • Model Heads of Terms (Model in Appendix 1 and Checklist in Appendix 2)
  • A Guide for Landlords and Tenants (not mandatory, provides guidance for both parties on a range of lease terms, letting issues such as negotiation of HOT’s, the premises, service charges, rent deposits and insurance)
51
Q

Rent Deposit - Talk me through the use of Rent Deposits?

A
  • must be legally documented in rent deposit deed and money held in seperate bank account
  • Interest to tenant
  • Agreed terms for release of rent deposit
  • Details of the release mechanism to be stated in the deed
  • Can include top up mechanism for rent review uplifts
  • the rent deposit deed attached to the lease is a seperate deed, personal to tenant
52
Q

Tenant Selection - When would you request from a tenant prior to a lease?

A
  • bank, accountant and 2 trade references
  • previous/existing landlord references
  • 3 years audited accounts
  • business plan
  • credit rating (Credit Safe)
53
Q

Tenant Selection - How would you add quality to the covenant strength?

A
  • sureties
  • personal guarantees
  • rent deposit
54
Q

Tenant Selection - What is the profit test?

A
  • net profit must be at least 3x the rent for 3 consecutive years
  • or Net Asset Value must be more than 5 times the rent

but consider the level of demand for the property and current market conditions

55
Q

Leasing Issues - What lease terms affect value?

A
  • lease length
  • break clause
  • alienation
  • repairing obligations
  • user clauses
  • rent review pattern
  • inside or outside the act
  • security of tenrure
56
Q

Leasing Issues - Talk me through break clauses

A
  • break clauses are time of the essence with a strict timetable for serving notice
  • is break clause mutual?
  • what is the required notice period? is time of the essence?
  • is there a penalty rent to be paid if the lease is terminated?
  • is there preconditions to break clause e.g. full payment of rent / returning premise in good order
  • tenants break is often conditional on lease obligations

e.g. compliance with lease covenants
payment of all rent and other sums due
vacant posession

57
Q

Leasing Issues - What are the pros and cons of Pre-Lettings

A
  • if market shortage or large demand
  • advantages to tenant is delivery of a bespoke building designed to suit needs
  • disadvantage include entering a length and complex process and level of risk should developer not perform
58
Q

Leasing Issues - What is legally required for Pre-Lettings (Agreement for Lease) AFL

A
  • the lease (in pre-agreed form, agreement for lease, executed as lease at PC)
  • licence for alterations (allow tenant to undertake works)
  • specification and plans (of proposed scheme)
  • developers guarantee/bond (if dealing with weak covenant)
  • warranties (any tenant taking FRI lease will want collateral warranties_
  • collateral warranty (gives tenant direct contract with construction team, privity of contract)

most developers are unwilling or unable to give guarantees for latent defects and may put decennial insurance in place to cover risk

59
Q

Business Rates - How are business rates calculated?

A

The rateable value represents the annual rent the property could reasonably be expected to achieve if it were let on the open market at the valuation date.

RV is then times by a business rates multiplier on VOA

60
Q

Lease - What is a lease?

A

A binding contract in law that sets out the terms and conditions of the tenancy between parties and defined their rights and obligations

61
Q

Licence - What is a licence?

A

Licence to occupy
Typically temporary and terminated at any time
e.g. In-Post lockers at Durham
No exclusive posession

62
Q

Assignment - What does it mean to ‘assign’ a lease?

A

Transfer the lease to another party who takes over occupation and responsibility for the lease obligations.

Security of tenure transfer to assignee

Leases should allow tenants to assign the whole of the premise with landlord consent , which is not to be unreasonably refused.

63
Q

Assignment - what grounds can a landlord refuse assignment of a lease?

A

arrears of rent, service charge, insurance
also read the lease for any absolute or qualified covenant

64
Q

Subletting - What does it mean to ‘sublet’ a property?

A

Existing tenant continues to hold the lease and pay rent to the landlord but sublets the space to another party, from whom the tenant will in turn collect rent.

without security of tenture

Leases should allow for sublet with landlord consent, not to be unreasonably refused.

subleases excluded from statuatory renewal rights

sublease of part to be agreed on different terms if appropriate.

65
Q
A

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