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RICS APC1 > Leasing & Letting > Flashcards

Leasing & Letting Flashcards

1
Q

What legislation covers disposal of interest in land?

A

Estate Agent Act 1979

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2
Q

What does S18 of the Estates Agent Act refer too?

A

Terms of agency

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3
Q

Main change brought in by the consumer protection unfair trading regulation CPRS & Business Protection from Misleading Regulation 2008 BPRs

A

Wider scope so cannot rely on caveat emptor principle

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4
Q

What is the average consumer under the CPRs/BPRs

A

Reasonably well informed , observant and circumspect

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5
Q

Under CPRs/BPRs when may a commercial practice be deemed unfair?

A

Giving false info
Omitting material information
Aggressive practices - coercion
Not acting with a standard of care
Engaging in banned practices

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6
Q

Defences under CPRs/BPRs

A

Due diligence
Reasonable steps to verify
Singpost consumers appropriately

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7
Q

Any other legislation for consumer protection

A

Misrepresentation Act 1967

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8
Q

What is a misrepresentation?

A

Misrepresenting fact during negotiations which is relied upon and induces the other party to enter contract

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9
Q

What can misrepresentation be?

A

Innocent
Negligent
Fraudulent

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10
Q

Is there any defence under Misrepresentation act 1967?

A

Reasonable grounds to believe it was true

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11
Q

Name current RICS leasing & letting guidance?

A

RICS Real Estate Agency & Brokerage Professional Statement 3rd Edition

RICS UK commercial real estate Estate Agency professional statement 1 st edition

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12
Q

What does the Real Estate Agency & Brokerage REAB PS relate too?

A

Sales, letting, leasing and management of real estate

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13
Q

Under REAB PS can you disclose offers to other tenants?

A

Yes - if you have client consent and inform all parties

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14
Q

Do you need PI as a letting agent?

A

YES

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15
Q

If you give advice on an anticipated market rent, does this constitute a formal valuation?

A

No

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16
Q

can you fabricate offers?

A

No - see the Fraud Act 2006

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17
Q

Due diligence associated with lease or letting?

A

Proposed rents
Check client is legal owner
Consents
Any headlesase terms
EPC
Asbestos
Equality Act
Floor plans
Inspect
Measure
CDD under 5th Anti-money laundering

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18
Q

What is alienation?

A

Ability to dispose of a lease or allow a third party to occupy

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19
Q

What does the Landlord & Tenant (covenants act) 1995 say?

A

Applies from first January 1996
For new leases, assignors
For old leases original tenant is liable until expiry
Abolished privity of contract
For new leases successive landlords liable

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20
Q

What is an AGA

A

Authorised Guarantee Agreement - voluntary arrangement between landlord and most recent former tenant to guarantee lease obligations of immediate assignee, which falls away upon future assignment.

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21
Q

Can a tenant assign a lease to its’ guarantor?

A

No - this would be void under the recent EMI ruling.

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22
Q

What does Section 19 1a of the L&T Covenants Act 1995 say?

A

Landlord can specify pre-conditions for assignment which don’t have to pass the reasonableness test (but they do have to be capable of objective assessment or independent review).

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23
Q

Why might a landlord prohibit subletting?

A

To retain control of who occupies the property

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24
Q

What happens if there is no alienation clause in the lease?

A

Tenant is free to do what they want in regards to alienation.

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25
Q

Name some typical sub-lease clauses

A

Outside the 1954 Act
No subletting at a below market rent
Complies with head lease
Provide a guarantor or rent deposit
Rent reviews in line with head-lease

26
Q

What is a pre-emption clause

A

Landlord right to take back the premises in the event the the tenant wishes to assign or sublet their lease

27
Q

Is an Agreement for lease a binding contract?

A

Yes

28
Q

What must you consider when erecting a marketing board?

A

Town and Country Planning (control of advertisement) Regulations 2007

29
Q

Planning regulations in relation to marketing boards?

A

Flat boards no larger than 2 sq.m
V boards can be no larger than 2.3sq.m
1 per building
No more than 1m wall projection
No more than >4.6m above the ground

(planning consent required for illuminated, remote or boards erected on listed buildings)

30
Q

Do you need client consent before board installation?

A

Yes - see S13 Trade Descriptions Act

31
Q

When considering tenant selection what do you ask for?

A

Bank account and two trade references
Previous or existing landlord reference
3 years audited accounts/business plan/credit rating

32
Q

Why is tenant covenant strength important

A

It impacts investment value
You need the tenant to pay rent on time

33
Q

What is the profits test?

A

Net profit = 3x rent for 3 years

or

Net asset value = 5x rent

34
Q

What security might you ask from a tenant?

A

Rent deposit
Guarantor
Personal guarantee
Rent paid in advance

35
Q

Do you know any other leasing codes?

A

BPF modern commercial lease
RICS/ British Retail Consortium small business lease

36
Q

When agreeing a new lease after a tenant vacated what should you consider?

A

Dilapidation liability - outgoing tenant could do works or pay cash

Reinstatement provisions

Compensation for tenants improvements

37
Q

What is a section 18 valuation

A

L&T Act 1927 - limits landlords diliaps claim to lower of the cost to carry out works - or the diminution in value caused by the disrepair.

38
Q

is VAT always charged on rent?

A

Sometimes - if the property has a VAT election - lasts 20 years

39
Q

What tax is paid on the occupation of non-domestic property?

A

Business rates

40
Q

What is the current antecedent valuation date

A

1 April 2015

41
Q

What is the current rating list date?

A

1st April 2017

42
Q

How do you calculate rates payable

A

RV x UBR

43
Q

How long are empty properties exempt from paying business rates for?

A

3 months (6 months for industrial property)

44
Q

What buildings are completely exempt from rates?

A

Agricultural land and building
Public religious worship buildings
Buildings used for training or welfare of disabled

45
Q

What is the business rates appeal system called?

A

Check challenge appeal

46
Q

Who collects business rates?

A

Local authority

47
Q

Tell me what you know about RICS Code for Leasing Business Premises 2020

(Think new-letting basic details)

A

Professional statement

Covers:

Demise, length of term, rent deposit & garuntees, rent and review clauses, service charge - insurance, alienation, change of use, EPC, Landlords title, Management & operational performance.

48
Q

What are some key principles of the Estate Agent Act 1979

A

Clarity on Terms of agency S18
Honesty & accuracy
Absence of discrimination
Tell clients all offers
Clients money separate

49
Q

Can you name a key RICS document for real estate agency?

A

RICS Professional Statement Real Estate agency and brokerage 2016

It outlines the principles that shape the culture of fairness and transparency that underpin all activities undertaken by real estate agents. Key areas include:
Communications
Accurate Marketing
PII
Identity of client

Note 12 in total above are just key

50
Q

What are the 7 chapters of RICS Commercial Real Estate Agency 2016

A
  1. S - scope
  2. S - standards & ethics
  3. S - securing instructions
  4. D - disposals: marketing the property
  5. I - implementing the disposal
  6. A -acquisitions
  7. E -ending the instruction
51
Q

Basis of agency?

A

Sole agency - only one agent
Joint sole - shared fee
Multiple agency - only successful agent gets fee
Sole selling rights - agent gets fee regardless

52
Q

What are the rates for SDLT (stamp duty land tax)?

A

Net present value of rent - SDLT rate
£0 - £150,000 = Zero
The portion from £150k - £5mill = 1%
The portion above £5mill = 2%

53
Q

What does the RICS code for leasing business premises 2020 say around representation?

A

MUST advise unrepresented to seek professional advice

54
Q

What is an agreement to lease?

A

A contractual agreement to enter into a lease at some point in the future

55
Q

When would you need an agreement to lease?

A

When you might have concerns the other party would back out

56
Q

What is a collateral warranty?

A

It creates a contract between a third party i.e a duty of care between and an architect and an occupier in relation to defects

57
Q

Tell me what you know about RICS Professional Statement, Code for Leasing Business Premises 2020?

A

This is a professional statement that sets out mandatory requirements for:

Heads of terms - approached in constructive and collaborative manner

Representation - parties unrepresented must be advised to seek professional advice

Heads of terms - must be provided in writing on a subject to contract basis and include minimum headings

58
Q

What are some heads of terms clauses would include?

A

Identity and extent of the premises, with the landlord providing a Land Registry compliant plan if the lease is registerable (i.e. lease term over 7 years)

Special rights to be granted, e.g. parking or telecom/data access

Term length and security of tenure

Break or renewal rights

Any guarantor and/or rent deposit

Rent and frequency of payment

Payment of business rates and VAT

Incentives, e.g. rent free

Rent reviews, frequency and basis

Service charge

Insurance

Alienation rights

Repairing obligation

Permitted use and changes of use

Alterations and reinstatement

Initial alterations or fit-out

Conditions, e.g. subject to survey, board approval or planning consent

59
Q

According to code of leasing business premises what are minimum inclusions for Heads of Terms?

A

• the length of term and whether the Landlord and Tenant Act 1954 will apply or be
excluded
• any options for renewal or break rights
• any requirements for a guarantor and/or rent deposit
• the amount of rent, frequency of payment and whether exclusive of business rates
• any rent-free period or other incentive
• any rent reviews including frequency and basis of review
• liability to pay service charge and/or insurance premiums
• rights to assign, sublet, charge or share the premises
• repairing obligations
• the initial permitted use and whether any changes of use will be allowed
• rights to make alterations and any particular reinstatement obligations
• any initial alterations or fit-out (if known) and

60
Q

What are the 6 principles of the estate agent act?

A
  1. Honesty & Accuracy
  2. Clarity of TOE
  3. Open & Transparent
  4. No discrimination
  5. Pass on all offers in writing
  6. Keep clients money separate
61
Q

What is S21 of the Estate Agents Act?

A

Disclosure of interest

62
Q

What type of credit check would you undertake to check a tenants covenant?

A

Use a credit reference agency such as Dunn & Bradstreet

RICS APC1 (18 decks)

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