Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

RICS APC 2022 > Leasing/letting > Flashcards

Leasing/letting Flashcards

1
Q

What RICS guidance do you follow when leasing and letting?

A

RICS Professional Statement: Code for Leasing Business Premises 2020

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the key objectives of the Code for Leasing Business Premises 2020?

A

To improve the quality and fairness of negotiations on lease terms and promote the use of a new set of comprehensive heads of terms to make legal drafting of leases more efficient

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

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 – Appendices
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the five mandatory requirements under the Code for Leasing Business Premises 2020?

A
  1. Lease negotiations must be approach in a constructive and collaborative manner
  2. Unrepresented parties must be advised about the existence of the Code, and to seek professional advice
  3. Terms of leases must be recorded in written heads of terms, stating ‘subject to contract’, and must cover position on several points as a minimum
  4. Lease renewals or extensions must follow minimum heads of terms requirements, unless stated to follow previous lease terms subject to reasonable modernisation
  5. Negotiations should aim to produce letting terms that achieve fair balance between the parties having regard to their respective commercial interest
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What lease terms does the best practice section of the Code for Leasing Business Premises 2020 cover?

A
  • Rent deposits
  • Service charges
  • Rent reviews
  • Repair clauses
  • Alienation clauses
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is set out in the appendices of the Code for Leasing Business Premises 2020?

A

Template heads of terms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are some major lease terms that affect value?

A
  • Lease length/term certain
  • Break clauses
  • Alienation
  • Repairing obligations
  • User clauses
  • Rent review pattern and basis of valuation
  • Security of tenure provisions
  • Impact of a restrictive lease clause upon value
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

If a tenant has a weak covenant, what might a landlord request?

A
  • AGA

* Rent deposit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are some requirements of a rent deposit?

A
  • Personal to the tenant
  • Must be legally documented in rent deposit deed / money held separately
  • Interest to tenant
  • Agreed terms for the release of the monies
  • Details of the release mechanism to be stated in the deed
  • Can include top up mechanisms for rent review uplifts
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is usually requested for a rent deposit?

A
  • Bank, accountant and 2 trade references
  • Previous/existing landlords reference
  • 3 years audited accounts/business plan/credit rating (Dun & Bradstreet)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the profits test?

A
  • Net profit for tenants business must be 3 times the rent for 3 consecutive years
  • OR, net asset value of the business must be 5 times the rent
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the advantage of a pre-letting to a tenant?

A

Delivery of a bespoke building designed to suit their needs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the disadvantage of a pre-letting to a tenant?

A

Entering a lengthy and complex process, and a level of risk in the event of the developer or contractor not performing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What documents are required to be attached to an Agreement to Lease for a pre-letting?

A
  • The lease
  • License for Alterations
  • Specification and plans
  • Developer’s guarantee/bond
  • Warranties
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the difference between an assignment and a subletting?

A
  • Assignment – a new tenant has a direct relationship (privy of contract) with the landlord (effectively steps into the shoes of the outgoing tenant)
  • Sublease – the new sub-tenant has a direct relationship with the tenant and pays them rent, who then pays rent to the landlord
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What are the types of alienation clauses?

A
  • Absolute – not allowing subletting or assignment
  • Open – allowing alienation
  • Restrictive (qualified) – subject to some conditions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is a typical clause for alienation?

A

Landlords consent is not to be reasonably withheld or delayed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Why might you choose a sublease instead of an assignment?

A
  • Requirement of the lease (alienation clauses)
  • For part of the demise and not the whole
  • If the market rent is higher than the passing rent (face rent) then there is a profit rent
  • If the tenant wants to reoccupy in the future
  • The new party is of a lesser covenant strength
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How does an assignment or subletting impact investment values?

A
  • If rents agreed are below market rent and/or the current passing rent in the building, terms of a subletting can be used as comparable evidence against the landlord for rent reviews and lease renewals in the buildings
  • This can also be detrimental to capital valuations of the property, and therefore potential sale price, and/or ability to raise finance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Why might the landlord refuse consent to this subletting/assignment?

A

• Assignor has not paid in full all rents and other sums due
• Assignee accounts have not been audited, or audit is out of date
• Assignee hold sovereign / state immunity
• Assignee is a related / group company to assignor
The usual clause is that landlord’s consent is not to be unreasonably withheld or delayed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What UK legislation covers the statutory duty of landlords to deal with alienation consents diligently, and not to reasonably withhold or delay?

A

Landlord & Tenant Act 1988

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What UK legislation covers assignments of leases?

A

Landlord & Tenant (Covenants) Act 1995

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What does the Landlord & Tenant (Covenants) Act 1995 cover?

A

Assignment of leases – introduced AGAs
• Can only be one AGA in place at a time
• Section 17 notice must be served to guarantor within 6 months of tenant defaulting to request payment of arrears

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What are alterations?

A

Internal works such as demountable partitioning or other non-structural works

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Who carries out alterations?

A

The tenant, during the lease. They must be approved in writing, and are usually subject to reinstatement at the end of the lease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is a license for alterations?

A

Written approval required before alterations commence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is a function of a license for alterations?

A

Protects the parties at rent review and dilapidations at the end of the lease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What RICS guidance is there on license for alterations?

A

RICS License for Alterations Guidance Note 2013

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What does Landlord & Tenant Act 1927 cover?

A

Alterations – under section 19, landlords consent cannot be reasonably withheld or delayed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What is the definition of repair?

A
  • Liability cannot arise in the absence of repair
  • Repair is distinct from renewal – a tenant cannot be expected to hand back wholly different premises
  • Tenants may be responsible for inherent defects
  • Repair is not an improvement
  • An effective FRI lease is when the landlord is responsible for repairs and re-charges via the service charge
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

How can landlords remedy a breach of repairs?

A
  1. Serve a repair notice
  2. Forfeit the lease
  3. Service an interim schedule of dilapidations
  4. Do the works and charge the tenant
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What is a notice to repair?

A

Served under Section 146 of the Law of Property Act 1925, sets out:
• Details of repairing/decorating breach which has occurred
• Timescale allowed to remedy the breach
• Course of action proposed if tenant fails to remedy the breach

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What is a forfeiture?

A

Landlord request to forfeit the lease due to disrepairs – must serve section 146 (Land and Property Act 1925). There must be forfeiture clause in the lease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What is a schedule of condition?

A

Record of the condition of a property prior to a new lease agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Why are schedules of condition important?

A

They limit the tenants repairing obligation in respect of agreed items of disrepair for the duration of the lease. Reinstatement at the end of the lease will be limited by the terms of the schedule

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

What is a user clause?

A

Relates to planning use of the property and/or how the property can be used

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What are the two types of user clause?

A
  • Planning use

* Specific uses (e.g. working hours)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

How can user clauses depress market rent?

A

A restrictive user clause such as hours of working for an office building

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What does ‘without prejudice’ mean?

A

Any information provided during negotiations that is labelled ‘without prejudice’, which cannot subsequently be used as evidence against sender in litigation proceedings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

What does ‘subject to contract’ mean?

A

Means that all points covered are subject to a contract

41
Q

What is a license?

A

Passes no interest in the land, but makes lawful what would otherwise be unlawful

42
Q

What is an example of a license?

A

Right to park a car

43
Q

What defines a license?

A
  • Right to enter a property
  • Personal arrangement between licensor and licensee
  • Licensee acquires no interest in the property
  • Personal right that can be terminated by either party
44
Q

What are the four requirements of a lease?

A
  1. Exclusive occupation
  2. Payment of rent
  3. Duration for a specified term
  4. If for more than 3 years, must be in writing , signed and registered as a deed
45
Q

What are the main differences between a lease and a license?

A
  1. A lease provides an occupier with an estate in the relevant land – a license is a permission to make it lawful for them to use the land
  2. A lease can be assigned – and license is normally a personal right that cannot be assigned
  3. A lease cannot be terminated until it expires (unless there is a break clause) – a license can usually be revoked at any time
46
Q

What is a tenancy at will?

A

Form of licence created by written agreement for an unspecified time in which the landlord may evict the tenant at any time – not a legal interest in land with no renewal right

47
Q

When would a tenancy at will be used?

A

Used for allowing a tenant early entry for fit out works or whilst tenant is agreeing a new contracted out of the 1954 Act lease after the lease expiry

48
Q

What is a wayleave?

A

Temporary right and receives annual payment – such as it provides a right for an electricity company to install and retain their apparatus

49
Q

What is an easement?

A

Permanent right that received a capital payment – e.g. right of way

50
Q

When can a prescriptive right of way or prescriptive easement be obtained?

A

Continuous and uninterrupted use being proven over a period of not less than 20 years

51
Q

What is a permissive right?

A

Right granted by a landowner to allow access over the land (not public rights of way)

52
Q

What is adverse possession?

A

Process of a person who is not the legal owner of the land becoming the legal owner through possession of the land for a specified period of time, without owners permission (squatters rights)

53
Q

How long must squatters be in place for them to gain ownership?

A

If the land is registered – 10 years

If the land is not registered – 12 years

54
Q

What are the 6 basic requirements of a business tenancy under Section 23, for a lease to be protected under the 1954 Act?

A
  1. It is a tenancy
  2. Premises must be used for business
  3. Tenant must occupy at least part of the premises
  4. Must be occupancy of more than 6 months
  5. Must not be an exempted or excluded tenancy (tenancy at will or service tenancy)
  6. Must be a competent landlord (freeholder or tenant with >14 months remaining)
55
Q

What does Section 24 of the 1954 Act cover?

A

Protected tenancies do not expire at the lease end, only when either party serves notice – known as ‘holding over’ until notice served

56
Q

What does Section 25 of the 1954 Act cover?

A

Landlords notice to seek a new lease / end the lease

57
Q

When does a Section 25 notice have to be served?

A

No more than 12 months, and no less than 6 months, before the termination date of the lease

58
Q

What is a ‘friendly’ Section 25 notice?

A

Landlord notice to grant a new lease

59
Q

What is a ‘hostile’ Section 25 notice?

A

Landlord notice to end the lease

60
Q

What should be included in a Section 25 notice?

A
  • Name/address of landlord and tenant
  • Address of the property
  • Notice of date to end the tenancy (friendly or hostile)
  • Confirmation of whether new is to opposed or granted
  • Confirmation of the date of response required
  • If ‘friendly’ – terms of the new lease
  • If ‘hostile’ – ground for refusal of new lease
  • Recommendation to seek professional advice
61
Q

What is a Section 26 of the 1954 Act?

A

Tenant notice to request a new lease

62
Q

What is a Section 27 of the 1954 Act?

A

Tenant notice to end a lease (3 months notice after lease expiry)

63
Q

What does Section 30 of the 1954 Act cover?

A

Grounds for refusal of a new lease

64
Q

On what grounds can a landlord refuse a new lease under Section 30 of the 1954 Act?

A
  1. Breach of repairing covenant
  2. Persistent delay in paying rent
  3. Other substantial breach
  4. Provide suitable alternative accommodation
  5. Uneconomic subdivision
  6. Demolition or reconstruction
  7. Owner occupied
65
Q

What does Section 38A of the 1954 Act cover?

A

Sets out the procedure which must be followed for the Landlord to contract outside the 1954 Act

66
Q

Why might a letting be contracted outside the 1954 Act?

A
  • Requirement of the head lease
  • Landlord wants to reoccupy the property is due course
  • Landlord wishes to redevelop the property at lease end
  • Rent may be lower
  • Landlord wants future flexibility
67
Q

What are some features of a lease contracted outside the 1954 Act?

A
  • At lease end, tenant has no right to remain or seek compensation for leaving
  • No compensation payable at lease end to the tenant
68
Q

What is the procedure for contracting leases outside the 1954 Act?

A
  • Landlord must serve notice to prospective tenant warning that lease will not be protected – known as a ‘health warning’
  • Tenant must make declaration in response (simple or statutory) to confirm terms and accept
  • Procedure must be completed before lease is signed
69
Q

What are the two types of declaration for contracting outside the 1954 Act?

A
  • Simple declaration

* Statutory declaration

70
Q

What is a simple declaration?

A

Given when parties have at least 14 days or more prior to committing to the lease

71
Q

What is a statutory declaration?

A

Given when the parties have less than 14 days prior to committing to the lease (must be made before an independent solicitor)

72
Q

What methods are there for terminating a lease?

A
  • Forfeiture
  • Surrender and negotiation
  • Merger
  • Disclaimer (due to insolvency)
  • Break clauses
  • Lease expiry and service of 1954 Act notices
73
Q

What RICS guidance covers agency work?

A

RICS UK Commercial Estate Agency Professional Statement 2016

74
Q

What does RICS UK Commercial Estate Agency Professional Statement 2016 cover?

A

Mandatory standards for RICS members involved in agency work – sets out 12 core principles

75
Q

What are some of the 12 core principles of RICS UK Commercial Estate Agency Professional Statement 2016?

A
  1. Honesty
  2. Skill, care and diligence
  3. Clear terms of engagement (including CHP)
  4. Avoid/manage conflicts properly
76
Q

What are the 12 core principles of RICS UK Commercial Estate Agency Professional Statement 2016?

A
  1. Honesty
  2. Skill, care and diligence
  3. Clear terms of engagement (including CHP)
  4. Avoid/manage conflicts properly
  5. Do not discriminate
  6. Clear communications
  7. Honest advertising and marketing
  8. Hold client money separately
  9. Appropriate PII
  10. Identify your client
  11. Realistic advice with regard to market evidence
  12. Ensure safety during inspections
77
Q

What key areas of estate agency are covered in RICS UK Commercial Estate Agency Professional Statement 2016?

A
  • Acting with integrity – duty of care, gifts and incentives and dealing with conflicts of interest
  • Securing instructions – legal requirements, AML checks, types of agency and H&S
  • Marketing the property – legal requirements, market appraisal and preparing particulars
  • Implementing the disposal – methods of sale and legal requirements
  • Acquisition of property – conflicts of interest, client communication and progressing purchases
78
Q

What is the Estate Agents Act 1979?

A

UK legislation applicable to the disposal or acquisition of freehold and leasehold interests with a capital value (buildings and land)

79
Q

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

A
  1. Clarity as to the terms of agency (Section 18)
  2. Honesty and accuracy
  3. Agreement and liability for costs
  4. Openness regarding personal interests (Section 21)
  5. Absence of discrimination
  6. Legal obligation to tell the client about offers received
  7. Keep clients’ money separate
80
Q

What are the most important points covered in the Estate Agents Act 1979?

A
  • Specify all costs/fees in advance, in writing in terms of business (Section 18)
  • Itemise all payments – no global budget allowed
  • Specify nature of agency and selling rights to be agreed
  • Advise clients of any services available to applicant, i.e. financial advice
  • Disclose of personal interests – a ‘connected person’ (Section 21)
  • Misrepresentation of interest/offers – you can only tell the truth regarding offers received
  • Handling clients’ money – follow RICS rules
  • Procedure to follow when offers are received promptly and in writing
81
Q

Who polices the Estate Agents Act 1979?

A

National Trading Standards Estate & Letting Agency Team (NTSEAT)

82
Q

What are the penalties for breaching the Estate Agents Act 1979?

A
  • Negative licensing – right to be an estate agent can be taken away or not granted
  • Prohibition order – stops agent practicing
  • Warning order – written warning not to take action again
83
Q

What are the Consumer Protection from Unfair Trading Regulations 2008?

A

Estate agency legislation relating to business to consumer protection. Protects all consumers; clients, interest parties, buyers

84
Q

Who polices the CPRs 2008?

A

Trading Standards Office

85
Q

What are the penalties for breaching CPRs and BPRs?

A

Unlimited fine and/or prohibition order (and compensation to complainant up to £25,000)

86
Q

What is the Misrepresentation Act 1967?

A

Relates to misrepresentation or false statements during pre-contractual enquiries that may lead to a purchase or sale

87
Q

What can happen is false statements are made and discovered?

A

Vendor and/or agent can be sued for damages and/or the contract rescinded

88
Q

What are the three types of misrepresentation?

A
  • Fraudulent
  • Negligent
  • Innocent
89
Q

How can agents / vendors be protected from misrepresentation?

A

Disclaimer clause

90
Q

What is the leading misrepresentation case?

A

Hedley Byrne & Co Ltd vs Heller & Partners (1964)

91
Q

What are the three tests to decide agent’s liability for negligent statements?

A
  1. Foreseeability – damage is reasonably foreseeable
  2. Proximity – relationship can be characterised in law as being sufficiently proximate
  3. Fairness – it is regarded as fair, just and reasonable for such a duty of care to arise
92
Q

What is the Regulation of Property Agents (RoPA)?

A

Proposed legislation in which all property agents be regulated by an independent regulator – not yet in force

93
Q

What legislation cover marketing signage?

A

Town & Country Planning Regulations 2007

94
Q

When is planning consent required for agency boards?

A
  • Larger than 2 sq m (flat) and 2.3 sq m (V board)
  • Illuminated boards
  • Remote boards
  • Boards on listed buildings and in conservation areas
95
Q

When must agency boards be removed?

A

14 days after the transaction completes

96
Q

Who polices agency boards?

A

Local Planning Authority

97
Q

Are there any restrictions on positioning of agency boards?

A

Must not project more than 1m from the face of the building, and not above 4.6m from the ground in a safe condition

98
Q

How have market conditions created by the pandemic impacted commercial lease negotiations?

A

Tenants are seeking more flexibility and better incentives during negotiations
• Shorter terms with break options
• Contracted outside the Act
• Fitted options in high demand in office market

RICS APC 2022 (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions