Leasing & Letting Flashcards
What is the hierarchy of evidence for
establishing Market Rent?
Open market lettings
Lease renewals
Rent reviews
Third party determinations
Sale and leasebacks
Inter-company transactions
What is the main RICS Professional Statement and what did this replace
RICS Professional Statement: Code for Leasing Business Premises 2020.
Replaced the 2007 code
What is the objective of the RICS PS Code for leasing business premises 2020
Objective of the code is to improve the quality and fairness of negotiations on lease terms
Promote the use of new set of comprehensive HoTs to make legal drafting more efficient.
What is the structure of the code?
Introduction
Mandatory requirements
Lease negotiation best practice
Appendices.
What are the mandatory requirements of the Code.
1 - Negotiations must be approached in a constructive and collaborative manner.
2 - Party that is unrepresented by RICS member or other property professional must be advised about the existence of the code.
3 - The agreement as to the terms of the lease on a VP letting must be recorded in written Heads of Terms that is subject to contract
4 - Lettings should aim to produce terms that achieve a fair balance between parties having regard for respective commercial interests.
What areas does Part 3 provide advice on?
Rent deposits, rent reviews, service charges, repairs and alienation clauses.
What lease terms affect value
Length.
Break clauses
Alienation
Repairing Obligations
User clauses
Rent Review
Security of tenure provisions.
What is a lease?
A binding contract in law that sets out the terms and conditions of the tenancy between parties and their defined rights and obligations
What is the difference between assignment and subletting
Alienation = transfer the lease to another party who takes over occupation and responsibility for the lease obligations.
Sublease = new lease agreement.
When does the Estate Agents Act 1979 apply?
Disposal or acquisition of an interest in land.
Freehold property
Leasehold property with a capital value
Land as well as buildings`
What are the 7 key points
Clarity as to he terms of the agency (Section 18)
Honest and accuracy
Agreement and liability for costs
Openness regarding personal interests (Section 21)
Absence of discrimination
Legal obligation to tell the client about offers received.
Keep clients money separate.
Which clauses are preferable for the LL in a lease
Term certain
Rent Review
Rent
Break Clause
Service Charge
Which clauses are preferable for the tenant in a lease
Break clause,
Repair clause
Rent
Alienation
LTA / security of tenure
L2 Industrial Unit. What rent did you achieve for the short - term letting. Where their any advantageous clauses?
Achieved £25 psf which was a reasonable rent for the lease offering.
One year lease with rolling breaks contracted outside section 24-28 of the LTA.
L2 industrial unit. How did you determine market rent
Reviewed nearby comparables such as PGD and determined a market rent of £30 psf. Given the nature of the lease this was discounted to avoid tenants vacating.
L2 Industrial Unit - What was included in the draft heads of terms
Subject to contract
LL & Tenant details
Solicitor details
Unit details (2,500 sqft)
L2 Industrial Unit - what are engrossments?
An engrossment is the final printed version of a particular document following agreement of terms that is then going to be signed by the parties.
L2 - What is a rent deposit deed and why is it separate from the lease
A seperate document to specifify how and where the deposit is held in a seperate bank account.
Provides clauses for which the LL can retain the deposit if the tenant defaults or breaches the lease.
L2 - PR TofE - what was included in the agents pitch / presentation
- Market / sub-market description
- Market comparable
- Target occupier mix
- Other similar schemes they have acted on.
- Initiatives
L2 TofE - What was included in the agents TofE
- Confirmation of Client
- Acknowledgement of appointment (sole or joint)
- Services. Which include Market analysis, campaigns, inspections, reporting, negotiating.
- Letting fee (7.5% for joint agent) 8.5% if above ERV.
- Marketing expenses.
- VAT
- Data Security
- Conflicts of Interest.
L3 PR - How did you go about surrendering the existing lease
Through Blooms KYC intiitve I was aware the tenant wanted to vacate the unit. He had missed his break date prior to Blooms acquisition
We communicated that pursuant to terms being agreed with a neighbouring tenant that an express surrender could be agreed.
Also arrears were paid.
Inspection of the unit prior to vacating
Solicitors where instructed to draft a deed of surrender.
L3 PR - what ERV had been underwritten?
Headline rent of £37.5psf = c.£103k pa.
L3 PR - How did you calculate the Net Effective rent
Net effective rent is calculated by multiplying gross rent by the length of the lease (term certain) - the discounted months you’re given by the property owner.
Then, you divide the amount by the length of the lease. Finally, you subtract the calculated amount from the gross rent to get your net effective rent.
L3 Fulham - What is liquidation
Liquidation is the process of closing a business and distributing its assets to claimants.
Insolvency created as the tenants can no longer meet financial obligations such as rental payment.
How did you know the lease was granted during Covid
Is their any guidance on this?
I read the lease and was aware that the lease commencement date was during the pandemic.
Code of Practice for commercial property relationships during the COVID-19 pandemic 6 April 2021 updated November 21
