Leasing/Letting Flashcards
How do you apply the RICS Code for Leasing Business Premises (2020) in your leasing negotiations?
I ensure that lease negotiations are fair and transparent, with clear communication, agreed terms, and a focus on balancing both landlord and tenant interests.
I also ensure that HoTs align with the RICS Code’s best practices.
What is the significance of key lease terms, such as alienation and security of tenure, in lease negotiation?
Alienation clauses impact the tenant’s ability to assign or sublet the premises
Security of tenure protects tenants under the Landlord and Tenant Act 1954.
Both influence negotiations and the tenant’s future rights and obligations.
How do you ensure due diligence and compliance with money laundering regulations during lease negotiations?
I verify tenant identity
Conduct financial checks
Enhanced customer due diligence for Political Exposed Persons
Report suspicious activity
Do not tip off the other party if suspicions arise
Inform Money Laundering Reporting Officer
Can you explain the relationship between a tenant’s covenant strength and the investment value of a property?
A strong tenant covenants increases the property’s investment value as it ensures steady rental income and reduces the risks of voids or arrears.
A financially stable tenant is more attractive to investors.
How did you approach drafting marketing particulars for the new letting in Wickford?
Undertook due diligence:
- Tenure (held by client)
- Location
- Specification
- Accommodation
- Asbestos
- EPC
- I reviewed the property details, verified them with the landlord, and ensured key information like property extent, floor areas, and terms were accurate, ensuring transparency for prospective tenants.
What steps did you take to verify the accuracy of property information before marketing the Wickford property?
- Undertook due diligence and I cross-referenced the property’s legal documents, lease terms, and inspection reports, confirming the details with the landlord to ensure the marketing materials were correct.
How do you ensure transparency and honesty in your communications with prospective tenants?
I provide accurate information upfront, clarify all lease terms, and address any tenant queries promptly, ensuring they have a clear understanding of the property and the leasing terms.
How did you assess and select tenants for the retail property in Wickford, and what factors did you consider during the selection process?
- I conducted a market analysis (tenant demand)
- Reviewed tenant offers
- Assessed factors such as financial stability, business plans, and tenant mix compatibility to shortlist suitable tenants.
I considered additional devices for security such as a rent deposit, guarantee or payment of rent in advance
I requested the following information from prospective tenants:
- Bank, accountant and 2 trade references
- Previous/existing landlord’s reference
- 3 years audited accounts/business plan/credit rating
Why did you recommend choosing a tenant with stronger covenant strength over one offering higher rent in Wickford?
A tenant with stronger covenant strength provides long-term security and reduces the risks of void periods, which benefits the landlord more than short-term higher rent from a less stable tenant.
What was your approach to drafting the HoTs for the cricket clubhouse letting?
- Had regard to the RICS Professional Standard Code for Leasing Business Premises
- Identified the parties
- Defining the boundaries of the demised premises,
- Term
- Commencement date
- Security of Tenure
- Break options
- Rent deposit
- Rent
- Rent free
- Rent review
- Service charge
- Alienation
- Responsibility for repairing
- Permitted use
- Alterations
How did you ensure clarity and transparency in identifying the parties and the demised premises in the HoTs for the cricket clubhouse?
I clearly identified the group of trustees as the tenant, confirmed with both parties, and marked the precise boundaries of the demised areas on a plan to avoid any ambiguity.
What advice did you give your client regarding the pre-letting and refurbishment of the vacant retail unit at Whitmore Way?
I advised on entering an Agreement for Lease, allowing the tenant to carry out refurbishment works specific to their needs, and recommended that the lease be granted upon completion of those works.
Can you explain the benefits and risks you identified in the Agreement for Lease at Whitmore Way?
Benefits:
- Tenant would take responsibility for the refurbishment, reducing the landlord’s upfront costs
- Grant of a new lease
Risk:
- Ensuring that the works were completed to a satisfactory standard before the lease was granted
- Non-completion of works
- Lengthy planning process
- Planning permission might be refused
- Tenant defaults or becomes insolvent
How did you ensure that the terms of the Agreement for Lease protected the landlord’s interest while facilitating the tenant’s refurbishment works?
- I included conditions in the Agreement for Lease that required the works to meet a satisfactory standard, with regular inspections and the landlord’s approval before the lease was signed.
- Set out a reasonable timeline for completion of works
- Instructed legal to prepare a licence to alter to allow the tenant to enter the property and carry out the works
- Included a longstop date
What documents must be attached to an Agreement for Lease?
- The lease (in a pre-agreed form, which shall be executed once the tenant has fulfilled its obligations under the AfL, usually at practical completion of the works)
- Licence for Alterations: To allow the tenant to undertake fitting out works
- Specification and plans of the proposed scheme
- Developer’s guarantee/bond (if dealing with a weak covenant)
How do you balance tenant expectations with landlord requirements when negotiation leasing terms?
I facilitate open communication between both parties, address any concerns, and seek compromises that satisfy both the landlord’s long-term goals and the tenant’s business needs.
In the Wickford marketing case, how would you handle a situation where a prospective tenant misrepresents their financial position during tenant selection, and you only discover this after initial negotiations?
I would immediately pause negotiations and conduct a deeper financial investigation. If misrepresentation is confirmed, I’d advise the landlord to withdraw the offer due to the breach of good faith. I’d then reassess other shortlisted candidates, ensuring more stringent financial checks going forward.
If the selected tenant at Wickford were to default on rent shortly after being chosen based on their covenant strength, how would you reassess your tenant selection process? What adjustments would you make going forward?
I would review the financial analysis tools used, possibly incorporating more robust stress testing or external financial ratings.
Additionally, I’d reconsider rent deposit levels or guarantor requirements in future to mitigate such risks. More detailed references and business plans may also be required in the selection process.
When preparing marketing particulars, how do you ensure compliance with consumer protection regulations and what could be the implications if the information provided is found to be inaccurate or misleading?
I ensure the marketing particulars are thoroughly reviewed against the property’s legal documents, title, and planning permissions to avoid inaccuracies.
If misleading information were provided, it could lead to claims under the Consumer Protection from Unfair Trading Regulations, reputational damage, or potential financial liability.
In the Cricket Club HoTs negotiation, if there was a dispute over the extent of the demised premises after the lease was signed, how would you resolve it and what preventative measures could have been taken during negotiations?
I would first review the marked plans attached to the HoTs and lease, engaging surveyors if necessary.
Mediation or legal intervention may be required.
To prevent this, clearer site boundaries should have been agreed upon during negotiations, with detailed plans signed by both parties to avoid ambiguity.
May need to vary the lease to reflect changes
If a prospective tenant, like the trustees in the cricket clubhouse case, requests additional changes to the HoTs after agreeing to them, how would you manage this situation while protecting the landlord’s interests?
I’d assess the materiality of the requested changes. If minor, I would negotiate a compromise ensuring no significant impact on the landlord’s interests. For major changes, I’d consult the landlord on risks and advise either renegotiation or holding firm on the original HoTs to avoid reopening terms unnecessarily.
During negotiations for the cricket clubhouse, if the trustees were hesitant to agree to the repair and maintenance terms, how would you balance their concerns with the landlord’s need to protect the value of the asset?
I’d propose a compromise, such as a tenant break clause contingent on repair obligations or a schedule of condition to limit tenant liability for existing disrepair
In the Whitmore Way case, how would you handle a situation where the tenant is unable to complete the refurbishment works as outlined in the Agreement for Lease? What options would you recommend to the landlord?
I’d recommend invoking the break clause or an alternative exit strategy within the Agreement for Lease. If the landlord prefers to keep the tenant, I’d negotiate an extension or additional financial guarantees to ensure the works are completed to a satisfactory standard.
How do you mitigate the risks to the landlord in cases like Whitmore Way where an Agreement for Lease involves tenant-led works, and what specific clauses would you include to protect the landlord’s position?
I’d ensure that the Agreement includes strict timelines for work completion, inspection rights for the landlord, and penalties for non-compliance (e.g., retention of deposits or delayed rent-free periods).
Additionally, I’d include a clause for the landlord to step in and complete the works at the tenant’s expense if necessary.
If the refurbishment at Whitmore Way turned out to be more extensive than anticipated and delayed the lease start, how would you advise the landlord to manage this delay and any potential impact on rental income?
I’d advise negotiating an interim agreement, possibly extending rent-free periods or offering an incentive for faster completion. Alternatively, the landlord could consider financial compensation through liquidated damages if such provisions were included.
In a multi-tenanted property, how would you manage a situation where a prospective tenant’s business type might negatively impact the covenant strength of the existing tenants?
I’d assess the potential impact and advise the landlord to consider compatibility clauses or restrictive covenants. If the new tenant poses a serious risk to existing tenants’ covenant strength, I’d recommend rejecting the offer in favour of long-term stability for the tenant mix.
In a case like the Wickford marketing, if the landlord wanted to prioritise achieving higher rent over covenant strength, how would you advise them on balancing short-term gain against long-term stability?
I’d caution against prioritising higher rent if it compromises long-term stability, advising the landlord that a stronger covenant provides more reliable income and enhances property investment value. Short-term higher rent could lead to voids or arrears down the line.
What legislation needs to be complied with for estate agency work?
- S.18 of the Estate Agents Act 1979 - terms to be confirmed in writing, honest and accuracy,
- Agreement and liability for costs
- Openness regarding personal interests (S.21),
- Legal obligation to tell the client about offers received
- Keep clients’ money safe
- Money laundering regulations
- RICS RoC
How would you go about marketing a shop/office?
- Instruct agent
- ToE
- Due diligence
- Inspect property
- Agree marketing campaign
- How are you offering premises to market
- Consider market
- Agree target audience
- Methods of marketing
