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ROSIE APC > Leasing Letting > Flashcards

Leasing Letting Flashcards

1
Q

what is the RICS Professional Standard: Code for Leasing Business Premises 2020

A
  • objectives are stated to improve the quality and fairness of negotiations on lease terms and promote the use of a new set of heads of terms to make legal drafting of leases more efficient
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2
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

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3
Q

What does Part 2 Mandatory requirements include

A
  • negotiations must be undertaken in a collaborative manner
  • an unrepresented party must be made aware of the existence if the Code
  • must have subject to contract on the heads of terms
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4
Q

what is in heads of terms

A
  • identity and extent to the premises
  • any special rights
  • length of the term
  • options for renewal/ break rights
  • guarantor/ deposit
  • rent
  • rent free or incentives
  • frequency of payment
  • whether VAT applicable
  • rent reviews
  • service charge
  • alienation
  • repairing obligations
  • permitted use
  • alterations
  • fit out if known
  • conditions of letting eg surveys
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5
Q

what di you need to request when choosing a tenant

A

bank, accountant and 2 trade references
previous LL reference
3 years audited accounts

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6
Q

what is the profits test

A

net profit is 3x the rent for 3 consecutive years

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7
Q

What major lease terms affect rent value

A
  • lease length
  • break clauses
  • alienation
  • repairing obligations
  • user clauses
  • rent review pattern & basis of valuation
  • security of tenure
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8
Q

what are the typical conditions for a break

A

compliance with the tenants covenants
payment of all rent and other sums due
vacant possession

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9
Q

what are the advantages and disadvantages of pre lettings

A
  • tenant has the delivery if bespoke building /premises designed to suit their needs
  • disadvantages include entering a lengthy and complex process and level of risk in the event of the developer or contractor not performing
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10
Q

what documents need to be attached to the agreement to lease

A
  • the lease
  • license for alterations
  • specification and plans
  • developers guarantee/bond
  • warranties
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11
Q

what is the UK Commercial Estate Agency 2016

A
  • mandatory professional statement
  • mandatory standards for members involved in agency and real estate management
  • sets out 12 core principals:
  • act with honest, fair, transparent and professional manner
  • carry out work with due skill, care and diligence and ensure all staff have the necessary skills
  • ensure that clients are provided with fair and clear terms of business and complaints handling procedure
  • do the upmost to avoid conflicts of interest
  • not to discriminate unfairly in dealings
  • all communications are fair and decent, clear and timely and transparent
  • all advertising and marketing material is honest and truthful
  • any clients is held in separate accounts and covered by adequate insurance
  • hold appropriate PII/errors or omissions issuance to ensure customer does not suffer loss due to negligence
  • make it clear the identity of your client and ensure clear obligations
    -give realistic of of prices having regard to evidence
  • ensure all meetings inspections are carried out in accordance with the client’s wishes
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12
Q

What is the Estate Agency Act 1979

A
  • UK law that regulates the work of estate agents
  • it contains 7 key points
    1. clarity as to the terms of the agency (s.18)
    2. honesty and accuracy
    3. agreement and liability for costs
    4. openness regarding personal interests (s.21)
    5. absence of discrimination
    6. legal obligation to tell the client about offers received
    7. keep clients money separate
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13
Q

what are the most important points from the Estate Agency Act 1979

A

Section 18 - Terms of business
- specify all costs and fees in advance
- itemise payments
- specify the nature of agency and selling rights to be agreed ( sole, joint or multiple)
- advise clients of any services available to the applicant

Section 21 - disclosure of personal interests
- a connected person is someone who can benefit financially from the transaction such as relation or business associate
- any personal interest should be declared on the heads of terms as a minimum and if appropriate not appropriate to act

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14
Q

what are the penalties under the Estate Agents Act 1979

A
  • prohibition order (stops agent from acting)
  • warning order - written warning to not do it again
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15
Q

what is the Estate Agents (Undesirable Practices) No 2 Order 1991

A
  • order made under the Estate Agents Act 1979
  • must inform clients of any services to be offered to perspective purchasers unless offered free of charge
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16
Q

What is the Estate Agents (Provision of Information) Regulations 1991

A
  • regulations relating to the provision of information which should be supplied to a client
    must provide info in writing regarding
  • the service to be provided
  • remuneration
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17
Q

what is the cooling off period

A
  • up to 14 days allowed for clients to change their mind o instructing the agent in accordance with the consumer protection regulation
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18
Q

What is the Consumer Protection from unfair trading regulations 2008

A
  • provides protection over misleading information
  • relates to business to consumer work
  • broader non-specific consumer protection for estate agents
  • duty of care extended to not just clients but all consumers (viewers, buyers, potential clients, vendors)
  • unfair practices include giving false or misleading information or hiding or failing to provide information
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19
Q

what are the penalties Consumer Protection from unfair trading regulations 2008

A

unlimited fine and/or prohibition order
compensation may also have to be paid to complainant up to £25,000

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20
Q

What are the 10 key facts in the Consumer Protection from unfair trading 2008

A
  • applies to lettings and sales
  • duty of care to clients and all interested parties
  • must declare everything known about property
  • must not exert pressure on buyers
  • if any info is discovered during - must be shared
  • any omissions can also lead to a breach
  • due diligence is required
  • must be validated by the client
  • policed by the Trading Standards Office
    declaimers do not apply to this criminal offence
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21
Q

what does the caveat ‘let the buyer beware’ mean

A

the buyer should satisfy itself on all the matters relating to the property

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22
Q

what is the Consumers rights act 2015, who is it policed by and what is the penalty

A
  • letting agents must clearly display summary of charges both in their offices and on the website
    -policed by the Local authority and penalty £5,000 for each breach
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23
Q

what is the Misrepresentation act 1967?
what are the penalties?

A
  • relates to the misrepresentation or false statement of the fact made by a party during pre-contractual enquiries
  • agent has a duty to check the information is reliable
  • vendor and agent can be sued for damages and or contract rescinded
  • civil offense
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24
Q

what is the case that relates to the misrepresentation act and what are the 3 tests to decide agents liability for negligent statements

A

Hedley Byrne & Co v Heller & Partners
1. foreseeability
2. proximity
3. Fairness

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25
Q

What are the rules over market signage

A
  • Under the Town and Country Planning (Control of advertisements) England Regulations 2007
  • Planning is required for non-resi boards over 2sq m (flat) and 2.3 sq m (V board)
  • only one board per building
  • must not project more that 1, from the face of the building and not above 4.6m from ground safe condition
  • also need planning consent for:
  • illuminated boards
  • remote boards
  • boards on listed buildings or conservation areas
  • must be removed 14 days after completion of the transaction
  • some local authorities have more restrictive requirements
  • must have owners approval
  • policed by local Planning Authority who can remove boards, issue fines and order costs
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26
Q

What are capital allowances

A

important form of tax relief upon capital expenditure for the construction or purchase of commercial property or business assets

they can generate substantial tax relief on the value of plant and machinery fixtures such as AC and lifts

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27
Q

What is the purpose of the Land Registration Act 2002

A

provides a framework for electronic property conveyancing by allowing formal documents to be executed electronically

all freeholds and new leases granted or over 7 years or existing leases sold or assigned with 7 years left to run must now be registered with the Land Registry

adverse possession - have to prove 10 years of use

trying to achieve comprehensive registration of all Property and by 2030

28
Q

what must freehold transactions have in their compliant plan under the Land Registration Act?

A
  • drawn to a metric scale (normally 1:100 or 1:200)
  • have a scale measurement bar
  • have the scale noted on the plan
  • include a 1:1,250 scale location map
    full address including post code
    a north point
    demise in red outlines on the inside edge of the property
29
Q

What is an assignment

A

upon assignment the new tenant has a direct relationship (privity of contract) with the LL

30
Q

what is a sublease

A

new sub tenant has a direct relationship with the tenant and pays them the rent who then pays it to the landlord

31
Q

why would you sublet rather that assign

A
  • requirement of the lease
  • for part of the demise and not the whole
  • if the market rent is higher than the passing rent (face rent) then there is profit rent
  • if the tenant wants to reoccupy in the future
  • the new party is of a lesser covenant strength
32
Q

what are the actions undertaken when dealing with an application for consent to assign or sublet

A

read the lease
will the tenant give an undertaking of the surveyors and legal costs?
is the proposed rent the market rent and or the same as the passing rent?
what will be the effect on the investment value of the property?
what do terms of the lease state?
what is the strength of the covenant
has a rent deposit been agreed and is there an AGA clause
client will need to be provided with a report
obtain clients approval to proceed
license for assignment or or subletting will be required

33
Q

what are the landlords remedies for illigal alienation

A

forfeiture, damages or an injunction

34
Q

what is a new lease

A

lease from 1st January 1996

35
Q

What is the Landlord & Tenant (Covenants) Act 1995

A

relates to assignment of leases
the act abolished privity of contract for new leases
it gave LLs more scope for setting conditions regarding the approval of an assignee
it introduced Authorized Guarantee agreements for the most recent former tenant only agreed between the LL and the T
there can only be one AGA in place at a time

36
Q

what is a section 17 notice

A

must be served upon a guarantor within 6 months of the tenant defaulting to require the former tenant who has entered into the AGA to pay the arrears

37
Q

What does the Code of Leasing Business Premises 2020 say about AGAs

A

although they are commonplace exceptions, tenants should not seek to enter into an AGA if for example the new tenant is financially strong enough, pays appropriate rent deposit and/or provides a suitable guarantor

38
Q

what is the legal position in an AGA

A

Guarantor (G1) may guarantee T1s obligations in an AGA (and so indirectly guarantee T2s performance of covenants)

G1 cannot directly guarantee the performance of T2s obligations
G1 cannot take an assignment from T1

39
Q

what are the common clauses for assignment and subletting

A

under Code for Leasing Business Premises

leases should allow Ts to assign the whole - AGA has to be clearly stated

leases should allow Ts to sublet the whole and may allow subleases of parts and at rents not less than market rent . Subleases should be required to be on the same terms consistent with the Ts own lease

with LLs consent which should not be unreasonably withheld or delayed

40
Q

what is the purpose of Licence for alterations

A

to protect the parties at rent review and dilapidations at the end of the lease

41
Q

what is contained in a licence to alter

A

most require the tenant to reinstate the works at the end of the lease
must clearly document the works agreed
they must be approved in writing before works are undertaken

42
Q

what are the actions when dealing with an application for consent for alterations

A
  1. read the lease (RTL) - do you need LLs approval for for changes/improvements to the demise?
  2. ask for full set of plans and a specification
  3. obtain an undertaking for the surveyors and legal costs
  4. all alterations need to be documented in the license of alterations
  5. check the long term impact on the property (if the tenant defaults)
  6. consider whether a financial bond would be appropriate to be held by the LL
  7. consider reinstatement required by the lease at expiry
  8. has the T got necessary planning consent and building regs
  9. check the Equality Act 2010 and CDM compliance and there is a necessary risk assessment and method statement & public liability insurance in place
  10. provide report to the client and obtain instructions
  11. instruct clients lawyer to prepare a Lta
  12. inspect the completed works to ensure that they are agreed
43
Q

What is the Landlord and Tenant Act 1927

A

if the lease prohibits improvements being made to the property without landlords consent, s.19 of the act imposes a provision such that it cannot be unreasonably withheld

if s.19 procedures have been followed, the LL may be obliged to pay compensation for alterations that may constitute improvements

44
Q

what are the usual things to check/look out for relating to dilapidations

A

RTL
check lease terms to understand repairing liabilities
check for schedule condition
check for license for alteration

Tenant is usually required to return the building to the original state, or otherwise as stated in the lease

45
Q

what are the two options for the tenant at expiry relating to dilapidations

A
  1. T can do the agreed works
  2. T can pay a sum to the LL to undertake the works
    Breach +loss + evidence = recovery
46
Q

what is a section 146 notice

A

notice served under the Law of Property Act 1925

served if there is a breach of repairing obligation

most schedules are served on a draft basis first

claim is limited to the cost of the works OR in accordance with s.18 of the Landlord and Tenant Act 1927, the diminution in value of the reversionary interest
if the LL proposes to demolish or substantially refurbish the value of the reversion could be nil

47
Q

What are the 3 different types of schedules

A
  1. Interim schedule - served by the LL or T during the lease, with at least 3 years remaining
  2. Terminal schedule - served normally in the last years of the lease
  3. Final schedule - served at or after the lease expiry/break clause date when the tenant is out of occupation and the Landlord wants to agree a claim for damages
48
Q

what is the format of the schedule

A

Outline repairing obligations
State the remedy and cost of the breach
Loss of rent, if appropriate, over period to do the works
fees +VAT for the claim for surveyors and lawyers
Negotiations conducted on a without prejudice basis until agreement reached

If agreement not reached, landlords surveyor may be required to prepare a Scott Schedule for the Court/ADR setting out a summary of the landlords and tenants position

49
Q

What is the guidance on dilapidations

A

RICS Professional Standard, Dilapidations, 7th edition 2016

50
Q

what are the key points in the RICS Professional Standard, Dilapidations, 7th edition 2016

A

aims to reduce claims between landlords and tenants

  • guidance on diminution valuations
  • explores supersession - the provision that the LL can only claim the amount lost because of the Ts breach
  • relates to interim and final claims
  • importance of careful and considered estimate of loss
  • keep to agreed timescales
  • parties are to act reasonably
  • separates role of the surveyor as ‘advisor’ prior to litigation and ‘expert witness’ in litigation
  • the ‘qualified demand’ is the complete statement of costs that are sought in damages - to include construction costs and other ancillary and consequential costs
51
Q

why would a dilapidations claim not be agreed or agreed in full at the end of the lease?

A
  1. when the lease if not FRI
  2. reinstatement not required by the LL
  3. schedule of condition limits the repairing liability
  4. the building is to be demolished or substantially refurbished after the lease expiry (if the value of the reversion is nil)
  5. use the diminution in value cap
  6. Tenant has gone into administration
  7. when it is agreed between the LL and T to roll over the claim until the end of the next lease granted
52
Q

what is the usual clause relating to insurance in a lease?

A

usually the landlord arranges and recharges to the tenant
cover for reinstatement of the building for a range of perils eg fire, storm, flood, subsidence, loss of rent & service charge, theft, terrorism, public liability. plus VAT and fees, site clearance /fencing/demolition and inflation and loss of rent cover

53
Q

what is the usual basis of measurement for building reinstatement

A

GIA

54
Q

Can RICS members deal with insurance

A

RICS became a Designated Professional Body for insurance matters in Feb 2005 in accordance with FSA regulations
Only registered members can now deal with insurance

55
Q

what actions would a property manager undertake for empty buildings

A
  • building insurance - tell the insurers it is empty and note their requirements
  • maintain fabric of the building
  • obtain EPC and consider MEES
  • remove any combustible material
  • undertake and record regular inspections (for insurance purposes)
  • undertake health and safety and fire risk assessment of the building
  • inform the local rating authority for the payment of empty rates
  • inform the local rating authority for the payment of empty rates
  • arrange security and decommission services and isolate power supplies
  • seal up the letter box to help prevent arson and secure the property
  • planned maintenance programme to include servicing of plant
  • set frost controls and drain down water
  • agreement of a disposal strategy and marketing initiatives
  • Maintain the asbestos register
  • landscaping/gardening
56
Q

is residential squatting a criminal offence

A

yes it is which can be subject to police action (Legal Aid, Sentencing & punishment of offenders act 2012)

commercial landlords must rely on common law powers to use ‘reasonable force’ to remove trespassers from land usually with the use of a certified bailiff or civil legal proceedings in the County Court

57
Q

what are the key principles that have emerged from case law on repairs

A

Ravenseft Properties v Davstone (Holdings) Ltd 1978

  • liability cannot arise in the absence of repair
  • repair is distinct from renewal - a tenant cannot be expected to hand back a wholly different premises
  • tenants may be responsible for inherent defects
  • repair is not an improvement
  • an effective FRI lease is when the LL is responsible for repairs & recharges via service charge
58
Q

what are the landlords remedies for breach of repairs

A
  1. serve a repair notice
  2. forfeit the lease
  3. serve an interim schedule of dilapidations
  4. do the works and charge the tenant
59
Q

What is a notice to repair

A
  • served under s. 146 of the Law of Property Act 1925 by the LL during the lease subject to terms of repair works required by the lease
  • notice in writing and comply with the terms of the lease

sets out:
- details of the repairing or decorating breach
- timescales allowed to remedy the breach
- a course of action proposed if the tenant fails to remedy the breach

60
Q

what is forfeiture

A
  • must be a forfeiture clause in the lease
  • a LL wishing to forfeit the lease for disrepair will have to serve a s.146 notice on the T
  • should state the breach and outline what is to be done to remedy the breach
  • t must be given a reasonable time to undertake the works
61
Q

what does the LL do to serve an interim schedule of dilapidations

A

instruct a building surveyor to prepare a draft or formal schedule to serve upon the tenant

62
Q

How does the LL enter to do repairs that haven’t been done by the T

A

Leading case is Jervis v Harris (1996)
in respect to the landlords right to reenter the property to undertake repairs and then claim to recover the cost of doing so from the T as debt if T hasn’t complied with the repairing obligations - this is a debt not a claim for damages

Gives the LL a right to pursue an effective remedy against defaulting tenants to ensure that the premises are kept in good and substantial repair for the duration of the term

63
Q

When should the Jervis v Harris clause be used

A

in the following instances when repairs are required:
- when tenant is solvent
- where the LL wants the lease and rent to continue
- the LL wants to retain control to carry out repair works
- where the treat of entry may compel the T to do the work

64
Q

What is the Leasehold Property (repairs) act 1938

A

applies to the leases granted for a term of 7 years or more, and has at least 3 years until expiry
- aims to protect Ts with onerous interim schedules of dilapidations
- requires LL to serve s.146 notice on the T

65
Q

when can the court only permit enforcement of the repairing covenant

A

the court is only to permit enforcement of the repairing covenant if the LL can prove one of the 4 following points:
1. immediate remedy necessary to prevent substantial diminution in the propertys reversion value
2. immediate remedy is necessary to comply with current legislation
3. if the T does not occupy the whole property, immediate remedy is required in the interests of another occupier
4. breach is capable of immediate remedy as relatively small cost compared with the consequences of postponement

66
Q

What is a user clause

A

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

change of use is usually not to be unreasonably withheld

a restrictive user clause can depress market rent eg restriction working hours

ROSIE APC (18 decks)

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