Leasing & Letting Flashcards
Code for leasing business premises, 2020 (prof standard) - objective
Improve quality & 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.
What are the mandatory requirements of Code for leasing business premises, 2020?
- Lease negotiations must be approached in a collaborative manner
- To recommend each party seeks professional advice if not already done so.
- Heads of Terms must state STC on a VP letting
- Negotiations should aim to produce letting terms that achieve fair balance between parties
Tenant Selection - why is it important?
There is a relationship between the ‘quality’ of a tenants covenant and the investment value of the property.
Tell me about Security Deposits?
- They must be legally documented in a rent deposit deed (attached separately to the lease - as it is personal to the tenant).
- Money is held in a separate bank account and the interest made goes to the tenant
- Monies can be released, as per agreed terms within the deed
How do you determine when a security deposit is required?
Either a ‘Profits Test’ or a ‘Net Asset Value Test’
What terms in a lease affect value?
Lease Length
Break Clauses
Alienation
Repairing Obligations
User Clauses
Rent Reviews
Security of Tenure
Tenants covenant
What are the main risks of pre-lets?
It is a lengthy complex process and there is a risk in the event a developer or contractor not performing.
Framework of an AFL?
- The lease in a pre-agreed form.
- License for alterations - allowing tenant to continue fitting works
- Specifications and plans for the proposed scheme
- Developers guarantee (if required)
- Warranties - potential collateral warranties
Difference between a lease and a license?
Lease - commercial contract that outlines your rights and responsibility to occupy the premises.
License - a permission to make it lawful for the occupier to use the land / property.
Differences:
1. Leases can be assigned and licenses cannot
2. A lease cannot be terminated until it expires / a license can usually be revoked at any time
Requirements of a lease?
- Exclusive occupation
- Payment of rent
- Duration of term
- To be in writing and signed as a deed (if more than a 3 year period)
Wayleave - what is it?
Temporary right of way and receives an annual payment
What are the assumptions included in rent reviews?
- The property is available to let on open market by a willing tenant to a willing landlord
- Property is fit for immediate occupation and use
- All covenants observed by landlord and tenant
- Property may be used for the purpose set out in the lease
What are the disregards for rent reviews?
- Any effect of goodwill on tenant occupation
- Ignore goodwill attached to the property
- Tenants improvements if landlord consent has been granted for works
Where to get rent review evidence?
Open market lettings
Lease renewals
Rent reviews
Independent expert determinations
Arbitrator awards
S&L
What grounds does a LL have to refuse new lease?
(S30 of the L&T act 1954)
Breach of repairing covenant
Persistent delay in paying rent
Other substantial breach
Provide suitable alternative accommodation
Uneconomic Subdivison
Demolition or reconstruction (again… compensation)
Owner occupation (compensation)
How long must a landlord have owned the property for in order to refuse a new lease … for owner occupation?
5 years
Whom should be served or serve notice?
Landlord
either the freeholder or superior tenant with a minimum lease term of 14 years unexipred
Benefits for landlord of a lease outside the L&T act?
provides flexibility as a tenant has no statutory right to remain in occupation.
If a LL wants a contract to be outside the act - what must they do?
Serve notice on tenant warning them that the lease is not protected - ‘Health Warning’ - tenant must make a declaration in response confirmed they received notice and agree to terms
Ways to terminate a lease?
Forfeiture
Surrender and Negotiation
Merger
Disclaimer
Break clauses
Lease expiry
Serve notice
What should be included within a leasing brochure?
Address
photos
EPC rating
Agent contact details
Reference to being in accordance with the misrepresentation act
Date
What are the 12 Principles of the RICS Prof Standard - UK commercial Estate Agency 2016?
- Be Honest
- Work with due skill, care and diligence
- Provide clients with clear and fair terms of business
- Avoid conflicts
- Do not discriminate
- Communication to be transparent
- All advertising is true
- Any client money held separately
- Use professional indemnity insurance
- Ensure all parties are clear of each other obligations
- Provide realistic assessments of prices/rents/costs
- All viewings carried out with LL consent
What are the 7 Principles of Estate Agents Act 1979?
- Be Honest
- Agreement and liability for costs
- Be open regarding personal interest
- Absence of discrimination
- Legal obligation to tell client about offers recieved
- Keep clients money separate
- Clarity to the terms of agency set out in S18
When a LL is instructing a leasing agent - what is a cooling off period?
14 days allowed for client who change their minds and don’t want to instruct agent in accordance with current consumer protection regulation.
What legislation protects consumers?
Consumer Protection from Unfair Trading Regulations (2008)
What does BREEAM stand for?
Building Research Establishment Environmental Assessment Methodology
What is Gross Rent?
Rental value in lease contract not considering incentives and concessions
What does VRF stand for? What is it?
Variable Refrigerant Flow
A type of HVAC system - using refrigerant as primary heating and cooling
