Leasing/Letting & Market Appraisal

Question 1

Tell me about the Housing Act 2004?

Answer 1

a. The main legislation used by local authorities and councils
b. For landlords it considers SEVEN parts:
i. Housing conditions and enforcement
ii. Definition of a HMO
iii. Licensing of a HMO
iv. Selective licensing
v. Interim and final management orders
vi. Empty dwelling management orders

Question 2

Tell me about the Landlord and Tenant Act 1954?

Answer 2

a. If your lease is “inside the act” you are entitled to a new lease on the same terms subject to reasonable modernisation at a new market rent
b. If your lease is “outside the act” you are not entitled to that
c. Landlords don’t like the act because to repossess they have to issue a section 25 notice
d. Even if the landlords recovers possession of a lease inside the act, the tenant is entitled to compensation at 1 x the rateable value or 2 x the rateable value if the tenancy is more than 14 years long
e. Essentially, the act confers protection known as security of tenure

Question 3

What is referencing and how is it done?

Answer 3

a. The checks that a landlord or agent perform when assessing the suitability/affordability of a potential tenant
b. Is normally 2.5x the annual rent
c. Can be a simple credit check or a more comprehensive background check
d. Done using Homelet

Question 4

What are right-to-rent checks and how are they done?

Answer 4

a. Check for a potential tenant to see their ID. Ensures the tenant has the right to rent a property in England
b. If you’re allowed to be in England, you have a right to rent
c. Done using Smart Search
d. They were piloted in the West Midlands and rolled out across England in February 2016

Question 5

Tell me about the Immigration Act 2016?

Answer 5

a. An act to introduce new sanctions on illegal working and to prevent migrants accessing services
b. Right to rent checks are conducted due to the Immigration Act 2016

Question 6

Are there any exemptions from Right to Rent checks?

Answer 6

a. Student accommodation
b. Accommodation provided by your employer as part of your job or training
c. Social housing
d. Accommodation provided by the council
e. Hostels and refuges
f. Care home
g. Hospice

Question 7

What AML checks did you run on the applicant?

Answer 7

a. Verify name, DOB and contact details
b. Undertake right to rent checks, ensuring it’s not a PEP

Question 8

Define what you meant by suitable applicant?

Answer 8

Those who’s search criteria and budget were in line with that property

Question 9

What is a politically exposed person?

Answer 9

Individuals around the world with prominent public functions

Question 10

Define a market appraisal?

Answer 10

General estimates of a property’s market value. Not red book valuations. Generally conducted by estate agents

Question 11

What rental price did you deduce for the flat in Chelsea?

Answer 11

1 bed, at £800 pw.

Question 12

What are your firms’ fees?

Answer 12

a. Letting and management – 11% + VAT (standard tenancy)
b. Letting and management – 21% + VAT (short let)
c. Letting Admin - £240 and £60 for registration of deposit in Tenancy Deposit Scheme
d. £90 – serving notice including notice to quit and Section 21 notice under the Housing Act 1988

Question 13

What proof of ID can you ask for from a client who has instructed you to let?

Answer 13

a. Passport/license
b. Proof of ownership such as title deed, mortgage statement

Question 14

What AML checks did you run on the client?

Answer 14

a. Passport/license
b. Proof of ownership such as title deed, mortgage statement

Question 15

How did you ensure ownership of the property was in order?

Answer 15

Checked the title deed

Question 16

What did you include in the lettings agreement?

Answer 16

a. Property information
b. Details of owners
c. Landlord bank details
d. Right to cancel details (cooling off period)
e. Complaints procedure

Question 17

Define holding deposit?

Answer 17

a. A fee paid by the tenant to secure the property
b. Paid before signing tenancy agreement
c. Asked for prior to carrying out referencing

Question 18

Who was the holding deposit paid to?

Answer 18

a. It goes into a client account with the word ‘client’ on the bank account
b. It can be held for X days (generally 15 unless otherwise agreed between both parties)
c. It’s deducted from first instalment if deal is agreed, or returned to applicant

Question 19

Was there any other way the property could have been let?

Answer 19

Via the use of a UK based guarantor who would have had to pass respective AML and referencing checks

Question 20

Why did the applicant need to give the client a 2 month notice period?

Answer 20

To enable the landlord to avoid any potential void periods and find have sufficient time to find a suitable tenant

Question 21

How did the applicant prove they could pay for 6 months?

Answer 21

Showed evidence of sufficient funds in their bank account

Question 22

What is included in a normal marketing process?

Answer 22

a. Conduct market appraisal
b. Receive instruction
c. Advertise in accordance with client’s instructions
d. Contact potential tenants
e. Conduct viewings
f. Receive offer
g. Present offer to client

Question 23

What are the three forms of residential agency?

Answer 23

a. Sole Agency – agent gets a fee if they sell
i. Pros – lower commission fees, more fluid and concentrated marketing period
ii. Cons – Less market coverage, less competition
b. Joint (two or more share a fee)
i. Pros – Two agents have more access to clients, leading to a wider marketing campaign. Competition between agents to get the bragging rights
ii. Cons – Two separate adverts appear online, two separate boards – creates the illusion the seller is keen to sell
c. Multi (successful agent gets fee)
i. Pros – Only winning agent gets fees, this drives up competition and also means more access to potential tenants
ii. Cons – Discrepancies between marketing campaigns and a higher fee than sole agency

Question 24

Is a market appraisal a formal valuation?

Answer 24

a. It is an assessment of what the property should be marketed at, may not be a true reflection of what the property is worth
b. Exempt from the Red Book global and not to be relied upon for any other use

Question 25

What is the form of a market appraisal report?

Answer 25

a. Came in the form of a best price guide
b. Detailed the comparable evidence used to arrive at a marketing price
c. Data from Rightmove that showed how asking prices related to achieved prices in that area
d. Caveats that ensured the valuation was to not be relied upon for any other purposes

Question 26

How can a landlord regain possession of each tenancy type?

Answer 26

a. AST:
i. The process is governed by statute, namely the Housing Act 1988, Sections 8 and 21
ii. Section 8 notice = landlord can seek possession using various grounds at anytime in the tenancy with 2 weeks to 2 months written notice, depending on the ground
iii. Section 21 notice = landlord gets automatic right of possession once fixed term expires – notice period is 2 months
b. AT:
i. Housing Act 1988 Section 8 notice
c. RT:
i. Landlord must prove there is grounds for eviction

Question 27

What is a break clause?

Answer 27

a. A break clause is a tenancy agreement clause that allows either the tenant or landlord, to end the tenancy agreement during the fixed term.
b. They are not compulsory
c. They should state at what stage notice can be given

Question 28

What is a company let?

Answer 28

a. Properties let to a company, not individual
b. Company responsible for all tenant obligations

Question 29

What are the tenant reference checks?

Answer 29

a. Smart Search check – Run against Experion data & Dow Jones Watchlist
b. Identify AML risks and PEP
c. Home let Enhanced checks:
d. Employment history
e. Credit checks
f. Background search
g. Previous LL references
h. Students: Letter from University
i. Company Tenant: Letter from firm

Question 30

How do you do a right to rent check?

Answer 30

a. Must check all tenants over the age of 18
b. Run details on Smart Search
c. Check in person – passport & proof of address
d. If BPR card has not come yet, check with UK Visas and Immigration

Question 31

What is the penalty for not performing a right to rent check?

Answer 31

a. Up to 5 years imprisonment
b. £1000 fine per tenant in rented accommodation if first offence
c. £3000 fine per tenant in rented accommodation if previous offender

Question 32

What is a tenancy deposit scheme and what info must be provided to the tenant?

Answer 32

a. A TDS is a scheme that ensures a tenants deposit will be returned if they look after the property they are renting
b. The deposit is no more than 5 weeks rent
c. Once received it must be registered to a TDS within 30 days
d. Details provided to the tenant include:
i. Amount of deposit
ii. Details of chosen TDP scheme
iii. ADR details
iv. Contact of LL/Prop manager
v. Why you can lose deposit

Question 33

When do you not need to do a right to rent check?

Answer 33

a. Student accommodation
b. Social housing
c. Care home
d. Hospice

Question 34

What documents can you accept for a right to rent check?

Answer 34

a. A visa
b. Proof of settlement
c. Passport and valid visa or biometric residence permit

Question 35

What does smart search run its checks against?

Answer 35

a. Experion data
b. Dow Jones Financial watchlist

Question 36

What was included in the tenant fees act 2019?

Answer 36

a. Implemented to improve transparency and affordability in the residential lettings market
b. Bans various fees often charged to residential tenants including:
i. Admin fees
ii. Referencing fees
iii. Guarantor fees
iv. Credit checks
v. Check out fees
vi. Inventory check
vii. Professional clean
c. Refundable tenancy deposits capped at 5 weeks rent if rent is less than £50,000 pa
d. Policed by NTSEAT

Question 37

What is Alienation?

Answer 37

The right for a tenant to assign, sublet or share occupation of their property

Question 38

What lease terms can affect value?

Answer 38

a. Lease length/term certain
b. Break clauses
c. Alienation
d. Repairing obligations
e. User clauses
f. Rent review pattern and basis of valuation
g. Impact of a restrictive lease clause (competitions proximity, retail examples)
h. Planning use

Question 39

What does the Housing Act 2004 ensure lettings agents must do?

Answer 39

a. Protect Deposits
b. Register within 30 days and return within 10 days of agreeing amount
c. Protect them under government backed Tenancy Deposit Scheme

Question 40

What are your firms fees?

Answer 40

a. Letting and management – 11% + VAT (standard tenancy)
b. Letting and management – 21% + VAT (short let)
c. Letting Admin - £240 and £60 for registration of deposit in Tenancy Deposit Scheme
d. £90 – serving notice including notice to quit and Section 21 notice under the Housing Act 1988

Question 41

Describe the Lettings market in Chelsea?

Answer 41

Relatively active, lettings remained consistently strong with properties letting within a week – no real impact of wider economic factors

Question 42

Describe the Lettings market in Canary Wharf?

Answer 42

a. Very strong due to students moving in
b. No impact of wider economic factors

Question 43

What would you send with the tenancy agreement?

Answer 43

a. Details of TDS
b. EICR – proof you had the
c. Gas safety check annual
d. Fire safety report annual
e. EPC certificate
f. If you don’t send the above then a landlord can’t implement a section 21 notice

Question 44

What is included on a tenant offer form?

Answer 44

a. Name of tenants
b. Tenant contact details
c. Proposed rent
d. Payment structure
e. Employment
f. Income
g. Whether they have pets/or are smokers etc

Question 45

What part of the red book says market appraisals are not red book compliant?

Answer 45

Professional Standard 1 section 5.4 – “Providing an agency or brokerage service in respect of the acquisition or disposal of one or more assets”

Question 46

How long is an assured tenancy?

Answer 46

a. An assured (and assured shorthold) tenancy can be:
i. a fixed-term tenancy – where the landlord and tenant have agreed the tenancy will run for a set period of time, eg six months
ii. a periodic tenancy – for an indefinite period with the rent being paid on a periodic basis, eg weekly, monthly, yearly

Question 47

How long is an assured shorthold tenancy?

Answer 47

6 months – 3 years. If it’s longer than that it’s got to be executed as a deed. A deed has to be witnessed signed. If it’s less than 6 months it’s a license

Question 48

Is the auction price market value?

Answer 48

Yes because that’s what the market values it at the time of sale - think of the red book definition

Question 49

Turning to the landlord and Tenant Act 1954, could you talk me through what is a protected tenancy?

Answer 49

a. The tenancy has security of tenure, so it gives the tenant the rights to renew and tenancy doesn’t automatically end at the end of the term. It requires a section 25 notice to be served by the landlord or notice by tenant.
b. A regulated tenancy is a protected tenancy so long as the tenancy agreement (which need not be in writing) is still in force. Even if the agreement ends on or after 15 January 1989, the regulated tenancy becomes a statutory tenancy and stays one as long as the tenant lives in the property

Question 50

Tell me about ASTs

Answer 50

a. Came into effect 15TH Jan 1989
b. Rent must be under £100k pa
c. Minimum 6 month term
d. Private landlords can regain possession via 2 routes under Housing Act 1988
i. Section 21 means landlord gets automatic right of possession once fixed term expires
ii. Section 8 means landlord can seek possession using various grounds at anytime in the tenancy with 2 weeks to 2 months written notice, depending on the ground
e. Possession order is required if tenant refuses to leave

Question 51

Tell me about Assured Tenancies

Answer 51

a. Started before Jan 1989 – introduced by the Housing Act 1988 before the introduction of ASTs
b. Tenant can end tenancy on one month notice if rent paid monthly or 28 days notice if paid weekly
c. Possession can only be regained when there is reasonable grounds for possessions such as rent arrears, antisocial behaviour etc

Question 52

Tell me about Regulated Rent (Protected Tenancy)

Answer 52

a. Long term tenancy from a private landlord under Rent Act 1977
b. Have stronger tenancy rights, landlord required court order to evict tenants
c. Can be inherited by spouse/partner/cohabitee if they lived with tenant before tenant’s death
d. Can also be inherited by close family member in they lived in the home for at least 2 years before tenant’s death. This becomes an assured tenancy
e. Valuation depends on factors such as age of tenant, any successors and condition of the property
f. Life tables can be used for indication of discount
g. Establish market value and discount depending on factors listed above
h. Can be increased every 2 years
i. Tenants entitled to fair rent
j. Set by rent office at VOA
k. Landlord responsible for repairs, exterior and structure of the home
l. Four weeks notice to landlord if paid weekly or one month notice to landlord if paid monthly

Question 53

Is there any new or upcoming legislation that may impact renters that you’re aware of?

Answer 53

The renters reform bill, which is to do with the abolishing section 21, no faults evictions

Question 54

We’ll move on to leasing and letting. How would you assign a lease?

Answer 54

Read the lease and it depends if there’s provisions in the lease that allow assignment

Question 55

And how do ASTs generally differ from assured tenancies?

Answer 55

They are more in the landlord’s favour, so they have the ability under the Housing Act, to evict for no grounds. At the end of the tenancy, whereas assured tenancies are stronger security of tenure

Question 56

What are some possible reasons why section 21 notices have been served at increasing rates in the last kind of 12 to 18 months?

Answer 56

In order for landlords to be able to increase rents up to market rents AS the rents have been rising so rapidly. And also for a lot, landlords have been selling off their properties onto the private market.

Question 57

What would you include typically in your marketing particulars?

Answer 57

a. I’d include details about the property, the local amenities, transport links, schools, Ofsted ratings.
b. Specifics about the layout of the property of the floor plans the building.
c. The price, obviously.

Question 58

How do you protect against negligence claims of market appraisal?

Answer 58

Save your comparables with the date and time to prove how you arrived at your opinion of value at that time

Question 59

What is a fair rent?

Answer 59

a. The statutory definition of a fair rent is found in section 70 of the Rent Act 1977. This states that in determining a fair rent regard must be had to all the circumstances, but not to personal circumstances In particular the following must be considered:
b. the age, character, locality and state of repair of the dwelling
c. the quantity, quality and condition of any furniture provided for use under the tenancy
d. any premium which has been or may be paid on the grant, renewal, continuance or assignment of the tenancy