Leasing LEVEL 1 Flashcards
What Is A Lease And A License? When Would You Recommend A Client Using One Or The Other?
Lease – Grants A Tenant Exclusive Possession Of A Property For A Defined Term. It Creates A Legal Interest. E.G. A Commercial Office Lease Where The Tenant occupies the space for a 5-year period.
License – does not mean exclusive tenant’s only has the permission to occupy/use the premise. It doesn’t create a legal inters e.g. a co-working space where individuals share an office and can be moved at any time.
What Case Law Relates To The Distinction Between A Lease And A Licence?
Street v Mountford – clarified the distinction between a lease and a licence (exclusive possession, term certain and rent).
What Are The Different Acquisition Options?
Leases, licenses, subleases and assignments
What distinguishes a sublease from an assignment, and what are the typical situations in which each would be appropriate?
SUBlease – when a tenant leases all or part of their premise to a third party for a term that is less than the original lease term.
The original tenant remains responsible for the head lease obligations
Subleases are common when a tenant wants TO reduce space or relocate without break the lease.
Assignment –the transfer of a tenants entire lease to a third party
The new tenant takes over the lease and the original tenant is release from further obligations.
Assignments are used when a tenant wishes to exit their lease fully.
When would you recommend a sublease or assignment
Assignment – when tenants want the property completely off their liability and bank sheet.
Sublease – when in a rising market where rental values have increased since the original lease was agreed, can allow the tenant to charge profit rent
What is an agreement for lease?
It is a legally binding contract where the landlord and tenant agree to enter into a lease at a future date.
What are the key factors that influence the value of a property for both landlords and tenants when searching for a new office space?
Location – influences rent and desirability
Amenities – proximity to public transport, cafes/restaurants/shops
Fit-out
Size
Lease terms – length of lease, break clauses and rent review clauses
How do location and amenities impact a property’s attractiveness to potential tenants, and how would this affect negotiations between landlord and tenant?
Prime location with good transport links will attract higher demand – driving up rent.
Amenities, such as fitness facilities or communal spaces, make properties more desirable.
This gives the landlord stronger leverage during negs, potentially allowing them to command a premium rent.
Less amenities and worse location might allow tenants to negs lower rent or more flexible lease terms.
What are the key differences in advising a Occupier client on a disposal of current space v an acquisitions?
DISPOSAL – FOCUS ON MAXIMISING THE VALUE AND ENSURING THAT THE TERMS OF ANY ASSIGNMETN OR SUBLEASE ARE FAVOURABLE FOR THE TENANT DISPOSING THE SPACE. ENSURING ANY CONSENT REQUIREMETNS UNDER THE LEASE ARE MET AND MANAGING LIABILITEIS FOR FUTURE REPAIRS/DILAPIDATIONS
Acquisition – securing favourable terms of the incoming tenant, such as rent-free periods, repair obligations, flexibility (break clauses) and ensuring security of tenure under the Landlord and Tenant Act 1954.
How would you approach advising a landlord (tenant disposing) versus a tenant in the negotiation of a new lease? What considerations differ between the two?
For a landlord – focus on securing financially stable tenants with a long-term lease.
For a tenant – negotiate for break clauses and flexibility in lease terms, secure rent-free periods or tenant improvement allowance to offset costs.
WHAT ARE Tenant IMPROVEMENT ALLOWANCES IN COMMERCIAL LEASES?
Tia IS A SUM OF MONEY PROVIDED BY A LANDLORD TO A TENANT TO COVER THE COSTS OF FITTING OUT OR REFURBISHING A COMMERICAL SPACE. THIS ALLOWANCE HELPS TENANTS CUSTOMISE THE PRESMISES TO SUIT THEIR BUSINESS NEEDS.
Can you describe the purpose of the RICS Professional Standard: Code for Leasing Business Premises 2020?
Best practice framework for lease negotiations in commercial property, ensuring transparency, fairness and efficiency for both landlords and tenants
Standardising leasing practices – Set out guidelines to make lease terms clearer and more consistent
Encourages fair negotiations – promotes balanced agreements, avoiding unfair terms that could disadvantage either party
It ensures that HoT’s are clear, covering key aspects such as rent, service charges and tenant obligations.
How DOES the RICS Professional Standard: Code for Leasing Business Premises 2020 protects both landlords and tenants?
For tenants:
Ensures key lease terms (e.g. rent, rent reviews, break options) are clearly outlined before commitment.
Provides protection against excessive service charge and unfair dilapidations claims
Encourages a tenants guide to provided, ensuring informed decision-making
For Landlords:
Reduced the risk of disputes by ensuring clarity in lease agreements
Helps attract responsible tenants by providing a clear, fair leasing process
Supports compliance with Rics ethical standards, reinforcing professional integrity
Give an example where the RICS Professional Standard: Code of Leasing Business Premises (2020) would be important to a tenant during negotiations?
When negotiating a lease with a break clause.
The RICS Code requires break clauses in leases to be unconditional.
This ensures tenants are not held to burdensome conditions and can exit the lease without unexpected penalties.
E.G., A burdensome condition is the requirement for full repairs, where the tenant must ensure the office is in perfect condition before leaving – these conditions can be costly and difficult to fulfil, making it hard for tenants to exit the lease smoothly. The Code states that break clauses should be unconditional, meaning you wouldn’t have to meet those heavy repair obligations.
If you were negotiating against an unrepresented party, what does the RICS Professional Standard on Code of Leasing Business Premises (2020) recommend you do?
It recommends taking extra care to ensure fairness and transparency.
It recommends that you encourage the unrepresented party to seek professional advice, to avoid any potential misunderstandings or disputes later on.
What is the Misrepresentation Act 1967 and how does it influence leasing transactions?
The Misrepresentation Act 1967 allows tenants to seek remedies if they have entered into a lease based on false or misleading statements made by the landlord or their agent.
The act reinforces the importance of transparency in commercial property
Duty of Accuracy:
Landlords and agents must ensure that any statements made about a property, such as its condition, permitted use, service charges, or future developments, are factually correct.
Misleading claims can lead to legal liability under the Act.
What are examples for remedies under the Misrepresentation Act 1967?
Recission – the contract may be cancelled, meaning the lease is set aside as if it never existed
Damages – if financial losses occur due to misrepresentation, the affected party may claim compensation
What is the key difference between Misrepresentation Act 1967 and the Consumer Protection Regulations 2008?
Misrepresentation Act focuses on false and misleading statements that cause a party to enter a contract based on that misinformation.
Penalties: Sued for financial damages and/or contract rescinded.
CPR extends further and protects consumers from the omission of material information that could mislead or cause consumer harm.
Penalties unlimited fine and/or prohibition order and/or prison up to 2 years.
Misrepresentation Act 1967 is relevant when a contract exists, and a party is seeking a remedy for a false statement that influenced their decision.
CPRs 2008 cover a wider range of unfair practices, even before a contract is formed, and apply mainly to businesses interacting with consumers.
How does the Estate Agents Act 1979 regulate agents to do?
The Estate Agents Act (1979) regulates the behaviour of agents in property transactions.
It requires agents to act in the best interests of their clients, be transparent about fees and conflicts of interest and not make misleading statements.
To ensure compliance, market materials are accurate, disclose any potential conflicts in writing, provide clear terms of business.
What can you tell me about the CPR 2008 consumer protection regulations?
CPR 2008 regulations protect consumers from unfair commercial practices, requiring agents and landlords to provide full, accurate and non-misleading information in property transactions.
What is the difference between Leasehold and Freehold?
Leasehold – owning the right to occupy a property for a fixed term, while the freeholder owns the land.
Freehold – owning the property and the land it’s built on indefinitely.
