Level 1 Flashcards
What is the profits test?
A test to determine whether the rental deposit can be returned by the tenant providing 3 years audited accounts showing a net profit of 3 times the annual rent consecutively
What legislation should be adhered to when creating HoTs
RICS PS Code of Leasing Business Premises 2020
Is tax payable on rental property?
Yes, have to be exempt if not
What is freehold ?
Freehold is a tenure where the owner own the building and land it’s built upon. The freeholder will be named on the land registry and own the title absolute
Don’t have to pay occupational charges
Responsible for maintaining
What is leasehold?
A type of tenure where the leaseholder had a contract with the freeholder with terms stated within the lease
Freeholder less responsibility - has to pay occupational costs
Requires permissions to change/ assign property
How would tenure have an impact on property value?
It would dependable on the landlords use of the property. If the L wanted to occupy it, a property with an attached leasehold may be unattractive due to the costs associated with serving notice on the tenant if the lease is protected
What is an FRI lease?
Full Repairing and insuring lease
Tenant is responsible for maintenance and repair of the whole building, inside and out, including structure and roof. The landlord insures the building but the tenant pays a premium
What is an IRI lease?
Internal Repairing and Insuring lease
Tenant only takes responsibility for the maintenance and repair of the interior of the property
Pays a S/C and insurance fee to cover costs of exterior, maintenance for common parts, security, cleaning
What is the difference between and FRI and IRI lease?
An FRI gives the tenant responsibility to repair and maintain the whole building, whereas an IRI only gives T responsibility on inside. Landlord pays insurance on FRI but tenant pays premium
In practice, T’s want to limit liability and often a schedule of condition is enforced so T isn’t responsible for putting property into any better state of repair
What is a schedule of condition
A schedule of condition is a document often in report form outlining the condition of the property, both internally and externally, often including photographic evidence.
To ensure T has to return property in no worse state than the start of the lease
What is the legislation for leasing and letting?
RICS Professional Standard: Code for Leasing Business Premises 2020
What is the legislation objectives?
Code for Leasing Business Premises 2020
Improve quality and fairness of lease negotiations and promote new set HoTs to make legal drafting more efficient
What is the structure of the legislation?
Code for Leasing Business Premises 2020
Part One- Intro
Part Two- Mandatory requirements
Part Three- Lease negotiations best practice
Part four- Appendices
What are the requirements of part 2 of the legislation?
Mandatory requirements:
Negotiations must be constructive and collaborative
Party not represented must be advised about code and supplementary guidance- recommending prof advice
Terms must be agreed in written HoTs stated subject to contract
What are the requirements within written HoTs?
Identity and extent of premises
Length term and LTA 1954 provisions
Renewal options and break rights
Guarantor or rent deposit
Amount rent, freq, excluding or including business rates
VAT payable
Rent free and incentives
Rent reviews, freq and basis
S/C and insurance
Rights assign, sublet
Repairing obligations
Permitted use
Alterations
Fit out
Conditions - subject to board approval etc
Special rights- parking, telecoms access
