Level 1 L&T Flashcards
What are the requirements of a lease?
FOUR REQUIRMENTS of a lease
EXCLUSIVE OCCUPATION
PAYMENT OF RENT
DURATION FOR A SPECIFIC TERM
If more than 3 YEARS, the terms must be in writing, signed and registered as a deed
NB. If exclusive occupation is granted of a defined areas for over 6 months, it is likely to be a lease.
Can you explain the key differences between a RR & LR?
RR is the process of adjusting rent within an ongoing lease typically to reflect market conditions.
LR occurs when a lease term expires, a new lease is negotiated, potentially altering key terms such as rent, lease length, and tenant obligation .
What factors do you consider when assessing a RR?
Lease terms & Rent Review Provisions, Comparable Market Evidence, Property characteristics
What are the Core principles of the LTA 1954?
The Act provides security of tenure to business tenants, allowing them the right the renew their lease unless excluded or challenged under specific grounds.
It also sets out STATUTORY PROCEDURES for LEASE RENEWALS and terminations.
What do you look for when reading a lease document?
I examine key clauses such as lease term, rent review provisions, break clauses, repair and maintenance obligations, alienation rights and any onerous lease obligations, or restrictions affecting the tenant’s use of the property.
What is the difference between an FRI lease and an IRI lease?
FRI (Full Repair and Insuring) required the tenant to cover all repair and insurance costs
IRI (Internal Repair and Insuring) lease typically limits the TT responsibility to INTERNAL repairs ONLY such as flooring, ceilings, internal decorations. The landlord retains responsibility for STRUCTURAL REPAIRS, including the roof, external walls and communal areas. IRI more common in multi-occupancy buildings such as office or shopping centres. IRI leases often come with a SERVICE CHARGE, where TT contribute towards the costs of maintaining the shared elements of the building. TT may still contribute to insurance costs, but their liability is generally lower than in an FRI lease.
What is the difference between Arbitration and Independent Expert Determination? (Dispute Resolution Methods)
Arbitration
Governed by the Arbitration Act 1996 in England and Wales, which provides a legal framework for how disputes should be conducted.
The arbitrator acts in a quasi-judicial role, meaning they consider legal arguments, weigh evidence, and apply legal principles to reach a decision.
The process is formal and structured, similar to a court case but conducted privately.
Both parties present their case, often with expert witnesses and legal representation.
The arbitrator’s decision, known as an award, is binding and enforceable in court, with limited grounds for appeal.
Commonly used in rent reviews where there is a dispute over market rent and both parties submit their own valuation evidence.
Independent Expert Determination
The independent expert is appointed for their specific expertise in the subject matter (e.g., a surveyor for a rent review or a construction expert for a building dispute).
Unlike arbitration, the expert does not have to rely solely on the evidence presented by the parties. They can use their own knowledge and investigations to reach a conclusion.
The process is typically more flexible and less formal than arbitration.
The expert’s decision is usually final and binding, unless the contract states otherwise
More common where a technical judgment is required rather than a legal ruling, such as rent reviews or valuation dispute
What is PACT, and when is it used?
Professional Arbitration on Court Terms (PACT) is a joint initiative set up by RICS and the Law Society as a form of alternative dispute resolution (ADR) for lease renewal disputes.
What are the advantages of PACT?
PACT provides a more cost and time efficient way of resolving disputes over rent are arguably better dealt with by a suitably qualified independent third party rather than the courts
What are the Third-Party Determinations RR?
DRS options can be identified in the lease
2 Options – Arbitration or Independent Expert
What are the Third-Party Determination for LR?
- County Court
- PACT
What does going to court involve for a DRS, in LR?
Court is the DEFAULT option for LR protected by LTA 54
involves initiating legal proceedings when landlords and tenants cannot resolve disputes through negotiation
After service of s.25 or s.26 one parties applies to court for a new tenancy (‘issue proceedings’) usually the tenant and to subsequently serve notice on the other party
Court starts with case management conference, or pre-trial review, at which s TIMETABLE for each stage is agreed.
A date for hearing is FIXED, and if the matter goes to court, then the lawyers and witnesses present a case and the court orders the new tenacnt
COMPLIANCE with PROCEDURAL steps and DEADLINES is VITAL
Trial judge has discretion over the costs of proceedings
After the order is made, the TT still has the option of decide to take up the lease or not on the terms ordered – there is a COOLING off period
What are the pros and cons of a determination by country Court?
Court proceedings can be costly and time-consuming, so alternative methods like PACT or mediation are often preferred where appropriate.
What is the definition of Market Rent?
Market Rent (MR) is defined in the valuation global standards as:
‘The estimated amount for which an interest in real property should be leased on the VALUATION DATE between a WILLING LESSOR AND WILLING LESSEE on appropriate lease terms in an ARM’S LENGTH TRANSACTION, after PROPER MARKETING and where the parties had each acted KNOWLEDGABLY, prudently and without compulsion (see IVS 104 paragraph 40.1)’
What are the Key Factors to consider when assessing a rent review?
Lease Terms & Rent Review Provisions
Market Evidence
Property Characteristics
What are the CORE principles of the LTA 1954?
- Security of Tenure (Part II of the ACT)
- Contracting Out (Exclusion of Security of Tenure – Section 38A)
- Grounds for Opposing Lease Renewal Section 30 (1)
- Lease Renewal Process (s.25 & 26)
- Interim Rent (Section 24A)
- Court Determination of terms (Section 34 & 35)
What is the current cost of an application to the DRS (Dispute Resolution Services)?
£425
In a falling market when acting for a landlord what is better? An arbitration or IE?
Arbitration - In a falling market, where the landlord might be under pressure to retain tenants or adjust rental terms, arbitration can provide a more structured and predictable approach to resolving disputes or negotiating lease terms.
In a falling market which is better for a tenant? Arbitration or IE? Independent
Independent Expert – neutral and unbiased opinion, market insight – detailed knowledge of the current market conditions, IE more cost effective alternative to court of arbitration
In a RISING MARKET, when acting for the Landlord which is better, Arb or IE?
INDEPDENT EXPERT – enhances the likelihood of maximising income The involvement of an independent expert can strengthen the landlord’s negotiating position. Tenants may be more likely to accept adjustments or rent increases if they see that the decision is based on a thorough, impartial evaluation of the market.
In a RISING MARKET, when acting for the TENANT which is better?
ARBITRATOR - Time and Cost Efficiency: Arbitration tends to be quicker and more cost-effective than going through formal court proceedings. In a rising market, tenants may want to resolve disputes efficiently to prevent being locked into unfavourable terms or excessive rent increases. Arbitration can provide a faster route to a resolution, avoiding the prolonged negotiations or delays that might occur in court or other dispute resolution processes.
