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RM APC Flashcards > Optional - Leasing Letting (L3) - done (exl. subs) > Flashcards

Optional - Leasing Letting (L3) - done (exl. subs) Flashcards

1
Q

What are three types of agency?

A
  • Sole agency - only one agent
  • Joint agency - two or more agents sharing a fee on a pre-agreed basis
  • Multiple agency - any number of agents but only the successful agent gets a fee
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2
Q

check in book

What must be included within of Terms of Engagement for an Agency Instruction (7)

A
  • Agency basis (sole/joint agency)
  • Proposed fee
  • Scope of Works (acquisition)
  • Marketing costs and disbursements
  • Confirmation of no conflicts of interests
  • AML requirements
  • Complaints handling procedure available
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3
Q

What are the RICS documents relating to Estate Agency? (2)

A
  • RICS Professional Statement Global Real Estate Agency and Brokerage 2016
  • RICS Professional Statement UK Commercial Estate Agency 2016
  • RICS Professional Standard Code for Leasing Business Premises (2020)
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4
Q

What are some of the core principles that agents must observe according to the RICS Professional Statement UK Commercial Real Estate Agency 2016 (upto 12)

A
  • Act in an honest, fair, transparent manner
  • Carryout work with due care, skill and diligence
  • Fair and clear terms of business with complaints handling procedure / compliance with legal requirements
  • Not to discriminate unfairly during dealings
  • Do utmost to avoid COI and if they arise deal with them openly, fairly, promptly
  • Advertising is honest and truthful
  • Fair, decent, clear, timely and transparent communication with client
  • hold client monies separately
  • Appropriate PII cover
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5
Q

What are some of the offences under the Estate Agents Act 1979? (4)

A
  • Acting dishonestly
  • Not providing clarity on the terms of engagement/agency (S.18)
  • Not disclosing a personal interest (S.21)
  • Not telling the client about offers received
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6
Q

What are the key principles within the Estate Agents Act 1979?(7)

A
  1. Clarity as to the terms of the agency (Section 18)
  2. Openness regarding personal interests (Section 21)
  3. Honesty and accuracy
  4. Agreement and liability for costs
  5. Don’t discriminate
  6. Legal obligation to tell clients about offers received
  7. Keep the client’s money separate
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7
Q

What are the two key sections within the Estate Agents Act 1979?

A

S18 - Terms of Engagement
S21 - Declaration of Personal Interests

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8
Q

What are penalties for non-compliance with the Estate Agents Act 1979? (3)

A
  • Warning order
  • Prohibition order
  • Fine
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9
Q

When does the Misrepresentation Act 1967 apply?

A
  • Mis-statements or misrepresentations made during the pre-contractual stage for freehold and leasehold transactions
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10
Q

What are the penalties for non-compliance with the Misrepresentation Act 1967? (2)

A
  • Sued for financial damages
  • Contract rescinded
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11
Q

How can an agent limit their liabilities under the Misrepresentation Act 1967?

A
  • Checking that the advice, information, or opinion is reliable
  • Disclaimer clause at the bottom of the marketing
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12
Q

What test does the Misrepresentation Act 1967 have reference to? (1+3)

A

Test of Reasonableness:
1. Foreseeability
2. Proximity
3. Fairness - fair for a duty of care to arise

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13
Q

What is the leading case for the Misrepresentation Act 1967 and what did it show?

A

Hedley Byrne & Co Ltd v Heller & Partners, 1964
Test of reasonableness

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14
Q

When does the Consumer Protection Regulations 2008 apply?

A

During the entire agency, sales, and lettings process

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15
Q

What is the offence under the Consumer Protection Regulations 2008? (3)

A
  • Criminal offence
  • Not treating customers fairly
  • Providing misleading marketing information
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16
Q

What are the penalties for non-compliance under the Consumer Protection Regulations 2008? (3)

A
  • Unlimited fine
  • Prohibition order
  • Prison up to 2 years
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17
Q

What are some of the key principles within the Consumer Protection Regulations 2008? (4)

A
  • Policed by the Trading Standards Office
  • Agents have a duty of care to clients and all interested parties
  • Agents must declare everything known about a property
  • Agents must not exert undue pressure on potential buyers
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18
Q

What does Caveat Emptor mean? (2)

A
  • ‘Let the buyer beware’
  • Means that the buyer should satisfy itself on all matters relating to the property
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19
Q

What does your firm’s disclaimer clause say?

A
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20
Q

What is the document surrounding estate agent’s boards?

A

Town and Country Planning (Control of Advertisements) Regulations 2007

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21
Q

What are the rules for advertising boards under the Town and Country Planning Regulations 2007? (5)

A
  • Planning consent is needed for non-residential boards over 2 sqm (flat) and 2.3 sqm (v-board)
  • Must not project more than 1m from the face of the building
  • Must not be above 4.6m from the ground in a safe condition
  • Must be removed 14 days after completion
  • Planning consent also needed for listed buildings, within conservation areas, remote/illuminated boards
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22
Q

Which occupiers cannot register for VAT? (3)

A
  • Financial instutions
  • Charities
  • Medical practitioners
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23
Q
A
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24
Q

What are the requirements for a plan? (7)

A
  • Drawn to a metric scale
  • Have a scale measurement bar
  • Have the scale noted on the plan
  • Include a 1:1250 scale location map
  • Full address including postcode
  • A north point
  • Demise in red outlined on the inside edge of the property
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25
Q

What does the Land Registration Act 2002 require?

A

Requires all freeholds and leases granted for terms over 7 years to be registered with the Land Registry with a compliant lease plan

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26
Q

What is the RICS Document for Leasing & Letting

A

RICS Professional Standard: Code for Leasing Business Premises 2020

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27
Q

What are the main objectives of Code for Leasing Business Premises 2020? (2)

A
  • To improve the quality and fairness of negotiations on lease terms
  • Promote the use of a new set of comprehensive Heads of Terms to make legal drafting of leases more efficient
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28
Q

What is the structure of the Code for Leasing Business Premises 2020? (4)

A
  • Introduction
  • Mandatory requirements
  • Lease negotiation best practice
  • Appendices (includes model Heads of Terms)
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29
Q

What are some of the minimum terms to be included in Heads of Terms?

A
  • Subject to Contract
  • Identity and extent of premises
  • Length of term
  • Whether the L&T Act is excluded or not
  • Options for renewal or break rights
  • Rent incentives
  • Rent reviews
  • Service charge
  • Alienation
  • Repair obligations
  • Conditions of the letting
30
Q

How can a landlord check the strength of a potental tenant’s covenant?

A

Profits Test
CreditSafe Report
Dun & Bradstreet

31
Q

What does a Dun & Bradstreet show?

A
  • Provides a quick and clear indication of the credit-worthiness of an organisation, split into:
  • Financial Strength: 5A to H based on an organisation’s Tangible Net Worth
  • Risk Indicator: 1 to 4 based on probability of failure
32
Q

What is the profits test?

A

Net profit must be 3x rent for 3 consecutive years (reviewed through audited accounts)
or 5x net asset value

33
Q

What is a usual request from a landlord for information before tenant selection?

A
  • 3 years audited accounts/credit rating

plus optional - previous/existing landlord reference, Bank, accountant, and 2 trade references

34
Q

How can a tenant get around poor covenant strength?

A
  • Rental Deposit
  • Guarantor
35
Q

What lease terms can affect value? (7)

A
  • Lease length (term certain)
  • Break clauses
  • Alienation
  • Repairing obligations
  • User clauses
  • Rent reviews
  • Security of tenure
36
Q

What would you do if a tenant you are negotiating with isn’t represented?

A

Advise that they seek professional advice, and refer them to the RICS Professional Standard Code of Leasing Business Premises (2020)

37
Q

What is security of tenure under the Landlord and Tenant Act 1954?

A
  • if a tenant has security of tenure (‘inside the Act’) they have right to renewal of a lease
  • Also have a right to remain, so protected tenancy does not automatically terminate and they can ‘hold over’
38
Q

What are some of the landlords grounds for opposition for renewal under the Act?

A
  • Failure to repair
  • Persistent delay in paying rent
  • Substantial breaches by tenant
  • Suitable alternative accomodation
  • Landlords occupation
  • Landlord intention to redevelop
  • Subletting of part
39
Q

What is being ‘Outside the Act’?

A
  • Exclusion of Sections 24 to 28 of the Landlord & Tenant Act will need to be contained explicitly within the Lease
  • Tenant will need to be served a notice by the Landlord setting out the effect of the exclusion of those provisions.
40
Q

What are the implications of the Landlord and Tenant Act 1954?

A

A tenant has rights to renew and their business tenancy does not come to an end on the expiry date, if they have security of tenure in line with S.24-28 of the Landlord & Tenant Act 1954.

41
Q

You have kept your clients name confidential - why is this important?

A
  • RICS Byelaw state clietn confidentiality must be maintained for all client affairs
42
Q

What is an RFP?

A

Request for Proposal

43
Q

What was the agreed mechanism for release of their rental deposit for your acquisition in Soho?

A
  • Once the client had satisfied the profits test, their deposit was returned (3x net rent for 3 consecutive years)
44
Q

What should you do before accepting an Agency instruction?

A
  1. Assess competence
  2. Ensure no COI/personal interest
  3. Issue ToE and get signed copy
  4. Conduct AML
45
Q

Tenant Disposal - Bloomsbury

What are some of the requirements for Rent Deposits?

A

Rent deposit deed must be annexed to the lease, as a separate deed and personal to the tenant

  • Must be personal to the tenant
  • Legally documented in a rent deposit deed and money held in a separate bank account
  • Interest is paid to the tenant
  • Agreed terms for release of monies
  • Details of release mechanism stated in deed
  • Can include top-up mechanism for rent-review uplifts
46
Q

Tenant disposal Bloomsbury

What is an Authorised Guarantee Agreement?

A

Landlord & Tenant (Covenants) Act 1995
* most recent former tenant guarantees lease obligations of the immediate assignee as a voluntary arrangement to be agreed between landlord & tenant

47
Q

Tenant disposal Bloomsbury

How do you enforce an AGA?

A

Section 17 Notice must be servied upon the gurantor within 6 months of tenant defaulting to require the former tenant to pay the arrears

48
Q

Tenant disposal Bloomsbury

What legislation relates to assignments?

A

Landlord & Tenant (Covenants) Act 1995 - abolished privity of contract for new leases, and came into force 1st January 1996

49
Q

Tenant disposal Bloomsbury

What does the RICS Code for Leasing Business Premises (2020) say about AGAs?

A
  • Code for Leasing Business Premises 2020 states – although AGAs are commonplace expectations by landlords, tenants should seek to not enter into an AGA, if for example, new tenant is financially strong enough, pays an appropriate rent deposit and/or provides a suitable guarantor.
50
Q

What does the Landlord & Tenant (Covenants) Act 1995 seek to achieve? (2)

A
  • abolished privity of contract for new leases
  • Gave landlords more scope for setting conditions regarding approval of assignees
51
Q

Tenant Disposal Bloomsbury

What should you consider when dealing with an application for consent to assign/sublet?

A
  • Read the Lease
  • If tenant will give undertaking for surveyors/legal costs
  • What does the existing lease say regarding consent, are there any reasonable grounds for withholding consent or conditions
  • What is the covenant strength of the proposed assignee - are thre accounts/references to condiser?
  • Has a rent deposit been agreed / is there an AGA clause?
52
Q

Tenant disposal Bloomsbury

When you assign to a new tenant - what is needed?

A
  • Landlord Consent, a licence to assign/sublet will be required and undertaken for their legal fees
  • Need clients approval to proceed
  • Potential need for an AGA / rent-deposit
53
Q

What are Landlord remedies for illegal alienation? (3)

A
  • Forfeiture
  • Damages
  • Injunction
54
Q

Tenant disposal Bloomsbury

What is an assignment?

A

New tenant has a direct relationship with landlord - existing liabilities transfer to from existing tenant to new tenant with Landlord consent

55
Q

What is a sublease?

A

New sub-tenant has a direct relationship with the existing tenant and pays rent, who then pays the landlord. Existing tenant in effect becomes a ‘landlord’

56
Q

Tenant disposal Bloomsbury

Benefits of an assignment over sublease?

A
  • existing tenant can walk away from all liabilities (subject to no AGA)
  • straightforward - does not require additional re-negotiation
  • ( no flexibility over lease terms)
56
Q

Tenant disposal Bloomsbury

What are some of the benefits of a sublease over an assignment?

A
  • Requirement of the lease (unable to assign)
  • For part of the demise not the whole
  • If market rent is higher than the passing rent then there is a profit rent
  • If the tenant wants to re-occupy in future
  • A new party is of lesser covenant strength
  • can be some flexibility over lease terms
57
Q

Tenant disposal Bloomsbury

What are three forms of alienation?

A
  1. Absolute (not allowing subletting/assignment)
  2. Qualified/Restrictive (subject to some conditions)
  3. Open (allowing alienation)
58
Q

What is a premium?

A

a premium is a capital payment made by one party to another

59
Q

In what instances can premiums be paid for?

A
  • Sum of money paid to landlord for surrendering existing lease and grant of a new lease
  • Sum of money paid by in-coming tenant to reflect positive difference between passing rent and market rent of property (profit rent)
  • Sum of money paid by out-going tenant to new tenant as a reverse premium
  • sum of money to represent fixtures and fittings
60
Q

What is a capital contribution?

A

Sum of money being paid to incoming tenant - usually as an incentive in lieu of rent free, or by a landlord for fixtures/fittings e.g. carpets or floor box contribution

61
Q

What is a pre-letting?

A

Where lease is agreed before practical completion fo a property

62
Q

What are the advantages/disadvantages of a pre-let?

A
  • Main advantage – delivery of bespoke building designed to suit their needs, can adapt
  • Main disadvantages – lengthy and complex process, level of risk in developer/contractor not performing e.g. delays
63
Q

What is an Agreement for Lease

A

It is a pre-agreed form of the lease, which is executed once the developer/Landlord has fulfilled their obligations under the AFL (e.g. building not built or adaptations needed before occupation) - usually PC

64
Q

What is a Licence for Alterations?

A

Allows a tenant to undertake fit-out works - needs to be approved by the Landlord

65
Q

What documents need to be annexed to an Agreement for Lease? (5)

A
  1. Lease - pre-agreed form to be executed once obligations under AFL complied with - usually at PC
  2. Licence for Alterations if tenant undertaking fit-out works
  3. Specification and Plans of proposed scheme
  4. Developer’s guaranteee/bond (if dealing with a weak covenant)
  5. Warranties - collateral warranties from professional team, such as contractor, providing direct relationship (although 3rd party rights are increasingly popular as quicker, cheaper and more certain way for tenants to have recourse) (some developers wont give guarantees for latent defects so put in decennial insurance to cover risk)
66
Q

What is a break clause?

A

An option to determine the lease before expiry. Can be mutual or in favour of one party, and often time is of the essence with a strict timetable for serving notice

67
Q

What conditions would you expect to see for a break clause?

A
  • Either mutual or exercisable by one party (landlord/tenant)
  • Time of essence - agreed notice period and strict timetable
  • Penalties for serving
  • Pre-conditions e.g. full payment of all principal rent or returning premises vacant, to good order
  • Can be personal to one tenant (in case of assignment)
68
Q

What are the main lease terms that impact value?

A
  • Lease length / term certain
  • Break Clauses
  • Alienation
  • Repairing obligations
  • User clauses
  • Rent review pattern and basis of valuation
  • Security of tenure provisions (Inside/Outside act)
  • Impact of restrictive lease clauses on value
  • Planning (check local authority planning portal)
69
Q

Can you talk me through your Tenant Disposal in Bloomsbury?

A
  • Instructed to dispose of tenants space with 3.5 years left on lease
  • Read lease to understand alienation provisions
  • Carried out cash flow to understand remaining liability for client
  • Undertook inspection of property to assess marketability - recommended remains fitted
  • Arranged marketing, inc. professional photography
  • Recommended marketing on assignment basis, so client could walk away from liability
  • Advised may need agree an AGA as contained in lease and tenant covenant strength was poor - recommended negotiating additional rent deposit
70
Q

Why did you not consider a surrender of the lease in your Bloomsbury Tenant disposal?

A
  • Landlord had vacancy on another floor so did not want an empty suite
71
Q

Why did you suggest an assignment rather than a sublease on your Tenant Disposal in Bloomsbury?

A
  • Rent was lower than market
  • Short-time remaining on lease, client wanted to walk away
  • Speed of negotiations - no need to negotiate full lease as everything transfers

RM APC Flashcards (22 decks)

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