Property Management Flashcards
What is Use Class E and when was it introduced?
‘Class E’ is a broad category of commercial, business and service uses. It was introduced by the Business and Planning Act 2020.
Class E effectively amalgamates the former Class A1 (retail), Class A2 (financial and professional services), A3 (restaurants/cafes), B1 (offices) along with health/medical uses, creches, nurseries (all formerly D1 uses) and indoor sports/recreation (formerly D2 use). Permission is not required to change between any of the uses within Class E.
The only retail uses not included in Class E are small shops under 280 square metres, selling ‘essential’ goods and not located within 1km of other similar shops. These shops are in Class F2.
What is an assignment?
Tenant transfers legal interest in lease to another tenant. Incoming tenant takes over lease obligations.
What is sub-letting?
Lease property from tenant, rather than Landlord. Original tenant maintains relationship with Landlord, and sub-tenant has relationship with original tenant.
Difference between assignment and sub-letting?
With assignment, original tenant is no longer liable under the lease. With sub-letting, original tenant remains liable but creates new relationship with sub-tenant. Landlord and sub-tenant have no direct relationship.
Why sub-let rather than assign?
- Lease may prevent you from assigning
- Tenant may want to re-occupy premises in the future
- Achieve a profit rent
Typical alienation clause?
Permitted to assign/sub-let whole but not part, with LL consent not to be unreasonable withheld or delayed
What should PM do when receives application to assign?
- Review the terms of the lease - Is an AGA required or rent deposit, can consent be reasonably withheld etc
- Undertaking of surveyor and legal fees - Without prejudice save as to costs
- Request financial information from the incoming party - personal and bank references, 3 years of company accounts and profit & loss statements to undertake a profits test (profit must equal 3 times the liabilities for the property).
- Request credit control undertakes a credit safe check of the incoming tenant and anti-money laundering check
- You could undertake an inspection to ensure the existing tenant has not made an unauthorised alterations and as part of the valuation to ensure the proposed market rent is the same as the passing rent (this would be to ensure the tenant can pay the rent) as well as undertaking an investment valuation. If the incoming tenant has a stronger financial covenant then the ARY may decrease.
- Surveyor provides a recommendation to the client of the appropriate course of action based on covenant strength etc
- Ensure tenant has paid all arrears up until the assignment date
- LTA issued by the landlords solicitors for tenant signature.
Aim of LL & T Act 1988?
S1 of LL & T Act 1988 states consent must be provided within reasonable timeframe (no delays) which is usually 28 days
What is Section 3 of the LL & Tenant Act 1927?
Section 3 - Gives the right to tenants to carry out improvements to their property (even if alterations are prohibited in the lease) and to register those improvements.
- The tenant can serve a written notice on the landlord detailing the improvements they want to make under section 3 of the 1927 LL & T act.
- The landlord has 3 months to review these and if they reject these the tenant can apply to court. The landlord also has the right to undertake these works themselves and if they do they can reasonably increase the rent of the property.
- The tenant must show the court that the improvements will increase the letting value of the premises on termination,
are reasonable and in character and will not diminish the value of any other property belonging to the Landlord. - If the court deems the improvements can be registered for compensation or the landlord does not object, they should undertake them as detailed in the plans. They should ensure landlord has signed off the works to enable them to gain compensation at the end of the term.
- At the end of the term, the tenant can apply for compensation based on the additional value the improvements bring to the premises (or based on the reasonable costs of the work)
What is Section 18 of the LL & Tenant Act 1927?
limits the amount of damages a LL is able to recover for breach of T repairing covenants to the diminution value
What is Section 19 of the LL & Tenant Act 1927?
States consent must not be unreasonably withheld
Benefit of Licence for Alterations?
Protection for LL - requires T to reinstate unit at end of lease, back to how it was originally let
Protection for T - prevents LL from rentalising alterations/improvements at rent review
Key RICS publication in regard to alterations?
RICS Guidance Note: Licence for Alterations in Commercial Property, 2nd Edition 2013
Process for completing LTA application?
- Review the application and the terms of the lease - is landlord consent required
- If the tenant is undertaking works to life safety systems or structural works a building surveyor may be required.
- Obtain undertaking of fees for surveyor, legal fees and BC (if necessary)
- Landlords solicitors document the works with an LTA
- Tenant provides start date for the works including RAMS, responsible person etc
- Surveyor (&/or BC) inspection to ensure works have been carried out as detailed on the plans
Different ways that consent to make alterations can be granted?
Automatically by lease terms (no consent required)
Formal Licence Deed - used for projects where there are significant internal changes being made
Simple Letter Licence - less complex project, no solicitor necessarily required
Why should inspection be carried out after completion of tenant works?
Surveyor needs to be satisfied that works were carried out to required standards, in line with plans and specifications
PM responsibility when managing vacant building?
- Building Insurance - inform them it is vacant and comply with the terms
- Inspections - regularly for insurance purposes (usually every seven days). Undertake any repairs you find.
- EPC - ensure there is a current EPC if there isn’t one
- Health & Safety and Fire Risk Assessments to be carried out
- Inform Council - Empty Rates
- Isolate utilities and power supplies
- secure the unit
- Maintain landscaping and asbestos register
Implication of Insurance Act 2016?
The main aim of this act was to improve the responsibility insurers had to their policy holders. For example, before this act if a policy holder breached the terms of the insurance, the insurance would be automatically void from that date.
However, after this date if the policy holder rectified the breach to the correct standards the policy was reactivated
Remedies for rent default?
Meet with the tenant
Negotiate payment plan
Pursue guarantor
CRAR
Draw down rent deposit
Serve Statutory Demand
Forfeiture
Court proceedings
How can Court proceedings be used toc recover tenant arrears?
LL can obtain court judgement
High Court Enforcement Officer may then enforce this but need to pay court fees
Similar to CRAR
Can be useful if tenant is still solvent as threat of going to Court may prompt payment!
However - slower process, more expensive etc
When can former tenant who has assigned their lease be pursued for arrears?
If Lease started before 1 January 1996
Privity of Contract was abolished by LL & T (Covenants) Act 1995
What is Statutory Demand?
Preliminary step to pursuing winding-up proceeding’s (AKA bankruptcy)
Can be used to put pressure on tenant to pay arrears
Used on undisputed arrears of £750
What is the process of serving a Statutory Demand?
Notice served by the landlords solicitors, tenant has 21 days to pay, propose a plan or dispute the arrears position
After this time, LL can present winding up petition to Court
What is CRAR?
Commercial Rent Arrears Recovery - introduced in 2014 by Tribunals, Courts and Enforcement Act
What are CRAR timelines?
Tenant must have 7 days unpaid rent
landlord fills out warrant of control form, enforcement agents then give the tenant 7 working days notice to pay arrears
Once the 7 days expires, Enforcement Agents visit and take and seize any items they can
Another 7 days before sale/auction of any seized goods
Can you CRAR a sub tenant?
Yes under Section 81 of the Tribunals, Courts and Enforcement Act 2007, but you must give them 14 days notice not 7. If the sub tenant pays all of the arrears, this could give them an overriding interest in the property with them able to take over the lease.
What can the enforcements agents seize from the tenant when using CRAR?
- Only goods belonging to the tenant (Not 3rd Party)
- ‘Tools of the trade’ with an aggregate value of up to £1,350 eg computers. The tenant must still be able to operate a business eg can’t remove the chairs people are sitting on from an office
- Only non perishable goods with a value not greater than the rent arrears owed
Can a tenant stop CRAR?
Yes by paying the arrears or by applying to the courts and proving there is a dispute after which the court will take a view
Can a landlord speed up the CRAR process?
Yes, they can apply to court to speed up the CRAR process if they think the tenant is likely to abscond
How can a landlord forfeit a lease?
- By serving a Section 146 notice
- Through the forfeit clause in the lease eg peaceable re-entry and change the locks
What is a Section 146 Notice of the Law and Property Act 1925?
Served by the landlords solicitor on a tenant when they wish to commence forfeiture proceedings for breach of tenants covenant under their lease.
This notice must contain details of the breach, the reasonable timeframe to remedy the breach (usually 6 months) and any compensation the landlord believes it is owed eg tenant not maintaining their repairing covenant has caused damage to another building.
If the tenant does not respond, make the repairs to the correct standard within the reasonable timeframe or meet the reasonable costs, the landlord can apply to the court to have the lease forfeited.
Is a tenants breach of rent covenant treated differently when serving a section 146 notice?
Yes, the rent arrears must have been unpaid for 21 days and be at least £350
What must the landlord do to forfeit a lease (where the lease contains a forfeiture clause)?
- There must be no communication with the tenant for 21 days following the arrears becoming due. This is to show that the landlord has no intention of continuing the lease. Cannot CRAR or serve section 25 notice (obviously)
- The lease will usually state how long the rent will have to be owed for following the quarter day eg 21 days or 14 days to forfeit.
What is Section 17 of the Land lord and Tenants Covenant Act 1995?
The tenant can serve a notice on the Authorised Guarantor requesting them to pay any fixed charges under the lease when the tenant fails to do so. The guarantor can only be pursued for charges within 6 months of them falling due.
What was impact of Legal Aid, Sentencing and Punishment of Offenders Act 2012?
Made residentail squatting a criminal offence
Commercial landlords must rely on Bailiff or Court to remove squatters/trespassers
Four main options for LL when T not fulfilling their repairing obligations?
Serve repair notice (S146 of Law and Property Act 1925)
Forfeit lease
Serve interim schedule of dilapidations
Do works themselves and charge tenant
What is the leading case law for LL right to re-enter property to undertake repairs?
Jervis vs Harris
Gives LL right to enter the premises and undertake the repairs themselves where the tenant has been given a reasonable timeframe/notice to do so and hasn’t. The landlord can then recover these costs from the tenant.
3 possible stages of PPM regime?
Cyclical maintenance - regularly carried out actives EG plant servicing annually
Planned Preventative maintenance - timetable provided by building surveyor for undertaking works
Responsive maintenance - repairing leak or unblocking drain etc
