Rent Review, 3.66 Acre Site

Question 1

What was the use of the land at Hardwick Narrows?

Answer 1

Industrial use - manufactured garden furniture

Question 2

How does a 14 year review pattern compare with the modern lease?

Answer 2

Modern leases contain a 3-5 year review pattern, which is beneficial for the landlord because they have the ability to review the rent regularly.

Question 3

What information did you include in the trigger notice?

Answer 3

1. Reference the details of the parties
2. Followed wording of the rent review clause
3. Proposal with an effective date

Question 4

What was the passing rent?

Answer 4

£32,000

Question 5

What was the proposal?

Answer 5

£55,000

Question 6

What was the difference between the agents Calderbank offer and your opinion of value and the eventual accepted offer?

Answer 6

Agents first Calderbank was £36,000, while the proposal was £55,000. My first Calderbank was at £50,000.

After an Arbitrator was appointed, the agent served a second Calderbank at £45,000 and I served one at £47,250.

Agent initially didn’t accept, so I proceeded to write the agreed statement of facts, however the agent agreed to the proposal on the deadline for submitting the agreed statement of facts

Question 7

Tell me about your analysis to determine the market rent?

Answer 7

1. Looked at recent reviews for ground leases in King’s Lynn
2. Difficult to obtain like for like evidence due to sites and review patterns varying significantly.
3. Best comparable was for a 2.69 acre site which was agreed at £13,000 per acre.
4. Other comparable’s were for smaller sites and with shorter review patterns, therefore had to make adjustments to reflect the subject site.

Question 8

What were the allowances?

Answer 8

Plus 5% uplift to account for the longer review pattern and then deducted 19% for quantum.

Question 9

What was in the Statement of Facts?

Answer 9

1. Details of the parties
2. Summary of the lease
3. Full details of the agreed comparable’s
4. Statement confirming I am acting in my capacity as an expert witness

Question 10

What were the assumptions and disregards?

Answer 10

Assumptions

1. Assume property is cleared land at 3.66 acres
2. Assume same terms as existing lease commencing on the rent review date

Disregards

1. Any effect on occupation
2. Goodwill
3. The effect of any improvements

Question 11

What is the significance of Without Prejudice save as to costs on a Calderbank?

Answer 11

Arbitrator is not able to refer to the offer, except for when dealing with the issue of costs after they have made an award.

Costs are usually awarded to the party that ‘wins’.

Question 12

What are the risks of rejecting a Calderbank offer?

Answer 12

The losing party may have to pay the Arbitrators costs, as well as the other sides costs.

Question 13

What did you include on the Calderbank?

Answer 13

1. Marked as Without Prejudice (Save as to Costs)
2. Genuine offer to settle
3. Time limit for acceptance
4. Statement stating offer does not represent opinion of value

Question 14

What are the risks of serving a Calderbank?

Answer 14

Poor drafting

1. Marking as subject to contract - Arbitrator will rule that it cannot be relied on because the offer is condtional
2. Not stating (save as to costs) - cannot refer to the Calderbank without the other side agreement.
3. Not giving the offeree reasonable time for acceptance

Question 15

Why did you advise your client to make an application to the RICS?

Answer 15

1. Agent offered a nil increase, which was below market rent.
2. There was a difference of £19,000 in our opinion of values, which spread over 14 years is a significant amount of money.

Question 16

How does Arbitration work?

Answer 16

1. Make an application to the RICS who will appoint an Arbitrator
2. Both parties agree directions with the Arbitrator
3. Prepare and agree Statement of Facts
4. Written Submissions and or Oral Hearing
5. Arbitrator considers submissions and makes an award
6. Calderbank offers disclosed by winning party and Arbitrator makes an award on costs

Question 17

What is the difference between an Arbitrator and an Independent Expert?

Answer 17

6 Key differences

1. Arbitrator is governed by the Arbitration Act 1996, whereas Independent Expert is governed by the lease.
2. Arbitrator will rely on written submissions between the parties, whereas the Independent Expert will rely on own expertise.
3. Cannot appeal an Independent Expert’s determination, but you can with an Arbitrator’s award on a point of law.
4. Arbitrator can make an award on costs, whereas the issue of costs will be dealt with in the lease and the Independent Expert does not have the jurisdiction to award costs.
5. Arbitrator can request disclosure of documents / evidence, whereas an independent expert cannot.

Question 18

If you had a choice of an Independent Expert and Arbitrator, which one will you advise?

Answer 18

Depends on the value of the premises. In cases where the value is likely to be high and an accurate decision is vital, I would choose an arbitrator to ensure that all evidence is properly available, legal arguments are properly addressed and witness evidence is considered by the Arbitrator.