Rent Reviews

Question 1

What is an old lease?

Answer 1

 A lease pre 1st Jan 1996 with Privity of Contract
 Landlord and Tenant Covenants Act 1995

Question 2

Are heads of terms legally binding?

Answer 2

 Not if you put subject to contract on them
 Not legally bound until they are engrossed (signed by both parties)

Question 3

Rent review types?

Answer 3

 OMRV
 RPI
 Turnover rent

Question 4

When you conduct a rent review what documents do you want to see?

Answer 4

 The existing lease and any plans
 Any licences for alterations, improvements, subletting, or assignment
 Any deeds of variation
 Contact details for the tenant
 Copy of the property file for any relevant background information which could assist your negotiations

Question 5

What process do you go through to complete a rent review?

Answer 5

 CIT
 Understand client’s objectives
 Obtain all of the required info. Read the documents carefully
 RR – understand the rent review clause (is time of the essence?)
 Any particular requirements regarding initiating review/serving notices? Does tenant need to serve counter notice?
 Inspect in accordance with RICS Surveying Safely. Check for any breaches.
 Measure in accordance with Code of Measuring Practice, 6th Ed, 2007.
 Undertake a market rent valuation, having regard to the terms of the lease (BARUS) and comparable evidence.
 Prepare report to client setting out recommendations.
 Agree strategy with client. Confirm who is serving notices.
 Open negotiations. Check notices received are valid.
 Conclude negotiations. Document RR and upload documents to ensure accurate rent collection.

Question 6

How can you tell if time is of the essence?

Answer 6

 United Scientific Holdings v Burnley Borough Council - Time is of the essence if it expressly says so in the lease
 Al Saloom v Shirley James Travel - connected lease event e.g. break clause can make time of the essence.
 Deeming provision – such as the need to respond to a notice by a certain time.

Question 7

What is a Deeming Provision?

Answer 7

 Assumption of acceptance.
 In older leases landlord can be required to specify the rent in the trigger notice and then if tenant does not serve counter notice within specified time, assumed tenant accepts rent.

Question 8

What is the hypothetical term?

Answer 8

 The length of term to be valued
 Basingstoke and Deane v The Host Group - ambiguity of hypothetical term make a presumption in favour of reality, therefore, residual term.
 Ritz Hotel v Ritz Casino – “Term hereby granted” - whole term starting at the lease date, unexpired term at review.
 Canary Wharf v Telegraph 2003 – “From the grant thereof”…if silent, then presume residue of term

Question 9

What is the presumption of reality?

Answer 9

 If rent review clause does not specify otherwise then assume content of the main lease.
 British Gas v Universities Superannuation Scheme (1986) - would hypothetical lease upon review contain a rent review clause? No clear words otherwise, future rent reviews in the actual lease should be taken into account in the hypothetical lease.

Question 10

What are the standard assumptions?

Answer 10

 Vacant possession
 Available for immediate occupation and use
 Covenants in the lease have been observed
 Willing L and willing T

Question 11

What are the standard disregards?

Answer 11

 Goodwill
 Improvements. If no disregard you value what you see, regardless of licence.
 Occupation

Question 12

What case states that post dated review evidence can be accepted?

Answer 12

 Segama v Penny Le Roy - Post review transactions can help to determine rental tone.

Question 13

What would happen if you had a rent review and couldn’t agree the new rent?

Answer 13

 Could serve a Calderbank letter.
 Could follow the procedures in the lease and go to 3rd party determination (IE or arbitrator)
 No point in serving a Calderbank if the lease states IE and they do not have the power to award costs.

Question 14

What should you include in a Calderbank letter?

Answer 14

 Without prejudice save as to costs
 Unconditional offer to settle
 Time frame

Question 15

When would you use a Calderbank?

Answer 15

 Genuine offer to settle
 Use one at any stage of the negotiation, generally once other avenues exhausted, considering 3rd party
 An offer to settle - aim to prompt settlement from other side and protect client from costs.

Question 16

What would you do if tenant did not respond to rent review?

Answer 16

 Could serve a Calderbank letter then consider 3rd party

Question 17

What is the difference between a Calderbank and a Part 36 Offer?

Answer 17

 A Part 36 Offer:
o Governed by Part 36 of the Civil Procedures Rules 1998
o Must be genuine offer to settle, be made without prejudice save as to costs
o Part 36 Offers have stricter timings and inclusions – offer valid for 21 days
 A Calderbank offer:
o Does not have to comply with Part 36
o Offer is in writing, offering a settlement “without prejudice save as to costs”
o Letter referred to when considering responsibility for costs, otherwise confidential

Question 18

How do you appoint an arbitrator?

Answer 18

 Apply to President of RICS - £425 inclusive of VAT

Question 19

How would you adjust for a restrictive clause?

Answer 19

 Rent deductions can be made for restrictive user clauses
 Depends on state of the market, look to comparable evidence to establish level of deduction
 Plinth Property v Mott Hay & Anderson

Question 20

How do you adjust rent if you have a longer rent review pattern than 5 years?

Answer 20

 Inflation over a longer period – unable to recoup
 Need higher rent at start of rent review period to recoup inflation
 Add 1% to rent for each extra year
 Advantageous for T to have longer rent review period.

Question 21

What is a rent review calderbank offer?

Answer 21

A calderbank offer is a LETTER, expressed as ‘WITHOUT PREJUDICE SAVE AS TO COSTS’, which contains OFFER to the other party in the review inviting it to SETTLE, WITHOUT taking the arbitration further.

BINDING OFFER TO SETTLE

Question 22

What must a CALDERBANK OFFER include?

Answer 22

The letter MUST set out ALL TERMS to SETTLE the DISPUTE, PRINCIPALLY RENT and COSTS. It should also contain a TIME LIMIT within the other party may ACCEPT THE OFFER.

Calderbanks offer a BINDING offer to settle. You should ensure you have the APPROPRIATE AUTHORISATIONS and/or CONSENTS from your client and any other appropriate parties before such offers are made.