Rent Reviews Flashcards
What is an old lease?
A lease pre 1st Jan 1996 with Privity of Contract
Landlord and Tenant Covenants Act 1995
Are heads of terms legally binding?
Not if you put subject to contract on them
Not legally bound until they are engrossed (signed by both parties)
Rent review types?
OMRV
RPI
Turnover rent
When you conduct a rent review what documents do you want to see?
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
What process do you go through to complete a rent review?
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.
How can you tell if time is of the essence?
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.
What is a Deeming Provision?
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.
What is the hypothetical term?
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
What is the presumption of reality?
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.
What are the standard assumptions?
Vacant possession
Available for immediate occupation and use
Covenants in the lease have been observed
Willing L and willing T
What are the standard disregards?
Goodwill
Improvements. If no disregard you value what you see, regardless of licence.
Occupation
What case states that post dated review evidence can be accepted?
Segama v Penny Le Roy - Post review transactions can help to determine rental tone.
What would happen if you had a rent review and couldn’t agree the new rent?
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.
What should you include in a Calderbank letter?
Without prejudice save as to costs
Unconditional offer to settle
Time frame
When would you use a Calderbank?
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.
What would you do if tenant did not respond to rent review?
Could serve a Calderbank letter then consider 3rd party
What is the difference between a Calderbank and a Part 36 Offer?
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
How do you appoint an arbitrator?
Apply to President of RICS - £425 inclusive of VAT
How would you adjust for a restrictive clause?
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
How do you adjust rent if you have a longer rent review pattern than 5 years?
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.
What is a rent review calderbank offer?
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
What must a CALDERBANK OFFER include?
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.
