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Landlord & Tenant > Rent Reviews and Third Party Determination > Flashcards

Rent Reviews and Third Party Determination Flashcards

1
Q

What lease terms would affect value at rent review?

A
  • Restrictive use
  • Restrictive alienation clause
  • Hypothetical term
  • Inside/outside the 1954 act
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2
Q

What are the various bases of rental value at rent review?

A
  • Normally upwards only, to open market rent, using standard assumptions.
  • Can be indexed (RPI or CPI), based on turnover rents or stepped increases.
  • Time is not normally of the essence.
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3
Q

What is meant by Time of the Essence?

A

A provision within a contract which indicates the performance of contractual obligation within the designated time frame is essential to avoid breach of contract.

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4
Q

What is the relevant case relating to Time of the Essence?

A

United Scientific Holdings v Burnley Borough Council (1977)

  • The House of Lords decided that, in the absence of clear contrary words, time is not normally of the essence in machinery to invoke a rent review.
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5
Q

What are the usual assumptions for a rent review?

A
  1. Property available to let on open market by willing tenant and willing landlord for term of years as stated.
  2. Property fit and available for immediate occupation and use.
  3. All covenants observed by landlord and tenant.
  4. Property may be used for purpose set out in lease.
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6
Q

What are the usual disregards for a rent review?

A
  1. Any effect of goodwill on tenant’s occupation.
  2. Ignore goodwill attached to the property.
  3. Tenant’s improvements if landlord consent had been granted for the works.
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7
Q

What is the notional term of the lease?

A

This is the length of term to be valued (also known as the hypothetical term) - if silent assume the residue of the term.

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8
Q

What does Basingstoke and Deane Borough Council v Host Group Ltd (1987) relate to?

A

The tenant successfully argued that the hypothetical letting should be assumed to be a lease on the same terms and for the same use as the actual lease.

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9
Q

What is a deeming provision?

A
  • Some rent review clauses in older leases require the landlord to specify the rent trigger notice.
  • The clause will state that if the tenant does not respond with the appropriate counter notice within the required time frame they will have deemed to accepted the new rent.
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10
Q

Is it possible to rely on post-dated evidence?

A
  • Post-dated evidence is admissible provided it supports circumstances which could have been known about at the time of the effective rent.
  • A time line can be used to devalue post-dated evidence.
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11
Q

What is meant by a headline rent clause?

A
  • When the basis of valuation cannot consider any incentives agreed when analysing a comparable of a letting to arrive at a net effective rent.
  • Now normally not agreed.
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12
Q

What is the hierarchy of evidence?

A

The relevant weight attached to different types of evidence:

  • Open market letting
  • Lease renewals and RRs
  • Independent expert determination
  • Arbitration
  • Court determinations under the 1954 act
  • Hearsay evidence
  • Sale and leaseback
  • Surrender and renewals
  • Intercompany transactions
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13
Q

What does the Code of Leasing Business Premises say about rent reviews?

A
  • The rent review clause must be clear.
  • Headline rent review clauses should not be used.
  • Landlords should on request offer alternatives to their proposed option for rent reviews based on a risk adjusted basis.
  • Leases should all both landlord and tenants to start the rent review process.
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14
Q

What is the RICS Guidance Note relating to comparable evidence?

A

Comparable Evidence in Real Estate Valuation, 1st edition, 2019

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15
Q

Why would you use a Calderbank letter?

A
  • Can achieve early resolution of a dispute and prevent costs from escalating.
  • For arbitration – arbitrators can award costs.
  • Must not be used as a mechanism to influence costs and must be a genuine offer to settle.
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16
Q

What needs to be included in a Calderbank Letter?

A
  • Must set out all the terms to settle the dispute and a time limit in which the other party must accept the offer.
  • Time limit is often 21 days.
  • Without prejudice save as to costs.
17
Q

What is Calderbank v Calderbank?

A
  • Divorce settlement after 17 years of marriage.
  • Court said husband should pay the wife’s legal fees as he should have accepted her original offer of £12,000 pa which was above what the courts ordered, therefore wasting time and money.
  • This awarding of costs is what led to the “Calderbank offer”.
18
Q

What are the key principles of independent expert determination?

A
  • RICS GUIDANCE NOTE ON INDEPENDENT EXPERT DETERMINATION 2016.
  • Needs to have detailed knowledge of the market as a valuer.
  • Appointed by President of the RICS – but not bound by judicial rules.
  • Can have own opinion of market rent.
  • Bound by the terms of the lease.
  • No judicial function.
  • Cannot appeal against the decision but can sue for negligence.
  • Can involve a hearing or written representations.
  • Good when there are limited market comparables and need to be up to date.
  • No power to order disclosure.
  • Orders costs as set out in the lease.
19
Q

What are the key principles of arbitration?

A
  • THE ARBITRATION ACT 1996
  • Arbitrators can be appointed by RICS president using DRS and be a member of the Chartered Institute of Arbitrators.
  • Format is decided by the arbitrator – can include agreed statement of facts and timetable for submission.
  • Can only use evidence submitted by the parties.
  • Immunity from negligence and can order disclosure.
  • Can only appeal to High Court within 28 days of the award.
20
Q

Can you appeal an arbitration award?

A

Yes, can appeal to high court within 28 days of the award – only on three grounds:

  1. A challenge to the tribunals jurisdiction
  2. On a point of law
  3. Serious irregularity
21
Q

What is meant by disclosure?

A
  • It entitles a party to a rent review to obtain details of the other sides rental evidence by ordering disclosure of the contents.
  • It can also be used to secure the attendance of a witness or the production of documents by a third party.
22
Q

What is the difference between an arbitrator and independent expert?

A
  • Evidence
    A - acts on evidence provided and arguments submitted.
    IE - Has a duty of investigation to discover the facts, details of relevant comps and all other info.
  • Appeal
    A - Limited right of appeal to high court.
    IE - No right to appeal.
  • Negligence
    A - is not liable for negligence and cannot be sued.
    IE - Can be liable and to being sued for negligence.
  • Disclosure
    A - has powers of disclosure.
    IE - has no powers of disclosure.
  • Law
    A - Acts within the Arbitration Act 1996.
    IE - There is no relevant legislation do act with an informal timetable.
  • Outcome
    A - called an award.
    IE - Called a determination.
23
Q

Can an arbitrator/independent expert award costs?

A
  • Arbitrator can award all costs e.g. their own, legal and other surveyors.
  • Independent expert can only award their own.
24
Q

What can an expert witness do to prove its duty to the court?

A
  • Change fee basis to be hourly not incentivised.

- Sign a statement of truth.

25
Q

What are the key principles of surveyors acting as advocates?

A
  • Represents their client at court.
  • RICS PROFESIONAL STATEMENT AND GUIDANCE NOTE ‘SURVEYORS ACTING AS ADVOCATES 2017’.
  • Duty to act in best interest of client.
  • Has to still be competent.
  • Must act with integrity.
26
Q

Is an arbitrator or independent expert more favourable in a rising market?

A
  • Rising market – Independent expert as they form their own view – will view market in positive light.
  • Falling market – arbitration – has to be based on evidence and not on sentiment.
27
Q

What is the contents of a rent review memorandum?

A
  • Name of landlord and tenant.
  • Address of property.
  • Date of lease and rent review.
  • Confirmation of new rent agreed.
  • Signed and dated by both parties.

Landlord & Tenant (6 decks)

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