SGS 11 (Rent Review)

Question 1

What is a ground rent lease?

Answer 1

long term leases reserving nominal rent and probably granted for a premium.

Question 2

Market rent lease?

Answer 2

(usual for commercial) - substantial market rent for shorter term without a premium - investment return for landlord is regular instalments.

Question 3

FRI?

Answer 3

Full repairing and insuring terms - ‘clear rent’ and therefore predictable rental income for landlord (tenant liable for repair of interior and must pay service charge and insurance costs)

Question 4

What is the purpose of rent review?

Answer 4

Keeps rent in line with rental market and retains value in the landlord’s investment.

Question 5

Which leases are subject to SDLT?

Answer 5

Those granted after 1 December 2003, must pay further SDLT for any rent review due to take place in first five years of term.

Thereafter, further SDLT only payable if an ‘abnormal increase’ in rent is due (more than 20%).

Question 6

Open market rent review?

Answer 6

Calculates how much rent a tenant win the open market would be prepared to pay based on rent comparable.

Question 7

What is common where the revised rent is not ascertained by the review date?

Answer 7

common to have a clause obliging tenant to pay any shortfall and interest on it.

Question 8

What does the surveyor take into account, aside from assumptions and disregards in determining the rent?

Answer 8

How restrictive the lease it.

Rent achieved by neighbouring properties.

Question 9

Disregards?

Answer 9

helpful to tenants as ensures that any improvements they make are not reflected in an increased rental figure.

Question 10

Tenant friendly assumption?

Answer 10

that tenant has complied with repairing covenants. Without - rent could be lowered to reflect the fact a tenant has not kept the property in good repair which is unfair on the landlord.

Question 11

tenant unfriendly assumption?

Answer 11

That tenant and landlord have complied with covenants.

Tenant may now be paying rent on the basis that it is benefitting from common parts even if the landlord is breaching obligations and therefore tenant is not.

Question 12

Grant of a lease, post-completion steps for SDLT?

Answer 12

SDLT on net person value.
Send SDLT1 + payment to HMRC within 14 days of effective date.
Failure: penalty + interest, cannot register lease without SDLT5.

Question 13

Grant of lease, post-completion registration steps?

Answer 13

If more than 7 years, registrable.
Send: AP1 + certified copies of: lease, mortgagee’s consent (if required), SDLT5.
Within : OS2 priority period
Failure: equitable lease, and tenant will take it subject to any new entries made in LL’s title after OS2.