L&T Flashcards
What are the factors in a lease that impact value?
- Rent
- Term
- Security of tenure
- User clause
- Break clause
- Review (reccurence and methodology)
- Alienation
- Repair
What are the different types of rent reviews?
- Open market
- RPI (index)
- Stepped or fixed
- Turnover
(IMPORTANT)
What are the assumptions and disregards for RR calculations?
Assumptions:
- hypothetical term
- both parties are willing and able
- property ready for the use permitted under the lease
Disregards:
- any increase in value due to approved tenant improvements
- tenant in occupation (you should assume the property is vacant and ready to be let on the market)
- goodwill of tenant (the value attributable to the property due to the tenant trading there e.g. two restaurants, one is performing better because of celebrity chef)
Difference between lease and license?
A lease has an intention to create a legal interest in land. A lease is a contract between two parties that defines 1) rent, 2) term, 3) exclusive possession
A license is legalising what would otherwise be illegal occupation
1954 Act doesn’t apply on licenses
(e.g. hiring of a conference hall for a few days)
Street v Mountford case sets out the difference between lease and license. Landlord called it a license, but in every way it was a lease
When does the 1954 Act applies?
A business must be run within a property for the 1954 Act to apply.
A stat dec can be agreed to exclude the lease from the provisions of the 1954 Act
Or a simple declaration
(Look out for a manuscript & signature)
What to do if a landlord does not want to renew the lease?
Hostile s.25 served 6-12 months prior to lease expiry
What is case law on s.25 and s.26
Royal Mail
What is a s.27 notice
Notice from the LTA 1954 which a tenant would serve to terminate their protected lease
Does a tenant always have to serve a s.27 notice?
If a tenant vacates fully before lease expiry, the protected lease will expire (as no business will be carried out from the property)
Tell me about Frances Ltd v Cavendish Hotel 2017 case
(refers to Level 3 - Putney Bridge example)
This case from 2017 ruled that landlords should evidence a “firm and settled” intention to redevelop (when trying terminate a protected lease through LTA 1954 s.30(f) grounds)
s.30(f) states:
“LL intends to demolish or reconstruct, or to carry out substantial works of construction on the holding OR part, that they could not reasonably do so without obtaining possession of the holding”
Evidence of intention:
- planning permission obtained
- building regulation approval
- professional advisers instructed
- scheme of works prepared
- finance secured
- superior landlord consent obtained
- contracts in place
Tell me about the United Scientific Holdings Ltd v Burnley Borough Council 1977 case
This case from the 70s ruled that time is not usually of the essence for rent reviews
(Landlord can serve a RR notice even way past after the date stated on the lease)
What is an Authorised Guarantee Agreement?
When does liability end for assignor under AGA?
As per L&T Act 1927, the liability ends at the end of the lease or when
What is the difference between assignment and sub letting?
Assignment creates a new contractual relationship between the assignee and the landlord
Subletting does not
Difference between an expert witness and independent expert?
Expert Witness: Stands up in court and gives evidence to the court is respect of a LR, RR, etc
Ind Expert: Appointed by the President of RICS to settle a dispute of a RR
Difference between LR and RR?
Lease is a statutory process governed by the LTA 1954
In the event of non-agreement, decision will be taken by court or under PACT (Law Society x RICS)
RR is a contractual procedure
In event of non-agreement, the decision will follow the RR clause which usually states the rent shall be determined by EITHER an independent expert or an arbitrator
Give me the process for an Open Market RR
- Receive instruction, check COI and confirm fee in writing
- Read the lease to know RR provisions.
- Generally initiate by serving a notice in writing to the tenant’s registered office
(Not a standard letter but should contain address of property, date of RR, parties involved, the proposed rent) - Determine market rent using comparable method. Make note of the assumptions and disregards
- Agree rent with tenant and sign the RR memorandum
What does a RR Clause include?
Will state
- How the trigger notice can be served
- Will set out basis of valuation (Open market, index linked…)
- Will set out the means of settling disputes
What is a statutory demand and when would you use it?
(1st step in the winding up process)
Procedure for a OM RR?
- Inspection (Surveying Safely) and Measurement
- Gather comparable to get market rent
- Provide recommendations
- Negotiate
- In event of dispute, refer the matter to 3rd party ALTERNATIVELY a Calderbank offer is submitted which can lead to an agreement
Is time of the essence in RR?
No, as per United Scientific Holdings v Burnley Borough Council
HOWEVER if there is a break clause, time will be of the essence
What is a hypothetical term? (assumption for Rent Reviews)
If I was to let the property for a term today, would it be the same as the hypothetical term?
Hypothetical term = 25 years
Would I let a retail unit in London now for 25 years? no, closer to 5 years
SO you have to reduce the value substantially
What is a Calderbank offer?
Calderbank letter is a BINDING unconditonal offer to settle without prejudice, save as to costs (= the evidence you give cannot be relied upon in court, except for the costs)
A Calderbank offer is generally only applicable with an arbitrator.
Generally valid for 21 days
What’s the difference between an arbitrator and an independent expert?
Arbitrator: “award”
- Appointed by the President of RICS
- Bound by Arbitration Act 1996
- Award has to be between the two offers made
- Can be appealed but cant be sued
Ind Expert: “determination”
- Appointed by both parties or by the President of RICS to settle a dispute of a RR
- Not regulated by law
- No right of appeal BUT can be sued for negligence
- No required explanation of their decision
