L+T Flashcards
(60 cards)
1
Q
When must Terms of Engagement be agreed?
A
At the start of the instruction.
2
Q
What must you check before agreeing Terms of Engagement?
A
- You are competent
- No personal interest or conflict of interest
- Refer to the standard Terms of Business that will apply alongside the Terms of Engagement.
3
Q
What can fees be based on for rent reviews or lease renewals?
A
- A fixed fee
- Incentivised fee – Percentage of the uplift achieved or saving made (cannot be applied for expert witness work)
- An hourly rate (commonly applied for expert witness work)
4
Q
What are general actions that could be required by the surveyor?
A
- Undertake a CoI check and competency check
- Agree ToE with client
- Obtain an understanding of your client’s objectives
- Obtain all the information from the client
- Read the lease packet and any licences carefully check and understand the rent review clause or check that the lease is not contracted out of the security of tenure provisions of the LTA 1954 (Section 24-28) in the case of a LR, if silent the lease is inside the act.
- Check whether time is of the essence for a rent review
- Undertake a site inspection and measurement of the property
- Undertake a market rent valuation
- Prepare a report to your client
- Agree your strategy with your client
- Open negotiations upon receipt of instructions
- Check that any notice received is valid
- Conclude negotiations and document the rent review in a RR memo.
- Lease renewals - instruct solicitors to prepare the new lease in accordance with the heads of terms prepared for the new lease.
5
Q
What does ‘without prejudice and subject to contract’ mean?
A
‘Without Prejudice’ means that during negotiations, the opposing party cannot rely on any document or discussions labelled ‘without prejudice’. where representations made in litigation to a judicial or quasi-judicial body. The information is there ‘privileged’ and cannot be used as evidence against the party that sent the letter. If used for a rent review, correspondence cannot be shown to the arbitrator/independent expert to show how negotiations have been conducted. It is a form of privilege against the disclosure of documents.
‘Subject to contract’ means subject to contract.
6
Q
What is a protected tenancy?
A
A protected tenancy is where the commercial tenant has security within their tenancy and the right to renew their lease, qualified by the lease being inside the L&T Act 1954.
7
Q
What is the difference between a lease and a licence?
A
- A licence is a right to enter a property, a personal arrangement between the licensor and the licencee, the licencee acquires no interest in the property and it is merely a personal right which can be terminated by either party.
- The four requirements of a lease are Exclusive occupation, payment of rent, duration for a specified term of years and if more than 3 years, the terms must be in writing and signed as a deed.
- The three main differences are:
- A lease provides an occupier with an estate in the relevant land – a licence is a permission to make it lawful for them to use the land.
- A lease can be assigned – a licence is normally a personal right that cannot be assigned.
- A lease cannot be terminated until it expires (unless there is a break clause) – a licence can be revoked at any time.
- Street v Mountford (1985) sets out the differentiation between a lease and licence.
- If exclusive possession is granted of a defined area for over 6 months, it is likely to be a lease.
8
Q
What is a tenancy at will?
A
A tenancy at will is a temporary arrangement allowing a tenant to use a commercial unit, with no legal interest and can be terminated by either party.
9
Q
What is a periodic tenancy?
A
A short-term rolling tenancy with no fixed end date until one party gives notice.
10
Q
What is a Wayleave?
A
- A temporary right allowing an electricity company to install and retain apparatus, receiving an annual payment.
- Personal to the company and cannot be automatically transferred to the new owner and it is not compulsorily registrable.
11
Q
What is an Easement?
A
- Permanent right and receives a capital payment and capable of being registered at the land registry.
- It allows a right enjoyed by one party over the land of another.
- A prescriptive right of way or prescriptive easement can be obtained because of continuous uninterrupted use being proven over a period of not less than 20 years.
- A permissive right can be granted by a landowner to allow access over the land. They are not public rights of way and the public do not have a right to use them. There is usually signage in place to confirm a permissive right of way.
12
Q
What is Adverse Possession?
A
- The process by which a person can become the legal owner of land through possession for a specified period without the owner’s permission.
- If the land is registered, a squatter needs 12 years of possession before the Land Registration Act came into effect in 2003. 10 years of occupation is required after the Act. If the land is not registered the 12-year rule applies.
13
Q
What is the Basis of Valuation for a Rent review?
A
Normally upwards only to the market rent using standard assumptions.
* Otherwise, indexation (CPI or RPI with caps & collars), turnover rents and other stepped increases.
* Time is not normally of the essence (United Scientific Holdings V Burnley Borough Council 1977).
14
Q
What are the standard assumptions and disregards usually found for a rent review?
A
Assumptions
* Property Available to let on the open market by willing tenant to a willing landlord for a term of years as stated (notional or hypothetical term)
* Property is fit and available for immediate occupation and use
* All covenants observed by landlord and tenant
* Property may be used for purpose set out in lease.
* The tenant has received the benefit of a rent free or fit-out period.
Disregards
* Any effect on goodwill on tenant’s occupation.
* Ignore goodwill attached to the property
* Tenant’s improvements if landlord consent has been granted
15
Q
What is a headline rent review clause?
A
- A Headline rent ignores all incentives/concessions granted on a letting whether they be for fitting out, pure incentive or in lieu of dilapidations/works.
- Case law has shown that it is difficult for the LL to achieve a headline rent at RR unless the wording is explicit.
- Headline rent clauses are rare in modern leases due to assumption/disregard.
16
Q
What is an assumed term/hypothetical term?
A
- Unless the wording is explicit e.g. 10 years from the review date, the assumed term is likely to be the unexpired residue. The following cases decided this:
- Norwich Union Life Insurance Society v TSB 1986
- The Ritz Hotel (London) Ltd v Ritz Casino Ltd 1989
- Canary Wharf (Three) v Telegraph Group Ltd 2003
17
Q
What is time of the essence?
A
The presumption that time is not of the essence unless there are sufficient contra-indications - case pf United Scientific Holdings v Burnley Borough Council 1978.
18
Q
What is Deeming Provisions?
A
Clauses requiring the landlord to specify the rent in the trigger notice, leading to deemed acceptance by the tenant if no counter-notice is served.
19
Q
Can evidence post-rent review be used as evidence?
A
Yes, prior transactions on comparable properties may be admissible, but post-rent review events like covid-19 cannot be taken into account if not in the mind of the parties at the review date.
Segama v Penny Le Roy Ltd (1984)
20
Q
What is the relative weight of evidence according to the Handbook of Rent Reviews?
A
- OML
- LR
- RR
- Independent expert determinations
- Arbitrator Awards
- Court determinations under L&T Act 1954
- Hearsay Evidence
- Sale & Leasebacks
- Surrender & Renewals
- Inter-company arrangements.
21
Q
What is a trespasser?
A
Someone who has entered land without permission and has specific legal rights if injured due to property owner negligence. There must also be intern to tresspass in place.
22
Q
What is a Calderbank Offer?
A
- Case law is Calderbank v Calderbank 1975.
- For a disputed rent review.
- Calderbank must be marked “without prejudice save as to costs” but must not be “subject to contract”.
- To be valid the offer must set out in clear terms the offer being made and the timescales for acceptance. Offer requires careful drafting and requires clear client approval because terms are binding if accepted by the receiving party.
- The validity of a calderbank offers can be influenced by various factors such as it must be a genuine offer to settle, it must be clear, it must be capable of unconditional acceptance and it must remain open for a sufficient period to allow the recipient to properly consider the proposal.
- For lease renewals within LTA 1954 a calderbank can be used but should be drafted by a solicitor as contains rent and non-rent terms
23
Q
When should a ‘without prejudice save as to costs’ be used?
A
- Primary purpose is to afford a party to dispute some protection against the high costs of the dispute resolution but they also have a useful secondary function of focussing attention of disputing parties to achieve an agreement id the tribunal for dispute resolution has the power to award costs.
- Alternatively for LR within LTA 1954 a “without prejudice save as to costs” offer could take the form of a Part 36 offer under Part 36 of the Civil Procedures Rules. Legal advice should be sought over which offer might be more appropriate and Part 36 offers should be drafted and served by solicitors because they are more prescriptive and potentially carry greater cost sanctions than a calderbank offer.
24
Q
What are the dispute resolution offers for rent reviews?
A
- Typically identified in the lease
- Options usually include arbitrator or independent expert
- Appointment via application to the RICS Dispute Resolution Service
25
What are the key features of arbitration?
* Governed by the Arbitration Act 1996
* Usually dealt with by way of written representations but arbitrator could call a hearing
* Decision must be based on submitted evidence
* Arbitrator has the power to order disclosure and can issue a witness summons.
* Arbitrator has the power to award costs.
* Limited rights to appeal under specific grounds - A challenge to the tribunal's jurisdiction, on a point of law and serious irregularity.
26
What are the key features of an independent expert?
* Procedure governed by contract (what the lease states).
* IE must have detailed knowledge of market/sector/location.
* Duty to investigate and make enquiries
* Usually dealt with by way of written representation.
* No grounds for appeal; potentially liable for negligence
* No power to order disclosure or issue witness summons.
* Can only determine costs if lease provides for it and then it is only IE costs.
* Advantageous if dealing with a property or lease terms for which comparable evidence is scarce.
27
Compare IE and Arbitrator
28
What are the two roles a surveyor can adopt in dispute resolution proceedings?
* Expert witness
* Advocate
29
What is the contents of a RR Memorandum?
* Name of landlord and tenant
* Address of the property
* Date of the lease and rent review
* Confirmation of new rent agreed
* Signed and dated by both parties
* It can also be recorded by an independent expert’s determination or an arbitrators award or written acceptance of the Calderbank offer or an open letter (not marked subject to contract)
30
What is Section 24?
At the end of a fixed term of a lease, the tenancy continues automatically on the same terms if the tenant remains in occupation.
Known as holding over.
31
What is holding over?
The tenant remains in the unit under the same terms as the current lease until notice is served to end the tenancy.
32
What is Section 25?
Landlords notice served with a date not more than 12 months and not less than 6 months before the date for the termination of the tenancy to be specified which cannot be before the contractual expiry date specified in the lease.
33
What are the time limits for a landlord's notice under Section 25?
Not more than 12 months and not less than 6 months before the termination date.
34
What Notices must be given in the Section 25?
* Be given by a competent landlord and be given to the tenant
* State the date for the terminantion of tenancy
* Be in the prescribed form and inform the tenant of their rights
* Where the LL is prepared to grant a new lease the proposed terms of the new lease must be stated to include the new rent.
* When the LL is opposed to a new lease (hostile notice) the grounds for opposition must be stated.
* Parties can extend time limits by agreement
* Maximum term of 15 years can be granted by the CC but parties free to agree longer term.
* Tenant loses their security of tenure if you pass the date of the notice during LR negotiation unless:
New lease in place
Either party has applied to court
Parties have agreed in writing to an extension of the deadline to apply to court for a new tenancy.
35
What must a Section 25 Notice include?
* Name and address of the landlord and tenant
* Address of the property
* Date to end the tenancy
* Confirmation of new lease to be opposed or granted
* Deadline for tenant to ask for a new tenancy to the courts.
* LL proposals for a new tenancy to include the proposed rent if a ‘friendly’ notice.
* When the LL is opposed to a new lease (hostile notice) the grounds for opposition must be stated.
* Strong recommendation to seek professional advice.
36
What does Section 26 allow a tenant to do?
* It allows a tenant to serve a notice requesting a new tenancy starting not more than 12 months and not less than 6 months after the request, which cannot be before the contractual expiry.
* Notice must be in the prescribed form.
* Must state the tenant’s proposals for a new lease to include the proposed rent.
* If LL opposes this, a counter notice must be served within 2 months.
37
How can a tenant apply for a new lease?
* Section 26 notice
* Section 29 notice (through the courts)
38
What is the purpose of a Section 27 notice?
To inform the landlord of the tenant's intention to vacate the premises.
39
What are the two options for a tenant under Section 27?
* Vacate by the contractual expiry date
* Serve a S27 (1) notice giving at least 3 months’ notice - no requirement to serve this notice.
* If a T wishes to vacate once they are holding over following the expiry of the contractual term. A S27 (2) notice must be served on the LL. This notice must give at least three months’ notice of the termination.
40
What are the 7 grounds of Section 30 for a landlord to object to a new lease?
A. Breach of Repairing Covenant (Fault based)
B. Persistent delay in paying rent (Fault based)
C. Other Substantial Breach (Fault based)
D. Provide suitable alternative accommodation (non-fault based)
E. Uneconomic Subdivision (non-fault based) (compensation)
F. Demolition or Reconstruction (non-fault based) (compensation)
G. Owner Occupation (non-fault based) (compensation)
41
Which grounds of Section 30 are mandatory?
* F - Redevelopment intention, prove funding and planning, substantial work & necessity to gain vacant possession and an ability to redevelop provided vacant possession is secured.
* G - Must have owned the property for five years and prove intention to occupy and/or run a business
* prove intention to occupy and/or run a business.
* Grounds A to E are discretionary – court will decide if reasonable
42
What is the compensation owed to a tenant.
* Grounds E-G, RV if under 14 years and 2x RV if above 14 years as at the date of the hostile S25 or S26 counter notice.
* Right to compensation is lost if tenant vacates ahead of the end of tenancy.
* - Could also get compensation for improvements under Part 1 of the LTA 1927 if conditions met but very rare.
43
What sections of the LTA 1954 assist courts in determining a new lease?
* Section 32 - Set the property comprised in the new tenancy determined.
* Section 33 - Maximum term of 15 years from the courts.
* Section 34 - Rent
* Section 35 - Any other terms of the lease.
44
What is an important court of appeal decision that applies when one party to a LR wishes to introduce a change against the will of an opposing party?
* O’May v City of London Real Property Co (1982) (persuasive as case law on other disputes of a similar nature)
- Any departure from the terms of the current lease must be fair and reasonable in all the circumstances. Burden of persuading the court to change the terms of the current lease on its renewals is on the party proposing the change.
45
When is the Valuation date/lease commencement date for a new lease if determined by the courts?
* In the county court it is the commencement date of the new lease.
* Lease commencement date will coincide with the disposition of proceedings which will be 3 months and 21 days after the hearing/trial.
* Not possible to predict rental values at a future date the, valuation date for the LR is often agreed or taken for practical purposes as the date of the hearing/trial or the date of the expert witness reports.
46
What does Section 34 of the LTA 1954 address?
* Rent determined by the courts “as may be agreed between the landlord and the tenant or as in default of such agreement may be determined by the court to be that at which, having regard to the terms of the tenancy (other than those relating to rent), the holding might reasonably be expected to be let in the open market by a willing lessor”.
* **4 matters to be disregarded**
o Any effect on the tenant’s occupation
o Any goodwill in the tenant’s business attaching to the premises.
o Any effect on rent of improvements carried out by the T unless the works were undertaken as an obligation to the landlord or completed more than 21 years before the date of application for a new tenancy.
o In the case of licenced premises, any effect on rent of additional value because of a licence.
47
What is a Summary of the key sections of the LTA 1954?
48
What are interim rents?
* S24a introduced as a later amendment by the law of property act 1969.
* Payable after the expiry of the contractual term of a 54 act protected lease and before a formal LR completed.
* Either party may apply for interim rent
* Only triggered after the service of a S25 or 26 notice.
* Payable from the earliest date that could have been specified in the notice.
* S25 or 26 notice is served up to 12 months before expiry or after the end of the term if holding over but the date must not be more than 12 months or less than 6 months.
* Usually same as rent agreed for new tenancy if same property.
* Could be different interim rent if market changed (e.g. covid) or if demise or lease terms have changed.
* Basis for calculating interim rent is different if tenant does not take up a new tenancy.
49
What is a Section 40 request?
A request for information from either the landlord or tenant.
50
What defines a competent landlord under Section 44?
* Defined under S44 as the person/body upon whom a notice should be served or who should serve the notice.
* A freeholder or superior tenant with an unexpired term of over 14 months.
51
What are the dispute resolution options for a lease renewal?
* Referral to county court
* Alternative dispute resolution (PACT)
52
What is the County Court process?
* After the service of a valid S25 or S26 notice, process requires only one party to apply to court for a new tenancy (usually tenant) to “issue proceedings” and subsequently serve proceedings on the opposing party.
* Court process starts with case management conference or pre trial review (over phone/video call) to set a timetable for each stage of the case.
* Date of hearing is fixed and if the matter goes to court then the lawyers and witnesses present a case & the court orders the new tenancy.
* Compliance with procedural steps and deadlines is vital
* Trial judge has discretion over costs of proceedings
* After order is made, tenant still has the option of deciding whether or not to take up the lease on the terms ordered (cooling off period).
53
What is PACT?
Professional Arbitration on Court Terms, an alternative dispute resolution mechanism for unopposed business tenancy renewals.
* Only an option if both parties agree to refer dispute to PACT
* Joint initiative by RICS and Law society.
* Encouraged by the courts and RICS as an ADR mechanism for unooposed business tenancy renewals
* Non-rent issues can be decided by a solicitor and rent issues can be decided by a chartered surveyor.
* Parties to decide whether the dispute resolver acts as an arbitrator or an independent expert.
* Different procedures apply for pre-issue PACT (before one party has issues proceedings in the county court) or post-issue PACT (after one party has issued proceedings in the county court, in which case court must sanction referral under PACT)
* Dispute resolver can be appointed following an application to the dispute resolution service of RICS or by application to the law society.
* Decision is binding
54
What are the Advantages of PACT
* Faster
* Cost Savings – an expensive CC hearing is avoided
* Greater flexibility and control over procedure for the parties
* Decision by a surveyor over rent rather than a county court judge.
55
What are the proposed changes to the LTA 1954 announced in March 2023?
A review of Part II of the LTA 1954 to ensure it works for today's commercial leasehold market.
56
What are the key features of Lease Renewals contracted out of the LTA 1954?
* Section 38A of the act sets out procedures which must be followed to contract outside the Act.
* No right to remain in occupation
* No compensation payable
* TAW will ensure tenant cannot claim statutory protection for the duration of period between expiry of old lease and commencement of new lease if not agreed on previous expiry.
* Strict procedures must be followed to contract outside the Act
57
What is the procedure to contract a lease outside the act?
* LL is required to serve notice on the prospective tenant warning that the proposed lease will not be protected (known as a health warning)
* Proposed T must make a declaration in response confirming they have received notice and accept its terms.
* Procedure must be completed before lease is signed.
58
What are the two types of declarations when a tenant contracts out of the LTA 1954?
* Simple declaration - given when parties have at least 14 days or more prior to committing to the lease.
* Statutory declaration - given when the parties have less than 14 days prior to committing to the lease. If this is the case a statutory declaration must be made before an independent (not the proposed tenant’s retained solicitor)
59
What are the various ways to terminate a lease?
* Forfeiture
* Surrender and negotiation
* Merger
* Disclaimer (due to insolvency)
* Break Clauses
* Lease expiry and service of notices
60
How do you approach a lease renewal for a client?
* Carry out a CoI check, agree ToE and then receive the lease information.
* Review lease, inspect the unit and take measurements.
* During Inspection carry out GOAD plan investigation to find any leads for comparable evidence and look for signs to let.
* Collect comparable evidence via agents or other L&T surveyors and analyse.
* Create Report which includes, location, description, lease summary, highlight any terms believed to impact rental value, highlight comparable evidence, make a conclusion highlighting a rental value based on the evidence. Create Rental valuation and report to client with a recommendation on how to proceed.
* Once approved by client, enter into negotiations based on recommendation
