Landlord and Tenant Level 2 Flashcards
(71 cards)
1
Q
What was your High Street Retail Lease Renewal, Thetford example?
A
Boots
(Bank stated in the example)
2
Q
Thetford Boots (Pretend Lloyds bank)
A
3
Q
What is the governing statue?
A
Landlord and Tenant Act 1954
4
Q
What were the salient lease terms for Thetford?
A
- Term: 10 years
- TOB at 5th
- 1954 Act: Yes
- Use class: A1 (shops) - now under Class E
- RR Clause: 5 yrly OMRV
5
Q
How did you know the lease was inside the act?
A
Silent clause - assume inside if not mentioned
6
Q
What was the passing rent at Thetford?
A
£18,000
7
Q
What was your ERV at S.26
A
£16,000
8
Q
Agreed Market rent ?
A
£17,500
9
Q
How do you know if the lease outside the Act?
A
Will state that it is “outside the Act” or “contracted out” of the LTA 1954
10
Q
Why did you advise on serving a S.26 notice?
A
- To crystalize the expiry date for my client
- To capture the reduced rent as soon as the lease expires
- Showed commitment to staying within the property
11
Q
Did you need to serve a S.26?
A
Technically no, but I wanted to crystalise the expiry date for my client
12
Q
What must be included within a S.26?
A
- Proposed Term (5 Yr TOB at 5th)
- Proposed Rent (£16,000)
- Any other proposed terms
- Proposed new lease date
- Signed and dated
- Addressed to the Landlord
- Sometimes section 30 - grounds for refusal
(also included timeframes to oppose)
13
Q
What were the proposed terms in the Thetford S.26?
A
Term: 5 years
Rent: £16,000 pa
Break Clause: TOB at 3rd
14
Q
Can you describe the inspection of Thetford?
A
- Location: Main retail parade
- Retail mix: strong retail mix
- Demise: GF, kitchen and ancillary, upper floor flat
- Vcaancy: Some vacant units
15
Q
What was your key comp at Thetford?
A
Boots
- opposite the unit
- OML
- same terms
-£30 ZA
- We were bound by these terms as the most recent and relevant piece of comparable evidence
16
Q
How did you calculate the ERV of Thetford?
A
- Measured and Zoned
- Applied ZA Rate from comps
- less 7.5% of total GF for set back
- £500 pcm for the Flat
- -33% management allowance
17
Q
What does the discount of for flats account for?
A
Management allowance
- 33% discount on flat pcm
- Takes into account for agents fees, boiler issues, tenant issues etc
- gathered from comparables with similar discounts
18
Q
What was the ERV of Thetford?
A
£17,500 pa
19
Q
What was the strategy of Thetford bank (Boots)?
A
Term: 5 years with TOB at 3rd
20
Q
What terms did you negotiate at Thetford?
A
Term length: 10 years down to 5 years
Rent: Negotiated the value of the flat £500 -> £750 (sought advice from estate agents on rents pcm for a 1 bed, supported by Rightmove)
Comparables: Compared and negotiated comparables evidence of commercial rents
Discount: Allowance for set back (-7.5% of GF area)
21
Q
How did you agree a reduced lease length?
A
- Pattern of leases has changed since the commencement of the original lease
- 5 years with TOB fell in line with recent comparables
- In line with the clients strategy
22
Q
What happened after you negotiated with the Landlord’s representative?
A
- After negations
- Subsequently made recommendations to my client
- We agreed HoTs
- Got it into legals with solicitor
23
Q
What were the agreed HOT for Thetford?
A
Term: 5 years with TOB at 3rd
L&T Act: Inclusive
Rent: £17,500 pa
Rent review: n/a
Break clause: TOB at 3rd
Repair/decoration: As per existing
Use: within class E
Alienation: As per existing
Alterations: as per existing
24
Q
Did the value change at lease renewal?
A
remained broadly in line
- retail value want down
- resi values had increased
25
What length of notice did you give for the S.26?
A date not more than 12 months and not less than 6 months after making the request.
26
Who serves the S.26?
Solicitor
27
How long does the landlord have to respond to a S.26?
2 months
28
What does a Landlord do if he wishes to object the S.26?
Serve a S.26 counter notice
29
What length of notice did you give when serving your S.26 and why?
6 months
Enough notice so that the new lease was prepared in time of lease expiry - No interim rent
30
What is section 40 notice?
* Requires information from the LL or T
* Can check the details of competent landlord or tenant with **statutory protection** (timeframes to respond)
31
What is section 44?
Competent Landlord is either:
- A freeholder, or
- Superior tenant with an unexpired term of 14 months
32
What considerations would you have for an objected s.26?
- Object
- Timeframes (was it opposed in correct timeframes)
- What the grounds are
- When and how much compensation is payable
33
If unsure?
- Speak to supervisor
- Seek expert legal advice
34
So what was the outcome of thetford?
- Agreed a reduced rent
- In line with client strategy 5yr term, TOB at 3rd
35
High Street Bank Rent Review, London
Walton on Thames (Lloyds)
36
Walton on Thames
37
What was the lease length of London Bank?
10 years
38
What was the passing rent at the Walton on Thames?
£65,000 - £40 ZA
39
What was your opinion of market rent?
£55,000 - £36 ZA (in line with Boots opposite)
40
What was the rental tone of Walton on Thames?
£30-£40 zone A
41
What were you looking out for in the rent review clause?
Time of the essence
Type of review
Review date
Assumptions and disregards
Third party
42
What was the Rent Review clause of London Bank?
5 yearly
OMRV (upwards only)
Arbitration
43
What were the assumptions and disregards of London Bank?
Assumptions
1. Assumed term of 5 years
2. willing parties
3. Vacant possession - ready for immediate occupation
Disregards
1. Tenants occupation
2. Goodwill
3. Tenants Improvements
44
Describe the inspection of London Bank?
**Location**: Southern end of the High Street in a secondary pitch.
**Retail mix**: Monsoon, New Look, Sports Direct and Waterstones
**Demise**: Ground floor retail with kitchen and ancillary space at the rear
**Demand for location**: Numerous vacant units
45
How did you use RICS Comparable Evidence in Real Estate Valuation 2019?
Cat A - Direct comparables had the most weight
- OML, LR, RR
Within that I had consideration to the hierarchy of evidence as set out in the Handbook of RR, Reynolds and Barnstein)
46
What is the hierarchy of evidence in the Handbook of Rent Reviews, Reynolds and Fetherstonhaugh)
1. OML
2. LR then RR
3. Independent Expert determinations
4. Arbitration awards
5. Court determinations
6. Hearsay evidence
7. Sale and leaseback
8. Surrender
9. Inter-company arrangements
47
What are the categories A within RICS Comparable Evidence in Real Estate Valuation 2019?
Category A: **Direct comparables**
* Completed transaction of nearly identical property where full information is **available**, or **reliable** information available.
* Similar asset but offers made, and no binding contract.
* Asking prices (treat with caution)
48
What are the categories B within RICS Comparable Evidence in Real Estate Valuation 2019?
Category B: **general market data**
* Information from published sources/commercial databases
* Indirect evidence (i.e. indices)
* Historic evidence
* Demand/supply data for rent, investment
49
What are the categories C within RICS Comparable Evidence in Real Estate Valuation 2019?
Category C: other sources
Transactional evidence from other real estate types/locations
Other background data (interest rates, stock market movement
50
For your London Bank example, give an example of each comp evidence used
Cat A - direct comparables
- OML, LR, RR
Cat B - general market data
- Inflation, Interest rates
Cat C - other sources
- Maps, other locations
- provide BROAD indication
51
How did you conclude there was no rental uplift for the London Bank?
- Evidence showed Zone A's were decreasing
- Many vacant units
52
Why did you trigger the rent review at nil increase for the London Bank?
- no evidence for uplift
- upwards only rent review
53
What was included in the Calderbank?
1. **Address** of subject property
2. Proposed rent (£65,000) – nil increase
3. Each party shall bear own costs and one half of Arbitrator costs
3. Offer open for 21 days
4. ‘Without Prejudice, Save as to Costs’
54
Why did you need to issue a Calderbank in the London Bank example?
- It was an obvious nil increase from the evidence i had found
- Following some negotiations, the landlord was not engaging
- Therefore we served a calderbank to show full intention of our position
- and bring them to the table
- To protect my clients position on costs
55
What would happen if the LL did not respond to the calderbank within the timeframe?
- If they do not accept the calderbank within the timeframe they have to accept that if it went to court, they could be liable for my clients costs if it went to third party
56
What is a calderbank?
Commercial offer to settle, to protect my clients position on costs
57
How does a calderbank protect the clients position on cost?
- If the determination concluded that that the opposing party was better off accepting the calderbank
- my clients costs could be recovered
- arbitrator would have power over the costs
58
Why is it important that details within the calderbank are correct?
- If details are wrong, they will not be valid
59
How did the landlord accept your calderbank?
- Confirmed receipt
- Requested that we issue the memorandum
60
When would you not need a RRM?
If a Calderbank has been accepted
61
What was in the RRM for London Bank?
- Date
- Landlord
- Tenant
- Property
- Agreed rent (£65,000)
- Brief particulars of lease
- Signed and dated by both parties
62
How did you document the RRM?
- Evidence of a nil increase
- Send a trigger letter stating opinion of nil increase
- Attached memorandum with the trigger letter
- Checked the confirmed lease terms were correct
- Attached a blank copy for Landlord
- Request for the RRM to be signed and left undated
- Once signed by the LL, give to client to sign and date
= complete
- send completed to the landlord for their file
63
Was there any negotiation for the London bank?
- LL provided some evidence
- Through negotiations we revealed that LL evidence was dated and lower in hierarchy
- Following receipt of my more recent evidence the LL went quiet
- Advised my client to issue calderbank to engage the landlord
- Wanted to provide our best and final offer
64
Was Time of the Essence and what does this mean?
It was not of the essence. It means that time is of the essence to exercise the right to trigger a rent review. Failure to do so in time limit means the right is lost.
65
CASE LAW: Starmark Enterprises v. CPL Distributions 2000
Time of the essence
66
New valuation date is 6 months from the date of expiry
If it was 3 months from expiry, you would have three months until natural lease expiry and then another 3 months after that until you can capture the new rent
67
How do report on lease renewals and how to ensure strategy with your client?
- We are instructed to report 24 months prior to lease expiry day
- Gives them enough time to review the report and decide on a strategy
- Once it falls within the window to serve a section 26, then we can serve the notice within the specified timeframe
- We served the notice 8 months prior
- This allowed the new lease to commence the day after the lease expiry
- This was to capture the reduced market rent as evidence showed that rents were falling in Thetford
68
What date is reported in the S.26?
The proposed new lease start date i.e the valuation date that you will be working toward
69
How would you agree a lease renewal outside the act?
- Informal approach
- Same approach but not serving of notices as per sections 24-28 1954 act
70
When do fees get paid to an independent expert?
- in order for the determination to be released, both parties have to pay half of the fees
- once the determination is released, the value closest to the calderbank, will be able to recover the clients cost from the opposing party
- This is because you have protected your client on cost
- for an arbitrator this is all costs incurred
- for an independent expert, it is just the expert fees that get paid (will state in the lease)
71
Can you accept a calderbank after the timeframe?
Yes - if agreed between the landlord and tenant can request an extension
