Leasing and Letting Flashcards
(140 cards)
1
Q
What professional statement did the RICS release for global agency practices?
A
RICS Global Real Estate Agency and Brokerage, 2016
2
Q
What RICS professional statement sets out mandatory standards for those involved in agency and real estate management work?
A
The RICS UK commercial real estate agency professional statement, 2016.
3
Q
Can you tell me any professional statements relating to estate agency?
A
The RICS UK commercial estate agency professional statement, 2016.
4
Q
What does the RICS UK Commercial Estate Agency, 2016 contain?
A
12 core principles which agents must observe
5
Q
Can you tell me what the core principles are of the RICS UK commercial estate agency professional statement, 2016?
A
- Act in a honest, fair, transparent and professional manner.
- Carry out work with due skill, care and diligence (ensure staff are competent)
- Provide fair and clear terms of business and complaints handling procedure
- Avoid conflicts of interest - deal with them openly, fairly and promptly.
- Don’t discriminate unfairly in any dealings.
- All communication is fair, clear, timely and transparent.
- Advertising and marketing material is honest, decent and truthful.
- Client money is held separately from other monies in appropriately
designated accounts and is covered by adequate insurance. - PII
- Identify client and make obligations clear
- Realistic assessment (i.e. likely selling, buying or rental price etc)
- Meetings / inspections / viewings – Regard to clients wishes and security/safety
6
Q
What is the key estate agency legislation?
A
Estate Agents Act 1979
7
Q
When does the Estate Agents Act 1979 apply?
A
- Disposal or acquisition of an interest in land
- Freehold property
- Leasehold property with a capital value
-Land as well as buildings
8
Q
What are the SIX key points which the Estate Agents Act 1979 promotes?
A
- Honesty and accuracy
- Clarity on TOE (s. 18)
- Open and transparent
- No discrimination
- Pass on all offers in writing
- Keep clients money separate
9
Q
What must you do according to Section 18 of the Estate Agents Act 1979?
A
In advance (in TOE) set out:
- the instruction
- fees
- any additional costs (i.e. marketing disbursements)
10
Q
What must you do according to Section 21 of the Estate Agents Act 1979?
A
- Disclose any personal interests
- Any personal interest should be declared on the terms of engagement
11
Q
What must you do according to the Estate Agents Act 1979 when you receive offers?
A
- Must report all offers received to the client, promptly and in writing
- Not able to misrepresent interest/offers - you can only tell the truth regarding offers received
12
Q
Who polices the Estate Agents Act 1979?
A
Trading Standards Office
13
Q
What are the penalties for non-compliance with the Estate Agents Act 1979?
A
- Warning order not to do again (first offence)
- Prohibition order - prevents the agent from practicing
14
Q
What are the different types of agency and selling rights that can be agreed?
A
Sole letting rights - Exclusive rights to one agent, fee due if let during agency appointment (including if client finds a buyer)
Sole agency - Exclusive rights to one agent, if client finds a buyer the agent won’t get a fee
Joint Agency - Two agents appointed to act together and the fee is split on a pre-agreed basis
Multiple Agency - More than one agent appointed - the agent who finds the buyer is paid the fee.
15
Q
What is the ‘cooling off’ period?
A
Period of up to 14 days is allowed for clients to change their mind and not instruct an agent in accordance with the Consumer Rights Act 2015
16
Q
What is money laundering?
A
Money Laundering means exchanging money or other assets that were obtained criminally for other money / assets that are clean.
also means money to fund terrorism
17
Q
Who do money laundering regulations apply to?
A
- All regulated sectors
18
Q
What are the requirements under the money laundering, terrorist financing and transfer of funds regulations 2017?
A
- Undertake CDD (identify customer - 2 x ID)
- Keep records of CDD (5 years)
- Maintain and undertake internal procedures to identify and prevent money laundering
- Report suspicious activity (SAR Report) - internally to nominated ML officer, externally to serious organised crime agency
- Training for employees
- Letting agents must register with HMRC if they are receiving rent over 10,000 euros per month.
19
Q
What is the money laundering regulations?
A
Money laundering, Terrorist financing and transfer of funds regulations 2017
20
Q
What would raise concern for money laundering?
A
- Suspicious behaviour i.e. sudden urgency or uneconomic decisions
21
Q
What is the proceeds of crime act 2000?
A
Applies to everyone and facilitates money laundering regulations 2017
- makes it illegal to be involved with concealing or transferring criminal property.
22
Q
What is the penalty as per the proceeds of crime act 2000?
A
14 years imprisonment and fine
(5 years and fine for ‘tipping off’)
23
Q
What is the Terrorism act 2000?
A
Makes it an offence if you have reasonable cause to suspect to be involved with financial activity involving terrorism
24
Q
What is terrorism?
A
the unlawful use of violence in the pursuit of political aims.
25
What is the consumer protection regulations 2008?
They protect consumers from unfair or misleading trading practices and ban misleading omissions and aggressive sales tactics.
26
What was the Property Misdescriptions Act 1991?
It was an Act which was repealed by an order in 2013.
Consumer Protection From Unfair Trading Regulations 2008 replaced the Property Misdescriptions Act
Removed in order to reduce duplicate legislation
27
Who do the Consumer Protection from Unfair Trading Regulations (CPRs) 2008 relate to?
Business to Consumer activities
28
Who do the Business Protection from Unfair Trading Regulations (BPRs) 2008 relate to?
Business to Business activities
29
Who is owed a duty of care under the CPRs / BPRs?
Potential buyers and vendors, potential clients, viewers and actual buyers
30
What agency practices do the CPRs / BPRs? relate to?
- Lettings
- Sales
- Online agency
31
What must agents do to ensure compliance with the CPRs / BPRs?
Must not mislead 'average consumer' - Declare everything known about a property - good and bad
Not to put undue pressure on potential leasee / buyer
Undertake full due diligence for all new instructions
Pass any information discovered during the agency process onto all interested parties
32
What is the penalty for breaching the CPRs / BPRs?
- Unlimited fine
- Prohibition order
- imprisonment (2 years)
* Compensation paid to the complainant of up to £25,000
33
What is a tenancy at will?
An agreement which permits the tenant to occupy a property and is terminable immediately by either party
34
Can you tell me the permitted development rights / restrictions on marketing boards (to-let boards)?
- 2 sqm (2.3 sq m if V board)
- Projection 1M from building
- Planning permission needed in conservation area / listed building
- No illumination
- Remove within 14 days of letting
35
What legislation sets out the restriction on to-let boards?
The Town and Country Planning (Control of Advertisements) (England) Regulations 2007
36
How would you promote / market an available building or space?
A marketing plan:
- Call client list
- targeted mailshot to clients
- Press and internet advertising
- To let board
- Estate agents window
37
What is an energy performance certificate?
An energy performance certificate tells you how energy efficient a building providing a rating from
A, very efficient,
to
G inefficient
Includes energy use and recommendations for improvement
38
What are the requirements for EPCs when letting a building?
- Must be instructed prior to marketing
- Letting details must show the rating (since Jan 2013)
39
What are the penalties if you don't comply with EPC?
- Trading standards enforce fines if don't comply (2.5% RV subject to a min of £500 and max £5,000)
40
When is an building exempt from requiring an EPC?
- unheated building
- listed building and the required improvements would unacceptably alter it
- a detached building with a total floor space under 50 square metres
- Building used for place of worship or other religious activities
- due to be demolished / redveleoped
41
Where can you find an EPC?
Stored on national register (epc register . com)
42
How long is an epc valid?
10 years (unless altered)
43
What are MEES?
Minimum Energy Efficiency Standards which force green deal improvements on Landlords
(came into force 2018)
44
What is current MEES legislation?
from 1st April 2023 all buildings must have an EPC rating of E or above
45
What is future MEES legislation?
Compliance windows
2025 - 2027 (C by 27)
2028 - 2030 (B by 2030)
46
How do you check a Tenant's covenant strength?
- Credit report (i.e. Dun and Bradstreet) - assess creditworthiness of business
- 3 years audited accounts - profit and loss, balance sheet
47
What would you recommend to your client if the tenant had a poor credit score / rating?
- Rent deposit
- Guarantor (name and address)
- If granting an incentive (payment from day one i.e. 1 year at half rent = 6m rent free)
- Authorised Guarantee Agreement (AGA on subletting)
- Regularly chase accounts to ensure payments have been made
48
What is the key RICS Professional Statement on leasing/letting practices?
RICS Code for leasing business premises, 2020
(reissued in September 2023 as a professional standard)
49
What is the aim of RICS Code for leasing business premises, 2020?
-Improve the quality and fairness of negotiations on lease terms
-Promote the issue of comprehensive heads of terms to make the legal drafting process more efficient
50
What are the FOUR sections of the RICS Code for leasing business premises, 2020?
Part 1: Introduction
Part 2: Mandatory requirements (Negotiations and heads of terms)
Part 3: Lease negotiation best practice
Part 4: Appendices
(Appendix A - Template heads of terms and checklist; Appendix B - Guide for landlords and tenants)
51
What does the RICS Code for leasing business premises, 2020 say with regards to the negotiations of heads of terms?
- Must be approached in a constructive and collaborative manner
-An unrepresented party must be advised about this code and must be recommended to obtain professional advice
- The agreed terms of a lease must be recorded in written heads of terms and must summarise the position on a number of aspects
-Negotiations should produce letting terms that achieve a fair balance between the parties commercial interests
52
What items must be addressed in the heads of terms according to the RICS Code for leasing business premises, 2020?
- Demise (Identity and extent of the premises)
- Length of term
- Inside or outside Landlord and Tenant Act 1954
- Break option
- Requirements for a guarantor and/or rent deposit
- Amount of rent, frequency of payment, any VAT?
- Business Rates
- Rent-free period or other incentive
- Rent reviews including frequency and basis of review
- Liability to pay service charge and/or insurance premiums
- Responsibility for Business Rates
- Alienation - Right to assign, sublet, charge or share the premises
- Repairing obligations
- Permitted use
- Rights to make alterations and any particular reinstatement obligations
- Any initial alterations or fit-out (if known)
Any conditions (subject to surveys, approvals or planning permission)
53
What is contained within Appendix A of RICS Code for leasing business premises, 2020?
Template head of terms and a checklist, which can be used should the landlord wish to use their own form of heads of terms document
54
What is contained within Appendix B of RICS Code for leasing business premises, 2020?
Guide for landlords and tenants
(supplemental to this professional standard and does not hold any mandatory
status)
55
What is Heads of Terms?
a summary of the agreement between the parties, used to instruct lawyers
to produce the actual lease.
(HOT and lease should comply with the
recommendations of the lease code)
56
What is a Guarantor?
A person or company who will guarantee to the landlord the obligations of the
tenant.
57
What is the position of the Landlord?
The person or company who will grant the lease
(may be a freeholder or
leaseholder).
58
What is the position of the Tenant?
The person or company who will rent the property from the landlord.
59
For a lease term over seven years what is required and why?
For a term of over seven years a scale plan meeting the Land Registry’s requirements will be
needed, as such leases must be registered at the Land Registry
60
What is the benefit of implementing a break clause in a lease?
If a tenant and or landlord wishes to have a shorter term.
The benefit of a Break clause provides the, with an option to serve notice to leave sooner than expiry which avoids having to negotiate the renewal that would be needed if the tenant wanted to stay.
61
What is a disadvantage of a break clause for a tenant?
The longer term attracts a larger amount of stamp duty land tax or land transaction tax, which is not refundable if the lease is ended early under the break clause.
62
What information needs to be provided to the tenant in relation to a rent deposit or guarantee?
- how much is to be deposited or whether any guarantee
is unlimited or capped in amount
-when the deposit or other security will be returned or the guarantor released.
63
What is a rent guarantee agreement?
A rent guarantee agreement is where a guarantor agrees to pay the rent and meet all the obligations and duties of the tenant, should the tenant default, and also pay for any loss or damage caused by the tenant's breach of the tenancy agreement.
64
What is a lease?
A binding contract in law that sets out the terms and conditions of the tenancy between parties and defined their rights and obligations
65
What do rental guarantees typically cover?
Usually make the guarantor liable for the rent and the tenant’s other obligations, including service charge payments and repairs
66
Do tenants have to pay VAT on rental payments?
Depends if the property is ‘opted for VAT’ by the landlord
67
What does it mean to ‘assign’ a lease?
Transfer the lease to another party who takes over occupation and responsibility for the lease obligations
68
What does it mean to ‘sublet’ a property?
Existing tenant continues to hold the lease and pay rent to the landlord but sublets the space to another party, from whom the tenant will in turn collect rent
69
What is an AGA?
- Authorised guarantee agreement
- Requires the tenant who assigns a lease to guarantee the performance of the lease obligations by the party to whom the lease is assigned
70
What provisions can there be in the lease to mean that a tenant does not require an AGA to assign a property?
- If the new tenant is financially strong enough
* If the new tenant pays an appropriate rent deposit and/or provides suitable guarantor
71
What is a ‘schedule of condition’?
Record of the condition of the property
Written description of the property or a set of photographs or both
Referred to in the lease and attached to it or kept with it
72
What should be the only condition on a tenant being able to exercise a break option, according to the RICS Code for leasing business premises, 2020?
Only be conditional on the rent having been paid
(other liabilities such as paying service charges or handing the property
back in good condition - failure to comply should not be used by landlords to
invalidate the right to break)
73
When is a rent deposit refunded?
A tenant should normally be refunded any deposit when they no longer have an
interest in the property
74
Where should the obligations of a tenant providing a rent deposit be recorded?
in a detailed rent deposit deed.
75
What are the methods of increasing the rent at a review?
- open market rental valuation - based on market evidence
- indexation - rent increases in line with increases in a published index such as the
Retail Prices Index (RPI) or Consumer Prices Index (CPI)
76
What is an 'upwards only' rent review?
allow the rent to be increased but never decreased.
77
What should be disregarded during an open market rent review?
disregarding of any:
- added value from improvements the tenant makes (other
than under an explicit obligation)
- any value arising from the tenant’s business.
78
What happens if parties cannot agree on what the open market rent is?
Either party refers this to an independent expert or arbitrator to settle.
79
What details with regards to the rent deposit should be included in the lease, according to the RICS Code for leasing business premises, 2020?
- the amount (including where required any
sum to cover VAT)
- the time it will be held, whether it will be security for only the rent or all the tenant’s obligations under the lease
- circumstances in which the deposit will be returned to the tenant with any accrued interest
80
What details with regards to the rent review should included in the lease, according to the RICS Code for leasing business premises, 2020?
- The initial rent
- frequency of payment
- whether the landlord intends to charge
VAT
- details of any rent-free period or
other incentive
81
What details with regard to the service charge and insurance payments should the landlord provide an indication of, according to the RICS Code for leasing business premises, 2020?
- the landlord should indicate the range of main services
- provide proper
estimates of service charges and insurance payments.
- disclose the
types of other outgoings (such as business rates)
- Landlords should disclose known irregular events that would have a significant impact on the
amount of future service charges.
82
What is said with regards to assignment in RICS Code for leasing business premises, 2020?
83
If a tenant’s repairing obligation are to be limited to the initial condition of the premises, what is required according to the RICS Code for leasing business premises, 2020?
a schedule of condition will normally be required and the parties should agree
which party is responsible for the cost of obtaining it
84
What should the landlord do when holding a rent deposit?
- hold rent deposit funds
in bank accounts designated for holding only rent deposits
(to protect the funds in case the landlord becomes insolvent)
**any bank interest will
accrue for the tenant)
85
what can the landlord request for additional security if there is a tenant with a weak covenant strength?
- Payment from day 1 (i.e. 6 month incentive - 12 months at half rent)
- Rent deposit
- Guarantor
86
What information would you typically request from a tenant when looking to assess their suitability?
- ID (2 types with address)
-
87
What check or test can you use to assess the financial suitability of a tenant?
Credit check
or
profits test - the tenant to provide 3 years' audited accounts showing a net profit of 3 times the annual rent
88
What are the main lease terms that impact on the value of a property?
- size
- length of the lease
- break option
89
What is a pre-let?
a contract between a potential tenant and a commercial property developer which allows the tenant to agree to lease a building before the construction has started.
90
When is an occupier going to be more willing to consider a pre-let?
- when a tenant cannot find a suitable property in their search area
(lack of supply - I.e. industrial)
91
What is the main advantage of a tenant pre-letting?
- occupier will have some influence over the build design, therefore creating a space tailored to their business' needs
- Possible lower rent / incentives
92
What is the main disadvantage of a tenant pre-letting?
- Risk the unit might not be delivered on time
- Risk the unit will not meet expectations
- Difficulty in sub-letting if the building
is too ‘bespoke’
93
When a tenant pre-lets a building, what documents would typically be attached to an Agreement to Lease?
Licence to to enter into the premises to carry out works
(not a lease and does not allow the tenant many rights over the property.)
94
If a landlord is seeking to limit a tenant making changes to the property, what will they typically require?
Licence for alterations
95
What is a licence for alterations?
a legal document that grants a leaseholder permission to make specific alterations to their property.
- usually drafted by LL solicitor and at the cost of the T
- It must be completed prior to works commencing.
- Normally requires tenant to reinstate works at end of lease.
96
Why might a freeholder not be supportive of a tenant subletting the property?
the Landlord may feel they have less control over the property
(Landlord will often need to first approach the Tenant to remedy the breach as the Subtenant is not the direct tenant of LL)
97
What different types of alienation provisions can there be in the lease?
- assignment
- subletting
- sharing occupation
98
On what grounds can a landlord reasonably refuse permission for a tenant to sublet or assign their interest?
The code sets out that LL may refuse consent may be refused if:
- T is in arrears of rents, service charges or insurance premiums that are not the subject of a legitimate dispute
- the assignee has insufficient financial strength
99
What does 'not to be unreasonably withheld' mean?
When a Party requests any consent, permission, or approval which may be required or desired by that Party, the other Party shall not unreasonably withhold or postpone the grant of such consent, permission, or approval.
100
After you have instructed solicitors, is there anything you would do to ensure that the leasing completes?
- Chase solicitors for updates regularly
- Answer any questions
/ information requested from the Solicitor should be provided promptly
101
What is an engrossment?
The final version of a lease document
102
What typically occurs with the engrossment of the lease?
The final printed version of a particular document is printed and posted to be be signed by the parties
103
What are business rates?
What is the current multiplier?
Business rates are a tax on business property is set by the government.
The 2023/24 multipliers are set at 51.2p or 49.9p for small businesses.
104
What user clause is industrial?
B2 - General Industrial
B8 - storage and distribution
105
What user clause is Business (i.e. office)?
E
106
What user clause is Retail?
E
107
Can you give me an example of unit with a Sui Generis use class?
‘hot food takeaways, public house, and cinemas and bingo halls .
108
What is an alienation clause?
This sets out a tenants right to dispose of their lease, such as by way of assignment or sub-lease.
109
What are the different types of alienation clause?
Open
- Allowed
Restricted
- Conditional
Absolute
- Not allowed
110
What act are you aware of that relates to assignments?
Landlord and tenant covenants act 1995
111
What does the landlord and tenant (covenants) act do?
Automatically releases a tenant from their liabilities on assignment.
(Before 1996 the original tenant remained responsible - after 1996 a AGA is required)
112
What are dilapidations?
This is a negotiation between the landlord and the tenant at the end of the lease to put the space back to its condition at the start of the lease.
Two options:
Tenant does the works
Tenant pays landlord to do the works
113
What is a schedule of dilapidations?
This sets out the works that must be done by the tenant at the end of the lease in line with the reinstatement clause in the lease
114
What are the UK quarter days?
25th March
24th June
29th September
25th December
115
What is forfeiture?
Forfeiture occurs when the landlord exercises their right to regain possession
(usually if tenant has breached the lease)
116
What is an effective FRI lease?
The tenant is not directly responsible for all repairs, but the landlord is able to recover the cost of repairs to the common structure from the tenant.
117
What is a service charge?
An amount that tenants pay to cover the cost of providing communal or shared services to a building and, if applicable, the surrounding estate
118
How are service charge is normally apportioned?
On floor area
119
What is the sinking fund?
a fund formed by periodically setting aside money for the repair or replacement of a wasting asset (any asset with a predictable lifetime, not exceeding 50 years i.e. include lifts, roofing, air conditioning plant and equipment)
120
What is a sink fund used for?
What is the benefit?
A sinking fund is generally used to set aside money for the repair or replacement of specific wasted assets over the longer term.
Advantage - sinking fund being collected as part of the service charge is pre-planned repairs/ replacement - minimises the risk of a tenant being unexpectedly required to make a lump sum payment.
Disadvantage - some properties do not require any major repairs or replacement of a wasted asset during the term of the lease. Raises disputes to whether this is being used correctly or if balance is repayable on the termination of the lease.
121
What does without prejudice mean?
Allows parties to negotiate freely without the ability for discussions to be used against them in court.
122
What is a Calderbank offer?
A letter, expressed as 'without prejudice save as to costs', which contains an offer to the other party in the review inviting it to settle without taking the arbitration further.
The letter must set out all terms to settle the dispute, principally rent and costs.
123
What is section 25 of the L and T act 1954?
S25 notice is served by the LL on the Tenant to either:
- Inform tenant lease has come to an end however willing to enter into new lease
- Inform lease has come to an end and oppose a renewal under grounds E, F or G
124
What is section 26 of the L and T act 1954?
S25 notice is served by Tenant on the LL to request a new tenancy
125
What is section 27 of the L and T act 1954?
A formal notice for a tenant to serve on its landlord if the tenant does not wish to renew a lease that either is about to expire or has expired.
126
What is section 30 of the L and T act 1954?
- Sets out the grounds for opposing a new tenancy.
127
What is section 37 of the L and T act 1954?
- Sets out the compensation payable if the LL has opposed a new tenancy under grounds E,F,G in Section 30
128
How do you contract a lease outside the act?
Serve a health notice on the Tenant setting out that the lease is to be contracted out
Serve a simple or statutory declaration for signature
129
What is time of the essence?
The stated time for completion of an obligation in a contract is a condition of the contract.
Failing to comply can therefore allow the innocent party to terminate the contract and claim damages.
130
What is negotiation?
A discussion aimed to
settle a dispute and agree to be bound by this settlement
131
If a interested party has advised that they will not be using an rics professional as a representative, what would you do?
- Inform them about the code for leasing business premises 2018
- recommend they obtain professional advice
132
What are the 5 mandatory requirements of the code for leasing business premises 2020?
1. Negotiations must be approached in a constructive and collaborative manner
2. Party not represented must be informed of this code and advised to seek professional advice
3. Terms of agreement on a VP letting must be recorded in written HOT (subject to contract)
4. At lease renewal or extension HOT must comply with requirements (subject to reasonable modernisation)
5. Negotiations should aim to produce letting terms that achieve a fair balance between the parties
133
What are the 3 main types of lease?
- fixed term
- periodic
- tenancy at will
134
What is a fixed term lease?
Any period of time albeit long leases for residential property are usually 99, 125 or 999 years
135
What is a periodic lease?
A periodic lease is one for an initial fixed period but allows the lease to continue until lease is terminated by either party in accordance with lease
(Month to month tenancy is to ended on a months notice)
136
What is a TAW?
Either party can end the agreement on immediate notice
137
What is commonhold?
Type of freehold introduced to deal with multiple properties
(Individual units own the freehold and a share in the common hole association that manages and owns common parts)
138
What is exclusive possession?
LL cannot enter the property except in certain circumstances set out in the lease
139
What is a leasehold interest in property?
Lease granted for a distinct period of time and once term has ended, tenant is holding over before a tenancy at will is created which is terminated by notice.
140
Who insures the property?
Landlord and tenant repay premium
This allows LL to ensure properly insured at all times
