Leasing and Letting

Question 1

Tell me about your understanding of legislation relevant to your leasing
and letting practice?

Answer 1

there is theEstate Agents Act 1979 and Misrepresentation Act 1967, adhering to these Acts ensures you act in the client’s best interest while treating all parties fairly and avoiding disputes.

Question 2

Tell me about your understanding of the Estate Agents Act 1979

Answer 2

makes sure you comply with the duties of transparency and fairness, including disclosure, fees and fair marketing

Question 3

What are the 6 key principles of the Estate Agents Act 1979?

Answer 3

1. Disclosure of Personal Interests
2. Transparency in Fees and Charges
3. Duty to Avoid Misrepresentation
4. Handling of Clients’ Money
5. Provision of Terms of Business
6. Proper Handling of Offers

Question 4

How does Section 18 relate to your letting practice?

Answer 4

Section 18 of the Landlord and Tenant Act 1927 is all about dilapidations. It caps the value on dilaps - so has impact on lease negotiations and also a end of lease dilaps review

Question 5

What are the various agency bases?

Answer 5

1. Sole Agency
2. Joint Agency
3. Mulitple Agency

Question 6

What are the differences between the agency bases?

Answer 6

• sole agency – only one agent
• joint agency – two or more agents sharing a fee on a pre-agreed basis
• multiple agency – any number of agents but only the successful agent gets a fee

Question 7

Where is agency base defined?

Answer 7

Estate Agents Act 1979

Question 8

What is a ready, willing and able purchaser?

Answer 8

Ready: Prepared to proceed.
Willing: Agrees to the terms.
Able: Has the financial means.

Question 9

How does Section 21 relate to your letting practice?

Answer 9

Section 21 of the Landlord and Tenant Act 1985 requires landlords to provide service charge information that is reasonable and for costs properly incurred.

Question 10

Tell me about key points of the Consumer Protection / Business
Protection Regulations

Answer 10

The Consumer Protection from Unfair Trading Regulations 2008 and Business Protection from Unfair Trading Regulations 2008 are designed to protect consumers and businesses from unfair practices. Key points include:

Prohibition of Unfair Practices: Bans misleading actions and omissions, false advertising, and aggressive sales tactics.
Transparency: Requires clear and truthful information in marketing, especially regarding prices and terms.
No Misleading Actions: Agents must not misrepresent property details or lease terms.
Fairness in Business: Protects businesses from misleading practices that could damage their reputation or cause unfair competition.

Question 11

What is an average consumer?

Answer 11

A typical person who is reasonably informed, observant, and circumspect, but not necessarily an expert. This concept is used to assess whether information or actions are misleading or unfair to a general consumer.

Question 12

What is material information?

Answer 12

Information that a reasonable consumer would consider important when making a decision, such as property details, lease terms, or fees. Misleading or omitting material information is prohibited under the Consumer Protection Regulations.

Question 13

What are considered to be unfair practices under this legislation?

Answer 13

-Misleading Actions
-Misleading Omissions
-Aggressive Commercial Practices
-Bait Advertising
-False Claims

Question 14

How does the Misrepresentation Act 1967 relate to your agency practice?

Answer 14

1) Preventing false or misleading statements about property.
2) Ensuring accurate information in marketing and negotiations.
3) Allowing damages or rescission of agreements if misrepresentation occurs.
4) Holding agents accountable for negligent or fraudulent misrepresentation.

Question 15

What does the Unfair Contract Terms Act 1977 say?

Answer 15

1) Limits the ability to exclude or limit liability in contracts.
2) Prohibits terms that unreasonably limit a party’s liability for breaches or damages.
3) Requires reasonable terms in contracts for consumers and businesses.
4) Ensures transparency and fairness in contract negotiations.

Question 16

Do you need to inform your client if you offer a service to a prospective
tenant?

Answer 16

Yes, you must inform your client if you offer a service to a prospective tenant. This ensures transparency and avoids conflicts of interest, as required by the Estate Agents Act 1979

Question 17

Tell me about your understanding of the Code for Leasing Business
Premises in England & Wales.

Answer 17

• Clear and Transparent Terms
• Balanced Obligations
• No Unfair Terms
• Pre-lease Negotiations
• Reasonable Costs

Question 18

When and how was it last updated? (Code of Leasing Business Premises)

Answer 18

First Published: February 2020
Effective Date: 1 September 2020
Amended: January 2022 to update references to RICS Rules of Conduct
Reissued as RICS Professional Standard: September 2023

Question 19

Explain the key principles of the RICS Professional Standard Property
Agency and Management Principles to me.

Answer 19

Integrity
Competence
Accountability
Confidentiality
Transparency
Professionalism

Question 20

Tell me three key issues raised in the RICS Real Estate Agency and
Brokerage Standards / RICS Commercial Real Estate Agency (Purple Book).

Answer 20

• Conflict of Interest
• Transparncy in Fees
• Marketing and advertising

Question 21

Explain what alienation is?

Answer 21

alienation refers to the transfer of rights or interest in a property, typically through assignment or subletting of a lease. It allows a tenant to transfer their lease to another party, subject to the landlord’s consent, which may not be unreasonably withheld.

Question 22

What happens if there is no alienation clause in a lease?

Answer 22

If there is no alienation clause in a lease, the tenant cannot assign or sublet the property without the landlord’s consent. In such cases, the tenant must seek the landlord’s approval, and the landlord may have the right to refuse the request, depending on the lease terms.

Question 23

What is subletting?

Answer 23

Subletting is when a tenant leases part or all of their leased property to a third party (the sub-tenant) while retaining their original lease agreement with the landlord. The tenant remains responsible for the lease obligations to the landlord.

Question 24

What is assignment?

Answer 24

Assignment is the transfer of the tenant’s entire interest in the lease to a third party (the assignee). The assignee takes over the lease, assuming all rights and obligations, and the original tenant is usually released from further liability.

Question 25

Explain your understanding of the Landlord & Tenant (Covenants) Act 1995 and how it affects your leasing work.

Answer 25

- Tenant not automatically liable after assignment. - Landlord’s covenants bind new tenant. - Original tenant may remain liable unless released.

Question 26

What does S19 1a of the Act say?

Answer 26

Section 19(1A) of the Landlord and Tenant Act 1927 states that a landlord cannot unreasonably withhold consent to an assignment, subletting, or charging of the lease. The landlord must give written consent if the tenant requests it, and if consent is refused, it must be based on reasonable grounds.

Question 27

What is an Authorised Guarantee Agreement and when might one be given?

Answer 27

- Original tenant guarantees assignee’s lease obligations. - Given during assignments for additional security. - Ensures compliance with lease terms by assignee.

Question 28

Can a tenant assign a lease to it’s guarantor?

Answer 28

No, a tenant cannot assign a lease to its guarantor unless the landlord specifically agrees. The guarantor is typically a party providing security for the tenant's obligations, not someone who assumes the lease itself.

Question 29

What is a pre-letting?

Answer 29

A pre-letting is an agreement where a tenant commits to lease a property before it is fully constructed or available for occupation. It often occurs in new developments, with terms agreed in advance of the property's completion.

Question 30

What is an Agreement for Lease?

Answer 30

An Agreement for Lease is a contract between a landlord and tenant that sets out the terms and conditions for a lease, to be signed at a future date. It typically occurs when the tenant agrees to lease the property once it is ready for occupation or certain conditions are met

Question 31

Why would AFL be used?

Answer 31

-Secures tenant before property is ready. -Sets out future lease terms and conditions. -Provides financial security to landlord. -Allocates responsibilities for pre-lease works.

Question 32

What is a collateral warranty?

Answer 32

A collateral warranty is a legal agreement where a third party (such as a contractor or consultant) provides a warranty directly to a party (e.g., tenant or purchaser) who is not a party to the original contract.

Question 33

Tell me about the planning considerations you are aware of if you want to install a marketing board.

Answer 33

1) Check if planning permission is required. 2) Ensure compliance with size and location restrictions. 3) Avoid obstructing highways or pedestrian areas (consider Highways Act). 4) Follow advertising regulations (e.g., illumination, content). 5) Adhere to local authority guidelines (e.g., duration, placement). 6) Obtain tenant/property consent before installation.

Question 34

Do you need planning consent to install a marketing board?

Answer 34

You may need planning consent to install a marketing board, depending on factors such as: - Size of the board. - Location (e.g., conservation areas, listed buildings). - Whether it’s in a highway or public space. - Type of advertisement (illuminated, digital, etc.).

Question 35

tell me about the requirement surrounding letting property and EPCs.

Answer 35

- Property must have an E rating or above. - Landlord must provide valid EPC before lease signing. - Exemptions for listed buildings or short leases (<6 months). - EPC is valid for 10 years. - Non-compliance can lead to fines up to £5,000.

Question 36

What buildings are exempt from having an EPC?

Answer 36

- Listed buildings or those in a conservation area (if works affect character). - Temporary buildings with leases under 6 months. - Buildings due for demolition. - Non-domestic buildings under 50m². - Places of worship and certain religious buildings

Question 37

Can you charge a tenant for a copy of an EPC?

Answer 37

No, you cannot charge a tenant for a copy of the EPC. The cost of providing the EPC should be covered by the landlord, and it must be given to the tenant free of charge before the lease agreement is signed.

Question 38

Where does the EPC have to be shown?

Answer 38

On the EPC Register. Marketing particulars. Given to solictors during conveyancing

Question 39

How long do you have to produce the EPC after a property is put on the market?

Answer 39

An EPC must be produced within 7 days of a property being put on the market for sale or rent. If the EPC is not available within this time frame, the landlord or agent may face a penalty.

Question 40

Tell me about how MEES affects your leasing practice.

Answer 40

- Property must have an EPC rating of E or above to be let. - Properties below E rating cannot be let unless exempt. - Landlord obligations to improve energy efficiency. - Non-compliance can result in fines up to £150,000. - Possible exemptions (e.g., cost-effectiveness, third-party consent).

Question 41

What are the key compliance dates?

Answer 41

April 1, 2018: Commercial properties must have an EPC rating of E or above for new or renewed leases. April 1, 2023: All commercial properties must have an EPC rating of at least E to continue being let, sold, or occupied under existing leases (unless exempt). 2030 - maybe a B.

Question 42

How can MEES risk be reduced?

Answer 42

1) Conduct regular EPC assessments. 2) Upgrade energy efficiency (e.g., insulation, lighting, heating). 3) Apply for exemptions if necessary. 4) Include energy efficiency clauses in leases. 5) Monitor compliance with MEES regulations. 6) Engage professionals (e.g., energy assessors, contractors).

Question 43

What would you do if you were asked to let an F or G rated property?

Answer 43

1) Advise landlord on MEES regulations. 2) Recommend improvements to EPC rating. 3) Check for exemptions (e.g., cost-effectiveness, third-party consent). 4) Negotiate lease terms or adjust rent if improvements aren’t feasible. 5) Monitor compliance with MEES deadlines.

Question 44

How can you improve an EPC rating?

Answer 44

- Upgrade insulation (walls, roof, floors). - Install energy-efficient lighting (LEDs). - Upgrade to modern, efficient heating systems. - Install double-glazing windows. - Consider renewable energy (e.g., solar panels). - Ensure proper ventilation. - Install smart energy systems

Question 45

How could onerous lease clauses / macro / micro economic conditions impact upon tenant confidence and demand?

Answer 45

Impact of Onerous Lease Clauses / Economic Conditions on Tenant Confidence: 1. Onerous Lease Clauses: - Increased costs (service charges, repair obligations). - Reduced flexibility in lease terms. - Creates tenant uncertainty and reduced demand. 2. Macro-Economic Conditions: - Recession or inflation reduces demand. - Interest rate hikes increase borrowing costs. - Economic uncertainty lowers tenant confidence. 3. Micro-Economic Conditions: - Local market conditions (e.g., vacancy rates) affect demand. - Sector-specific challenges reduce demand in affected industries.

Question 46

How does VAT affect lettings?

Answer 46

- Rent: Commercial property rent is usually VAT-exempt. - Option to Tax: Landlords can opt to tax and charge VAT (20%) on rent. - Service Charges: Subject to VAT if landlord has opted to tax. - New Leases: VAT can be charged on rent if opted to tax. - Exemptions: Residential lettings or small-scale commercial leases may be VAT-exempt. - Impact on Tenants: Tenants may pay VAT but can reclaim it if VAT-registered

Question 47

What type of operator might be affected by a rent which is subject to VAT?

Answer 47

- Retailers: Can reclaim VAT if VAT-registered. - Hospitality: Hotels, restaurants, and bars can reclaim VAT if VAT-registered. - Offices: Tenants can reclaim VAT if VAT-registered. - Warehousing/Storage: Can reclaim VAT if VAT-registered. - Professional Services: Law firms, accountants, etc., can reclaim VAT if VAT-registered.

Question 48

What health checks apply to contracting out?

Answer 48

- Assess financial viability of the contractor. - Ensure appropriate insurance coverage (e.g., liability). - Verify experience and expertise of the contractor. - Confirm compliance with laws (e.g., health and safety). - Check references and reputation. Review contract terms

Question 49

When did contracting out procedures last change?

Answer 49

Landlord and Tenant (Covenants) Act 1995: Amended procedures for contracting out of lease protections.

Question 50

Explain what you understand by the planning use classes.

Answer 50

- Class A: Retail and food services (e.g., shops, cafes, restaurants). - Class B: Business and industrial uses (e.g., offices, light industry, warehouses). - Class C: Residential (e.g., houses, flats, care homes). - Class D: Non-residential institutions (e.g., schools, medical clinics, places of worship). - Class E: Commercial, business, and service uses (e.g., gyms, offices, retail, medical uses, cafes). - Class F: Local community uses

Question 51

When was Use Class last amended and what changes were made?

Answer 51

Use Classes Order 2020. Merged most commerical business into Use Class E

Question 52

How do you assess tenant covenant strength and what security might you request as a result?

Answer 52

Use CreditSafe, can request a deposit or guarantor as secuirty

Question 53

What money laundering checks do you undertake during agency work?

Answer 53

- Client identification (e.g., passports, driving licenses). - Verify source of funds (e.g., bank statements). - Enhanced due diligence for high-risk clients. - Ongoing monitoring of transactions for suspicious activity. - Record keeping for at least five years. - Report suspicious activity via Suspicious Activity Report (SAR).

Question 54

What is the profits test and how would you apply it?

Answer 54

The profits test is used to determine if a business or tenant is financially viable and able to meet their financial obligations. 1) Review financial statements (income, balance sheet, cash flow). 2) Calculate net profit and ensure it covers liabilities (e.g., rent). 3) Compare performance to industry benchmarks. 4) Consider financial forecasts for future profitability. 5) Assess financial risk based on profit stability.

Question 55

In a new leasing deal, how might you include a pandemic rent suspension clause?

Answer 55

- Define trigger events (e.g., lockdowns, restrictions). - Set a clear duration for rent suspension. - Specify percentage reduction or full suspension of rent.