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APC JB > Leasing and Letting > Flashcards

Leasing and Letting Flashcards

1
Q

What legislation applies to commercial leasing and letting?

A
  • Estate Agents Act 1979
  • Misrepresentations Act 1967
  • Consumer Protection Regulations 2008
  • Business Protection Regulations 2008
  • Bribery Act 2010
  • Town and County Planning (Control of Advertisements) 2007
  • MEES
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2
Q

What RICS documents apply to commercial leasing and letting?

A
  • Code for Leasing Business Premises 2020
  • UK Real Estate Agency 2016
  • Real Estate Agency and Brokerage 2016
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3
Q

What are the objectives of the Code for Leasing Business Premises?

A
  • to promote fairness and transparency in the negotiation of commercial leases
  • to promote comprehensive Heads of Terms to streamline the drafting process
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4
Q

What are the mandatory obligations for chartered surveyors under the Code for Leasing Business Premises?

A
  • to make negotiations constructive and collaborative
  • if a party is not professionally represented, they must be alerted to the existence of the code and strongly recommended to seek professional advice
  • written HOTS must be used for lettings with minimum requirements
  • renewals must also use written HOTS
  • negotiations should seek to promote a fair balance between the parties
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5
Q

What is the structure of the Code for Leasing Business Premises?

A 
Part 1 - introduction
Part 2 - mandatory obligations
Part 3 - best practice
Appendix A - sample HOTS
Appendix B - guide for Landlords and Tenants
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6
Q

What is the purpose of the Estate Agency Act 1979?

A

That buyers and sellers are treated honestly, openly and fairly

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7
Q

What important sections of the EAA 1979 are there?

A

Section 18 - discusses fees, charges, agency definitions and scope of services provided
Section 21 - declaration of interest in a property

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8
Q

What does the Misrepresentation Act 1967 seek to do?

A

To protect consumers from false or fraudulent claims that may induce them into entering into a contract.

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9
Q

What types of representation are there?

A

Fraudulent, negligent and innocent

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10
Q

What are the 12 principles of the RICS Real Estate Agency and Brokerage?

A 
Acronym - A MICRO DVD
Act (with integrity)
Marketing
(Client) Money
Insurance
Conflicts of Interest
Clarity
Communication
Realism 
Obligations
Dilligence
Viewings
Discrimination
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11
Q

What are the various types of agency?

A
  • sole agency - fee due unless client transacts personally
  • sole selling rights - any transaction= fee due
  • joint agency - split fee
  • multiple agency - agent who makes introduction gets whole fee
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12
Q

What are the 7 key points of the EAA 1979?

A

(HAT DO MAP) Honesty & accuracy, clarity on terms of engagement, no discrimination, inform client of offers, client money separate, itemised payments, disclosure of personal interests.

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13
Q

Who polices the EAA 1979?

A

Trading standards office.

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14
Q

What legislation governs marketing signage?

A

Town and County Planning (Control of Advertisements) Regulations 2007.

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15
Q

What is permitted in terms of marketing signage.

A

Flat board of 2sq/m; V-board of 2.3sq/m; one board per building, cannot project more than 1m; must be removed 14 days after completion.

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16
Q

What boards need consent?

A

Bigger than permitted under regs; illuminated boards; boards on listed buildings.

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17
Q

What are the rules for VAT?

A

You should avoid advising your client on VAT. Owner can choose to elect for VAT.

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18
Q

What is in your marketing report?

A

Brief description of location, construction/specification/accommodation, market overview, proposed selling/letting prices, marketing strategy, fees, terms of engagement.

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19
Q

How are rent deposits held?

A

Separate bank account, interest paid to the tenant. Covered by rent deposit deed.

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20
Q

What is the profits test?

A

Net profit = 3x annual rent for 3 consecutive years.

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21
Q

What would happen if a party who goes on to exchange is introduced by a former agent whilst you are instructed?

A

Both agents would get a fee under TOE.

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22
Q

What is a turnover rent?

A

Rent that is dependent upon the financial performance of the tenant in the specific property. Will often have a base.

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23
Q

What is an AST?

A

Assured Shorthold Tenancy. Used for residential; no security of tenure.

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24
Q

How might you protect yourself under the Misrepresentations Act 1967?

A

Use a disclaimer on marketing particulars - parties should not rely on the information.

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25
Q

How would you assess the covenant strength of a tenant?

A

Get a bank reference & trade reference; Previous LL reference;; Last 3 yrs audited accounts – or for new business – a copy of the business plan; External credit rating

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26
Q

If a tenant is not of sufficient covenant strength to recommend them to your client, how might you protect your client?

A

Rent deposit; guarantee (/AGA); parent company take the lease.

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27
Q

What lettings must be registered with the Land Registry?

A

7+ years.

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28
Q

What does a Land Registry compliant lease plan need to have?

A
  • Must be drawn to metric scale (1:100 or 1:200)
  • Have scale measurement bar
  • Scale noted on the plan
  • Include a 1:1250 scale location map (for urban areas)
  • Full address inc. post code
  • A north point
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29
Q

How do you advise a landlord on tenant selection?

A

look at a combination of the interest received and the market demand before looking specifically at the selection. For example, when leasing a small shop in Handforth, we had very good demand all from new companies but because of the size of shop/location I did not expect many good covenants to express interest. I therefore advised that we secure a security deposit as we would not have any assurances of the track record of new companies.

30
Q

What legislation may apply to guarantors?

A

LTCA 1995

31
Q

How are security deposits handled?

A

Documented in a rent deposit deed – outlines how and when the deposit can be used and the conditions for returning it to the tenant.

32
Q

What is an assignment?

A

Selling a lease. Assignee comes in on the same lease and has direct relationship with the landlord.

33
Q

What is a subletting?

A

New legal interest – subtenant has relationship with the tenant, not directly with landlord.

34
Q

What should you consider if approached to a) market premises for assignment/sub-let or b) approached by a tenant with a request to sub-let or assign?

A

Main consideration – does the lease permit it and what conditions are there for incoming (sub)tenant selection/what criteria can the landlord withhold consent.

35
Q

What is an AGA?

A

Authorised Guarantee Agreement. LTCA 1995 – assignor guarantees performance of assignee. S17 notice served by L on assignor within 6 months of assignee breaching lease.

36
Q

What is privity of contract?

A

Old leases – outgoing T guarantees performance of ingoing T.

37
Q

When does the LT©A 1995 apply from?

A

1/1/1996

38
Q

What are the Consumer Protections Regulations?

A

Replaced property misdescriptions act. Duty of care to provide accurate and truthful information with no misleading statements or omissions. Business to consumer.

39
Q

What is the Misrepresentation Act 1967?

A

Protects consumers against false/fraudulent claims made with the intention of inducing to purchase.

40
Q

What is section 21 of the EAA 1979?

A

Declaration of personal interest.

41
Q

What are other important sections of the EAA 1979?

A

Section 18 – disclosure of fees and itemised payments in TOE.

42
Q

What are the principles behind the EAA 1979?

A

Clarity on agency terms; honesty and accuracy; disclosure of full cost liability; disclosure of personal interests; absence of discriminations; legal obligation to report offers in writing.

43
Q

What does the RICS Professional Statements Code for Leasing Business Premises (2020) say? 4 points.

A

Improves fairness and quality of LH negotiations. Recommend professional advice to other party; full written HOTS; negotiations in constructive and collaborative manner

44
Q

What does the Real Estate Agency and Brokerage (2016) say?

A

12 principles – A MMICCCRO DVD. Act fairly, client money kept separate, truthful marketing, PI insurance, COI, communication, CHP, realistic assessments of value, obligations to each party, no discrimination, viewings in accordance with client, diligence.

45
Q

What does the PS UK Commercial Real Estate Agency (2016) say?

A

Purple book. Best practice and mandatory obligations for agency work. EG – avoid COI, H&S, duty of care to use best endeavours to secure best outcome within legal & ethical framework.

46
Q

Why is good access important for industrial properties?

A

Large goods vehicles – deliveries, forklifts, etc. Usually require large door and circulation space. Modern spec units prioritise motorway access for distribution etc.

47
Q

What legislation governs property use?

A

Town and Country Planning Act 1987.

48
Q

How does a party obtain change of use?

A

Submits application to local authority, often via planning advisor/consultant.

49
Q

Can you advise on change of use?

A

Initial advice based on demand, permitted development etc but refer to specialist planning consultant.

50
Q

How did you advise the landlord on 79a LH, given it was a new company?

A

Low levels of interest and obviously good covenant would have been preferable. Given client desire to avoid a void, interest in the unit, sight of business plan (prior industry experience) and security deposit advised client to proceed.

51
Q

What are Heads of Terms?

A

Marked subject to contract – non-binding summary of primary lease terms that have been agreed. Skeleton outline for solicitors to use.

52
Q

What was in your Heads of Terms?

A

Property, parties, lease term, rent, incentives, rent review, breaks, use, alienation, alterations, repair, LTA 1954.

53
Q

Is a planning application always submitted in tandem with the legal work?

A

Not always – can often be done by way of an agreement for lease (both parties agree to enter into a defined lease subject to certain conditions being met – planning consent, property being constructed/refurbished etc).

54
Q

When you acted to acquire premises in Trafford Park, what were your client’s objectives?

A

Financial (low rent, incentives) and operational (flexible, location, power supply, stable (security of tenure)).

55
Q

When you acted to acquire premises in Trafford Park, what were your client’s specific criteria?

A

Keeping costs down plus keeping flexibility (rent, rent-free, outside LTA 1954) plus operational (Trafford Park ideal; power supply criteria; parking).

56
Q

What were the break conditions when you acted to acquire the Trafford Park premises?

A

Rent up to date, 6 months notice TofE, VP on break date

57
Q

What are the benefits of a protected lease to a tenant?

A

Automatic right of renewal if terms can be agreed; if L successfully opposes then compensation due

58
Q

Why is it notable that a protected lease did not have a higher passing rent/less incentives?

A

Security of tenure is a benefit to tenant so sometimes will pay a bit more to have a lease with that benefit.

59
Q

Why did you recommend a schedule of condition and how does it limit the dilapidations liability?

A

Objective record of how property was given to tenant; referred to in the lease with the requirement that the tenant yield up in no better condition than as evidenced. Prevents disputes further down the line.

60
Q

What were the uses in the mixed use scheme in Rusholme?

A

Retail/leisure plus residential

61
Q

Why was the incoming tenant concerned because of Covid?

A

Lockdown would reduce turnover massively as destination venues.

62
Q

What were your client’s other options given the San Court tenant was considering withdrawing due to Covid?

A

Refuse and risk losing the tenant (hard to re-let, especially if Covid happened, and good chance that a future tenant would ask for the same. Possible vacant rates liability and s/c void).

63
Q

Why did you advise the client to have a rent suspension clause?

A

Fair compromise. Rent payable when tenant can trade; rent suspended when covid completely stops trade (risk otherwise is tenant insolvency).

64
Q

Why was the tenant at San Court significant?

A

Taking 3 units – 37.5% of the scheme.

65
Q

Why was the tenant at San Court significant?

A

Taking 3 units – 37.5% of the scheme.

66
Q

Why did you advise an additional rent-free period at San Court?

A

`risk losing tenant otherwise. Voluntary Covid code encourages collaboration and this may generate goodwill in relationship.

67
Q

What are the SDLT rates for leases?

A

Payable on the rent over the life of the lease (+ any premium). 1% on rent between £150k - £5m.

68
Q

/What might a good solution be if you have a landlord and proposed tenant who both want a lease but cannot agree a rent due to Covid?

A

Low initial rent with RR on 1st anniversary when market has stablilised. Turnover based rent. Market rent pre Covid but generous rent-free.

69
Q

What is a turnover rent?

A

Rent is linked to financial performance of the store.

Usually base rent with turnover based top up.

70
Q

What disputes are there with turnover rents?

A

What rent is counted - click and collect?

APC JB (17 decks)

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