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Harry Penman APC > Leasing and Letting L1 > Flashcards

Leasing and Letting L1 Flashcards

1
Q

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

A

Th Estate Agency Act 1979
The Misrepresentations Act 1967
CPRs/BPR’s - 2008
Bribery Act 2010
LTA’s 1927 1954 1988 1995
Money Laundering Information on the payer.

Core principles of all are:
Transparency
Honesty
Accuracy in actions and representations
Primarily concerned with protecting the “consumer”

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2
Q

Tell me about your understanding of the Estate Agents Act 1979.

A

Enacted to put rules in place to protect clients and consumer, anyone with to whom the agent owes a duty of care. The legislation introduces 6 key rules:

  1. Honesty and accuracy
  2. Open and transparent
  3. Clarity on terms
  4. No discrimination
  5. Share all offers in writing
  6. Client money held separately
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3
Q

How does Section 18 relate to your letting practice?

A

s.18 - Agreeing terms, basis of agency, definitions, services and marketing.

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4
Q

What are the various agency bases?

A

Sole Letting Rights
Sole Agency
Joint Agents
Multiple Agency

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5
Q

What are the differences between the four agency bases?

A

Sole Letting Rights – sole letting rights and fee due for private
introductions.
Sole Agency – sole letting rights but no fee for private introductions.
Joint Agents – two agents with split fee
Multiple Agency – 2 or more agents and pays the one that sells the
property.

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6
Q

Where are these defined?

A

????

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7
Q

How does Section 21 relate to your letting practice?

A

Disclosure of interest in the property by the agent.

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8
Q

What is a ready, willing and able purchaser?

A

Some agents terms include this as a reference to someone that is ready willing and able to complete a purchase and therefore a fee is due.

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9
Q

Tell me about key points of the Consumer Protection Regulations

A
  • The Consumer protection from misleading marketing regulations
    replaced the Property Misdescriptions Act 1991.
  • Provides consumer protection from unfair or misleading trading
    practices, misleading omissions, and aggressive sales tactics.
  • Requires estate agents to use care when using general
    descriptions relating to location, environment, photographs,
    measurements, parking, and pricing.
  • Prohibits the use of misleading advertising and regulates
    comparative advertising.
  • If not in compliance consequences can be civil or criminal, 2
    years prison on unlimited fine.
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10
Q

Tell me about key points of the Business Protection Regulations

A
  • Prohibits misleading advertising: Businesses cannot provide false
    or deceptive information to other businesses during marketing or
    promotions.
  • Regulates comparative advertising: When comparing products or
    services to competitors, claims must be objective, verifiable, and
    not misleading.
  • Protects against unfair practices: Deceptive business practices
    that could harm a competitor or influence another business’s
    economic decisions are prohibited.
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11
Q

What is an average consumer/material information?

A

The average consumer is assumed to be reasonably well-informed, observant and circumspect.

Material information’ is defined as “information which the average consumer needs, according to the context, to take an informed transactional decision”.

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12
Q

What are considered to be unfair practices under this legislation?

A

‘misleading actions’ and ‘misleading omissions’ that would lead the average consumer to make a transaction decision they would not have otherwise taken.

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13
Q

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

A

False verbal or written statement made during pre contract which has the effect of inducing the party to purchase.
These can be fraudulent (knowingly wrong) or negligent (subsiquently found to be wrong.

Civil offence – sued for financial damages
Vendor and or agent can be sued
Contract can be nullified.

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14
Q

What does the Unfair Contract Terms Act 1977 say?

A

The Unfair Contract Terms Act (UCTA) protects parties from unfair terms in contracts, especially exclusion clauses. These clauses might not be enforceable if they limit liability in an unreasonable way.

The reasonableness test considers:

Knowledge of both parties at the time of the contract.
The burden of proof lies on the party relying on the clause (usually the business).

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15
Q

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

A

Yes!

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16
Q

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

A

Designed to provide a more level playing field between LL and T.
Designed to create a less adversarial approach including between agents and soliciors.
Especially important for unrepresented or lay tenants.
Defines the typical lease terms and their relevance on the negotiations contractual relationship that ensues.

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17
Q

When and how was it last updated?

A

2020 issued
Reissued 2023 as a professional standard.

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18
Q

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

A

Standards and Ethics - conflicts of interest
Securing instructions - eg terms of engagement
Disposals Marketing - market appraisal
Implementing disposal
Acquisitions - - buying on their behalf
Ending the instruction - incl retention of records

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19
Q

Explain what alienation is.

A

The leaseholders right to divest themselves of their occupancy of part or all of a property.

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20
Q

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

A

They are free to do what they want. There must be provision in the lease for this, if not the law favors the tenant.

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21
Q

What is subletting?

A

Maintaining the contractual relationship with the landlord while allowing a sub tenant to lease all or part of the space in the property.

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22
Q

What is assignment

A

Assigning the contractual relationship with the landlord to 3rd party entirely in order for the 3rd party to occupy the premises.

23
Q

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

A

1995 Lease Act: Binds new landlords/tenants to lease promises & limits liability for past breaches (post-1996 leases). You’re responsible for current terms, not past breaches by others (unless agreed). You can request release to transfer lease & challenge unfair terms in court.

24
Q

What does S19 1a of the Act say?

A

The Landlord and Tenant (Covenants) Act (LTCA 1995) inserted into s19 of the LTA 1927 a new subsection 19(1A) which provides that, in new tenancies, the parties can set out in the lease, or by other documentation, the circumstances in which consent to an assignment can be withheld and/or conditions subject to which consent may be given

25
Q

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

A

An agreement signed by the existing tenant with the landlord, that they remain liable for breaches of the lease on the part of the assignee.

26
Q

Can a tenant assign a lease to its guarantor?

A

No

27
Q

What is a pre-letting?

A

A lease agreement reached before practical completion of build or refurbishment of commercial premises.

28
Q

What is an Agreement for Lease?

A

A separate contract which runs alongside the a lease. The contract essentially binds both parties to signing the lease on practical completion of the building or any other criteria.

29
Q

Why would one be used?

A

To provide securty between landlord and tenant in the period where premises (often built to spec) are being constructed. Particular risk to landlord where tenant could otherwise walk away leaving the landlord high and dry having spent a lot of money on the build.

30
Q

What is a collateral warranty?

A

A document which provides rights to a party (usually a developer/funder or owner) against a party with whom they have no privity of contract.
This form of document is frequently used in construction contracts to ensure a right of action directly against a building contractors’ sub contractors, consultants or design team

31
Q

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

A

Town and Country Planning (Control of Advertisements) (England)
Regulations 2007 provide permitted development rights for to let
boards.
Size is 2 square meters or 2.3 square meters for a v board, it can
protrude 1m from the wall.
Remove within 14 days of letting.

32
Q

Do you need planning consent to install a marketing board?

A

Yes if in conservation area or listed building.

33
Q

Tell me about the requirement surrounding letting property and EPCs.

A

All leased properties must have a valid EPC on renewal or new letting.

34
Q

What buildings are exempt from having an EPC?

A

o Listed if work would unacceptably alter it.
o a temporary building 2 years or less
o place of worship
o an industrial site, workshop or agricultural building
o due to be demolished

35
Q

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

A

No

36
Q

Where does the EPC have to be shown?

A

You must display an EPC by fixing it to your commercial building if all these apply:

  • The total useful floor area is over 500 square metres
  • The building is frequently visited by the public
  • An EPC has already been produced for the building’s sale, rental or
    construction
37
Q

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

A

7 days but the EPC must have been commissioned before marketing.
a further 21 days is permissible if all reasonable efforts have been used to obtain it within 7 days.

38
Q

Tell me about how MEES affects your leasing practice.

A

Its not as big a factor in my business as it would be other markets with large tenants where costs of occupation are higher AND the organisation might have an established green policy or ESG credentials to meet. Typically the biggest thing for my business is that the EPC IS E or above!

39
Q

What are the key compliance dates?

A

The MEES are set to tighten further, requiring a minimum EPC of B by 2030, and an interim milestone of EPC C by 2028.

40
Q

How can MEES risk be reduced?

A

Prioritize & Verify:
Check all property EPC ratings (energy efficiency grades).
Focus on those with low ratings (C or below) and ensure existing ratings are accurate.

Go Beyond the Rating:
Consider factors like lease renewals, planned work, and tenant improvements.

Get Expert Advice with Cost Analysis:
Hire an energy assessor to draft new EPCs with improvement suggestions.
Analyze the cost-benefit of these suggestions before implementing them.

Financing & Implementation:
Explore funding options and schedule upgrades with minimal tenant disruption.

Tax Benefits:
Consult an accountant to maximize tax deductions for efficiency improvements.

41
Q

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

A

Decline unless the LL was taking reasonable steps to get the property compliant.

42
Q

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

A

Tenants desire flexibility and certainty, anything that reduces either typically reduce demand.

Example, high rent deposit, break penalties, recession etc.

43
Q

How does VAT affect lettings?

A

Can be very off putting to small tenants under the VAT threshold.

44
Q

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

A

Small businesses under the VAT threshold.

45
Q

Talk me through your understanding of contracting out a lease, why it might be done and how you do so.

A

Contracting our of security of tenure under the 1954 LTA.
Done through statutory or simple declaration. LL might do it to ensure they can take occupation at lease end.

46
Q

What health checks apply to contracting out?

A

The notice to contract out includes a prescribed form of words which spell out to the tenant exactly what the impact of contracting out is.

47
Q

When did contracting out procedures last change?

A

2004 to prevent court order for opting out in favor of simple and statutory declaration.

48
Q

Explain what you understand by the planning use classes.

A

Defines the purposes that premises in England and Wale can be occupied for.

49
Q

When were these last amended and what changes were made?

A

September 2021 - introduced Class E

50
Q

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

A

With great care. I am not an accountant.
Dunn and Bradstreet not helpful as I mostly deal with very small businesses with poor covenant.
I tend to seek:
References from a previous Landlord.
Profits test.
A bank, accountant and 2 trade references
A copy of the business plan for a new business.

Security might be Directors/personal Guarantee or rent deposit.

51
Q

What money laundering checks do you undertake during agency work?

A

I check proof of address.
I check ID
Depending on risk I may use a third party software to check for PEP.
I will sometimes ask for proof and indication for source of funds.

52
Q

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

A

Profits test – net profit for business must be 3 times the rent for 3 consecutive years or the net asset value of business must be 5 times the rent

53
Q

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

A

50% rent in the event of government enforced closure.

54
Q

What issues might you face when agreeing this type of lease term?

A

Some landlords resistant and feel it should be dealt with by consent.
What happens if the company trade well online.
What happens in the event of partial closure as per the recent case with WH Smith.

Harry Penman APC (34 decks)

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