Leasing and Letting (submission) Flashcards
1
Q
Explain a factor you have come across which impacts upon letting value/ lease terms.
A
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2
Q
Explain an example of when you have provided marketing/leasing strategy to a client.
A
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3
Q
Talk me through an example of when you have let a commercial property.
A
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4
Q
Talk me through an assignment or subletting you have dealt with.
A
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5
Q
Talk me through your inspection and measurement for agency purposes.
A
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6
Q
What factors affected marketability?
A
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7
Q
What advice did you provide on value, lease terms and marketing strategy?
A
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8
Q
What due diligence did you carry out?
A
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9
Q
What pre-instruction checks did you carry out?
A
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10
Q
How did you market the property?
A
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11
Q
How did you negotiate - what was the outcome and how did you record this?
A
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12
Q
How did you manage the legal process?
A
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13
Q
What did you include in your particulars?
A
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14
Q
What were the requirements around the board?
A
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15
Q
Who were your targets for marketing?
A
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16
Q
How did you comply with RICS guidance / legislation?
A
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17
Q
Talk me through an example of when you have let a commercial property. (v simple all steps, 15)
A
- Receive instructions from client
- Check competence and independence
- Issue agency instruction agreement to client
- Receive agreement signed by the client – (s.18 EEA 1979)
- Complete and record money laundering checks (MLR 2020)
- Gather information/undertake due diligence – inspection details, leases, legal title documents, planning information, OS plans, floor plans, warranties etc.
- Inspect and measure property taking detailed notes/photographs
- Research market and assemble, verify and analyse comparable evidence
- Undertake market(?) rental valuation – not actually Market Rent formally though
- Prepare marketing report to vendor with full recommendations
- Obtain written approval of contents of marketing particulars (CPR 2008 and Misrep Act 1967)
- Undertake the marketing campaign as agreed
- Negotiate the letting, draft HOTs and instruct solicitors
- Assist with any queries during legal formalities
- Issue invoice upon completion of transaction and retain file
18
Q
How did you get this agency instruction?
A
We had managed the block for several years. The previous tenant had occupied on a 5 year lease with approximately 3 years to run, and had exercised their option to break, resulting in a void from 21 September 2020 (break notice on 3 March 2020). I therefore commenced discussions with the client from the serving of the notice in March 2020. Having received the instruction I checked I was competent, which I was given I have conducted agency and valuation work in the area previously, and considered there to be no conflict, as I was instructed by the landlord of a building I manage (IS THIS CORRECT? ASK PETE).
19
Q
What was included in your TOE for agency instructions (basis/rights, fee basis, marketing costs/disbursements, conflicts, MLR, payment timescales fees/disbursements, RB, CHP)?
A
Agency basis – sole
• Agency rights – letting
- Therefore sole letting rights: fee due if let during agency agreement. Private introductions included.
- Proposed fee - retained to act on your behalf based upon 10% of the rental price achieved (exclusive of VAT and disbursements) however this would be subject to a minimum fee of £1,300.00 plus VAT.
- Marketing costs and disbursements – to let board £150 + VAT, advertising on Zoopla and EGI - £150 + VAT. Production + circulation of in-house marketing particulars free of charge, included within global fee.
- Confirmation of no conflicts of interest - we have undertaken internal checks and can confirm that we are not aware of any other client or property conflicts in this instance.
- Money laundering regulation requirements – in this case we had previously (in recent years) conducted MLR checks on client, and therefore were not necessary for this instruction.
- Timescale for the payment of fees & disbursements – payment is to made by you within 30 days of fee account. Time of payment shall be of the essence. If you dispute payment, you shall give notice in writing within 7 days stating reason. If no such notice given then after 7 days account will be deemed to have been accepted by you in full. 2.5% over AIB GB base rate interest for overdue amounts from due date.
- RICS Red Book Exemption: any indication of an asking price or rent, will not be carried out in accordance with the formal valuation requirements. Given our agency involvement, under the RICS Valuation – Professional Standards Section VS1.1 (exceptions c & d) the RICS standards and conditions of valuation do not apply.
- Details of the practices complaints handing procedure – CHP available on request. NEED TO FIND CHP, MUST BE SOMEWHERE…
20
Q
What pre-instruction checks did you carry out?
A
- Conflict check
- Competence check
- Money laundering regulation requirements – in this case we had previously (in recent years) conducted MLR checks on client, and therefore were not necessary for this instruction. However, I am aware that in normal circumstances – in order to comply with MLR 2020 - we will require two forms of identification which can include your passport and driving licence, in addition to a recent utility bill to provide proof of address. We are also required under the regulations to establish whether there are any other beneficial owners and whether you have authority to sign the Terms of Engagement on their behalf.
21
Q
What due diligence did you carry out?
A
Market analysis – surrounding units rents, lease terms obtained etc.
Statutory – EPC rating/expiry, rating assessment, building insurance policy (?), asbestos register, gas safety certificate, electrical installation condition report, fire risk assessment (all of which we had on file already as existing management client, any more?)
22
Q
What rates were payable during this?
A
The rating assessment currently appearing on the 2017 Valuation List is as follows: Shop & Premises: £13,500 The Small Business rate for the year 2020/2021 is 49.9 pence in the pound.
23
Q
- What advice did you provide on EPC and MEES risk?
A
The unit has an energy performance certificate rating of E106, expiring in X years. Therefore advised was currently not a problem (?).
24
Q
- Talk me through your inspection and measurement for agency purposes - surrounding area
A
Located in secondary part of thoroughfare towards southern end, mainly local occupiers (retailers, newsagents, takeaways, estate agents, charity shops, professional services) with prime area around 200m to north (Greggs, Co Op, Subway, Boots).
- Further south the area becomes more peripheral, comprising a few separate pockets of shops in amongst mainly terraced residential properties.
- Few vacancies, but large number of non-essential retailers that were closed/could close due to COVID restrictions. Neighbouring occupiers included 2 local solicitors, a newsagent, and local hairdresser, Chinese takeaway and estate agents. No particular dominant theme, suggested unit would be attractive to a range of occupiers.
- Large residential catchment area (Low Fell), Durham Road is major traffic road to Gateshead town centre (high traffic), public parking provision off main road, reasonable footfall as nearby to prime part of street, but a little isolated on end of main thoroughfare.
25
- Talk me through your inspection and measurement for agency purposes - external/internal
60s built, concrete frame with no columns, all stud walls, timber frame shopfront glazing, first floor beauty user above, long and quite narrow shop, generally open plan with WC, tea to rear, alongside stud wall installed by previous occupier to rear, ascertained could be easily removed if necessary. Plastered, painted, carpeted, no suspended ceiling, height of 3m, strip fluorescent lighting, gas central heating system, generally good condition left by previous occupier, albeit dated in rear ancillary space.
- Ready for tenants fit out, average condition, other than gas central heating system, services not capped off etc., and potentially tenant would want to remove rear wall to increase retail space. Advised client to leave in place for now as there were a range of professional businesses etc. nearby who may prefer the separation, but may be helpful to agree removal once outline terms agreed.
- Includes stairs to lower ground storage space, basic but no signs of defects. Rear lane in quite poor condition, but useable for moving goods into storage space at lower ground.
- Measured on NIA basis, using ITZA methodology.
- Ground Floor 86.08 sq m (926 sq ft), Lower Ground Storage 36.6 sq m (393 sq ft)
- On ITZA basis – 56.37 sq m (607 sq ft), therefore asked £14,000 (£23 psf), achieved c. £22 psf Zone A
26
- Why was the unit vacant?
Recent occupier had exercised break, resulting in void in challenging market conditions.
27
- What was your rental evidence for Low Fell?
Reviewed local market and spoke to agents of similar units.
Rental evidence: £15-30 psf dependent on proximity to prime area of street and unit size, with more isolated units achieving the lowest rates. Therefore subject was approx. in middle of this range (£21-£24 psf ZA), given location on periphery of prime thoroughfare, but not isolated, and broadly mid-size unit for the area. ANY MORE PETE?
28
- What was your marketing campaign for Durham Road? What advice did you provide on value, lease terms and marketing strategy? What timescales did you advise on? Were there any factors you came across which impacted upon letting value/ lease terms / affected marketability?
For the letting of Durham Road I developed the marketing strategy and advised on the marketing channels to use which involved:
- Marketing Report Content
- Commentary on current market conditions:
o COVID-19 has highly disrupted market – recommended that I could only state what previous market conditions were like, albeit there was likely to be a negative impact on marketing prospects going forward.
o Advised that based on my analysis of previous rental transactions:
• Rental evidence: £15-30 psf dependent on proximity to prime area of street and unit size, with more isolated units achieving the lowest rates. Therefore subject was approx. in middle of this range (£21-£24 psf ZA), given location on periphery of prime thoroughfare, but not isolated, and broadly mid-size unit for the area, therefore should put asking at top of range (£24 ZA, c. £14,000 p.a., on EFRI/FRI terms (prev. EFRI).
• Discussed clients requirements prior to reporting –in agreement that as market conditions were difficult, the primary objective would be to achieve a quick letting. Client stressed that the highest rent was preferable to a longer lease term.
• I recognised this would impact on marketability, as currently tenant demand was falling, which would make it difficult to achieve highest rent in short time period. Therefore advised that a shorter lease term would have to be accepted, and unit should be marketed on flexible terms to attract widest range of potential offers, which should result in best chance of achieving highest rent in shortest time.
• Advised typical voids were 6 months, however this could be longer now.
• Advised 3-5 year term the norm, with 3+ years typically including more than 3 months rent free granted (lower net effective rent), or at a lower rent (c. £18-£20 psf Zone A).
• Following this I considered the current market – advised client that on this basis a rent in the range of £13,000 - £14,000 p.a. (£22.50 - £24 psf ZA) should be achievable for a 2.5 – 4 year term.
- Advertising Strategy:
- V-angle to let board
- Listing on Zoopla (£50 + VAT), EGI Property Link (£100 + VAT) and firm website (inc. free in global fee) – advised that given relatively low rent, secondary retail property that would mainly be attractive to local occupiers, should target relatively low cost local website marketing options initially, as this generally provides exposure to these businesses, and higher cost wider exposure would be unlikely to provide better exposure, and would be costly.
- Circulate in-house marketing particulars which would be free of charge and included within our global fee.
- Targeted marketing through retail mailing list (Campaign Monitor), (inc. free in global fee).
- Advised that if marketing strategy did not garner sufficient interest within 6 months, could review strategy and consider higher cost options (i.e. Rightmove (3 months for £300 + VAT), potentially local press).
29
- What did you include in your particulars?/ What steps do you take before producing brochure?
- Address
- Photograph of front
- Location – overview of Low Fell and nearby occupiers
- Description – self-contained, ground floor retail unit set back from Durham Road by a large paved area, key internal features (glazed frontage, gas heating, staff room, WC, Tea, lower ground floor with rear access, on-street parking to front)
- Size – on overall NIA basis (926 sq ft ground, 393 sq ft lower ground storage)
- Asking terms: new effective full repairing and insuring lease at a rent of £14,000 per annum (exclusive). All other terms are to be agreed by negotiation.
- Use class – A1
- Rating assessment - Shop & Premises: £13,500, SBR 20/21 49.9p
- Legal costs – each party to bear own
- EPC – E 106
- AML Regs - two forms of identification and confirmation of the source of funding will be required from the successful tenant.
- Agent contact details – name, tel, email
- Subject to Contract
- Location plan with arrow indicating location
- Date of particulars publication – August 2020 (check if have time if makes sense)
- Misrepresentation Act 1967 exclusion (disclaimer) clause
30
- Was there a disclaimer in the particulars/why? What did it say (4)?
Yes. To protect against Misrepresentation and Misstatement – reduce liability of company.
1. These particulars are not an offer or contract, nor part of one.
2. All statements contained in these particulars are made without acceptance of any liability in negligence or otherwise by Johnson Tucker LLP, for themselves or for the Vendors/Lessors.
3. JT have taken reasonable endeavours to confirm the information, but no statements should be relied on as a representation of fact, and purchasers must satisfy themselves by whatever means as to the correctness of any statements made.
4. The Vendors/Lessors do not make, give or imply, nor do Johnson Tucker LLP or any person in their employment have any authority to make, give or imply, whether in these particulars or otherwise, any representation or warranty whatsoever in relation to the property.
The statement does not affect any potential liability under the Property Misdescriptions Act 1991.
31
- What steps did you take to comply with CPR and Misrepresentation Act 1967?
Due diligence - ensure that a comprehensive inspection of the subject property has been conducted. This ensures I am able to comply with CPRs, with the marketing documents accurately representing the subject property.
Sent to client for approval that information was correct.
Disclaimer
32
- What size board did you use?/ What regulations go with the board? When was the board taken down?
Used V-angle board, 2.3 sq m maximum (check if right), as per TCP control of advertisements regulations 2007, no planning permission necessary. Within 14 days of end of marketing?
Board complied with CPRs and BPRs
Board said – JT logo, TO LET, JT tel no. and website.
33
- Who were your targets for marketing? / Who was the likely purchaser?
Local occupier – given range of retailers, professional businesses etc. nearby and marketing conditions recommended to my client to keep as broad as possible.
34
- Talk me through a viewing you carried out.
...
35
- How did you comply with RICS guidance / legislation? / How did you report offers in line with the Purple Book?
I detailed the offers as soon as was reasonably possible in writing to my client.
36
- What regulations were you mindful of when responding to enquiries?
CPRS, estate agents act 1979, Misrepresentations, Bribery Act
37
- How did you secure the letting?
- After period of limited interest, which I advised was mainly due to significant disruption of market due to COVID-19, had 1 offer-
o Tenant initially put forward £11,000 p.a., 5 years, 5 months rent free.
o Advised client too low, should respond with £13,500 p.a. and 3 months rent free, with 3 year break in return for improved offer.
- Client accepted this, as did tenant. I recommended accepting offer because of the limited interest, potential for marketing prospects to decline further (COVID).
38
- What references and security did you request? / Talk me through how you assessed the offers/ How did you verify funds?
- Completed legal enquiries: I obtained MLR docs, did checks (Photo ID (passport/driving licence) and proof of address), alongside proof/source of funding – established that although new business, tenant had approximately 1.5 years savings for rent+business rates (reasonable covenant strength) etc.
o Requested following information (CONSIDER AT LATER TIME WHAT I ACTUALLY DID):
• Bank, accountant and 2 trade references
• Previous/existing landlord’s reference
• 3 years audited accounts/credit rating (e.g. D&B) – I SAID I DID A CREDIT CHECK
- As was quite low, I advised client that best offer in current conditions, viable financial standing, as long as 3 month rental deposit obtained. (could not use profits test (net profit of proposed tenant’s business must be 3x rent for 3 consecutive years). PERHAPS THINK ABOUT OTHER OPTIONS I COULD HAVE USED – GUARANTOR (NAME/ADDRESS), RENT PAID UP FRONT IF WEAK COVENANT, PERSONAL SURETIES/GUARANTEE
- This was then agreed, and I therefore recommended my client accept as best offer in current market conditions + lack of interest in what were probably better market conditions.
39
- How was the rental deposit arranged/documented?
- Personal to tenant
- Legally documented in rent deposit and money held in separate bank account
- Interest to tenant
- Agreed terms for release of monies
- Details of release mechanism stated in the deed
- Rent deposit deed attached to lease as a separate deed, personal to tenant.
40
- How did you negotiate - what was the outcome and how did you record this? / What was included within the Heads of Terms?
* Date
* Property Address
* Landlord and Tenant + solicitors (address/contact)
* Demised Premises
* Term: 5 years within Act
* Rent: £13,500 p.a. excl. VAT payable monthly in advance
* Rent Deposit: 3 months as deposit on lease completion
* Rent Free: 3 months
* VAT: not elected
* Repairing liability and service charge: tenant responsible FRI, pay to landlord
* Buildings Insurance: tenant pays to landlord
* Signage/Alterations: reasonable consent
* Use: A1
* BR
* Utilities: T responsible, final readings taken upon completion
* Alienation: assign/sublet whole with reasonably consent
* Legal costs: each party responsible
* Conditions: subject to contract
41
- How did you manage the legal process? / How did you respond to legal enquiries - what issues were raised?
I liased with my client’s solicitor as necessary. I was informed that, even after my initial advice, the prospective tenant was unrepresented. I confirmed that I had informed the party of the risks of this, to reiterate it to the party, and to continue in either circumstance. I then received solicitors details from the p. T., and passed these on to my clients solicitor.
42
- What was the outcome of your advice? / What was the outcome of your disposal?
The property successfully exchanged and completed within my client’s desired timeframe and to their objectives.
43
- What were some of the key lease terms for Low Fell?
- 5 years within 54 Act
- £13.5k p.a. monthly in advance
- Break year 3, subject to only 6 months notice, all payments due.
- 3 months rental deposit
- EFRI
- A1 use class restriction
- Only non-structural internal alterations permitted, subject to landlords reasonable consent, plans provided etc.
- Assign/sublet whole, but not part, AGA required, reasonable.
- Keep in repair – CHECK IF HAVE TIME.
44
- Talk me through an assignment or subletting you have dealt with.
I haven’t but I am aware of how to undertake one properly.
