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Leasing & Letting > Leasing & Letting 1 > Flashcards

Leasing & Letting 1 Flashcards

1
Q

What is the Estate Agents Act 1979?

A

Governs the work of an estate agent (someone dealing with the disposal or acquisition of interests in land or property).

The main sections are section 18 (terms of engagement) and section 21 (declaration of personal interests).

Also includes:

  • Acting honestly and accuracy
  • legal obligation to tell client about offers (section 3).
  • Keep clients money seperate
  • Absence of discrimination
  • Agreement and liability of costs
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2
Q

What would you typically find in a lease?

A

Landlord
Tenant
Property name and address
Rent
Rent payment frequency
Term
Start date
Expiry date
Review pattern
Whether inside or outside the 1954 act
Any tenant or landlord breaks
Alienation clause
Repair obligations

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3
Q

What is an FRI lease?

A

Full repairing and insuring (landlord has no insuring or repairing liability and this is down to the tenant).

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4
Q

What is an IRI lease?

A

Internal Repairing and Insuring - Tenant is only liable for insurance, maintenance, decoration and repairs for the internal areas of the property

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5
Q

What are the pros and cons of an FRI lease?

A

Property is restored to a good state at the end of the lease / less obligations to landlord.

If not FRI can potentially negatively affect investment value or landlords ability to borrow against the property.

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6
Q

What are the pros and cons of IRI lease?

A

Less obligations to the tenant - however rent can be higher as a result.

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7
Q

What is an easement?

A

Permanent right and receives a capital payment e.g. where a third party, individual or utility company has a right to use the owners property for a particular purpose such as passing by foot or vehicles over the property.

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8
Q

What is a wayleave?

A

Temporary right and receives an annual payment - such as electricity company to install and retain their equipment

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9
Q

What is the difference between subject to contract and without prejudice?

A

Subject to contract means exactly that and nothing is binding until the point that the contacts have been issued and signed.

Without prejudice - during a period of negotiations, the opposing party cannot rely on any document or discussions labelled with this during litigation (cannot be shown to arbitrator or independent expert).

Privilege against disclosure.

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10
Q

What is the difference between a lease and a license?

A

A lease is a contractual agreement where a tenant pays a rent for a fixed term and has exclusive occupation.

A license is where the landlord grants permission to use the property for a specific purpose and can be terminated at any time. They acquire no interest in the property.

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11
Q

What is alienation?

A

Right granted in the lease for a tenant to assign, sublet or share occupation of their property.

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12
Q

What are the requirements of a lease?

A

Exclusive occupation
Specified term
Rent
If more than 3 years term must be in writing and stated as a dead

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13
Q

What is the hierarchy of evidence in regard to rent reviews and leases

A

Open market lettings
Rent reviews / lease renewals
Independent expert determinations
Arbitrator awards
Court determinations
Hearsay evidence
Sale and leasebacks
Surrender and renewals
Inter - company arrangements

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14
Q

What is the landlord and tenant act 1954?

A

Governs rights and obligations of landlords and tenants of premises occupied for business purposes.

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15
Q

What must be in place to gain protection from the 1954 act

A
  • Agreement is a tenancy
  • Used for business
  • Occupation of at least part of the business by the tenant
  • Occupancy of more than 6 months
  • Must not be an exempted or excluded tenancy
  • must be a competent landlord
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16
Q

What is stated under section 24 of the 1954 act?

A

A business tenancy to which the act applies will not come to an end until either the landlord or tenant serves notice to terminate.

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17
Q

What is a section 25 notice?

A

Landlords notice to terminate the lease

(Served no more than 12 and not less than 6 months before the date of termination to be specified)

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18
Q

What is a section 26 notice?

A

Tenants notice requesting new tenancy

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19
Q

What is a section 27 notice?

A

Notice to be served by the tenant at any time if they want to leave with 3 month notice after lease expiry.

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20
Q

Under section 30 what are the grounds for refusal to a new lease?

A

A - breach of repairing covenant
B - Persistent delay in paying rent
C - Other substantial breach
D - Provide suitable alternative accommodation

E - Uneconomic sub division (compensation payable)
F - Demolition or construction (compensation payable)
G - Owner occupation (compensation payable)

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21
Q

What is AGA?

A

Authorised Guarantee Agreements - obligation of outgoing tenant to guarantee the performance of a new tenant / assignee.

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22
Q

What is the Misrepresentation Act 1967?

A

This act relates to misrepresentations or false statements made by the party during the pre contractual enquiries which can ensure them to purchase. It is in place to ensure ensure you provide factual and truthful information.

You can either be
Fraudulent
Negligent
Innocent

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23
Q

What are the likely repercussions / penalties if you made a fraudulent statement?

A

This is a civil offence and can involve a warning order / prohibition order and / or fine.

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24
Q

Q - you say you understand the process involved with leasing and letting properties can you talk me through this?

A

Receive instruction
Check competence / independence
Terms of engagement
Signed terms
Complete AML
Gather info
Inspect and measure
Comparable
Rental value
Prepare marketing details
Market
HOTs
Instruct
Complete
Invoice

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25
Q

How can market trends affect values and premiums?

A

In the pub sector - a performing market will typically see demand increase and rental offer and values driven upwards in comparison to a poorer market.

In better markets premiums will increase and poorer markets these typically reduce or won’t be any premium.

Seeing 1 x profit atm.

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26
Q

What Is an assignment?

A

Transfer of an existing lease by a current tenant to a new tenant with consent from landlord.

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27
Q

What is are the benefits of assigning a lease?

A

Allows existing tenant to vacate a premises before agreed expiry date

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28
Q

What is a sub-let?

A

Existing tenant let’s whole or part of the property to a sub tenant.

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29
Q

When might you sub-let rather than assign?

A

If you wanted to take back full occupation of the premises in the future but perhaps needed some assistance with paying rent at the particular time

30
Q

What is an open market letting?

A

Where you market the property openly and agree a deal between a willing lessor and willing lessee

31
Q

What are long leaseholds?

A

This would refer to a longer term lease agreement such as 125 year or 999 year for example.

32
Q

How can size impact rental value?

A

In some instances when considering a rate per sq ft size can increase the rental value but there comes a point where there will be an element of quantum and this rate will be diluted. You can also see a premium for smaller units.

33
Q

How does condition affect rental value?

A

If a property is in poor condition people will typically pay less rent in comparison to a property that is ready to trade due to the required Capex

34
Q

How do lease terms affect rental value?

A

What I was referring to here was that longer terms can influence rental value.

In my experience, some landlords are happy to step the rent on a longer lease or reduce the rent slightly in comparison to shorter.

Also upward only rent review patterns means that rent will not be reduced at review.

35
Q

How does rent passing affect rental value?

A

This was a mistake in my submission but what I meant was it the rent passing was toppy in comparison to market rent tenants may look to exercise break options or service notice.

36
Q

How does configuration affect rental value?

A

Bigger and better trading spaces that area easily accessed and cater for more cover numbers will typically command a higher rental value than smaller trading spaces.

37
Q

What is the RICS Real Estate Agency and Brokerage Statement 3rd edition 2016?

A

Professional statement that applies to all RICS members involved with the sale, letting, leasing and management of real estate.

38
Q

What topics are covered in the Real Estate Agency Brokerage Statement 3rd edition 2016?

A

Ethics
Securing instructions
Acting for the seller: marketing
Acting for the seller: agreeing sale or lease
Acting for the buyer
Ending the instruction
Safety and security
Agency management

39
Q

What is the code for leasing business premises 1st edition 2020

A

Professional statement outlining the mandatory requirements for members when negotiating leases and outlines model HOTs

Intro
Mandatory requirements - must record in HOTS with min requirements
Lease negotiation best practice
Appendices

40
Q

What do you mean by fully fitted?

A

The property was fully operational and in a condition that was ready to open the doors and start trading with all fixtures and fittings.

41
Q

What is shell and and core condition?

A

Basic structure of the building (shell) is in place but without finishes or fixtures and fittings. So it is left to the operator to fit out how they want.

42
Q

What is category A fit out?

A

Fully functional but empty space with basic installations and mechanical and electrical services.

43
Q

What is Category B fit out?

A

Space is fully fitted and tailored to the tenants fit out requirements.

44
Q

Can you explain the difference between values and premiums in the leasing market and do they impact eachother?

A

Rental value is the rent attributable to the use of a property.

Premium is a capital payment made my one Party to another for a lease for example (maybe in an exceptional location).

Typically higher premium will mean a lower rent and visa versa.

45
Q

Are there any restrictions on what a tenant can do in regard to subletting or assigning their leasehold interest?

A

Will depend upon the terms within the lease

46
Q

What are your examples for leasing and letting ?

A

Level 2 - Salisbury, Wiltshire (Ramparts)

Level 2 - Warwick, Warwickshire (Punchbowl)

Level 3 - Reading, Berkshire (G&D)

Level 3 - Southampton, Hampshire (5A Bedford place)

47
Q

In your Salisbury example you say the property was class e? What is class e and what was the use here?

A

Class E - Commercial Business & Service.

This was restaurant use.

Other examples include - financial services, medical or health services, indoor sport (gym)

48
Q

In your Salisbury example, How did you ensure the details were in accordance with the Consumer Protection from Unfair Trading Regulations 2008?

A

I ensured to use factual and truthful statements and no misleading information.

I ensured to use a disclaimer stating that the details do not constitute a contract to sale, only part of the property is shown and calculations are approximate.

Images I used were also taken on the date of my inspection and were not historic.

49
Q

You say you ordered a To Let board, what is the ruling around this?

A

Require planning permission on listed buildings or in conservation areas etc.

Must be prior approved by client.

Cannot protrude out more than 1m or be bigger than 2 sqm or 2.3 sqm for v board.

50
Q

What lease terms can affect value?

A

Rent review pattern
Covenant strength
Rent
Any incentives? (Rent free etc)
Repairing / decorating obligations is it FRI or IRI
Alienation clauses
Rent review provision

51
Q

You say that the property you let in Warwick was attractive to the occupational Sui Generis market what do you mean by this?

A

This is the use class for public houses and means “class of their own” it appealed to the private operators within this sector as the property was of good size in a prominent position on an A road in proximity to nearby retail and leisure users (JD weatherspoon and privates)

52
Q

You say you produced a Mail shot when letting the property what did you consider when doing this?

A

I had regard to the Data Protection Act 2018 and UKGDPR and the rights of the individual I also contacted operators who had requirements for this type of site.

53
Q

You say you organised an EPC to be assessed for the Punchbowl what are the rules and these?

A

Any commercial property above 50sqm that is newly built sold or let for a period of 6 months or less than 99 years must have an EPC.

Lettings - E or better

54
Q

How long must an EPC be commissioned within?

A

7 days

55
Q

What are the penalties if EPC not displayed on marketing material?

A

Penalties around marketing are 12.5% of RV with a minimum fine of £500 and max of £5,000.

Resi = fixed fine of £200.

56
Q

You say you highlighted key information about the lease terms and information about the property for Punchbowl what were these?

A

Included an internal and external description, any planning info, that an EPC had been commissioned and would be available on request, rateable value, guide rent, details of the premises license.

Client was looking for a 10-15 year lease with terms to be agreed.

57
Q

Where did you look for comparable evidence for Punchbowl, is this readily available in the pubs sector?

A

I used my firms database and verified the information with the relevant agents. Here I used lease deals I had recently completed in the area and also my team.

Is readily available but less frequent transactions than core sectors such as residential.

58
Q

Where else could you look for comparable data?

A

Online portals such as Rightmove, EG property link.

Databases such as Costar

Indices, interest rates, Inflation rates if higher more
Money circulating.

59
Q

What is market rent?

A

Estimated amount for which interest in real property is expected to be let on the valuation date.

On appropriate lease terms
Between a willing lessor and willing lessee
After proper marketing
In an arms length transaction
Where all parties have acted knowledgeably, prudently and without compulsion

60
Q

You mention a landlords legal obligations to provide statutory documents to any new tenant what do you mean by this?

A

Well an EPC of an E or better must be provided but the the landlord will also have an obligation to ensure gas safety compliance and they will need establish who is responsible for the likes of fire safety, electrical safety, and health and safety compliance for example.

61
Q

For your level 3 Reading example, why did your client advise your client that drive-thru operators would likely be interested in the site?

A

The property was prominently situated on a busy A road, with traffic movements of around 15,000 to 20,000 a day and with double access which are requirements of premium operators in the market place.

62
Q

Are you able to give advice on drive-thrus to your tenant when you sit in the licensed leisure team?

A

At savills we have access to a wide variety of teams and expertise. In this particular instance I used my general knowledge and experience and understood the location but the instruction was joint with the road side retail team. Ultimately I wanted to provide the best outcome my client on a pub site.

63
Q

You say you agreed a deal with two parties why was this? Was this a contract race?

A

No this was simply two separate deals with two parties. This meant we could utilise the whole site and generate the most rental income.

One had a 2,200 sq ft drive thru and another an 1,800 sq ft drive to pod both paying a rent or around £70 psf.

64
Q

What was your advice to the client on your Reading example?

A
  • I advised drive - thru operators would likely be interested and why
  • I advised on a marketing strategy
  • I advised on market rent
  • I advised two units could be secured on site on the basis of 2,200 sq ft drive thru and 1,800 sq ft drive to
65
Q

I see you were involved in the letting of a commercial unit in Southampton what was your advice to the client?

A

As the property was in a shell condition this would affect my opinion of rental value and was lower than those fully fitted in the area.

I advised incentives would be likely of 6 months rent free and possibly a contribution to the tenant fit out.

I advised on rental value and marketing strategy.

66
Q

How did you present offers to your client?

A

I provided these in an excel spreadsheet but excluded any personal data so I did not break any GDPR ruling.

67
Q

You say you negotiated the headline lease terms and issued HOTS can you tell me what was included?

A

Date
Full property address
Tenant
Landlord
Agent
Both solicitors
Rent
Rent payment frequency
Term
Rent review pattern
Rent review provision
Any incentives
Repairing / decorating / insuring obligations
Type of lease FRI
Alienation clauses
Timescales

68
Q

What is the relationship with values and premiums

A

Typically the higher the headline rent the lower the premium and the higher the premium the lower the rent.

69
Q

If you have a fully fitted unit or a unit of shell condition, where might the landlord offset the difference in rent here?

A
  • Offer capital contribution and agree same rent
  • Capital contribution and Rent free as well
70
Q

What is Class E

A

Commercial, Business and Service

Restaurants, Gyms, Shops, Offices, Cafes

71
Q

If the client was a private individual what must you include in the terms of engagement with your fee?

A

Vat apportionment and total with VAT

72
Q

What lease terms affect value?

A

Lease length / term certain

Break clauses

Alienation clause

Repairing obligations

User clauses

Rent review pattern / basis of valuation

Security of tenure provisions

Planning use

Inside or outside act

If no mention of being contracted out then it is protected

Leasing & Letting (1 decks)

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