Leasing/Letting Flashcards
(39 cards)
What is the Code for Leasing Business Premises 2020?
A RICS Professional Statement that aims to improve the quality and fairness of negotiations on lease terms and promote the use of a new set of comprehensive heads of terms
What is the structure of the Code for Leasing Business Premises?
- Introduction
- Mandatory requirements
- Lease negotiation best practice
- Appendices
What are the mandatory requirements mentioned in part 2?
1.1 Negotiations must be approached in a constructive manner
1.2 Unrepresented parties must be advised by the other party that this code exists and they should recommend they obtain professional advice
1.3 The agreement must be recorded in written heads of terms that are stated as subject to contract
1.4 Lease renewal heads of terms must comply with the above
1.5 Negotiations should aim to produce letting terms that achieve a fair balance between parties
What does Part 3 of the code talk about?
Specific advice on lease terms to include rent deposits, rent reviews, service charges, repairs and alienation clauses
What is included in the appendices of the code?
Detailed template heads of terms
Including:
Extent of premises
Length of term
Whether inside or outside the act
Requirements for rent deposit
Rent and frequency of payment
Whether VAT is included
Rent free periods
Permitted use
Rights to assign/sub let
Repairing obligations
Rights to make alterations
What is the profits test?
If net profit for the proposed tenants business is 3 times the rent for 3 consecutive years
Or
If net asset value of the business is more than 5x the rent
What should be requested if the proposed tenant has a poor covenant strength?
Additional security such as a rent deposit or guarantee
What information is requested from a potential tenant?
Bank/accountant reference
Previous/existing landlord reference
3 years audited accounts/credit rating
What is a rental deposit?
Personal to the tenant
Must be legally documented in a rent deposit deed
Needs to include agreed terms for release of money
What should you ask yourself when looking at a break clause?
What is the required notice period?
Mutual or in favour of one party?
Is there a penalty rent?
Has the tenant met the conditions (e.g. full payment of rent/returning premises in good order)
What is the difference between a lease and a license?
Lease grants a legal interest in land whereas license is just personal right to occupy
Lease can be assigned but license can’t
Lease can’t be terminated before expiry but license has flexibility to be terminated any time
What does Street v Mountford (1985) state a lease is?
Gives exclusive possession for over six months
Payment of a rent
Duration of a specified time
What is section 24 of the LTA Act?
Relates to security of tenure
Business tenancy does not expire due to time and only when one party serves notice
What is section 25 of the LTA Act?
Landlord serves notice on tenant (6-12 month before end of tenancy) to either extend or end lease
What is section 26 of the LTA Act?
When the tenant serves notice requesting a new tenancy
What is section 27 of the LTA Act?
When a tenant serves notice to end the lease
Has to give 3 month notice if after initial expiry date
What is section 30 of the LTA Act?
Grounds for refusal of new lease
A) breach of repair
B) persistent delay in paying rent
C) other substantial breach
D) provide suitable alternative accommodation
E) uneconomic subdivision
F) demolition or reconstruction
G) owner occupation
Why would a lease be granted outside the act?
Landlord wants flexibility
Landlord wants to occupy in future
As it is a subletting
What does landlord have to do if it will be outside the act?
Serve notice to the tenant warning that the proposed lease will not be protected and that the tenant will get no compensation if they have to leave
Tenant signs declaration which is attached to lease
How big can a commercial board be?
2 sqm (flat)
2.3 sqm (v board)
How big can a residential board be?
0.5 sqm flat
0.6 sqm v board
When do boards need to be removed after a transaction completes?
14 days
What are some other laws relating to boards?
Only one allowed per building
Need consent to put on listed building
Restrictions in some areas (E.g. black and white in Mayfair)
Can’t be illuminated
How far away from wall can board be?
Can’t project more than 1m from face of building or above 4.6m from ground
