Leasing & Letting Flashcards
What is the RICS document for leasing & letting?
RICS Professional Standard: Code for Leasing Business Premises 2020
What are the main objectives of Code for Leasing Business Premises 2020? (2)
- To improve the quality and fairness of negotiations on lease terms
- Promote the use of a new set of comprehensive Heads of Terms to make legal drafting of leases more efficient
What is the structure of the Code for Leasing Business Premises 2020? (4)
- Introduction
- Mandatory requirements
- Lease negotiation best practice
- Appendices (includes model Heads of Terms)
What are some of the minimum terms to include within a Heads of Terms? (11)
- Subject to Contract
- Identity and extent of premises
- Length of term
- Whether the L&T Act is excluded or not
- Options for renewal or break rights
- Rent incentives
- Rent reviews
- Service charge
- Alienation
- Repair obligations
- Conditions of the letting
Are Heads of Terms legally binding? (2)
- No, as Heads of Terms should always be labeled ‘Subject to Contract’
- Except for confidentiality and exclusivity
How can a landlord test the strength of a potential tenant’s covenant strength?
- Dun & Bradstreet credit rating
- Profits test
What does a Dun & Bradsheet rating show? (3)
Provides a quick and clear indication of the credit-worthiness of an organisation, split into:
- Financial Strength: 5A to H based on an organisation’s Tangible Net Worth
- Risk Indicator: 1 to 4 based on probability of failure
What is the profits test?
Net profit must be 3 times the rent for 3 consecutive years
What is a usual request from a landlord for information before tenant selection? (3)
- Bank, accountant, and 2 trade references
- Previous/existing landlord reference
- 3 years audited accounts/credit rating
How can a tenant get around a poor credit rating? (2)
- Rental Deposit
- Guarantor
What lease terms can affect value? (7)
- Lease length (term certain)
- Break clauses
- Alienation
- Repairing obligations
- User clauses
- Rent reviews
- Security of tenure
What would you do if a tenant you are negotiating with isn’t represented?
As per the Code of Leasing Business Premises, you should advise the other party about the Code and recommend them to get professional advice
What is the relevance of the Landlord & Covenants Act 1995?
- It relates to the assignment of leases
- Introduced the concept of AGAs
What is a schedule of conditions?
Why would a tenant want a schedule of conditions?
