Leasing & Letting - WR/MB Flashcards
(25 cards)
Prof Standard: Code of leasing business premises 2020?
Improve quality of negotiations on lease terms and promote the use of a new set of heads of terms to make legal drafting of leases more efficient.
Mandatory requirements of Code for leasing business premises 2020?
- Advise unrepresented parties to seek professional advice.
- Heads of terms must state STC
- Negotiations to be approached in collaborative manner
What is Tenant Selection? Importance?
The concept of - will this tenant have a negative affect on the property / investment value?
Important to run analysis on covenant and background.
Example - 54 Hagley Road taking on a school.
Security Deposits
Deposit tenant puts down to provide security to the landlord in the event they breach an obligation within the lease.
- Must be legally documented in a rent deposit deed (separate to lease and personal to tenant)
- Money is held in a separate bank account and the interest made goes to tenant
- Monies can be released, as per agreed terms
Security Deposit Test?
Net Profits Test - look at last 3 years of audited accounts and look at the profit after tax - if 3x the rent then they pass.
Net Asset Test - same but looks at the total assets which need to be 5x the rent
What terms in lease affect value?
Security of tenure
Break clauses
Rent review mechanisms and frequency
Repairing provisions
Schedule of condition
Risks of pre-lets?
Developer or contractor not performing.
Agreement for Lease? and framework?
An AFL is a pre agreed lease which becomes active when something agreed both parties completes - i.e. subject to development or landlord works. Or subject on getting use class change.
Lease in pre agreed form
License for alterations
Specification and plans for proposed scheme
Developer warranties and guarantees
Difference between lease and license
A lease is a contract that outlines the tenants rights and responsbilities to occupy the property it cannot be terminated until it expires.
A license is a permission to make it lawful for the occupier to use the property. This can usually be revoked at any time.
Leases can be assigned and licenses cannot.
Requirements for lease
Exclusive occupation
Payment of rent
Duration of term
To be in writing and signed as a deed (if longer than 3 yrs)
Wayleave
A temporary right of way and receives an annual payment.
Typically used for service providers such as gas and electricity providers.
Rent review assumptions?
Willing tenant &landlord
Property is available to let on open market
All covenants observed by LL & T
To be used for purpose set out in lease.
Rent review disregards?
Any effect of good will on tenant & property
Any tenant improvements / works
Rent review evidence hierarchy
Open market lettings
Lease renewals
Rent reviews
Independent expert determinations
Arbitrator awards
S&L
Grounds for LL to refuse a NEW lease?
S30 of the L&T act 1954
1. Development
2. Owner occupation (if LL has owned for +5 years)
3. Uneconomic subdivision (tenant has sub leased)
4. Not paying rent
5. Provide suitable alternative accommodation
Landlord benefits to lease outside act
Flexibility as the tenant has no statutory right to remain in occupation
What is ‘Health Warning’?
When LL wants lease to be outside the act they serve notice - ‘Health Warning’ - tenant must make a declaration in response confirming they received notice and agree to terms.
What are the ways to terminate a lease
Forfeiture
Surrender
Expiry
Break clauses
Serve notice
What is needed in brochure (leasing)
date
address
epc
mis representation act
photos
contact details
12 principles of RICS - UK Commercial Estate Agency 2016?
- Honesty
- Provide ToB
- Don’t discriminate
- Clear communication
- Don’t false advertise
- Conflict of interest checks
- Be diligent
- Any client money to be held separate
- Use PII
- Ensure transparency with all parties regarding obligations
- All viewing carried out with LL consent
- Provide realistic assessment of price and rents
7 Principles of Estate Agents Act
Honesty
Don’t discriminate
Provide ToB
Keep clients money separate
Transparent about personal interest in property
Report all offers to client
Agreement and liability for costs
What legislation protects consumers?
Consumer Protection from Unfair Trading Regulations (2008)
BREEAM
Building Research Establishment Environmental Assessment Methodology
Gross Rent?
AKA Headline Rent - Rent before any incentives
