Mock Questions Transcribed (Viv)

Question 1

I’m going to go straight in there and look at your comparable evidence, which you haven’t really touched upon in your presentation. What was your best comparable and why?

Answer 1

My best comparables in this instance were recent transactions in the building - they were contemporary (within the last 2 years) and open market transactions carried out by my firm, so I had full evidence.

• The most recent deal was to a Software company on the 3rd floor in 2020. They took a 5-year lease with a 3rd year break at £52.50 psf (5 + 5 rent free).
• They also took a separate lease on the 1st floor in 2020 on the same terms (with 4 months rent free).
• I also had reference to the previous deal on the 4th floor in 2019 - this was at £52.50 psf (although I was fully aware market conditions have changed a lot since then and analysed contemporary evidence as well)
• On a Headline Basis my closest external comparable was 9 Holyrood Street - £57.50 psf in 2021.

Question 2

Talk me through how you calculate Net Effective Rents, because in your case study you give an ‘Achieved Rent’ - not a Net Effective. Surely there’s a reason why you didn’t put Net Effective on your schedule?

Answer 2

I established the Headline Rent first so that I could devalue it to produce a Net Effective Rent - to reflcet the ‘true market rent’.

I used the Straight Line basis in Excel until the next lease event.

To do this, I aggregated the cost of all rental payments (to include rent-free / any other concessions) and divided this by the term certain.

I would deduct a 3-month fitting out period from the rent-free before devaluing (unless the space was ready fitted).

Question 3

How did you calculate the Net Effective Rent for 9 Holyrood Street?

Answer 3

The headline rent was £57.50 psf.

I aggregated the cost of the rent (to include the rent-free period) and divided by the term certain (3 years as this was the break). It was ready fitted so no deductions were needed for fit out.

Question 4

Did the calculation of Net Effective change the weighting of your comparable evidence in any way? Could you tell me how and why?

Answer 4

It did change the weighting - it devalued the headline rent to produce the ‘true market rent’.

Having analysed the Net Effective Rent, the evidence was clear of challenging market conditions off the back of the pandemic. Landlord’s were clearly granting longer rent-free periods (2.4 months per term certain).

The result was roughly a £5.00 psf devaluation of the headline rent.

Question 5

You say you do it on a straight line basis in Excel - talk me through how you do that in a bit more detail please?

Answer 5

I use the straight line basis in Excel until the next lease event.

To do this, I aggregated the cost of all rental payments (to include rent-free period / any other concessions) and divided by the term certain.

I would deduct a 3-month fitting out period from the rent-free before devaluation (unless the space was ready fitted).

Question 6

Do you do the cash flow to the first lease event or for the whole lease?

Answer 6

To the first lease event

Question 7

Do you allow any normal fitting out period or do you take the whole incentive?

Answer 7

I deduct a 3-month fitting out period from the rent-free before devaluation (unless it is already fitted out).

Question 8

You say this is of Grade B specification - how does the specification vary to a Grade A building? Can you give me 3 or 4 differences please?

Answer 8

It was Grade B = there were no bike racks / showers in the building, the common parts were dated, the air conditioning was simple comfort cooling as opposed to VAV/VRF/Fan Coil.

When you compare it to the BCO specification, it was apparent. BCO define Grade A specification as:

• Full access raised floor with floor boxes
• Approximate ceiling height of 2.6 - 2.8m
• Ceiling void of 350mm and a raised floor void of 150mm
• Maximised opportunity for daylighting
• Air conditioning and double glazed windows
• 1 cycle space per 10 staff, and 1 shower per 100 staff
• 1:8m2 to 1:10m2 occupational density

BCO 2023 update - recommending the adoption of 1:10m2 occupational density.

Also a minimum target of BREEAM Excellent for new schemes.

Question 9

What was the floor-to-ceiling height, because in your photo it looks quite low? And how does this compare to what the BCO guide for Grade A?

Answer 9

4th floor: Floor-to-ceiling height was 2.3m

BCO Guide for Grade A = 2.6m - 2.8m

Question 10

You granted an 8-month rent-free period. If i picked up the lease having completed the letting, how was that rent-free period documented in the lease?

Answer 10

I would look at the lease start date vs. the rent commencement date.

Question 11

What was the process of getting the lease Outside of the L&T Act (1945)? How was it documented between lawyers? As an agent you should know how that’s done, perhaps…?

Answer 11

Section 38A of the Act sets out the procedure which must be followed for the Landlord to contract outside of the Act.

To contract Outside of the Act, a strict procedure must be undertaken.

The Landlord is required to serve a notice on the prospective tenant - warning that the proposed lease will not be protected. This is know as a ‘Health Warning’. (To advise the tenant they are being offered a lease which is not protected, and the tenant should not commit without professional advice).

The proposed tenant must then make a declaration in response, confirming that they have recieved the notice and accept its terms.

This procedure MUST be completed before the lease is signed.

There are 2 types of declaration:

1) SIMPLE DECLARATION = Given when the parties have recieved the warning notice at least 14 days or more prior to committing to the lease. (No need to track down an independent solicitor).

2) STATUTORY DECLARATION = Given when the parties have less than 14 days prior to committing to the lease. If this is the case, a “Statutory Declaration” must be obtained and requires an independent solicitor for oath.

Question 12

How long is a Health Warning Notice when contracting Outside of the Act?

Answer 12

At least 14 days before granting a new lease. This would lead to a simple declaration. A simple declaration is just signed by the tenant (no need to track down an independent solicitor). A simple declaration can only be made if the tenant has recieved the health warning 14 days or more before grant of a new lease.

If the Health Warning is less than 14 days, a “Statutory Declaration” is required which must be made in front of an independent solicitor.

Question 13

What are some of the main reasons for a lease to be granted Outside of the Act?

Answer 13

A requirement in the Head Lease to grant any subletting Outside of the Act.

The Landlord will want to reoccupy the property in due course.

The Landlord wishes to redevelop the property at lease end.

The Landlord wants future flexibility.

Question 14

And what’s the main advantage for the tenant taking a lease Outside of the Act?

Answer 14

The rent will likely be lower for a tenant - they would pay a premium for Inside of the Act.

Question 15

You said the common parts were quite dated - did you look at any discussions at all with the Landlord as to how they could be improved? What was there position there?

Answer 15

Part of my marketing recommendations report included refurbishment recommendations. This included:

New paintwork
Soft seating in reception
New passenger lift
Upgrading WCs

Question 16

Going back to the rent-free period you agreed - was that initial or was it split out over the term, because I note there was a Tenant break at year 2?

Answer 16

The 8-months rent-free period was frontloaded in Year 1.

I strongly recommended amortising the rent-free over the duration of the lease term (to be taken as 2 months per annum).

This was negotiated with the tenant - however they would only accept if frontloaded in year 1. My client took a view and was keen not to lose the tenant and extend the void period even further than it had been.

Question 17

Did you not consider splitting it out to incentivise the tenant to remain and not enact the break? This seems like a no-brainer doesn’t it?

Answer 17

Yes - I strongly advised amortising the rent free period over the duration of the term (2 months per annum).

This was negotiated with the tenant, however they would only accept if front loaded in year 1. My client took a view and was keen not to lose the tenant and extent the void period even further than it has been.

Question 18

So there was clearly a big risk there that the tenant would use all the rent-free up for the 2-year period and then threaten to enact the break. What was the break notice period?

Answer 18

6 months.

(The required notice to exercise the break was 6 months before the break date).

Question 19

Were there any conditions attached to the break at all?

Answer 19

Yes:

1) Up to date payment of all rent & service charge payments.

2) Making good and ensuring full vacant possession.

Question 20

You mention there were terraces / balconies on the floor. Were they publically accessible? If they were publically accessible, how would you go about valuing them?

Answer 20

I attriute a higher rental value to them vs the other floors in the building. An element of outdoor space will generally command a rental premium.

(Strange question…)

Question 21

What was the Rateable Value of the floor and what did you say to prospective tenants about that?

Answer 21

I am aware the VOA have revalued the Rateable Values of business properties and published a new Rateable Value list for England and Wales in April 2023 to reflect updated property market conditions.

The current uniform business rate for 2023 remains unchanged - this is £0.49 for RV’s less than £51,000 (small business multiplier) and £0.512 for RV’s of more than £51,000 (higher multiplier) in England.

So:

The Rateable Value for the 4th floor was £52,500. As this is higher than the threshold of £51,000, I use the higher multiplier (£0.512p). This = the Rates Payable of £14.50 per sq ft for the 4th floor.

Question 22

What was the Service Charge for the building? What did it include?

Answer 22

The service charge was £7.39 per sq ft.

This is the amount the tenant will pay to cover the upkeep of communal / shared facilities.

Here the service charge included:

Lift maintenance
Cleaning of common parts
Lighting and power to common parts
Fire alarm maintenance
Maintenance of the exterior
Managing Agents (In this case Cluttons Property Management team).

Question 23

Were there any major works planned for the building?

Answer 23

No - this was a ‘secondary investment’ for them

Question 24

In your report you mention the Southwark Planning Restrictions in respect of a letting board. What were these briefly?

Answer 24

These mirrored the Town & Country Planning Regulations (2007). These were:

Planning permission MUST be required for letting boards over 2 sq m (flat) and 2.3 sq m (if V board).

Only 1 board per building.

1m max projection from the front of the building and NO illumination

Must have Landlord approval

Must be removed 14 days from completion of letting.

Question 25

You mentioned the Hierarchy of Evidence. You also mentioned about previous lettings in the building which, to my mind, would be a very good indicator of value. What was the most recent transaction in the building?

Answer 25

The most recent transaction in the building was to a Software Company on the 3rd floor in Nov 2020 – they took a 5-year lease with a 3rd year break at £52.00 per sq ft (5 + 5 rent free). They also took a separate lease on the 1st floor in Nov 2020 on the same terms but with 4 months rent free.

Question 26

In terms of this being the 4th floor – what floor level adjustments did you make. If the building didn’t have a lift what level of rental adjustments would you make?

Answer 26

Being the top floor in the building and the only one benefitting from an element of outdoor space, the floor would command a rental premium. However, the difference in natural light wasn’t noteworthy compared the lower floors. Being the top floor is why it was important to ensure the headline rent remained at £53.00 per sq ft.

Question 27

You mention about the Profits Test - what's that?

Answer 27

The profits test is the market standard test to assess covenant strength (3x3). The businesses’ net profit must be 3x the annual rent for 3 consecutive years (3 x 3). Or the Net Asset Value of the business 5x the rent. Also use an external Credit check – Dun & Bradstreet.

Question 28

What was the EPC Rating for the building? What did you advise your client in respect of the regulations and changes happened the Energy Performance Certificates?

Answer 28

The EPC Rating was a D. As of April 2023, all commercially property must legally have an EPC rating of ‘E’ or above to be let, including new leases. I advised of future proposed legislation for the MEES to reach band ‘C’ by April 2027 and ‘B’ by 2030.

Question 29

Interesting you say it’s D at the moment – what are you advising the Landlord in terms of upgrading the building, because it’s going to bite for him soon isn’t it?

Answer 29

Upgrading the Air Conditioning to VAV/4-Pipe Fan Coil/VRF. Upgrade the lighting to energy efficient LEDs. Also install PIR motion sensor LEDs that turn off Double glazing / triple glazing. Recommend an EPC assessment to identify areas of upgrade.

Question 30

Tell me about the Air Conditioning on the floor?

Answer 30

They were wall-mounted, air-conditioning cassette units of traditional comfort cooling. These were electric and adjusted per floor.

Question 31

You say you always adhere to RICS Surveying Safely (2018) – tell me how. Can you give me 3 or 4 takeaways?

Answer 31

The RICS ‘Safe Person’ concept – placing emphasis on the individual to ensure safety of themselves, colleagues and others health & safety. Risk Assessments – Identify the ‘hazard’ and mitigate the risk. Follow guidance for inspections – Appropriate travel arrangements, lone working, ensure PPE).

Question 32

In your Level 2 example is an acquisition – a viewing tour of various offices. How did you establish your clients objectives and how did you relate that to the tour of the offices?

Answer 32

I arranged a meeting with the client to understand the key drivers behind their move. I used a scoring matrix to benchmark their most important objectives and had regard to this when producing a shortlist for their review.

Question 33

Did you give them any advice on their floor area requirements or had they got that themselves?

Answer 33

They had this themselves – they required 5,000 sq ft which was a slight downsize on their current floor.

Question 34

You say some of the buildings were under construction. Talk me through how you identify approaching a construction site with your clients?

Answer 34

I call the building manager in good time prior to the inspection to find out what PPE was necessary and what was available on site. I ensure all attendees sign in and out of the building register at the site. I ensure I allocate extra time in between viewings to account for safety briefings. I ensure I am aware of any hazards and identify the locations of fire escapes.

Question 35

You say this is an office building under construction – what form of construction was it? How was it being built?

Answer 35

This was a new build scheme on White Lion Street of steel construction.

Question 36

Are you aware of different types of office construction – have you come across a concrete frame building during your training?

Answer 36

The main types of office construction = Steel-frame construction & concrete frame construction.

Question 37

How can you tell the difference between a Steel Frame Construction Office and a Concrete Frame?

Answer 37

Steel Construction = Less columns and a wider span between the columns Concrete Construction = More columns, closer together columns and lower floor-to-ceiling height.

Question 38

Looking at your Level 3 inspection example in Fitzrovia - there was a problem with damp in the building. Can you talk me through how that manifested itself and what the likely cause was please?

Answer 38

The main cause of the rising damp was due to a failure in the damp proof course or damp-proof membrane. This meant that moisture from the ground could rise upwards through the walls via capillary action. I am aware rising damp can also be caused by cavity wall tie failure – the cavity having debris in them allowing for moisture build up.

Question 39

How high traditionally does rising damp rise? What did the damp look like?

Answer 39

Rising damp usually stops around 1.5m above the damp proof course. I noted visible tide marks on the wall above the skirting board, peeling / cracking wallpaper and a musty smell.

Question 40

What is damp proof course?

Answer 40

A layer of waterproof material at the base of a property to prevent rising damp.

Question 41

It’s a level 3 example – what advice did you give your clients on that?

Answer 41

I informed the client to seek professional specialist advice from a building surveyor to remediate the damp. My advice would be to apply a damp proof course if there’s not one in place already, or fix the fault in it.

Question 42

This was a damp shop – what do you think a building surveyor would recommend to do? What remediation works do you think would be needed?

Answer 42

The most crucial part of rising damp is to treat the root of the problem. Ensure the damp proof course is fixed.

Question 43

Have you seen any Dry Rot in your training? What does it look like – was there any in the retail unit? What does dry rot look like?

Answer 43

Dry rot is caused by Fungal Attack. Visible fungus spreads across the wood in fine white strands and large mushroom-like fruiting bodies. A strong smell and cuboidal cracking will be present.

Question 44

Now going to look at measurement which you’re taking to Level 2. Can you sum up where RICS is with regard to IPMS: All Buildings at the moment please?

Answer 44

IPMS published the latest standard in January 2023 called IPMS: All Buildings. This supersedes all previous IPMS standards and is applicable to all asset classes. It has been introduced to ensure consistency on a global stage about measuring property. HOWEVER, RICS have NOT published any updates in response to IPMS: All Buildings. For now – RICS Professional Statement: RICS Property Measurement (January 2018) remain the mandatory guidance for measurement, alongside the RICS Code for Measuring Practice (2015).

Question 45

How are you measuring buildings at the moment – tell me about the most recent office you measured?

Answer 45

(remember It is mandatory when measuring office to measure to IPMS) I am always dual measuring to both an IPMS 3 and NIA basis. Whenever a client wishes not to use IPMS, I always advise them of the benefits of IPMS.

Question 46

Can you sum up some of the differences between IPMS 3 and NIA please?

Answer 46

IPMS 3 measures to the Internal Dominant Face (IDF), includes columns/pillars and includes areas of less than 1.5m height (limited use area). The main differences for IPMS 3 vs. NIA are: Perimeter measurements are taken to the ‘Internal Dominant Face’ (IDF). Includes areas of restricted height less than 1.5m (limited use areas). Includes all pillars/columns On floors with multiple occupants, the area is taken to the midpoint of the partition wall between tenancies. You could always lift up the ceiling tile / measure thickness of the partition wall. Covered galleries and balconies for the exclusive use of one tenant are included and stated separately with IPMS 3 (e.g. 4th floor Bank Chambers).

Question 47

What is an Internal Dominant Face?

Answer 47

Internal Dominant Face = The inside finished surface comprising 50% or more of the floor-to-ceiling height for each wall section.

Question 48

What about areas of limited head room (less than 1.5m) – do you include or exclude with IPMS 3?

Answer 48

You include limited use areas of less than 1.5m headroom with IPMS 3 (but exclude with NIA).

Question 49

Your evidence has all been offices – have you ever measured an industrial unit during your training? Do you know what basis you would use for that?

Answer 49

Use Gross Internal Area (GIA) under the RICS Code for Measuring Practice (2015). Gross Internal Area (GIA) is the area of a building measured to the internal face of the perimeter walls at each floor level. Measurement from the perimeter wall internal face – to – perimeter wall internal face, including everything in between. Include: Columns, lift wells, mezzanine floor with permanent access, loading bays, WCs, changing rooms, cleaners cupboards. (Picture an industrial unit and what is included between each perimeter wall internal face). Exclude: Exclude external open-sided balconies / canopies, covered ways and fire escapes. Also exclude perimeter wall thickness. When on an industrial unit, it would also be prudent to measure: Eaves height Apex height Roller shutter height

Question 50

Tell me – what would you include / exclude on a GIA basis when measuring an industrial unit?

Answer 50

Measure from internal face of perimeter wall to the internal face of perimeter wall. Include: Columns, lift wells, mezzanine floors with permanent access, loading bays, WCs, changing rooms, cleaners cupboards. Exclude: Canopies, fire escapes, covered ways, external perimeter wall thickness. Ancillary offices within the industrial unit are measured to GIA.

Question 51

What do you mean by Eaves Height and how would you measure it?

Answer 51

Eaves height is the clear height between the floor and the lowest point on the underside of the roof (underside of the roof covering). Usually a vertical measurement from the corner of the perimeter wall (e.g. at the Eaves) Generally want minimum 8m eaves height.

Question 52

What is the Apex and how would you measure it?

Answer 52

In contrast to Eaves, the Apex is the max. height of the roof. A vertical measurement from usually the middle of the unit to the meeting point of the horizontal roof parts. Ideally minimum 10m apex height.

Question 53

What would you look for in a roller shutter height?

Answer 53

Minimum 10m roller shutter height.

Question 54

What basis of measurement would you use for retail units?

Answer 54

Use Net Internal Area (NIA) under the Code of Measuring Practice (2015). I would measure from the internal face to the internal face, excluding: * Structural columns / pillars * Limited use areas of less than 1.5m * Common parts / WCs * Plant room Prudent to take gross and net frontage measurements. Gross Frontage = The overall external measurement in a straight line across the front of the building from the outside of the external walls. Net Frontage = The overall frontage of the shop line measured between the internal face of the external walls.

Question 55

If you were measuring a shop unit fitted out with full height partitioning by the tenant, how would measure the built width of the retail unit?

Answer 55

Remove a ceiling tile Try and get behind the partitioning (spot any gaps / holes) Inspect the basement or first floor to see actual build width Scale from plans Take sufficient on-site measurements to calculate the ITZA measurement

Question 56

You talk about the Red Book Global and the Five Methods of Valuation. What are the 3 valuation approaches people have regard to these days?

Answer 56

1. Income Approach (Converting cash flow into a Capital Value – investment method, profits method, residual method). 2. Cost Approach (Reference to the cost of the asset whether purchase or construction – Depreciated Replacement Cost). 3. Market Approach (Using comparable evidence available – Comparative method).

Question 57

You did a valuation of an office in Islington – can you talk me through which method of valuation you used for that and why please?

Answer 57

I assisted in the valuation of a Freehold office building in Islington for agency purposes, as the client was considering whether to sell the property. As it was for agency purposes, it was not Red Book compliant (being one of the 5 exemptions). Prior to accepting the instruction, I assessed my competence (SUK), carried out a Conflict-of-Interest check and issued written Terms of Engagement. I then inspected and measured the property. As it was owner-occupied, I used the comparative method of valuation. I researched VP Sales and comparable rental evidence in the area. I sourced my comparable method from online databases such as CoStar and verified via phone call to the respective agent and triangulation. I then created a schedule of comparables and analysed these on a Net Effective Basis. I them adjusted the comps having reference to the Hierarchy of Evidence to arrive at my opinion of Market Value.

Question 58

There was enough Freehold Vacant Possession evidence around was there?

Answer 58

There were recent VP sales transactions I had become aware of. I cross-checked my values using the investment method.

Question 59

You talk about the Hierarchy of Evidence – are you aware of the RICS Guidance on Category A, B and C Evidence?

Answer 59

Category A = Direct Comparables. Direct comparables, nearby transactions, near identical properties. Data from subject property itself Contemporary, full and accurate information. Category B = General Market Data. Commercial Databases (CoStar) Supply / Demand data Info from published sources Historic Evidence Category C = Other Sources Wider market data (e.g. stocks and interest rates) MSCI

Question 60

You also valued another multi-tenanted office building in Camden, and you did an approach per tenancy as I understand it, i.e. you valued it per floor. What was the basis of valuation you used for that please?

Answer 60

I assisted with the valuation of a Freehold office building in Camden for inclusion in the client’s financial accounts. As it was for financial accounts, I reported the Fair Value of the property, in accordance with IFRS 13. I assessed my competence (SUK), carried out a Conflict-of-Interest check and issued written Terms of Engagement. Then began due diligence – requested the latest tenancy schedule and reviewed the existing leases. I also undertook Statutory Due Diligence checks to ensure there were no matters that could adversely affect upon value. As it was fully let and income producing, I used the Investment Method to come to a conclusion on Fair Value. I had established the property to be slightly over-rented, so I used the Hardcore Layer technique of investment valuation. To do this I divided the income flow horizontally. The bottom slice (Hardcore) was the market rent. Valued into perpetuity at a NIY (6.0%). The top slice (Layer) was the rent passing – the market rent. Capitalised until the next lease event with an appropriate risk adjustment to the NIY (6.5%). I selected two yields derived from comparable evidence. I applied 6% to the bottom slice (market rent) and 6.5% to the top slice to reflect the additional risk.

Question 61

What is the difference between Market Value and Fair Value?

Answer 61

There is a subtle difference between Market Value and Fair Value - but it's quite a key one. The Red Book defines Market Value as ... "The estimated amount which an asset or liability should exchange: - On the valuation date - Between a willing buyer and seller - In an arm's length transaction - After proper marketing" Whereas the Red Book defines Fair Value as ... "The price that would be recieved to sell an asset at the measurement date". (Fair Value relates to the actual worth of an asset, and would be the 'mutually beneficial value' between the buyer and the seller). (Market Value is the price which the asset will exchange between parties in the market, and is influenced by market forces). --> RICS view is that Fair Value is generally consistent with the definition of Market Value.

Question 62

Why was the property over-rented?

Answer 62

Fall in office market for Grade B stock such as Camden (supply increase). The specification of the ground floor tenant was dated and would struggle to be re-let in the current market without upgrade.

Question 63

What is the Estate Agents Act (1979)

Answer 63

Estate Agents Act (1979) = the key piece of legislation when disposing or acquiring freehold or leasehold property. It sets out 7 key points, to give you a flavour: Must act with honesty and accuracy Section 18 – All costs/fees must be agreed in writing in clear ToE, and basis of agency clearly outlined. Section 21 – Disclosure of personal interests, ‘Connected Person’ declared Must report all offers to the client, clearly and in writing.

Question 64

What is your fee basis and what do you typically include in Terms of Engagement?

Answer 64

Typically fee basis will be 10% of the first year’s rent, ignoring the rent-free period. However, I have also used 8% with a further 2% discretionary bonus based on – client satisfaction, time spent, deal outcome. For Investment agency, I would look to agree a fee equating to 1% of the purchase price. In Terms of Engagement I include: Proposed fee agreement Clear outline of the Scope of Work Reference to my firm’s Complaints Handling Procedure Any expenses to be paid Contact details

Question 65

What is the RICS Code for Leasing Business Premises (2020)?

Answer 65

Mandatory Professional Statement. * It’s objective is to improve the quality and fairness of negotiations on lease terms. * To promote the issue of comprehensive Heads of Terms to make the legal drafting process more efficient.

Question 66

In terms of the Whitechapel office acquisition, you mentioned ‘Subject to Contract’ – can you explain what you mean by that?

Answer 66

Subject to Contract means exactly that – it means the terms are not legally binding and the parties are still negotiating. ‘Without Prejudice’ – means there parties are able to negotiate freely without fear of their word being used against them in court.

Question 67

What were the eventual terms of that Whitechapel Office Acquisition? Rent, Rent-Free?

Answer 67

New 5-year lease, tenant-only break at the 3rd year 5,000 sq ft £58.50 per sq ft agreed rent 8 months’ rent-free total

Question 68

In terms of the Hammersmith office disposal, you mention you outlined refurbishment recommendations? What were they and did you apply costs/likely market outcome as a result?

Answer 68

This was a self-contained office building of ground and first floor. As a minimum recommended replacing the carpet on both floors. Soften the reception area – less branding, soft seating, green feature wall.

Question 69

In terms of the Slough acquisition, what are the differences between a lease and a licence?

Answer 69

As set out in the famous case of Street v. Mountford (1985) – established that a lease is characterised by 3 things: Exclusive Occupation Payment of a Rent Specific term certain A licence can be terminated at any time, whereas a lease cannot be terminated until a lease event. A lease can be assigned (transferred), whereas a licence can not.

Question 70

In terms of the Westminster disposal, I understand you were instructed to sublet out each floor. What were you advising the client in respect of that situation? How did you go about seeking Landlord consent - what were the conditions upon which you had to satisfy?

Answer 70

Must have Landlord consent to sublet Must satisfy that the subtenant can comply with the terms and conditions of the sublease

Question 71

In terms of the office disposal in Angel you provided Charity Act advice – could you explain what the requirements are there please?

Answer 71

Charities Act report MUST be required when selling, leasing or otherwise disposing of charity land or property – to demonstrate the charity is obtaining ‘best value’ for the asset. There have been recent changes to the Charities Act (2022) – this has broadened the scope on who can give advice to now include Estate Agents, Agricultural Valuers who are not RICS members. It is now termed “Designated Advisor” rather than “Qualified Surveyor” report. The change also simplified the sections of the report.

Question 72

You say about Article 4 Removal and the opportunity for a Freehold disposal to residential – what did this mean and did you give updated valuation advice in terms of the market / value per sq ft?

Answer 72

Islington removed Article 4 protection in the area, meaning conversion to residential would be planning risk-free by virtue of permitted development rights. Islington can reapply for Article 4 protection but this is likely to be subject to a consultation process which created a window of opportunity. I sought advise from our Development & Planning team on the value for residential conversion.

Question 73

In terms of AML how did you go about that? Whose the relevant person at your firm?

Answer 73

MLRO = James Gray Compliance Officer = Vicky Moss

Question 74

In terms of AML what do you understand by it?

Answer 74

All letting agents must register with HMRC if they let property for more than €10,000. Minimum CDD checks must be carried out on both the client and a purchaser / tenant on any letting equivalent to €10,000. There are two levels of due diligence checks: Customer Due Diligence (CDD) = KYC – Verify client identity based on passport / driving licence ID. Identify the beneficial owners and check company number & address on Companies House. Enhanced Due Diligence (EDD) = Required for high-risk clients or PEPs. More detailed examination into proof of funds and purpose of the transaction.

Question 75

With the Waterloo disposal you state bids were received and you collated the salient information – what was included in this and what was your advice to the client?

Answer 75

The offer amount Confirmation of finance arrangement (cash or reliant on third party financing). Proof of funding Background & track record of purchaser Details of any conditions attached to the bid Timeframe required (delayed completion or sale & leaseback). Applicant’s solicitors’ details I advised the client to accept the highest unconditional bid, a reliable track record and a suitable timeframe for completion.

Question 76

What is a Market Appraisal and what does it contain?

Answer 76

A market appraisal is where an agent provides an estimated guide price ahead of a potential letting / sale. Market appraisals are used for various reporting purposes, including advising clients on the disposal of a property or an acquisition strategy.

Question 77

With Moorgate you say you analysed comparable transactions. How dd you confirm the details of the comparables?

Answer 77

Always via phone call to the respective agents and also via triangulation.

Question 78

So say you come across a piece of evidence which is Inside of the L&T Act (1954). Are you making any adjustment for that in terms of value?

Answer 78

Yes – any deal Inside of the L&T Act (1954) will be at a rental premium because of the security of tenure.

Question 79

(Data Management) Tell me what practices do you put in place to secure data?

Answer 79

Password protected folders with ‘code names’ where necessary. Information held for the relevant time (at least 6 years after instruction for PII reasons) Any paper copies are kept in locked cupboards, main reception security 24-hours a day. Cluttons hold a number of ‘IT Security’ training sessions.

Question 80

What are you doing with the information if you have a CoI?

Answer 80

Request client informed consent they are happy with conflict management. Creating password protected folders with ‘code names’ – to ensure information / ethical barrier is in place and absolutely no oversight from either party.

Question 81

Are there any regulations governing data management?

Answer 81

GDPR (General Data Protection Act) 2016 = aimed to create a single data protection scheme in the EU. Data Protection Act (2018) = UK implementation of the GDPR = Right to be informed. Freedom of Information Act (2000) = Right to access

Question 82

Tell me about the Data Protection Act?

Answer 82

Data Protection Act (2018) is the UK implementation of GDPR. Relates to personal data. Gives individuals the rights to be informed about how their personal information is used. Policed by the Information Commissioner’s Office (ICO) – data security breaches need to be reported to ICO within 72 hours. Fines up to 4% of global turnover of the company or £17.5m

Question 83

Does the RICS say anything about Data Management? Any guidance?

Answer 83

Not yet – A Professional statement is proposed. A Prevention of Cybercrime professional statement is proposed - aimed at how surveyors capture, store and share data.

Question 84

Looking at your Stay vs. Go advice given to a charity – how did you calculate the total outgoings for the properties involved? (SREC Questions)

Answer 84

I requested information from the client and ran a cash flow for the term to include: rent, business rates, service charge, the size of their floor etc.

Question 85

You also calculated capital costs – how did you do that and what were they?

Answer 85

Capital Costs (CapEx) = The one-time expense of relocating to another premises - fit out costs (at circa £100 psf having consulted our PM team), move and IT costs. In contrast, Operational Expenditure (OpEx) = The operations expenditure, usually paid in regular instalments e.g. rent, utilities, business rates.

Question 86

You did a cashflow – did you discount this cash flow back to today or not? Why did you do that?

Answer 86

I did apply a discount rate (aka IRR to reflect the levels of risk). I selected an appropriate discount rate of 4% to produce a Net Present Value (NPV). The NPV = the sum of the DCF.

Question 87

What advice did you give the client having done this?

Answer 87

I advised the client undertake a Workplace Study to confirm the suitability of their current space I advised the client review alternative office premises to see if there are better suited options available, strongly recommending physical viewings across several submarkets to assist decision making. I advised they could meet with similar charity clients who have re-located post-Covid to hear of their experience.

Question 88

You also advised that a relocation should be planned for in the event of a contingency measure – what do you mean by this?

Answer 88

Because their lease was not protected (Outside of the L&T Act 1954).

Question 89

What are the implications for the tenant for not being protected by the L&T Act (1954)? What did this mean for the tenant?

Answer 89

They have no rights of renewal. The tenant will have to negotiate a new lease with the Landlord if they wish to stay. The lease must explicitly state that it is ‘outside’ of the act. The tenant will have to sign a simple (more than 14 days) or statutory (less than 14 days) declaration.

Question 90

Talk me through whether BREEAM is the industry standard now or whether any other standards are taking over for sustainability on offices?

Answer 90

BREEAM is absolutely the industry standard especially for new schemes. The BCO 2023 recommendations is a minimum sustainability target of BREEAM ‘Excellent’. Whilst not widespread, I am increasingly aware of NABERS UK being introduced as a sustainability target for new buildings (up to 5*).

Question 91

Absolutely. And what’s the difference between BREEAM and NABERS?

Answer 91

NABERS measures the actual base build of offices (includes LL common parts e.g. lighting, lifts, etc). NABERS separates base building ratings from the tenancy , whereas BREEAM assigns one single rating to the entire building. BREEAM is design based, whereas NABERS measures the actual energy use of offices and can be split into common parts etc.

Question 92

In your case study, could you tell me how you did an AML check before you undertook the instruction? What did you check?

Answer 92

As the client was a PLC, I confirmed their position on the London Stock Exchange. (That’s all you need to say. PLC’s are the most secure, you wouldn’t request passport / ID of a Director at a PLC…!!!!!!!!!!!)

Question 93

If a Complaint had arisen about your role on the letting – how would you advise the Landlord to proceed with their complaint?

Answer 93

(5-10-10-5) I would advise them to follow our RICS-approved Complaints Handling Procedure: Contact the Head of the Division. Acknowledge receipt of the complaint within 5 days Within 10 working days, the Head of Division will inform the complainant about the outcome. If dissatisfied, the Managing Partner will conduct a separate review and get in contact within 10 working days. If still unsatisfied, a Third Party Redress Scheme will be provided within a further 5 days – we use The Property Ombudsman (Residential) and The RICS Dispute Resolution Service (Commercial).

Question 94

Who is your firm’s Third Party Determination Scheme?

Answer 94

The Property Ombudsman (residential) and The RICS Dispute Resolution Service (Commercial).

Question 95

You talk in your submission about having regard to the ethical decision tree. Have you used it in your work?

Answer 95

The Ethical Decision Tree provides a framework of questions that members should ask themselves when faced with an ethical dilemma. The final question is whether members would be happy to have their actions made public. I had reference to the Ethical Decision Tree during a disposal I was working on, where a party conflict arose – the acquisition party was represented by Cluttons. The Ethical Decision Tree asked questions such as if I had informed consent / if I had sufficient facts on the issue.

Question 96

What’s the RICS core material on dealing with Conflicts of Interest? What does it seek you achieve before you set up conflict management procedures?

Answer 96

RICS Professional Standard: Conflicts of Interest (2017). It sets out 3 step process; Conflict Avoidance, Written Advice from both parties, Conflict Management. You MUST seek written Informed consent and outline how you intent to manage the conflict (Information / Ethical barrier) before proceeding.

Question 97

In terms of Professional Indemnity Insurance – who does it protect?

Answer 97

Professional Indemnity Insurance is mandatory for all Surveyors working in practice. It protects clients, surveyors and third parties against negligence claims in the event a duty of care has been breached and a claim for damages arises.

Question 98

After you’ve finished a job, such as the letting of your case study, how many years do you need PII cover?

Answer 98

Run-Off Cover = You still need PII for a minimum of 6 years to cover the recent work carried out. For consumer cover = a minimum of £1 million of cover for at least 6 years. For commercial claims = “adequate and appropriate” amount for a minimum of 6 years. RICS recommend more (up to 15 yrs).

Question 99

Cluttons is an LLP – could you tell me what does that mean?

Answer 99

Limited Liability Partnership = Where Partners have limited liability. Each partner’s liabilities are limited to the amount they put into the business. It means that if the Partnership fails, the partners personal assets are protected as they are only liable for what they put in. (In contrast, with a Partnership structure all Partners have unlimited liability). Benefits of LLP: Flexibility, easy to incorporate new members, incentive for equity partners. Cons: Profits are taxed as income, regular disclosure.

Question 100

If I was to pick up your firm’s balance sheet – what are the two main headings on the balance sheet?

Answer 100

A Balance Sheet = A statement of a business’s financial position shoeing its assets and liabilities at a given date, usually at the end of the financial year. It is a ‘snapshot’ showing what a company owns and owes. Assets = Physical property, cash, debtors, other investments held. Things that you get a future benefit from. Liabilities = Borrowings, Overdrafts, Loans, Wages. The amount a business owes.

Question 101

If you were to set up in practice on your own – could you tell me what you believe are the most important things to do please?

Answer 101

RICS requirements; Inform RICS Appoint ‘Responsible Principle’ Arrange Professional Indemnity Insurance Set up procedures for Handling Clients Money Obtain RICS approval for Complaints Handling Procedure Use RICS logo kit Legal requirements; Ensure compliance with Current Employment Law (e.g. National Living Wage) Inform HMRC (tax reasons) Bribery Act (2010) Equality Act (2010) Health & Safety Act (1974) Appoint AML officer