PM Flashcards

Question

What are the remedies for rent default?

Answer 1

* Court Proceedings * Rent deposit * Pursue former tenants and guarantors * Statutory demand * CRAR * Forfeiture * Payment Plan * Mutually acceptable arrangements ## Footnote Understanding these remedies is crucial for managing tenant defaults effectively.

Answer 2

* Obtain court judgment, secure payment via charge over property, Slow and costly process. * Useful if tenant is solvent * Legal steps required to enforce judgment ## Footnote Court proceedings can be a last resort in rent recovery, emphasizing the importance of proactive measures.

Answer 3

* Withdraw owed money from rent deposit * Tenant must top up the deposit ## Footnote Utilizing a rent deposit is a direct way to manage arrears but requires tenant cooperation.

Answer 4

* Preliminary step to bankruptcy or winding-up proceedings * Advisable when there is no dispute about arrears * Tenant has 21 days to pay or LL can present a bankruptcy or winding up petition to the court if the arrears are over £750. * Court has the residual discretion to set aside a statutory demand in order to avoid any injustice. ## Footnote A statutory demand serves as a formal notice to prompt payment before further legal action.

Answer 5

Check to see if there is an AGA in place if lease after 1996 and if prior then if former tenant assigned lease. * Section 17 of Landlord and Tenant (covenants) Act 1995 – timetable of 6 months to recover arrears form assignor. ## Footnote AGA refers to an Authorised Guarantee Agreement.

Answer 6

* Requires LL to act within 6 months and serve a Section 17 notice on any former tenant and their guarantors for the arrears. * Until recently it was assumed that the requirements would apply only where the current tenant was in default. Outcome of Scottish & Newcastle plc v Raguz (2007) may lead to LL having to serve S17 notice in respect of an undetermined uplift in rent. ## Footnote This section outlines the timeline for recovering arrears from the assignor.

Answer 7

Preliminary step to pursuing bankruptcy or winding-up proceedings ## Footnote Advisable when there is no dispute about the level of arrears.

Answer 8

* Tribunals, Courts and Enforcement Act 2007 replaces the ancient law of distress for rent with a modified regime know as the Commercial Rent Arrears Recovery Scheme (CRAR) in April 2014. * Scheme is to be available only to commercial property LL where a minimum level of rent is due under a commercial lease. * No minimum arrears * Can only be sued for basic rent demanded plus VAT and interest payable and not SC or other payments. ## Footnote Introduced by the Tribunals, Courts and Enforcement Act 2007.

Answer 9

* 7 days of unpaid rent * 7 days clear warning notice * Enforcement agents visit * 2 clear days to follow * Re-entry by enforcement agent to seize goods * Allow 7 clear days before sale of goods

Answer 10

* Forfeiture clause in the lease allows the LL to re-enter property and gain possession for a breach of lease (by peaceful re-entry or court action) but procedures must be followed and relief offered to tenant. * Special procedures apply for a tenant in administration or receivership * Must be a forfeiture clause in the lease. * Rent must have been properly demanded, acceptance of rent can be considered as continuance of the tenancy. A demand for rent or acceptance after knowledge of the breach is the most patent form of waiver to stop-tent safeguards must be built into rent collecting procedures. * Lease is forfeited by LL re-entering property, by either peaceable re-entry or court proceedings. * Tenant has right of relief from court within 6 months, tenant does not have to be warned of forfeiture. * Most leases do have a separate re-entry clause of the rent is unpaid after a certain time period so that formal forfeiture clause does not have to be used. * If forfeiture being sought for other lease terns (rather than non-payment of rent) the LL is required to serve a section 146 notice of the Law of Property Act 1925 providing details of the breach and how it is to be remedied and the LL compensated. ## Footnote Procedures must be followed and relief offered to tenant.

Answer 11

A section 146 notice of the Law of Property Act 1925

Answer 12

Allows LL to serve a notice to ensure that any sub-tenant’s rent paid for any arrears due from the tenant can be received by the superior LL

Answer 13

Repair is distinct from renewal; liability cannot arise in the absence of repair. * a tenant cannot be expected to hand back a wholly different premises * Tenants may be responsible for inherent defects * Repair is not an improvement ## Footnote Tenants may be responsible for inherent defects.

Answer 14

* Serve a repair notice - under S146 of the Law of Property Act 1925. * Forfeit the lease - Must be a forfeiture clause. S146 notice required for disrepair. * Serve an interim schedule of dilapidations * Do the works and charge the tenant - Jervis v Harris 1996 - LL right to renter the property to undertake repairs and then claim to recover cost of doing so from the tenant as a debt.

Answer 15

* Applies to leases granted for a term of 7+ years and has at least 3 years until expiry. Aims to protect tenants against onerous interim schedules of dilapidations. Act requires LL serve a section 146 notice. * Court is only to enforce the repairing covenant id the LL can prove one of the 4 following points 1. Immediate remedy is necessary to prevent substantial diminution in the property’s reversion value 2. Immediate remedy is necessary to comply with current legislation 3. If the tenant does not occupy the whole property, immediate remedy is required ion the interests of another occupier 4. The breach is capable of immediate remedy at a relatively small cost compared with the consequences of postponement.

Answer 16

Includes three stages: * **Cyclical Maintenance** - regular activities that are carried out irrespective of the condition of the building, such as servicing plant, H&S related maintenance and redecoration. * **Preventative Maintenance** - dependent on a condition survey prepared by a building surveyor, which forecasts future repair needs and plans the timetable for undertaking work. This could be for the replacement of single glazed windows with double glazing, upgrading facilities or services and refurbishment work. * **Responsive Maintenance** - This is initiated by the building occupier, such as repairing a leak unblocking drains or undertaking some remedial works to the building.

Answer 17

Limits the tenant’s repairing obligation in respect of agreed items of disrepair for the duration of the lease

Answer 18

* Charges to tenants of multi-tenanted properties for costs incurred by a LL to maintain and manage property. * No specific legislation covers commercial service charges * Many prospective tenants are now trying to negotiate SC caps fixed increases or link RPI or CPI increases to limit future liability.

Answer 19

* SC budget should be agreed with the T prior to the commencement of the SC year. * Quarterly billings are based on this estimate * Annual accounts are prepared at the end of the year end * Balancing payment made at the end of the year upon the presentation of audited accounts * Used of a sweeping up clause for unexpected costs * SC caps are becoming increasingly common. * Payments are usually reserved as rent in the lease.

Answer 20

* RICS Professional Statement - Service Charges in Commercial Property, 2018. * Came into effect 1st April 2019 * Aims are to improve general standards and promote best practice, uniformity, fairness and transparency in the management and administration of service charges in commercial property. * Ensure timely issue of budgets and year-end certificates. * Reduce the causes of disputes and to provide guidance on resolution * Provide guidance to solicitors, their clients (whether owners or occupiers) and managers of SC in the negotiation, drafting, interpretation and operation of leases, in accordance with best practice. ## Footnote Came into effect 1st April 2019.

Answer 21

1. All expenditure that the owner and manager seek to recover must be in accordance with the terms of the lease. 2. Owners and managers must seek to recover no more than 100% of the proper and actual costs of the provision or supply of the services. 3. Owners and managers must ensure that SC budgets, including appropriate explanatory commentary are issued annually to all tenants. 4. Owners and managers must ensure that an approve set of SC accounts showing a true and accurate record of the actual expenditure constituting the SC are provided annually to all tenants. 5. Owners and managers must ensure that a SC apportionment matrix for their property is provided annually to all tenants. 6. SC monies (including reserve and sinking funds) must be held in one or more discrete (or virtual) bank accounts. 7. Interest earned on SC accounts – or where separate accounts per property are not operated a proper and reasonable amount of interest calculated on normal commercial rates – must be credited to the service charge account after appropriate deductions have been made. 8. Where acting on behalf of a tenant, practitioners must advise their clients that if a dispute exists any SC payment withheld by the tenant should reflected only the actual sums in dispute. 9. When acting on behalf of the LL, practitioners must advise their clients that following resolution of a dispute, any SV that has been raised incorrectly should be adjusted to reflect the error without undue delay.

Answer 22

* Floor Area * Fixed Percentage * Rateable Value * Weighted Floor Area

Answer 23

Ensures operation performance standards are checked against an industry-used index ## Footnote Real Service publishes annual results from its SC compliance index.

Answer 24

* Considers key issues relating to use of sinking and reserve funds in commercial buildings. * Sinking fund is formed by periodically setting aside money for replacement of a wasting asset (for example, major plant and equipment such as heating/air-conditioning, lifts). Usually intended that a sinking fund will be set i[ and collected over the whole life of a wasting asset. * Reserve fund is a fund formed to meet the anticipated future costs of maintenance and upkeep to avoid fluctuations or an anticipated large, one-off increase in the SC payable each year (external cleaning and redecoration) * Provides some practical advice on the administration of these funds and the application of depreciation charges such as: * Taking legal advice and achieve full transparency * Maintain a full communication between the LL and T with clear accounting * Ensure that the lease terms are clear.

Answer 25

* Relate to planning use of the property and/or how the property can be used. * Two types of clauses – refer to planning use and specific use. * Change of use usually subject to LL consent not to be unreasonably withheld * A restrictive user clause can depress the market rent – e.g. restrictions on hours of working in an office. * Plinth Property Investments V Mott Hay & Anderson (1975) – substantial reduction in rent at review because user clause relating to its use as offices used by consulting engineers. * The leading ‘keep open’ case is Co-operative Insurance Society v Argyl Stores (1978) – The Co-op owned a shopping centre in Sheffield with Safeway as an anchor tenant. Safeway were making losses and decided to close the store. Lease stated they had to keep the shop open and trading, Court held that Safeway does not have to re-open.

Answer 26

*** Administration ** * Administrator appointed by creditors (Enterprise Act 2002) to rescue an insolvent company. * Act provided for a more streamlined and simplified out of court procedure. *** Receivership** * An administrative Receiver or Law of Property Act Received appointed by creditors to realise assets to repay debts. *** Company Voluntary Arrangements** * Voluntary arrangement with creditors as to how debts will be settled. Voluntary Liquidation, Winding up of a company, Bankruptcy, Court procedure for an individual.

Answer 27

* Most common ‘rescue’ route * Process commenced either by the company, its lenders or its creditors. * Purpose is to create a period of protection for the company for the administrator to deal with the assets of the company in the most appropriate way. * The period of protection is known as a moratorium and it restricts the actions which can be taken against the company while it is in place. * The directors of the company continue in office, but their powers cease. * Administrator must send proposals to the creditors within 8 weeks and then with their agreement will implement a strategy. The most common scenarios are: * Pre-pack business sale * Administration trading * Close down and wind-up * While a tenant is in administration the options the LL are limited due to the moratorium. If rent is still being paid, an equivalent amount can be claimed form the administrator. * The administrator may also seek LL consent to an assignment of the lease. ## Footnote The period of protection is known as a moratorium.

Answer 28

* Used when a company defaults in payment to a lender who is secured by a fixed charge * Usually, this procedure is only available where the floating charge pre-dates 15 September 2003. * An Administrative Receiver or Law of Property Act Receiver is appointed by creditors realise assets to repay debts. The receiver takes control of the company and realises its assets, often by selling the business as a going concern with a view to repaying the lender. * A Law of Property Act 1925 Receiver is appointed when a company defaults in payment to a lender who is secured by a property mortgage. ## Footnote An Administrative Receiver is appointed to realise assets.

Answer 29

* This is a contract between a company and its creditors appropriate for when a company is insolvent, but the directors believe it has a viable future with financial restructuring. * The company appoints an insolvency practitioner as a nominee to supervise and oversee the implementation of the proposed strategy. * under this statutory scheme, the company agrees terms for the repayment of accrued debts. * The arrangement will be binding on all creditors if it is approved by at least 75% of the creditors having regard to their value of debt.

Answer 30

A fixed charge is a type of security interest over specific assets of a company.

Answer 31

The procedure is usually available where the floating charge pre-dates 15 September 2003.

Answer 32

An Administrative Receiver or Law of Property Act Receiver.

Answer 33

The receiver takes control of the company and realizes its assets, often by selling the business as a going concern.

Answer 34

A Law of Property Act 1925 Receiver is appointed when a company defaults in payment to a lender secured by a property mortgage.

Answer 35

An insolvency practitioner as a nominee.

Answer 36

Approval by at least 75% of the creditors having regard to their value of debt.

Answer 37

Pre-Pack Administration allows directors to buy out and retain elements of the business while placing the remainder into administration.

Answer 38

* Tell your client * Consider taking legal action before a temporary or permanent moratorium is in place. * Read the lease – see if there is a rent deposit or a previous tenant who is liable or guarantor. * Make early contact with the Administrator/Receiver * Check the amount of monies owning in Rent, SC and insurance * Ensure that the property is insured and tell the insurers that it is vacant * Submit a claim for arrears and if still occupied, make an application for rent. * Consider preparing a schedule of dilapidations * Consider the position regarding empty rates * Thinking about reletting the property

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