What legislation applies to a letting agent?
Code for leasing business premises
What does the code for leasing business state and is it mandatory?
- Mandatory from September 2020
- Highlights significance of using a comprehensive set of HoT's
- Improve lease negotiation element
- Legal requirement to inform unrepresented parties of the code
How could you structure a rent free period?
Provide some at the commencement then the remaining if the break isn't operated
What did you include in your TOE's with your client?
- Surveyor details
- Client details
- Type of working to be carried out
- Basis of agency
- Marketing & disbursement costs
- Timeline and payment of fees
- Confirmation no COI
- PII details
- Commencement date
How did you measure the unit?
GIA and NIA
Why did you measure using both?
Measured using GIA as we wanted to target a restaurant occupier
Equally we measured using NIA in case we received interest from an A1 operator
How did you structure service charge?
This was documented in the lease however service charge amounts change on a yearly basis
SC for that year was £5 psf.
What was the planning use for the property?
What is meant by hierarchy of evidence?
It is a weighting system used to rank evidence in relation to its relevance based on weightings
Has there been any changes to the hierarchy of evidence?
Yes, RICS introduced RICS Guidance Note on Comparable Evidence in RE Valuation 2019
Why did you need to ensure an EPC was included when marketed?
It's the law.
Failure to comply with law = a fine of 12.5 of the RV (£500 - £5000) fine.
Why didn't you advise your client to market the property on a A1/A3/A5/D2 basis to start off with?
I felt we would have a good chance of letting the whole to an A3 operator due to its prominence and position fronting the cinema and market square
Did you secure planning for all of these uses?
No, the details were marked as STPP
Why was 2018 difficult for restaurant occupiers?
Over supply of restaurants who would offer greater rents than quoting thus having detrimental impact on the rest of the stock in the area at review / LR
Increase in minimum wage
Increase in business rates
What would you expect to see in a forfeiture clause of a lease?
Landlord has the right to forfeiture the lease for a breach in the condition of the lease
What type of breaches are within a forfeiture clause?
- Breach of covenant to keep a property in repair
- Breach of user covenant
- Breach of covenant to insure
What notice would a landlord need to serve to forfeit the lease?
S146 notice providing at least 14-21 days to remedy the breach
What is an alienation clause and what did you agree with Easy Coffee?
When you permit / restrict the tenant to underlet or assign the lease
Assign and underletting of the whole are permitted subject to LL's consent, NTBUW
When giving a market appraisal for a property, what things should you consider?
- Layout / spec
- Fixtures and fittings
How do you determine how much rent free to provide?
Depends on the covenant strength and length of the lease
How do you work out net effective rent?
- Sum up all rents until next lease event
- Deduct incentives less 3 months rent (tenant fit out)
- Divide by number of years to the next review
Why would you want to find out net effective rent?
Used in RR proceedings
To determine what the headline rent breaks back to inclusive of incentives
How would you treat subletting's in a RR?
- Vacant possession
- Available for immediate use and occupation
- Covenants observed by both LL and T
- Willing LL & T
How would you structure an alienation clause?
Alienation of the whole is permitted subject to LL's consent NTBUW
Alienation of part is not permitted.
How would you structure an assignment clause?
Include an AGA
What is an AGA?
- Authorised guarantee agreement
- Tenant is never released from liability
- Part of the L&T Covenants Act 1995
If a tenant is not happy with a AGA, what else could you do?
- Ask for more deposit
- Outline the assignment needs to be done at market rent and to a covenant no worse than 'you'
Why would you want to see companies accounts?
- For the tenant selection process
- Check if it's a strong covenant
- To determine if the company is a financially viable business
What would you request from the tenant regarding financials?
Ask to see last 3 years audited accounts
What if you were still unsure of the tenant accounts?
- Obtain and D&B report
- Apply profits test
What is a profits test?
Check to see if the net profit from the last 3 years is 3 x the annual rent
What is the core business activity for all your Strategic RE Consultancy clients?
- Some are income driven
- Some buy distressed assets to improve then sell
- Some buy low yield low risk assets
- Maximise profits
- Maximise use real estate
How is performance of real estate measured?
My clients use MSCI to benchmark local and global markets and evaluate performance of their individual assets
How do you assist with this?
- Client will feedback data to us agents on where we stand
- We would then provide advice on how to improve assets such as relocation, adding value, reducing vacancy rates, change uses
What option analysis did you use to conclude relocation was the best option?
We didn't want to end up with two anchor stores leaving within a 4 year period leaving only two anchors remaining
Best to relocate a tenant than lose a tenant
Provides scope for redevelopment as suggested
Can you give me an overview of the objectives of an organisations real estate strategy?
Patrizia pride themselves in doing everything in house. They don't outsource advisors, all asset management work is done in house
Seeing opportunities short field as markets are ever changing at a rapid rate
Purchase distressed assets where there's work to be done rather than low yield investments
Differentiating asset classes, including various uses within a scheme to mitigate risk
What advice can you provide to a client regarding strategic RE consultancy
- Benchmark against similar assets' vacancy rates
- Asset optimisation
- Varying uses
- Freehold v leasehold
- Redevelopment / refurbishment analysis
Can you renew leases outside of the act?
Yes but the tenant has no renewal rights
How can you determine if your lease is inside / outside of the act
Should say in the lease, if it is silent then it is inside the Act.
Always get clarification from solicitor if unsure
If the lease is inside the act, what sections of the act of the lease would be consulted if granting a new lease?
- LL - S25 friendly stating terms of new lease
- T - S26 stating terms
Both of the above needs to be in prescribed form, within 6-12 months of the expiry of the term, served to the competent LL / superior tenant
What does section 34 cover?
If you can't agree a LR, what would you do?
Serve a Part 36 offer or consider third party
What is PACT?
Professional Arbitration on Court Terms
So what is it?
It's a third party dispute resolution mechanism used to settle unopposed LR.
What guidance notes available independent experts?
Surveyors acting as independent experts in commercial property rent reviews 9th edition
What is the difference between IE and Arbitrator?
When is formal tender used?
- When there is expected to be a high level of interest
- For statutory bodies
- When there's expected to be a special purchaser
What is the adv and disadv to auctioneering?
- Achieve short timescale of sale
- Good method of sale to sell unusual assets
- Good method for when you expect there to be large amounts of interest
- Associated costs when marketing
- May fail to achieve reserve price
- Lack of confidentiality surrounding price achieved
What are the sections of Title Register?
- Section A - Property Register (Description of property)
- Section B - Proprietor Register (owner, how much they paid from 2000)
- Section C - Chargers Register (any mortgages on prop, rights of way, restrictive covenants)