Flashcards in Rent Reviews Deck (34)
What does an “institutional lease” refer to?
- 25 year lease
- On full repairing and insuring terms
- subject to 5 yearly upwards only rent reviews
What are the different rent review mechanisms?
- Reviewed to Market Rent
- Linked to an indexation factor (CPI/ RPI)
- stepped increases
- % Turnover of tenant’s sales/ business
What is the purpose of the rent review clause?
To provide a basis of valuation which the parties must adopt in calculating the reviewed rent
What are the standard assumptions and disregards of a rent review clause?
1. Property available to let on the OPEN MARKET btw a WILLING LL/ WILLING T, for a TERM OF YEARS AS STATED
2. Property is fit and available for IMMEDIATE OCCUPATION and USE
3. All COVENANTS OBSERVED BY LL/T
4. Property may be USED FOR PURPOSE SET OUT IN LEASE
1. Any effect of GOODWILL ON T’s OCCUPATION
2. Any GOODWILL ON PROPERTY
3. Any LICENSED TENANTS IMPROVEMENTS
Where the lease is “silent” with regards to the hypothetical lease term, what must be assumed?
Residue term as at rent review date is the hypothetical term
What are the potential hypothetical terms?
- Residue remaining at RR date
- Fixed term of X years
What is the purpose of the LTA 1954 and to whom does it apply?
Provides security of tenure to business tenants at the end of their tenancy by giving a statutory right to renewal subject to certain grounds upon which the renewal can be rejected by LL
What is the notional term of the lease?
This is the length of the term to be valued at Rent Review (the hypothetical term)
What is meant by a Time is of the Essence clause?
A time is of the essence clause requires the need for timely completion of the rent review (it specifies the timing within which the rent review must be triggered and settled)
It’s enforceability depends on its clarity, elaborateness, provision of notification etc
Time is not generally of the essence
What case law do you know in relation to time is of the essence clauses?
United Scientific Holdings vs Burnley Borough Council (1977)
Bello v Ideal View (2008)
This related to a lease where LL had not initiated the rent review for 13 years. It was held that time was not of the essence and the rent review could process
What are deeming provisions?
In older leases some RR clauses required LL to specify the new rent in the trigger notice
The clause will state that if T does not serve the appropriate counter notice within a specific time frame, T will have deemed to accept the new rent.
What is a headline rent review clause?
This is when the basis of valuation cannot consider any incentives agreed when analysing a comparable or a letting to arrive at a NER
These are not typically agreed
What is the hierarchy of evidence?
2. Lease Renewal
3. Rent Review
4. Independent Expert’s Determination
5. Arbitrators Award
6. Hearsay evidence
7. Sale and leasebacks
8. Surrender and Renewals
9. Inter- company transactions
What is a Calderbank offer?
A genuine offer to settle
Can achieve early resolution of a dispute
Prevents costs from escalating
What are Calderbank offers used as a tool for(
Used to influence costs and negotiations as the losing party will have to pay the other side’s recoverable costs
What must be marked on a Calderbank?
“Without prejudice save as to costs”
What must a Calderbank include?
- Marked “without prejudice save as to costs”
- set out all terms to settle the dispute
- timeframe in which the other party must accept the offer (typically 21 days but can be less provided it gives the other party sufficient time to consider the offer and respond)
What are the three RICS PS/GN relating to third party determination?
- RICS PS/GN 'Surveyors Acting as Arbitrators in Commercial Property Rent Reviews' (2013)
- RICS GN 'Independent Expert Determination' (2016)
- RICS GN 'Conflicts of Interest for Members Acting as Dispute Resolvers' (2012)
What is the cost of applying for 3rd party determination by the President of RICS?
Case Law relating to Independent Expert Determination?
Level Properties Ltd vs. Balls Bros Ltd (2007)
Expert's determination held not binding due to misinterpretation of RR clause
What legislation governs Arbitration?
Arbitration Act 1996
What does Section 34 of the Arbitration Act 1996 stipulate?
Provides Arbitrator with power to order disclosure of documents by parties to the arbitration. It entitles a party to the rent review, to obtain details of all other side's rental evidence, when ideally they would prefer to confine submissions to deals that are most favourable to their case
Can also be used to secure the attendance of witnesses
What are the key areas in which arbitrators and independent experts differ?
What are the key differences between an Arbitrator and an Independent Expert?
- Acts on evidence provided
- Limited right of appeal to High Court (only on a point of law/serious omission/jurisdiction of Arbitrator)
- Not liable for negligence - cannot be sued
- Powers of disclosure ("discovery")
- Bound by Arbitration Act 1996 - determined conduct of proceedings (to incl. statement of agreed facts & timetable for submission)
- "Arbitrator's Award"
- Power over all costs
- Duty of investigation (not solely reliant on evidence provided - uses their knowledge/experience)
- No right of appeal (unless due to misinterpretation)
- Liable for negligence damages - can be sued
- No powers of disclosure
- Not bound by legislation - informal procedural timetable
- "Expert's Determination"
- Power over their own costs
How long does a party have to appeal to the High Court regarding an Arbitrator's Award?
Within 28 days of receiving the award
Under what 3 grounds can a party appeal to the High Court regarding an Arbitrator's Award?
(1) A challenge to the tribunal's jurisdiction
(2) On a point of law
(3) Serious irregularity/omission
In a falling/rising market, which 3rd party determination might be preferred by a Landlord/Tenant?
In a falling market where there's no evidence of rental growth, LL would prefer an Arbitrator since they can only rely on evidence presented to them and not employ professional scepticism having regard to the declining market (Whereas T would prefer an independent expert in this case).
In a rising market, an independent expert is preferred by the LL and an Arbitrator by T
What is a Surveyor-Advocate?
An advocated represents their client at a hearing or in Court.
- Need only disclose matters they wish to
- Duty to client
- Must act with integrity
What is an Expert Witness?
The role of a surveyor acting as an expert witness in third party determinations is to provide unbiased expert evidence to the proceedings of any tribunal