Landlord and Tenant
Contact: Barry Andrews or David Holt or Martyn Howard
The relationship between landlord and tenant is complex. The contract between them is set out in the lease document. Many parties, particularly tenants, underestimate the importance of fully understanding the terms of this contract. This “sets down the rules” for the period of the lease, which can generally vary between three years and 25 years. The principle statute applying to leases is set out in the Landlord & Tenant Act 1954 (and amendments), but there are a number of other important statutes including the Law of Property Act (1925) and the Landlord & Tenant (Covenants) Act 1995.
It is very important to take independent advice from a surveyor when negotiating a lease to avoid many of the pitfalls – ie
a The terms of rent review.
b The repairing liabilities/dilapidations (a written Schedule of Condition may be attached to the lease).
c The user clause.
d All other terms of the lease. A simple word can change the whole meaning of a clause!
Rent Reviews
Under the terms of the typical lease there is provision for a rent review (usually upward only) at set periods in the lease, which are typically at five yearly intervals. The review can relate to:
1 The market rent at the time of review
or;
2 Be a fixed increase
or;
3 An increase determined by a formula, ie, a turnover rent.
What happens at rent review?
Typically, the landlord will serve notice on the tenant advising that he requires an increase. It is important that the tenant responds to this notice within any stipulated time (it may be stated in the lease) if he is unhappy with the proposals.
Negotiations should then ensue.
What happens if we cannot reach agreement?
Most leases provide for the appointment of an independent surveyor, who can be appointed either by agreement of the parties, or in the absence of agreement, can be made by a nominated person, often the President of The Royal Institution of Chartered Surveyors (RICS). The surveyor can be appointed either as an Independent Expert or as an Arbitrator. Subtly different rules apply in respect of the conduct of the surveyor.
Who is qualified to act as an Arbitrator or Independent Expert?
The RICS have a panel of surveyors that the President appoints from time to time.
This is complex, what do I do?
The appointment of a commercial surveyor experienced in Landlord & Tenant and rent reviews should be considered in order to advise on the best rent that can be achieved if acting for the landlord, or equally, the lowest rent if for the tenant.
What do I do when leases expire?
Under the Landlord & Tenant Act, usually the tenant is provided with security of tenure. This effectively means that if the landlord refuses to grant consent an application can be made to the Courts for a new lease to be granted, on similar terms to the existing lease, but adopting “modern” provisions. In the event that the original lease was granted “outside the provisions of the Landlord & Tenant Act”, the tenant is unable to claim a new lease.
Can the landlord resist an application?
Yes, the landlord can resist an application and there are seven statutory grounds; the three most commonly cited are:
1 The landlord requires the premises for his own occupation.
2 The landlord wishes to redevelop the property.
3 The tenant has failed to comply with his obligations under the terms of the lease, ie, has failed to pay the rent, undertake repairs and maintenance to the building following proper notice.
These can be challenged on certain grounds.
At what rent will the new lease be granted?
The Courts may direct that an “interim rent” be paid pending the agreement of a new rent and terms between the parties. Failing that, The Court may give Directions for the manor in which the rent is determined independently, by using experts.
As a tenant, what do I have to do when the lease expires and I am not claiming a new lease?
It is important that the tenant vacates the building on/or before the termination date of the lease and ensures that the covenants under the lease have been complied with, ie, all repairing obligations have been undertaken.
The landlord will often serve a Schedule of Dilapidations on the tenant and provided the tenant is obligated under the terms of the lease to undertake these works, it is important that he completes the work prior to the termination of the lease or alternatively, agrees a financial settlement with the landlord prior to the termination. If not, the landlord may be entitled to claim rent and other outgoings during the period that the works are undertaken or if the tenant does not undertake them, the time that it takes him to reasonably undertake the works. It is important that a Chartered Surveyor/Building Surveyor is employed to advise, because claims for dilapidations can be very significant.
Who do we use?
Many commercial firms of surveyors have an “inhouse” team of building surveyors, or alternatively, have an association with a building surveyor. D&P Holt work closely with Michael Evans & Co, Chartered Building Surveyors.
Leases can be very onerous documents. D&P Holt have considerable experience in advising on all aspects of Landlord & Tenant matters and property management.
Property Management
Contact: Martyn Howard or Marie Farrell
Why do I need a managing agent?
There are a range of issues which will invariably arise under the terms of a lease of any commercial property. A managing agent is experienced in handling these issues within the parameters of building maintenance, property law and investment value criteria. Drawing on the expertise, it is the aim of D&P Holt to strengthen income stream and enhance capital value.
As landlord, what do I do to maximise the value of my commercial property investments?
It is essential that a strategy for enhancement of the property asset is considered from the outset. Refurbishment, redevelopment, restructuring of tenancies and marketing policies for empty units are management tools for achieving income and capital growth. Established relationships with a variety of professional consultants, contractors and suppliers facilitate this aim.
How often should the property be inspected?
It is important that a regular inspection of premises is undertaken and that good tenant contact is maintained. Landlord and tenant relationships have, in the past, tended to be adversarial but it is so important, particularly with shorter tem leases, that the relationship between landlord and tenant is a good one to ensure that the tenant meets obligations under the lease willingly and feels that the landlord is mindful of the wishes of the occupier.
Collection of Rent
D&P Holt have a bespoke commercial property management software package and an excellent accountancy team which arrange for collection of rents and account to the client at quarter end, or monthly if required. Our aim is to account for rents 7 to 21 days after they fall due, dependant on portfolio size.
Service Charge
Most leases provide for the collection of service charges from the tenant to recover costs for maintaining common areas, property insurance, external property maintenance and decorations, etc. D&P Holt collect service charges on a periodic basis as reserved by leases and produce end of year accounts for the property, raising balancing debits/credits as appropriate.
What are the costs of employing a managing agent?
The cost of employing a managing agent varies dependant on income or service charge expenditure. We are always willing to provide an “on the spot” estimate to any potential new client.
Who pays for the managing agents charges?
Many leases provide for managing agents’ costs to be recovered either directly or more usually, through the service charge where it relates to maintaining the building and common areas. The cost to the Landlord of employing a managing agent can usually therefore, be recovered in whole or in part.
