RICS application fee reduction for VAT
Friday 05 December 2008 File - Rent
Review
For rent review, RICS application fee is now £333.00
inclusive of VAT at 15%
|
"Upward only" rent review vs. Landlord in financial trouble
Thursday 04 December 2008 File - Rent
Review
Many leases contain what are known as ‘upward only’
review clauses. That does not mean the rent must
necessarily go up at each review, only that whatever is
the open market rent in accordance with the review
guidelines and regardless of what rent might be set at
‘arbitration’, the actual rent payable cannot be below
the rent passing before the review date.
When, on the evidence, the open market rent is lower than the passing rent, as does happen, or when the open market rent is not high enough to justify the expense of implementing the review, landlords will often take no action to agree the review or leave it outstanding. For the tenant, however, an outstanding review can cause problems, because it gives the landlord an opportunity to take advantage if the tenant should want anything that involves the lease. Also, an outstanding review leaves the tenant in a state of uncertainty as to the correct rent for the period and that constitutes a business risk.
Another problem with an outstanding review is that, whereas there may be no evidence at the time to justify an increase, post-review evidence (of rising rents after the date of review) can be used to demonstrate increase; and if the investment is sold, then it is common for the new landlord to implement outstanding reviews. Post-review evidence is normally adjusted for difference in time, but rents do not increase in a linear way so it doesn’t follow that just because, for example, a year or so later the evidence would support a higher rent, the rent of your premises would necessarily have increased had the evidence been available at the time.
To be on the safe side, outstanding reviews should be documented at nil increase and if the landlord will not co-operate and complete a memorandum, then the tenant should either refer the review to ‘arbitration’ if the lease permits (with a Calderbank offer to protect costs) or serve notice obliging the landlord to implement the review or lose the right to do so.
(A Calderbank is a ‘without prejudice’ offer in writing to settle the rent by a specified time and date, which if not accepted in time could give rise to the other party becoming responsible for all costs and possibly surveyor’s fees if the outcome of a referral to ‘arbitration’ is a rent equal to or less than the offer.)
Strictly, all rent reviews are upward or downward, because a review to market rent is simply that. The ‘upward-only’ aspect only applies after the market rent has been agreed or ascertained, so another reason a landlord can be reluctant to implement a rent review is to avoid having the market rent ‘quantified’, in case that could reduce the value of the investment and possibly breach a loan covenant. By forcing the review, a tenant may be able to strike a deal with the landlord whereby, in exchange for documenting the review at ''nil increase' rather than the market rent, the tenant may be able to obtain a reduction in the actual rent payable.
When, on the evidence, the open market rent is lower than the passing rent, as does happen, or when the open market rent is not high enough to justify the expense of implementing the review, landlords will often take no action to agree the review or leave it outstanding. For the tenant, however, an outstanding review can cause problems, because it gives the landlord an opportunity to take advantage if the tenant should want anything that involves the lease. Also, an outstanding review leaves the tenant in a state of uncertainty as to the correct rent for the period and that constitutes a business risk.
Another problem with an outstanding review is that, whereas there may be no evidence at the time to justify an increase, post-review evidence (of rising rents after the date of review) can be used to demonstrate increase; and if the investment is sold, then it is common for the new landlord to implement outstanding reviews. Post-review evidence is normally adjusted for difference in time, but rents do not increase in a linear way so it doesn’t follow that just because, for example, a year or so later the evidence would support a higher rent, the rent of your premises would necessarily have increased had the evidence been available at the time.
To be on the safe side, outstanding reviews should be documented at nil increase and if the landlord will not co-operate and complete a memorandum, then the tenant should either refer the review to ‘arbitration’ if the lease permits (with a Calderbank offer to protect costs) or serve notice obliging the landlord to implement the review or lose the right to do so.
(A Calderbank is a ‘without prejudice’ offer in writing to settle the rent by a specified time and date, which if not accepted in time could give rise to the other party becoming responsible for all costs and possibly surveyor’s fees if the outcome of a referral to ‘arbitration’ is a rent equal to or less than the offer.)
Strictly, all rent reviews are upward or downward, because a review to market rent is simply that. The ‘upward-only’ aspect only applies after the market rent has been agreed or ascertained, so another reason a landlord can be reluctant to implement a rent review is to avoid having the market rent ‘quantified’, in case that could reduce the value of the investment and possibly breach a loan covenant. By forcing the review, a tenant may be able to strike a deal with the landlord whereby, in exchange for documenting the review at ''nil increase' rather than the market rent, the tenant may be able to obtain a reduction in the actual rent payable.
Base Rates 2%
Thursday 04 December 2008 File - Investment
Base Rate today reduced to
2%
For a list of MLR and Base Rate changes since 1989, please click here.
For a list of MLR and Base Rate changes since 1989, please click here.
In touch with reality
Thursday 23 October 2008 File - Retailing
Are you sitting comfortably?
A recession for some is about to begin. But not for everyone. Why are some retailers in touch with reality, and others not. Many retailers seem to have a somewhat snobbish attitude which leads them to think customers should expect to pay a high price for their products.
During a downturn, whilst reducing costs is necessary, the question is whether the costs are being reduced so as to preserve margins or to enable prices to also be reduced?
I think retailers should decide whose side they're on: the side of the retailer or the side of the customer.
We are not supposed to come unstuck in times of change: to be in sync with reality, requires prices to go down as well.
Referral: Independent Expert overstepping the mark
Tuesday 29 July 2008 File - Rent
Review
Acting for a retailer in Cheylesmore, Coventry, I arranged referral of a rent review to an independent expert and the revised rent was determined accordingly. (The rent devalues to the lowest Zone A in the area, as it happens)
The Lease requires the tenant to pays all costs of the determination (the expert's fees) if the determination were within 10% of the landlord's proposal, so the expert took it upon himself to determine my Client should pay all costs. However, what the expert overlooked was a) the proposal was that which had been made at the date of the application to the RICS for the appointment of the expert and b) the expert's role in the procedure did not extend to responsibility for costs. At the date of my application to the RICS, the landlord had not proposed any rent so I reasoned the provision for costs did not apply. Also, I reasoned that apportioning responsibility for costs was a separate issue which was nothing whatsoever to do with the expert. It was an arrangement the parties had agreed would apply after the determination were released and not part of the actual determination process.
Needless to say, the landlord's surveyor did not agree but, because I stuck to my guns the expert found himself in an invidious position, so the landlord said he would obtain legal opinion. Whilst waiting for the lawyers, the landlord' s surveyor sent me a memorandum for my Client to sign to confirm the new rent. I obtained my Client's signature but rather than return the Memorandum to the landlord's surveyor for completion, I said that because the expert's determination on costs was included in the determination the entire determination was invalid pending pending resolution of the costs issue. I emphasized that whereas I was not going to recommend the revised rent should not be agreed, I did not think it should be payable until after the issue of costs was finally disposed of, so if the landlord's legal opinion did not agree with my opinion, I should arrange for my Client's solicitors to apply to the Court for a declaration. However, I went on to say that I should, without prejudice, return the Memorandum for completion and payment of the rent without further ado if the landlord would agree to pay half the expert's costs. The landlord realizing the matter could take months to resolve, not to mention mounting legal costs, duly capitulated.
Credit Crunch - latest
Wednesday 14 May 2008 File - Investment
Once upon a time, there were lots of small banks and
building societies and they all got on well together,
managing as best they could.
Gradually, some of the bigger small banks started buying the small banks until there were only a few big banks left.
Witnessing what a bank could do that a building society couldn't, look, pots of gold at the end of the rainbow, let's become banks, said some of the building societies, and so they did.
That's not what we had in mind, thought the big banks, what we are going to do?
I've an idea, said one of the big banks, let's create a new lending market to attract customers we'd never want in a million years and pretend we don't mind the new small banks having a huge share of it, then, when they're up to their necks it in, we'll pull the plug.
Good idea, said the other big banks, coming up with lots of new financial products will give our marketing people something exciting to do.
And so it came to pass, the new small banks they fell for it and were allowed to capture a huge share; never mind if customers couldn't really afford to borrow, take the money.
For years, everything went according to plan. The new small banks had a field day. Thanks to them, the economy was booming, property prices rocketed, the government could introduce taxes galore and no one minded because there was so much money about they couldn't give it away.
Not everyone was happy. The really big bank, the one the banks revered, was getting a bit annoyed that its inflation target was coming into sight and the big banks could sense they'd lose their emotional credits if they didn't do something to make sure a letter didn't have to be written to the big chief Brown, whose initials GB appeared on car bumper stickers. No one wanted to go first, so they decided one big bank would have to play at being nice. So, because the revered bank is in England, where appearances must be kept up, they got one of the Scottish banks to draw the short straw.
All they had to do was choose the right moment.
Careful what you wish for!
A bank on another continent announced that a gift-wrapped parcel of mortgages it had bought from another bank was worthless because the borrowers that didn't have any money were unable to pay. Sensing a hand-out, the banking community responded generously, by immediately shutting their doors.
In England, a small bank, former building society, Northern Rock, found it couldn't borrow any money. Suddenly there were queues in the streets and the Government was being told it had to do something, which it did by summoning some politicians back from their holidays abroad.
To an observer, it seemed all hell was let loose, but to the banks in Britain it was a dream come true.
With Mrs Trellis of North Wales in mourning for Humph of Round Britain Quiz, it was left to Mr Bingley of Bradford to say there but for the grace of God.
God knows.
First to repent was HBOS, the biggest ex-building society, whose falling sp was met by a barrage of 'we shall not be moved', only to find that, when the tide came in again, it was not going to be quite as immovable as all that.
Sorry, said the Scottish bank, we've run out of money to give away, so we need you shareholders to cough up £12Bn, but don't worry you'll still get a dividend which we'll be able to pay you in shares just as soon as you've handed over the lolly. While the Scottish banks shareholders were reeling from the shock, while you're at, said HSBS, we'll have some, us too probably said Barclays.
Not us, said Lloyds TSB, we were so slow off the mark, we can call it old-fashioned banking. No problem, said Mr Bingley, we've sold a load of mortgages to GE Capital at 6% discount and have plenty more up our sleeve. Nothing to do with us, said Alliance & L, who'd been without a cheer-leader for years, and were happy distributing the non-existent CEO's salary, etc around the board.
What with sovereign states threatening to not invest their zillions in London, and a Mr Darling of Peter Pan flying through the roof, the big revered bank decided it would help out. Sensing an opportunity to replenish gold reserves, it offered to take all the securities the banks have in exchange for 0.01% off LIBOR, the overnight interest rate that the banks borrow at when they can't be bothered to look for 50p just to reconcile their books at the end of the day.
Meanwhile, in the real world, life carried on almost as normal. The supermarkets carry on ripping-off, this time using soaring demand from everyone else in distant lands to inflate prices. The big banks focus on helping themselves to their customers' money, whilst the new small banks focus on how to break the news to their customers that they, the new small banks, are not big enough to borrow any money, so fixed rate mortgages at 2% and 3% can be renewed, or at less than 7%. And, in the property market, whose BTR statement makes Britain what is today, with the legacy of the Olympics to look forward to, thousands of sellers who, whether through greed or sheer bad luck, had missed the buyer gravy train, now face the treble whammy of rising costs of living in a house they don't want, not being able to afford the petrol to go house-hunting, and losing their luggage at Heathrow T5.
And on a sunny Wednesday afternoon, the voices in the wilderness, those that no one ever listens to, were heard to say, 'don't know why we need so many banks, they're all the same, one or two is enough, why don't we just let those that are broke go broke and call it a day?'
God knows.
Gradually, some of the bigger small banks started buying the small banks until there were only a few big banks left.
Witnessing what a bank could do that a building society couldn't, look, pots of gold at the end of the rainbow, let's become banks, said some of the building societies, and so they did.
That's not what we had in mind, thought the big banks, what we are going to do?
I've an idea, said one of the big banks, let's create a new lending market to attract customers we'd never want in a million years and pretend we don't mind the new small banks having a huge share of it, then, when they're up to their necks it in, we'll pull the plug.
Good idea, said the other big banks, coming up with lots of new financial products will give our marketing people something exciting to do.
And so it came to pass, the new small banks they fell for it and were allowed to capture a huge share; never mind if customers couldn't really afford to borrow, take the money.
For years, everything went according to plan. The new small banks had a field day. Thanks to them, the economy was booming, property prices rocketed, the government could introduce taxes galore and no one minded because there was so much money about they couldn't give it away.
Not everyone was happy. The really big bank, the one the banks revered, was getting a bit annoyed that its inflation target was coming into sight and the big banks could sense they'd lose their emotional credits if they didn't do something to make sure a letter didn't have to be written to the big chief Brown, whose initials GB appeared on car bumper stickers. No one wanted to go first, so they decided one big bank would have to play at being nice. So, because the revered bank is in England, where appearances must be kept up, they got one of the Scottish banks to draw the short straw.
All they had to do was choose the right moment.
Careful what you wish for!
A bank on another continent announced that a gift-wrapped parcel of mortgages it had bought from another bank was worthless because the borrowers that didn't have any money were unable to pay. Sensing a hand-out, the banking community responded generously, by immediately shutting their doors.
In England, a small bank, former building society, Northern Rock, found it couldn't borrow any money. Suddenly there were queues in the streets and the Government was being told it had to do something, which it did by summoning some politicians back from their holidays abroad.
To an observer, it seemed all hell was let loose, but to the banks in Britain it was a dream come true.
With Mrs Trellis of North Wales in mourning for Humph of Round Britain Quiz, it was left to Mr Bingley of Bradford to say there but for the grace of God.
God knows.
First to repent was HBOS, the biggest ex-building society, whose falling sp was met by a barrage of 'we shall not be moved', only to find that, when the tide came in again, it was not going to be quite as immovable as all that.
Sorry, said the Scottish bank, we've run out of money to give away, so we need you shareholders to cough up £12Bn, but don't worry you'll still get a dividend which we'll be able to pay you in shares just as soon as you've handed over the lolly. While the Scottish banks shareholders were reeling from the shock, while you're at, said HSBS, we'll have some, us too probably said Barclays.
Not us, said Lloyds TSB, we were so slow off the mark, we can call it old-fashioned banking. No problem, said Mr Bingley, we've sold a load of mortgages to GE Capital at 6% discount and have plenty more up our sleeve. Nothing to do with us, said Alliance & L, who'd been without a cheer-leader for years, and were happy distributing the non-existent CEO's salary, etc around the board.
What with sovereign states threatening to not invest their zillions in London, and a Mr Darling of Peter Pan flying through the roof, the big revered bank decided it would help out. Sensing an opportunity to replenish gold reserves, it offered to take all the securities the banks have in exchange for 0.01% off LIBOR, the overnight interest rate that the banks borrow at when they can't be bothered to look for 50p just to reconcile their books at the end of the day.
Meanwhile, in the real world, life carried on almost as normal. The supermarkets carry on ripping-off, this time using soaring demand from everyone else in distant lands to inflate prices. The big banks focus on helping themselves to their customers' money, whilst the new small banks focus on how to break the news to their customers that they, the new small banks, are not big enough to borrow any money, so fixed rate mortgages at 2% and 3% can be renewed, or at less than 7%. And, in the property market, whose BTR statement makes Britain what is today, with the legacy of the Olympics to look forward to, thousands of sellers who, whether through greed or sheer bad luck, had missed the buyer gravy train, now face the treble whammy of rising costs of living in a house they don't want, not being able to afford the petrol to go house-hunting, and losing their luggage at Heathrow T5.
And on a sunny Wednesday afternoon, the voices in the wilderness, those that no one ever listens to, were heard to say, 'don't know why we need so many banks, they're all the same, one or two is enough, why don't we just let those that are broke go broke and call it a day?'
God knows.
Sub-Prime Crisis
Tuesday 08 April 2008 File - Investment