http://www.michaellever.co.uk/index.htmlMichael Lever Newsenhelp@michaellever.co.ukCopyright 2009 Michael Lever2011-06-21T14:16:55+01:00 hourly 1 2000-01-01T12:00+00:00 Wed, 03 Mar 2010 16:32:42 +0000help@michaellever.co.ukInvestmentValuation2011-06-21T14:16:55+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-26http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-26
The CA held that although the valuer had been negligent and the purchaser had relied upon the valuer’s report (amongst other advice) when deciding to proceed, the purchaser did not establish foreseeability of damage or a sufficient degree of proximity between himself and the valuer.
Nor did the purchaser show that it would be "fair, just and reasonable" to impose (on the valuer) a duty of care to the purchaser. The Court held there were important distinctions to be made between valuations for buy-to-let purposes and those made for home buyers.

The court commented that those buying properties to let, were less "deserving of protection by the common law against the risk of negligence than those buying to occupy as their residence."

]]>help@michaellever.co.ukNewsInvestment2011-06-01T09:42:57+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-24http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-24English Heritage has created a searchable database of all nationally designated heritage assets including Listed Buildings, Scheduled Monuments, Registered Parks and Gardens, Registered Battlefields and Protected Wreck Sites.

http://list.english-heritage.org.uk/]]>help@michaellever.co.ukNewsInvestment2011-05-28T13:27:10+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-23http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-23Commencing 26 May 2011, all UK businesses and organisations running websites in the UK are required by law to obtain people’s consent before they install cookies on their machines. (A cookie is a line of code that enables websites to monitor visitor usage, etc: it does not identify the actual user.)

None of the websites that I run and maintain install cookies, but the company whose services I use to monitor usage does install cookies. I am checking the legality of that as far my responsibility is concerned. Frankly I think cookies are an invasion of privacy although I accept they are necessary in some matters so if it transpires that I need to obtain your consent then I shall end the arrangement with the monitoring company.
]]>help@michaellever.co.ukRent ReviewExpert WitnessArbitration2011-02-25T12:45:20+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-22http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-22I have become so fed up with chartered surveyors paying ‘lip service’ to the RICS Practise Statement and guidance Notes for chartered surveyors acting as expert witness at rent review but ignoring the substantive provisions that I am going to make formal complaints to the President of the RICS.


In one case recently, the tenant’s expert witness surveyor, apparently on the RICS panel, failed to disclose that he and his firm are retained advisers for the tenant. The expert witness opinion was partisan and when challenged he said he was not answerable to me. Fair enough, but he is answerable to the RICS and being on RICS panel for dispute resolution appointed surveyors has a duty to set a good example.

In another matter at present, where I’m acting for the tenant, the landlord’s surveyor now acting as expert witness, quite apart from describing his report as a submission, thereby confirming ignorance of terminology, is basically arguing the matter as if an advocate.



]]>help@michaellever.co.ukInvestment2011-01-13T16:43:24+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-20http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-20On the page Shopping is History I have added a section “ex-growth’ where I list the trading names of multiple retailers that, in my opinion, are gradually or quickly falling by the wayside.

In the context of shop property for investment, the financial standing of a tenant can affect investment performance.

Although property costs (rent, business rates, etc) are often blamed, in practice, in my opinion, the majority of problems that befall retailers are self-inflicted through failure to address operational difficulties.

Difficulties also arise where the trading location has improved, but the nature of the tenant’s business is out of kilter. Conversely, the trading position may have deteriorated, but the retailer’s mode of business, particularly on pricing, is not commensurate.

Where trading difficulties are caused by external events over which a retailer has no apparent control, such as severe weather conditions, the state of the economy, recession, and so on, such events are often cited as the cause of profit deterioration, but the fact that other retailers operating in the same sector of the market may be doing well, despite the same ostensibly adverse conditions, makes me think that ‘blaming’ such external events is used as an excuse for the retailer’s own shortcomings.

The challenge, in times of change, as indeed at all times, is to always remain in sync with what customers want to buy. There are many reasons for being out of sync, for example:

• The retailer is not providing as good a service as it thinks
• The retailer is offering what it wants customers to want: not what people need.
• Directors have lost interest - particular common if just short of retirement age, or having made a pile cannot really be bothered!
• Directors are disillusioned - a feeling that indicates lack of sync with reality.
• The business is failing to deliver what it promises.
• The retailer’s staff have the wrong attitude for the customers in the reality that the business serves.
• There is insufficient demand or too much competition to run a profitable business.
• Cash-flow is poor and other business management skills are lacking.
• The business is not professional and forward-thinking in its outlook.
• The directors are more interested in helping themselves than helping others.
• The directors are not doing what is essentially true for them.

Although many retailers come unstuck in time of change, in practice it is not difficult to avoid that scenario. The main obstacle is that many retailers are resistant to change and will only do so when it is forced upon them, by which time it might be too late. ]]>help@michaellever.co.ukInterest RatesInvestment2011-02-25T12:45:14+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-19http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-19Interest Rates

Base Rate 0.5% as at 26 October 2009


For MLR and Base Rate changes since 1989, please click here.]]>help@michaellever.co.ukNewsCurrent Review2010-10-03T18:38:57+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2010#unique-entry-id-18http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2010#unique-entry-id-18The June 2010 edition of my newsletter, Current Review, can now be downloaded. If you would like to be on the regular mailing list then please email your name, company name, if any, and postal address. UK only!]]>help@michaellever.co.ukAssignmentInvestmentLease Renewal2010-10-03T17:57:47+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2010#unique-entry-id-17http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2010#unique-entry-id-17The latest in my series of ML Guides is now available, a summary of the information required for Lease Plans.

Please note a lease plan is not required if the tenancy is shorter than 7 years. To reduce the expense of getting a compliant plan on grant of a new lease or on renewal, it may pay to have a shorter term than 7 years. However, specific advice must be taken, since there are wider consequences to consider. ]]>help@michaellever.co.ukInvestmentBusiness Rates2010-03-03T16:30:46+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2010#unique-entry-id-16http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2010#unique-entry-id-16The Non-Domestic Rating (Unoccupied Property) (England) (Amendment) Regulations 2010 (2010 regulations) come in to force 1 April 2010. For the year 2010/11, empty commercial properties with rateable values of up to £18,000 will be exempt from business rates.
]]>help@michaellever.co.ukArbitrationRent ReviewRICS DRS fee2009-10-27T09:18:51+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-13http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-13Dispute resolution costs and fees

In my opinion, and I'm not alone, the fees required and charged by surveyors appointed by the RICS to act as arbitrators or independent experts are often out of touch with reality and, in many instances, obscene.

For example, I am dealing with two matters at present, for different clients, where the rents are likely to end up at around £14,500 pa. In each case, the independent expert wants to charge around £250-£300 an hour, with a minimum fee of £3500 + disbursements and VAT. Now if the agency side of the firms of which those experts are partners were instructed to let the property then chances are the commission would be 10% of the first year's rent (ignoring any rent-free) subject to a minimum commission of £2000 plus VAT. 

In another case, the appointed independent expert's hourly rate is £200 an hour + disbursements and VAT. Okay, maybe that's par for the course (or at least it used to be), but the surveyor has run up a bill of almost £1000 + VAT, etc just on dealing with preliminary communications. Also, at a different office of same company, where another person has been appointed, the charge is (only) £175 an hour which, considering it's the same administrative structure, suggests to me some sort of target approach to revenue. 

I don't know where such people think the money comes from to pay their fees but frankly if that's the way they carry on then it's hardly surprising so many surveyors are experiencing financial difficulties and having to lay off staff, etc. 

It's always been the case that where the parties have no choice the adviser will charge as much as they possibly can. You get that with legal costs and surveyor's fees in connection with tenant applications for licences to assign, sub-let, do alterations, and with schedules of dilapidations. I think the same principle is being applied at review referrals. Once appointed, the surveyor has a general duty to proceed and although that can be stopped by agreement what the parties have little or no control over is how much the surveyor will charge. 

Personally, and I've said this all along, I think there should be a fixed fee, possibly on a sliding scale according to the level of passing rent, (with adjustment if the passing rent is a ground rent, for example), for independent expert determinations and arbitrator awards at rent review. The old argument  it's impossible to know what will be involved doesn't hold water. When I take on a rent review for a client, I don't have the luxury of  being able to charge whatever I like: I quote a fee at the start and no matter how long the job takes or what's involved, I stick to what has been agreed and no more. 

An open-ended  'blank cheque' approach exposes both landlord and tenant to the risk of having to pay a disproportionate amount to a third party, which let's face it, particularly with an independent expert, expects most  of the job done for them.

The advantage of a fixed fee is that you know where you are the start. You can tell the client it would cost 'x' to go to referral and that would be it. At present, I can only estimate and having to say that the total costs could be in the region of £3000-£5000 + VAT, etc is a really frightening figure for most people, even if their share would only amount to half of that. 

Under the existing system whereby surveyors can charge whatever they like, I think landlords and tenants are being taken for a ride. 

PS - I am in the process of setting up a low cost dispute resolution service where, for example, I am likely to charge in the region of £1750 + VAT for expert determination and maybe the same for arbitration. The full fee would, of course, not be payable in the event the matter were settled beforehand. ]]>help@michaellever.co.ukRent ReviewArbitrationRICS DRS fee2011-02-25T12:45:34+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-12http://www.michaellever.co.uk/therentreviewspecialist/newsandblog.html#unique-entry-id-12RICS dispute resolution application fee
With effect from 4 January 2011, the application fee payable to the RICS is £369.00 (inclusive of VAT at 20%)
Previously:

2000 April  -  £275 inclusive of VAT
2002 August - £300 inclusive of VAT 
2006 June  - £320 inclusive of VAT
2008 April  - £340.00 inclusive VAT
2009 April 15 - £333 inclusive of VAT (15%)
2009 June 15 - £353 inclusive of VAT
2010 to 3 January 2011 - £361.00 inclusive of VAT (17.5%)
2011 January 4 - £369 inclusive of VAT (20%)


]]>help@michaellever.co.ukLease RenewalSub-lease2009-09-01T15:40:49+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-8http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-8Sub-lease implications

Multiple retailers, particularly, with premises that are surplus to requirements frequently sub-let, rather than assign the leases. Why? There are many reasons. For example:

1) the risk of assignment is that in the event of assignee default, the lease could revert to the assignor at any time. [Although leases containing Authorised Guarantee Agreements only revert to the assignor in the event of assignee default, older leases are subject to the original rules of privity of contract, so would revert to the original tenant, regardless of how many assignments have taken place, and with the assignor having no rights to reoccupy the premises.] 

2) The financial standing of the assignee might not satisfy the freeholder's criteria. 

3) Once assigned, it would not normally be possible for the assignor to take the premises back were the assignor to want to re-occupy the premises in future. 

4) Any use to which an assignee or future assignee might put the premises could, assuming no restriction in the lease, risk creating a competitor for the assignor's business in the locality. 

On balance, sub-letting is an opportunity to charge a profit rent, and enables the tenant to keep control of the lease. The risk of sub-tenant default or delay in paying the rent still exists, but the tenant would control what to do, rather than the landlord.

Generally, where a lease allows the tenant to sub-let, the required outline terms and conditions of any underlease are stated in the lease. Although modern leases may require any under-lease to be outside the Landlord and Tenant Act 1954, often older leases do not. That means that provided the under-lease would qualify for renewal rights on expiry, and assuming the under-lessee wants to renew and the superior landlord does not oppose renewal, the under-lessee would become the direct tenant of the superior landlord. 

Regardless of the conditions required by the lease, on grant of under-lease, it is not unusual for strictures of full repairing and decorating obligations to be eased by a schedule of condition or similar. In such cases, the under-lessee should be aware that, unless the underlease is worded correctly, the commercial value of a schedule of condition will end on expiry of the contractual term of underlease, and not continue into any statutory continuation or holding over period.  Furthermore, provided the under-lessee is in occupation of the premises on expiry, (and the superior landlord does not oppose renewal, and renewal rights are protected), it should be possible for the terms and conditions of the underlease to be reflected in the terms and conditions of the renewal lease. So, the renewal lease could also contain a schedule of condition. 

The risk/cost of managing surplus estate and onerous leases can mount up to become a noticeable provision on the balance-sheet, so retailers like to be rid of the commitment by assigning them, either to third parties, or more likely to their under-lessees. Where an under-lease contains a schedule of condition, the lessor/assignor will normally agree to indemnify the under-lessee for the cost of compliance with the difference between the full repairing covenant and the schedule of condition so that, in practice,  the underlesee/to-be-assignee is in no worse a position. 

However, unless careful consideration is given to the long-term and wider consequences, the position could be a lot worse. The under-lessee should ensure the indemnity covers any statutory continuation or holding over period of the lease. Also, the under-lessee should note that, on expiry and renewal, it would be the terms and conditions of the lease (assigned) that form the basis for the valuation aspects of s.34 and s.35 Landlord and Tenant Act 1954, and not the terms and conditions of the underlease. In other words, by taking over the lease, the under-lessee would be losing the right to renew on the same terms and conditions of the underlease, the schedule of condition not carried forward. 

The total cost of putting a property in a state of repair and decoration as envisaged by the lease can be considerable. It is not only the actual expense for the works but also the attendant costs and fees payable to lawyers and surveyors for the landlord, as well as the tenant's advisers. 

]]>help@michaellever.co.ukInvestmentPre-pack2009-03-01T15:39:23+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-7http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-7My letter published in Estates Gazette, March 2009:
"Whilst I agree with Anthony Ratclliffe there seems precious little difference between “phoenix” company and “pre-packs”, I do think landlords could do both themselves and the shop property sector a service by adopting a more robust approach to requests for assignment.

Generally, alienation criteria in a lease enable a landlord to require a director surety or guarantor as a pre-requisite for consent for assignment. Generally, multiple retailers are unwilling to provide personal guarantors but, since the pre-pack company is effectively a new business with no trading record, there is no reason to treat it any differently.

In my opinion, landlords are being presented with a rare possibly unique opportunity to influence the future of retailing and the structure of property costs in the UK. By refusing consent to assign to a pre-pack unless personal guarantor(s) are provided, multiple retailers are less likely to embark upon debt-fuelled jamborees, if their own personal money were on the line. One reason there is now a legacy of high rents in most places is not a consequence of supply and demand, so much as the knock-on effect of rental evidence caused overambitious egocentric retailers living off borrowings and overpaying for new lettings with no thought for the long-term wider consequences.

Increasingly, I am taking the view that comparable evidence at rent review involving a transaction where the lease is to a company without a personal guarantor should be treated with the utmost caution, because the rent is likely to be higher.

In my opinion, multiple retailers allowing branches to under-perform, such that they have to be ditched using pre-packaged practices, is tantamount to gross incompetence at the highest level. It is also a poor reflection on the investment acumen of innumerable landlords in allowing multiple retailers to be exempt or shielded from the strictures of tenancy management that are automatically applied to small businesses."

]]>help@michaellever.co.ukInvestment2009-10-01T15:38:49+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-6http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-6"Distressed" seller is the latest way for sellers to get rid of rubbish. The sort of properties that nobody else would buy. Start off by putting on the market over-priced. Expect to sell for much less. Attract interest, consider offers much lower than the quoting price. Do some due diligence as to whether the buyer has the money. Agree to accept what is thought by the buyer to be a bargain price. Exchange and complete contracts as soon as possible. Everyone is happy.  
]]>help@michaellever.co.ukInvestment2009-09-01T15:38:16+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-5http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-5It seems to me there are a growing number of people thinking to themselves now seems like a good time to invest in shop property. But I'm not convinced. Not because life's difficult for many retailers, and that for many struggling on in the hope of surviving is possibly about the best they can do, but that that the sort of property on the market for sale doesn't fill me with much enthusiasm for its investment potential.

Unlike the stock market, where you're buying a share of the company's business, with property you are not. You are simply buying the building in or which which the tenant runs its business. Whether the tenant intends to remain there is not something you are entitled to know and the tenant is not obliged to keep you informed. The only time the tenant has to tell you it is going is when it applies to assign the lease, sub-let the property, or does not renew the lease on expiry. And/or, in the case of a ltd company or plc, when it puts the occupant tenant in liquidation, administration or a CVA. Therefore, when you buy a shop property investment, you are placing a good deal of trust on the fact the tenant will continue to be the tenant for at least as long as the price you pay is commensurate with the value you have placed on the property per that price you have paid. For example, if the price you pay equates to 7% yield then to maintain that value, all other factors remaining constant,  the tenant or a tenant of at least the calibre (if the lease were assigned and/or the property re-let) would have to remain the tenant for just over 14 years. If not, if any future tenant within that 14 year period is of a lesser calibre, then the value of the property would be less (all other factors remaining constant). 

Buying a property let on 20 year lease is not the answer. Generally, retail property is a depreciating asset and the shorter the term the greater the yield. A property let to Barclays Bank plc, for example, on leaseback for 20 years from 2009 will likely fetch a higher price than if the term remaining is only a few years before expiry. 

There is a difference between the return or yield you can get based on what you pay and whether the investment is worth buying in the first place. I think many people are not realising they are falling into the trap of the first. And it is a trap, believe me, because what it leads to is becoming stuck with something that is really only resalable at the same sort of price now. ]]>help@michaellever.co.ukRent ReviewInvestmentMonthly Rents2009-09-01T15:36:18+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-3http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-3Monthly Rents

Although retailers in trouble are managing to persuade landlords to accept rents paid monthly, a growing number of retailers that are not in any difficulty are expecting the same treatment.

Some landlords can afford to be accommodating, but many cannot. Landlords that themselves are borrowing money are likely to be paying their interest quarterly, so accepting rents monthly from the tenant will mean the landlord subsidising the tenant. 

In any event, such an arrangement, where it is a departure from the terms and conditions of the lease, should only be temporary, and subject to notice to end the arrangement if the landlord should so desire. Landlords should also put the agreement in writing, in a side-letter with the lease, setting out clearly the terms and conditions of the arrangement. 

To avoid problems should the landlord want to sell the investment, the arrangement should be personal to the tenant and landlord and non-transferable. 

In my opinion, the investment value of a property where the tenant is being allowed to pay monthly could well be lower than where payments are quarterly. 
]]>help@michaellever.co.ukRent ReviewInvestmentTake-away food shops2009-10-26T15:35:41+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-2http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-2Take-away food shops planning restrictions

LB Waltham Forest has introduced a policy, likely to be copied by other planning authorities, of not allowing take-away food shops to open within 400 metres of schools, parks and youth centres. Also, the North East London planning authority has begun consulting on a suite of development control policies which would restrict the number of fast-food outlets within primary, secondary and retail parade zones.

Until the 400-mere rule becomes a nationally-adopted planning policy, the point would only arise within LB Waltham Forest. In the meantime, to prepare for the possibility:

At rent review in the lease of premises whereby the permitted user is take-away foods - Use Class A5 is hot food takeaway, and possibly A3 - an assumption of the hypothetical tenant being able to get planning permission for such use is normal. If the premises are within 400 metres of a school, park and youth-centre, then in the open market the assumption would fail in practice. That could have the effect of either increasing the market rent, on the basis that if the premises did not already have take-away use then it would not be allowed, in which case there is a scarcity value, or reducing the market rent on the basis that in the market such planning use would not be allowed. 

At lease expiry, if the tenant requires a lower rent or it will not renew, the landlord will have to weigh up the consequences of conceding a lower rent against the risk not being able to re-let the premises for take-away use if the planning permission for such use were to elapse. 

There are thousands of take-away food shops. As literal interpretation of the lease has given way to presumption in favour of reality, checking the distance to the nearest school, park and youth-centre will be necessary when evaluating the rent. 


 
]]>help@michaellever.co.ukRent ReviewNews2009-05-21T18:30:43+01:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-1http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-13CPD, a registered charity www.3cpd.co.uk invited me to give a talk about "Rent Review in the Prevailing Climate" on 21 May 2009 at the Barcelo Hotel, Oxford. Open to non-members, approximately 30 people attended the event. ]]>help@michaellever.co.ukRent Review2009-10-26T15:33:27+00:00http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-0http://www.michaellever.co.uk/therentreviewspecialist/newsandblog_files/2009#unique-entry-id-0Upwards or downward - rent review
Many tenants, and I should imagine landlords also, probably think that where a rent review is 'upward' or 'downward' so that the rent payable after the review could be less than before, the rent is likely to go down, in the prevailing economic climate. 

That may not be so. For a landlord, for whom I have acted for years, I recently negotiated a 10% increase in rent for a September 2008 review even though the lease contains a downward provision. 

The important thing to remember is that rents are not based on what the actual tenant could afford or the actual landlord might want, but upon comparison. Where the evidence is of rents whose reviews are upward-only, a nil increase (which, as I have said before, is no evidence of a lower rent) does not mean rents have fallen. Also, it is not only another rent (pro-rata) to which a review is compared, but also the terms of the lease. When you make a comparison between an upward only review clause and an upward/downwards clause, it is reasonable to assume a tenant would be attracted by the prospect of a lease containing upward/downward clause and paying a greater rent for the premises than if the review were upward only. 

So, if all the evidence is nil increase, which as I've said does not mean the rent has gone down, then in the absence of proof that rents have indeed fallen, the advantage of having an upward/downward review has a value. Which in this case I agreed at 10% more.]]>