Glossary Of Property Terms
S to Z
Schedule of condition
A record of the condition of premises at the commencement of a lease. Usually appended to the lease and referred to in the Repairing and Yielding Up covenants to limit the tenant's liabilities - typically to repair, keep and give back the premises in 'no better than' the condition than that evidenced by the schedule. Limits the tenant's exposure to various items of repair during the lease, and its dilapidations liability at lease expiry.
Schedule of dilapidations
This is a list of outstanding repair and maintenance items (that a landlord has assessed) that have accrued under the terms of a tenant’s repair and maintenance obligations. It is often served by the landlord at the end of the lease in the form of a 'Terminal' Schedule of Dilapidations. The tenant is obliged to carry out the outstanding works listed in the schedule, or pay damages which represent the cost to the landlord of doing the works.
The Scott Schedule is a document that enables the parties to compare their respective positions in relation to the landlord’s original schedule of dilapidations. It comprises a series of columns in which each party sets out its response to the opposing party’s contentions.
Section 18 is a reference to Section 18 of the Landlord and Tenant Act 1927. The Act is split into two parts or ‘limbs’. The first limb S 18(1) provides that the damages recoverable for breach of the repairing covenant, may not exceed the diminution in value of the landlord’s reversionary interest. The second limb S 18 (2) that a landlord may not recover damages where it intends to demolish or carry out structural works to the property that render the tenants repairs valueless.
Section 25 notice
The Landlord's Notice at lease renewal under the Landlord & Tenant Act 1954 procedure. Cannot be served less than six nor more than 12 months before the lease expiry date. Must confirm whether renewal of the lease is opposed or unopposed and on what terms the landlord is willing to offer a new tenancy.
Section 26 notice
The Tenant's Notice at lease renewal under the Landlord & Tenant Act 1954 procedure. Cannot be served less than six nor more than 12 months before the lease expiry date. Must confirm the terms which the tenant is seeking for the renewal of its lease.
Sections 24-28 of the 1954 Act
The sections of Part II of the Landlord & Tenant Act 1954 (as amended) which govern Security of Tenure. Section 24 deals with the Continuation of the Tenancy after the contractual expiry date, including the rules relating to interim rent payable during the continuation or 'holdover' period. Sections 25-27 deal with the Notices which must be served to either renew, oppose renewal, or end the tenancy by Tenant's Notice to Quit. Section 28 deals with the agreement of future 'reversionary' leases.
Security of tenure
The protection (security) afforded to tenants of commercial premises by Part II of the Landlord & Tenant Act 1954 at the end of their lease.
A service charge is payable by a tenant for services provided by the landlord for the repair and maintenance of common parts, such as lifts, reception areas and the external structure of the building. The service charge usually includes managing agent’s fees. It is normally collected quarterly in advance, at the same time as the rent. A service charge payment can be capped in order to limit a tenant’s financial liability. The RICS has developed a Service Charge Code of Practice to improve standards and promote consistency, fairness, transparency and best practice in the management and administration of commercial property service charges.
Specialised trading property
Property with trading potential, such as hotels, fuel stations, restaurants or the like, the market value of which may include assets other than land and buildings alone. These properties are commonly sold in the market as operating assets and with regard to their trading potential. Also called property with trading potential.
Stamp Duty Land Tax
This is a Government fixed tax, chargeable on the execution of documents, pertaining to transactions such as Leases, Agreements for Leases and Conveyances. The duty is payable by the purchaser or lessee, and the disposal document can not be adduced as evidence of the transaction unless adequately stamped. The rate applicable is set by Central Government and varies depending upon the value of the transaction.
A lease will generally include for covenants relating to the tenant’s or landlord’s obligations to comply with statute or regulations.
A sub-letting takes place when a tenant grants a new lease for their property, or part thereof, to an alternative occupier, for a period less than the residue of the tenant’s lease. The period of the sub-letting must be at least one day less than the unexpired period of the superior lease. If a tenant attempts to sub let the property for a period equal to, or more than, the unexpired period of their own lease; this operates as an assignment of the term and not as a sub-letting.
Subject to contract
Is a term used as a provisional agreement before contracts are exchanged where either party can withdraw from the transaction.
See Material compliance.
Uses that do not fall within any particular Use Class, including theatres, houses in multiple occupation (where not C4), hostels providing no significant element of care, scrap yards, petrol filling stations and shops selling and/or displaying motor vehicles, retail warehouse clubs, nightclubs, launderettes, taxi businesses, amusement centres and casinos. The change permitted is from casinos to D2.
Supersession is the process by which a landlord’s actual or intended future works to a property render of no value a tenant’s repairs. This is used as a defence to the landlords claim.
A legal mechanism whereby a Lease may be brought to an end before its Contractual Expiry date. Often linked to the grant of a fresh Lease (aka Surrender and Regrant transactions) and associated with Lease Regearing, but also where the Landlord and Tenant simply agree an early exit from the contract (Lease). For example, to permit redevelopment , or where the Tenant has marketed its interest and the replacement tenant requires a longer term than that available by assignment of the existing Lease.
The holding of a legal interest in Property by a Tenant under a Lease or other Tenancy Agreement.
Tenancy at will
Essentially a form of Licence - a legal (but non-Property) interest under which premises may be occupied by way of a "personal" agreement. A Tenancy at Will does not grant a formal Tenancy, or create any legal/enforceable interest in the property, which is occupied "at the will of" the Landlord. Often used to allow early access to Premises pending completion of a Lease.
These covenants are the promises a tenant agrees to when signing a lease. These are duties or commitments that a Tenant will perform regardless of whether a Landlord has fulfilled his duties of performance. Examples of a tenant’s covenants are the payment of rent or repairing and maintenance of the demised premises.
The expression tenant’s improvements is used to describe a wide range of works, that are usually carried out by a tenant, at their own cost, and usually require the landlord’s prior approval. Tenant’s improvements may not necessarily increase the value of the demised premises, but can have an impact upon the future rent payable by a tenant. Section 19 (2) of the Landlord & Tenant Act 1927 provides that a covenant in a lease against the making of improvements, without the consent of the landlord, is deemed to be subject to a proviso that consent will not be unreasonably withheld.
An agent, usually a Surveyor, appointed by the Tenant to represent them in negotiations and/or third Party dispute resolution - Arbitration, Independent Expert or Court proceedings.
The term refers to the duration of the lease, normally the terms is a specified period measured in years but can be measured in months. The Lease ends when the specified period expires. However Leases can be periodic or for an indefinite duration, until one of the parties gives notice. A periodic tenancy is one that is renewed automatically, usually on a monthly or weekly basis.
Terminal schedule of dilapidations
The terminal schedule of dilapidations, served at lease end, is intended to address all breaches of lease, prepared following the recommended format in the dilapidations protocol.
Termination Of Leases:
A Landlord can bring a Lease to an early end in the event that the Tenant is in breach of any of the covenants in a Lease. The Landlord can peaceably re-enter without a Court Order in the event that the Tenant fails to pay his rent within a specified time of the due date. A Landlord must first give a Tenant notice of the breach and give them time to remedy the breach before bringing an application to the Court to determine the Lease. It must be clearly understood that commercial Leases usually reserve payment of Service Charge and insurance premiums as rent so that if these sums are not paid on the due date the Landlord can take action to forfeit the Lease for non payment of rent. When a lease reaches the end of the term a Tenant, if granted security of tenure under the Landlord & Tenant 1954 Act, is usually entitled to grant of a new Lease on commercial terms. The Landlord can only object to the grant of a new Lease on one or more of seven grounds. If a Tenant has the aforementioned Security of Tenure can dispute these grounds and it is within Tribunal or Court’s discretion to decide whether or not a new Lease should be granted. Please see the separate Virtual Commercial document, Business Tenancies and The Landlord & Tenant Act.
Transfer of a Going Concern (TOGC)
A mechanism used on the sale of a property investment where VAT is chargeable but not actually payable and therefore has a cash flow benefit. It is only applicable where the asset is and remains income producing after the transaction.
This is a mechanism employed by government under statute to limit (phase) year on year changes in liability following a rating revaluation. The system is self funding so that limits in increases are financed by limits in decreases.
Triple net income
The net income from a property investment after deducting ground rent, non-recoverable expenditure and void holding costs.
A method of calculating all or part of the rent of commercial premises, by reference to the Tenant's turnover. Exact terms vary between Leases, but usually this is based on a percentage of Gross Receipts. The tenant will typically pay a Base Rent "on account", either based on the previous year's rent or a percentage (eg 80%) of Open Market Rental Value, with a balancing charge at year end. Most common in "destination retail" locations such as Regional Shopping Centres, and the Licensed and Leisure sectors.
Uniform Business Rate (UBR)
The Uniform Business Rate (UBR) is adjusted annually by inflation (RPI) and is the multiple applied to Rateable Value to calculate rates payable (subject to transition and some other reliefs for small business).
The category of Town Planning Use to which the current or intended use of a property is allocated, as defined in the Town and Country Planning (Use Classes) Order 1987. This is a Statutory Instrument and is subject to periodic variation and updating.
This is a contractual provision within a lease, that specifies the use, or uses to which a property may be put and the uses that are prohibited. The formal classification of “Uses” are set out in the Town and Country Planning (Use Classes) Order 1987 as amended, which is a statutory instrument defining various use classes. The terminology of a user clause contained within a lease is critical in determining whether the use specified is restrictive or open. This aspect can be very important when considering the open market rental value of a property.
Vacant possession is a legal term denoting the empty state of a property on hand back to the landlord. Usually required in a lease the extent of compliance will be determined by the factual position at the date the premises are handed back.
Valuation Office Agency (VOA)
The VOA is responsible for maintaining a fair and accurate rating list.
This is the Scottish equivalent of the Rating List.
This is the lower court responsible for hearing rating appeals in England and Wales.
A legal term applied to negotiations and correspondence with the intention that anything said, or offers made, are Privileged, and cannot be subject to forced Disclosure in the event of litigation or Arbitration. This allows the parties and/or their agents to negotiate more freely, and explore the potential for settlement without making binding offers - i.e. without prejudicing their position in respect of what may be presented, in e.g. Expert Evidence, if matters become contentious and subject to formal dispute resolution procedures.
Year to year
Under the rating hypothesis it is assumed that the actual property is let in an arrangement between a reasonable landlord and tenant, but on the assumption that a tenancy will run from one year to the next with an expectation of continuance.
A measure of the return on an investment. A yield is the reciprocal of the multiplier that converts an income stream into a capital value.
The yield up clause sets out the conditions on which the property is to be handed back to the landlord, e.g. in accordance with the lease covenants and may impose additional obligations.
This is the accepted "market standard" method of rental analysis and valuation adopted for conventional high street retail premises, but not retail warehousing or large shops. Zone A is always the highest value and the following Zone B, is normally valued at half of Zone A. Zone C is half of Zone B and it continues to Zone E with all space thereafter known as the remainder. The Zones are measured in tranche depths of 20ft / 6.096m. Using this method you can provide a calculation of size In terms of Zone A, ITZA.