RICS APC Commercial Property Management 2 — Questions and Answers
Question 1: Under Section 18(1) of the Landlord and Tenant Act 1927, what statutory cap applies to a landlord's terminal dilapidations claim?
- The claim is capped at one year's passing rent
- The claim cannot exceed the diminution in value of the landlord's reversion caused by the disrepair (Correct answer)
- The claim is limited to the actual cost of works carried out by the landlord
- The claim is capped at the rateable value of the demised premises
Correct answer: The claim cannot exceed the diminution in value of the landlord's reversion caused by the disrepair
Section 18(1) of the Landlord and Tenant Act 1927 limits a dilapidations claim to the reduction in the value of the landlord's reversionary interest caused by the disrepair, preventing recovery exceeding actual financial loss.
Question 2: What is a 'break clause' in a commercial lease?
- A clause entitling the landlord to forfeit the lease for persistent non-payment of rent
- A clause allowing one or both parties to terminate the lease before the contractual expiry date (Correct answer)
- A clause that automatically renews the lease unless written notice is served by a specified date
- A clause suspending the tenant's rent obligations during a force majeure event
Correct answer: A clause allowing one or both parties to terminate the lease before the contractual expiry date
A break clause gives one or both parties a contractual right to end the lease early at a specified date or dates, typically subject to conditions such as vacant possession and compliance with lease covenants.
Question 3: What is the purpose of a 'schedule of condition' attached to a commercial lease?
- To record all fixtures and fittings included in the letting for inventory purposes
- To record the property's condition at lease commencement, limiting the tenant's repairing obligation to no better than that recorded state (Correct answer)
- To schedule planned maintenance works to be carried out during the tenancy
- To document the tenant's proposed alterations that require landlord consent
Correct answer: To record the property's condition at lease commencement, limiting the tenant's repairing obligation to no better than that recorded state
A schedule of condition (typically supported by photographs) records the property's state at the start of the lease, restricting the tenant's repair liability to maintaining the property in no better condition than evidenced.
Question 4: Under the Landlord and Tenant Act 1988, what obligations are placed on a landlord when a tenant requests consent to assign a commercial lease?
- The landlord may withhold consent for any reason, provided written notice is given within 28 days
- The landlord must not unreasonably withhold or delay consent and must give a written decision within a reasonable time (Correct answer)
- The landlord must grant consent automatically if the proposed assignee meets the original tenant's financial covenant
- The landlord has 56 days to grant or withhold consent with no obligation to provide written reasons
Correct answer: The landlord must not unreasonably withhold or delay consent and must give a written decision within a reasonable time
The Landlord and Tenant Act 1988 requires landlords to respond to assignment applications within a reasonable time, not unreasonably withhold or delay consent, and provide written reasons when refusing.
Question 5: What does 'alienation' mean in the context of a commercial lease?
- The landlord's right to forfeit the lease for a material breach of covenant
- The tenant's rights to deal with the lease interest by assignment, subletting, or charging (Correct answer)
- The legal separation of the leasehold interest from the freehold title on registration
- The process of removing a tenant who has vacated and abandoned the property
Correct answer: The tenant's rights to deal with the lease interest by assignment, subletting, or charging
Alienation encompasses all forms of dealing by a tenant with their leasehold interest, including assignment to a third party, subletting, and charging the lease as security, typically subject to landlord consent.
Question 6: Under the RICS Professional Statement 'Service Charges in Commercial Property', when must a service charge budget be issued to tenants?
- Within 28 days of the end of the previous service charge year
- Before the start of the service charge year to which it relates (Correct answer)
- Within three months of the commencement of the service charge year
- At any point during the year provided six weeks' notice is given to tenants
Correct answer: Before the start of the service charge year to which it relates
The RICS Professional Statement requires landlords to issue a service charge budget before the commencement of the service charge year, enabling tenants to plan for anticipated expenditure.
Question 7: What is a 'certified service charge account' in commercial property management?
- An account approved by the Leasehold Valuation Tribunal as fair and reasonable
- An annual reconciliation account signed off by a surveyor or accountant confirming expenditure is accurate and in accordance with the lease (Correct answer)
- A service charge account backed by a performance bond from the managing agent
- An account certified by HMRC as exempt from VAT under property management rules
Correct answer: An annual reconciliation account signed off by a surveyor or accountant confirming expenditure is accurate and in accordance with the lease
A certified service charge account is the year-end reconciliation signed off by a professional, confirming that expenditure is properly accounted for, reasonable, and complies with the lease obligations.
RICS APC Commercial Property Management 2
Under Section 18(1) of the Landlord and Tenant Act 1927, what statutory cap applies to a landlord's terminal dilapidations claim?