Case Study Questions

Question 1

If the tenant did not leave following the irritation of the lease, what options are available to the Landlord?

Answer 1

• Raise an action for removing
• Serve a charge for removing
• Serve notice of date of removal
• Evict the tenant

Question 2

What is the difference between management of accounts and statutory accounts?

Answer 2

• Management of accounts – Internal use and not audited
• Statutory – legally obliged and to be audited by a chartered accountant
  o Profit and loss
  o Balance sheet – can be downloaded from companies house

Question 3

Apart from requesting company accounts/management accounts, what other ways are there to assess covenant strength?

Answer 3

• Credit report (dun and bradstreet)
• Profits test

Question 4

What is Dunn & Bradstreet?

Answer 4

• It is one of the leading suppliers of business information and research. Its global database contains commercial data on more than 240 million companies

Question 5

What does Brad & Dunn show you?

Answer 5

• Provides Scores & Ratings to help you identify organisations that are likely to fail or pay late.

Question 6

Can you advise what are the contents of a credit report?

Answer 6

• Credit rating
• 5 years accounts
• Income statement
• Balance sheet
• Subsidiary / parent company details

Question 7

What is the Profits Test?

Answer 7

Annual Net Profit = more than the annual amount or rent, sc, insurance and rates for more than three consecutive years

Question 8

What is the essential characteristic of a lease which would allow you to serve a Charge for Payment?

Answer 8

• The lease is required to contain the consent of the parties to registration and to be registered in the land register.

Question 9

Irritancy - what the statutory position would be and the Act in which that position is established?

Answer 9

• Law Reform (Miscellaneous Provisions) Scotland Act 1985
• Introduction of a 14 day pre-irritancy notice to allow tenants time to remedy the breach
• Must be sent recorded delivery
• Non monetary breaches – a court will only terminate the lease if fair and reasonable to do so
• If the breach can be remedied, then the tenant needs to be allowed reasonable opportunity to make good

Question 10

What potential void costs would the LL need to consider?

Answer 10

• Service charge
• Insurance
• Rates
• Utilities
• Repairing and Maintenance costs

Question 11

A payment plan was agreed in the first instance, can you advise how you protect the landlords interest?

Answer 11

• To ensure you include ‘Without Prejudice’

Question 12

You also mention the option to agree a lease surrender and market the property. What would you have to consider when negotiating a lease surrender?

Answer 12

• Tenant would need to pay a surrender premium – possibly a percentage of the remaining rent, sc and insurance and rates
• Tenant would need to pick up dilaps payment