10 & 11 - Contents of a lease (part iii & iv)

Question 1

What is rent review?

Answer 1

review of rent to keep it in line with local market by regularly adjusting it

Question 2

What is an FRI lease?

Answer 2

Full Repairing and Insuring lease:

• commercial leases
• ‘clear rent’
• predictable income for landlord
• tenants have to pay market rent + costs of insuring and repairing the premises

Question 3

Open market rent review

Answer 3

Re-valuation of rent based on what a new tenant would pay if they were moving in at date of review

Question 4

Why would a tenant want to avoid ‘best rent’ when determining the revised rent?

Answer 4

Would allow a rent review valuer to take into account any bids from potential tenants who are prepared to pay more

Question 5

What is the hypothetical lease?

Answer 5

Rent review is carried out on the basis of a hypothetical lease - contains assumptions and disregards - based on terms of the actual lease

Question 6

E.g. Assume that “the tenant has performed all of its obligations.”

Is this reasonable?

Answer 6

Reasonable - if the tenant has not complied with decorating obligations and we DON’T assume that he has, he will benefit from lower rent.

Question 7

E.g. Assume that “the landlord has performed all of its obligations.”

Is this reasonable?

Answer 7

Unreasonable - landlord is supposed to repair a roof, but has not, and the tenant has suffered damage. if we assume the landlord has repaired the roof, he will benefit from higher rent.

Question 8

E.g. Disregard “any improvements made by the tenant to the property.”

Is this reasonable?

Answer 8

Reasonable - would be unfair for the tenant to pay for extra works to be taken into account 5 years later

Question 9

Alienation

Answer 9

transfer of whole/part ownership of property by selling or underletting

Question 10

What is assignment of a lease

Answer 10

Tenant sells/transfers an existing lease to assignee, who becomes new tenant

no new lease is being created (like underletting)

Question 11

Privity of estate

Answer 11

relationship between parties who share an immediate interest in the same land

Question 12

Privity of contract

Answer 12

relationships between the original parties to a contract

Question 13

Landlord
|
Tenant

There is privity of…

Answer 13

Privity of contract

Privity of estate

Question 14

L
|
T
|
UT

Where is there privity of estate?

Answer 14

Landlord and tenant

Tenant and undertenant

Question 15

L
|
T
|
UT

Where is there privity of contract?

Answer 15

Landlord and tenant

Tenant and undertenant

Question 16

L
|
T - A1 - A2

Where is there privity of estate?

Answer 16

L and A2

Question 17

L
|
T - A1 - A2

Where is there privity of contract?

Answer 17

L and T

Question 18

What is a new lease (Section 3 LT(C)A 1995)?

Answer 18

(granted from and including 1 Jan 1996)

On the lawful assignment of a new lease, the tenant is released from all covenants and the assigneee is bound by them

Question 19

What is an AGA?

Answer 19

Authorised Guarantee Agreements = outgoing tenant guarantees the assignee’s obligations, to perform them if the lease defaults

e.g. if A fails to pay rent or breaches the lease, L can sue T

Question 20

Why is it important for the landlord to obtain a Licence to Underlet or Licence to Assign, particularly with old leases?

Answer 20

1. documents the landlord’s consent

2. creates privity of contract between L and UT/A, so L can sue for breach if necessary