10 & 11 - Contents of a lease (part iii & iv) Flashcards
Alienation & Rent review
What is rent review?
review of rent to keep it in line with local market by regularly adjusting it
What is an FRI lease?
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
Open market rent review
Re-valuation of rent based on what a new tenant would pay if they were moving in at date of review
Why would a tenant want to avoid ‘best rent’ when determining the revised rent?
Would allow a rent review valuer to take into account any bids from potential tenants who are prepared to pay more
What is the hypothetical lease?
Rent review is carried out on the basis of a hypothetical lease - contains assumptions and disregards - based on terms of the actual lease
E.g. Assume that “the tenant has performed all of its obligations.”
Is this reasonable?
Reasonable - if the tenant has not complied with decorating obligations and we DON’T assume that he has, he will benefit from lower rent.
E.g. Assume that “the landlord has performed all of its obligations.”
Is this reasonable?
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.
E.g. Disregard “any improvements made by the tenant to the property.”
Is this reasonable?
Reasonable - would be unfair for the tenant to pay for extra works to be taken into account 5 years later
Alienation
transfer of whole/part ownership of property by selling or underletting
What is assignment of a lease
Tenant sells/transfers an existing lease to assignee, who becomes new tenant
no new lease is being created (like underletting)
Privity of estate
relationship between parties who share an immediate interest in the same land
Privity of contract
relationships between the original parties to a contract
Landlord
|
Tenant
There is privity of…
Privity of contract
Privity of estate
L | T | UT
Where is there privity of estate?
Landlord and tenant
Tenant and undertenant
L | T | UT
Where is there privity of contract?
Landlord and tenant
Tenant and undertenant
L
|
T - A1 - A2
Where is there privity of estate?
L and A2
L
|
T - A1 - A2
Where is there privity of contract?
L and T
What is a new lease (Section 3 LT(C)A 1995)?
(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
What is an AGA?
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
Why is it important for the landlord to obtain a Licence to Underlet or Licence to Assign, particularly with old leases?
- documents the landlord’s consent
2. creates privity of contract between L and UT/A, so L can sue for breach if necessary
