2.2 Leases - Granting Leases

Question 1

What is required for drafting leases?

Answer 1

• Legal (writing UNLESS parol lease + by deed ( > 3 years) OR equitable
• Date
• L’s title no.
• Parties
• Full description > Property (‘Parcels clause’)
• Prescribed statements under statute
• Term
• Premium
• Sale (prohibitions/restrictions)
• Party’s right to acquire other’s title
• Restrictive covenants
• Easements (granted/reserved)
• Estate rent charges
• App > Standard form restriction
• Declaration of trust
• Registration ( > 7 years => Register at Land Registry)
• Registration ( < 7 years => Overriding interest binding reversionary interest)

Question 2

What are the advantages of leases?

Answer 2

Enforcing covenants

Management of

• Shared facilities
• Obligations

Flexibility (part leases)

Investor can collect

• Income (can alter to keep pace w inflation)
• Benefit from capital gain

Available to Ts (who cannot afford capital outlay)

Reduces risks to Ts

Rents deductible vs profits

Question 3

What are the disadvantages of leases?

Answer 3

Rent monies lost (T’s POV)

T’s obligations > More onerous than freeholds

Lease > Wasting asset

More complex

L liable for property under covenants

Question 4

How may title be deduced?

Answer 4

Once instructed > S’s conveyancer investigates L’s title

• Whether L has sufficient power to grant lease/sublease
• Whether TP consent required (lender/superior landlord)
• Whether encumbrances exist (restrictive covenants)

Question 5

What pre-contract searches and enquiries may the Landlord’s solicitors/Developers make for Buyer’s solicitors?

Answer 5

Information sheet

• Easements
• Roads
• Services for premium
• Home W insurance provided
• Confirmation > L’s consent is granted

Question 6

What is required for pre-completion in the contract bundle?

Answer 6

1) Draft sale contract

2) L’s title > Evidence
- Registered > Official copies of Register + Title Plan
- Unregistered > Central Land Charges search vs Landlowner, owners, root onwards + Official searches of Index map + Epitome of title and referred copies

3) Draft lease > Coloured plans

4) Replies > Developer/L’s enquiries
- Info re property/estate

5) Home warranty cover (NHBC) > New builds

6) Info re mgmt co providing services
- Articles
- Memorandum of association

7) Forthcoming years’ service charge estimate
8) Lender’s consent granted > Confirmation

Question 7

When are leases registrable?

Answer 7

Term =< 7 years

• Registered land > Takes effect as overriding interest vs superior title (LRA 2002)
• Unregistered land > Binding at large (including subsequent owners with/without notice)

Term > 7 years

• Registered land > Register within priority protection period (30 working days) > Change register (Form AP1) > Register dealing vs L’s reversionary title > Registered w own separate title + title no.
• Unregistered land > Register at HMLR (Form FR1) (within 2 months of completion, otherwise void) > Bind world at large > Registered w own separate title + title no.

Question 8

What is required for applying to register leases?

Answer 8

Registered land > Form AP1 (T’s solicitors)

• Completed transfer certified copy (TR1)
• Discharge evidence (if L’s title is mortgaged)
• New charge copy (if mortgage used to aid purchase)
• SDLT5 certificate
• Form D1 (overriding interests affecting property)
• Certified copies > Other docs needed to prove title and/or ownership

Unregistered land > Form FR1 => HMLR

• Form DL (T’s solicitor gives epitome + supporting docs => deduce L’s title)
• T’s pre-completion searches vs L
• Letter of consent by L’s lender
• TR1 (NO new lease)/Copy of original lease (new lease)
• New charge copy (if T has mortgage)
• Superior landlord’s licence to sublet
• SDLT5 certificate
• Form D1 (overriding interests affecting property)
• Certified copies > Other docs needed to prove title and/or ownership

Question 9

What is required after the lease is registered?

Answer 9

Check title info of doc

Give notice to Landlord of dealing

Deal w deeds + docs