6 Grant of a lease

Question 1

Define ‘lease’

Answer 1

the grant of a right to the exclusive possession of land for a determinate term less than which the grantor has himself in the land

Question 2

Essential factors of a lease

Answer 2

• exclusive possession
• fixed term or periodic tenancy
• formalities
• the reversion

Question 3

2 formalities of a lease

Answer 3

1. a legal lease must be created by deed if the term is over 3 years
2. a tenancy of 3 years or under may be created in writing, or even orally

Question 3

What is exclusive possession?

Answer 3

the tenant must be able to exclude strangers and even the landlord from the premises let

Question 4

what is FRI lease?

Answer 4

Full Repairing and Insuring lease
- a lease in which the tenant takes on all of the costs for repairs and insurance for the property being leased from the landlord.

Question 5

Term commencement date

Answer 5

date on which the lease term starts

Question 6

if the term of the lease is “from and including” 24 march 2019, when does the term expire? and why?

Answer 6

23 March 2019
- if it is from and including, then the term expires on the day before that day of the year

Question 7

What is a break clause?

Answer 7

a break by tenant or landlord if tenant is unsure about the commitment of a lease term, and the landlord is unwilling to grant a shorter term, a break clause can offer a compromise solution

Question 7

Who is the Code written by? and who does it apply to?

Answer 7

Royal Institution of Chartered Surveyors - RICS
applies to membered of the RICS

Question 7

What is the Code for Leasing Business Premises?

Answer 7

Code designed to ensure that commercial leases are fairly drawn up and adhered to

Question 8

What does the Code contain?

Answer 8

1. mandatory requirements
   indicated by the word ‘must’
2. Good practice
   indicated by the word ‘should’

Question 9

Landlord’s solicitor’s task in the pre-exchange stage of a leasehold transaction

Answer 9

1. take instructions
2. prepare draft lease
3. deduce title + respond to any queries on title
4. answer pre-contract enquiries
5. once agreed, engross the agreement for lease, obtain landlord’s signature, and send counterparty to tenant’s solicitor

Question 10

3 main stages for a grant of a lease transaction

Answer 10

1. Pre-exchange (more common in freehold transactions)
2. Pre-completion
3. post-completion

Question 11

Tenant’s solicitor’s task in the pre-exchange stage of a leasehold transaction

Answer 11

1. Take instructions
2. review draft lease
3. investigate title and raise queries on title
4. raise pre-contract enquiries and searches
5. arrange for tenant to sign counterpart of lease

Question 12

What is the lease drafted by the landlord’s solicitor based on?

Answer 12

heads of terms
- if there have been past lettings on the landlord’s estate, the solicitor may have a part-completed lease which just needs to be tailored to the individual letting.

Question 13

What type of enquiries would the tenant’s solicitor raise?

Answer 13

CPSE1 - commercial transaction
CPSE3 - grant of a lease

Question 14

Landlord’s solicitor’s task in the pre-completion stage of a leasehold transaction

Answer 14

• prepare original and counterpart lease, obtain landlord’s signature and send counterpart for tenant’s signature
• prepare and send completion statement, detailing the money due on completion

Question 15

Tenant’s solicitor’s task in the pre-completion stage of a leasehold transaction

Answer 15

• arrange for tenant to sign counterpart
• obtain funds from client needed to complete as per completion statement
• raise pre-completion searches

Question 16

On completion of the lease, what are the tasks of the landlord and tenant’s solicitors?

Answer 16

• the tenant’s solicitor sends the landlord’s solicitor the completion monies
• the landlord’s solicitor and tenant’s solicitor agree over the telephone to complete and date the executed leases that they are holding
• the landlord’s solicitor and tenant’s solicitor send the completed original and counterpart to each other

Question 17

Tenant’s solicitor’s task post-completion

Answer 17

· Arrange to submit SDLT or LTT return and pay appropriate SDLT or LTT if necessary

Question 18

Three different businesses occupy a lease block under FRI leases. Business A occupies two floors, and businesses B and C occupy one floor each. The lift needs replacing at a cost of £20,000.
Who will will the landlord recover the charge of repairs from?

Answer 18

£10,000 from A, and £5,000 from each of B and C by way of service charge.

Question 19

What effect do the mandatory provisions of Royal Institution of Chartered Surveyors (RICS) Code for Leasing Business Premises (1st edition February 2020) have regarding leasehold transactions?

A. Solicitors who act for an RICS member or RICS firm must comply with the Code or face disciplinary sanctions by the Solicitors Regulation Authority.

B. Letting agents and other property professionals must comply with mandatory provisions, and non-compliance may be taken into account in regulatory or disciplinary proceedings.

C. Following completion of a lease with an RICS regulated landlord, a tenant may apply to the court to strike out any provisions of the lease that do not comply with the mandatory provisions of the Code.

D. Letting agents and other property professionals who are RICS members or in a RICS regulated firm must comply with mandatory provisions, and non-compliance may be taken into account in regulatory or disciplinary proceedings.

E. Following completion of a lease with an RICS regulated landlord, a tenant may apply to the court to strike out any provisions of the lease that do not comply with the mandatory provisions of the Code and are manifestly unreasonable.

Answer 19

D

Question 20

In which of the following situations would an agreement for lease not be necessary?

A. In a residential transaction for the sale of a newly constructed 999 year leasehold flat.

B. The parties to the lease are ready to proceed to completion as soon as the form of the lease has been agreed.

C. The landlord is in the process of buying an office block with a rental void, and the tenant has agreed to take a lease from the landlord once the purchase completes.

D. The tenant is taking a unit in a shopping centre that is currently under construction.

E. The tenant intends to take a high street premises for a restaurant, but first wants to apply for a premises licence which is essential for its business.

Answer 20

B