6. Leases

Question 1

Options for the term of a lease

Answer 1

1. Fixed Term Lease
2. Periodic Tenancy
3. Tenancy At will

Question 2

Required Notice period to terminate a yearly periodic tenancy?

Answer 2

6 months notice

Question 3

When does a fixed term lease end

Answer 3

At the end of the term, no need to serve notice

Question 4

When does a tenancy at will end?

Answer 4

Can be terminated by either party at any time

Question 5

Three categories of leasehold covenant

Answer 5

1. Absolute Covenant
2. Qualified Covenant
3. Fully Qualified Covenant

Question 6

Benefit of having a ‘full repairing and insuring’ lease for landlords

Answer 6

FRI leases protect landlords from having to incur any expenditure which cannot be recovered from tenants

Question 7

If a tenant of business premises wants to carry out alterations contrary to an absolute covenant, what can they do?

Answer 7

1. serve notice on landlord to carry out improvements (LTA 1927)
2. landlord has 3 months to object and if they do, tenant can apply to court for permission
3. Landlord can offer to carry out improvements themselves for an increase in rent

Question 8

How are ‘improvements’ defined by s 3 LTA 1927, when is this definition applicable?

Answer 8

if they add to the letting value of the property, are reasonable and suitable to the character of the property and do not diminish the value of any other property of the landlord.
- relevant for business tenants dealing with absolute covenants

Question 9

If a tenant in a business premise wishes to carry out improvements but there isa qualified covenant against this, what does statute provide?

Answer 9

s 19(2) LTA 1927 implies term that in qualified covenants for improvements, landlord cannot UNREASONABLY withhold consent

Question 10

How are improvements defined in s 19(2) LTA 1927, when is this definition relevant?

Answer 10

Improvements: the works in question will increase the value or usefulness of the property to the tenant
- relevant for tenants in business premises dealing with qualified covenants

Question 11

If a tenant makes improvements (s 3 1927 LTA) which add value to the home, can they ever get compensation for this?

Answer 11

They can apply for s 1 LTA 1927 within statutory time limits for compensation from the landlord

Question 12

Meaning of Alienation

Answer 12

Essentially, creating an interest in the property for the benefit of a third party, including:
a. assignment
b. underletting
c. charging
d sharing occupation
e. parting with possession

Question 13

Three statutory provisions governing assignment covenants:

Answer 13

1. s 19(1)(a) LTA 1927: makes qualified covenant fully qualified
2. Section 19(1A) LTA 1927: landlord and tenant agree conditions where it would be unreasonable to withhold consent (ie. assignor will give AGA / guarantors)
3. Section 1 LTA 1988: where there is a qualified covenant, landlord must give consent / serve notice of its decisions on tenant and reasons WITHIN REASONABLE TIME

Question 14

Is an underlease an estate in land?

Answer 14

Yes, it is separate as a lease from the headlease

Question 15

What are rights ‘excepted and reserved’ in a business lease

Answer 15

these are rights in favour of the landlord over the leased property, such as a right to enter to do repairs to service media and other parts of the building.

Question 16

Advantages of a Full Insuring and Repairing lease:

Answer 16

General Rule: Full repairing and insuring or ‘FRI’ leases protect landlords from incurring any expenditure that cannot be recovered from tenants.

Question 17

What value should the insurance policy taken out by the landlord be? What special considerations must be taken into account?

Answer 17

1. Must be the full reinstatement value including:
   i. costs of demolition
   ii. costs of site clearance
   iii. professional fees
   iv. allowance for inflation

Question 18

Examples of insured risks

Answer 18

Insured Risks: means fire, explosion, lightning, earthquake, storm, flood, bursting and overflowing of water tanks, apparatus or pipes, impact by aircraft and articles dropped from them, impact by vehicles, riot, civil commotion, malicious damage and any other risks that the landlord may reasonably require from time to time.

Question 19

In the absence of any special insurance provisions in a lease contract, will rent continue to be payable if the property is rendered unusable by an insured risk?

Answer 19

YES - so the tenant should get this amended before agreeing

Question 20

If a lease contains a qualified covenant for user and planning (restricting use of the property to a single purpose) - will statute convert this into a fully qualified covenant?

Answer 20

NO
- but landlord cannot charge a fine or increase rent as a condition of giving consent (if no structural alternation is involved)

Question 21

If a lease contains a qualified covenant against underletting - any statutory controls?

Answer 21

Section 19(1)(a) Landlord and Tenant Act 1927: will turn qualified covenants into fully qualified covenants

Question 22

Qualified Covenant on Underletting: procedure for getting landlord consent

Answer 22

1. Statute will imply that it is fully qualified
2. tenant must make written application to landlord for consent
3. landlord must give consent within a reasonable time unless it is reasonable not to
4. Landlord must serve written notice of decision on tenant specifying conditions if appropriate / reasons

Question 23

Who is bound by RCIS Code?

Answer 23

Landlords are not bound nor are the landlord’s solicitors, non-RCIS surveyors and agents (so they are free to agree to non-compliance leases)