6. Leases Flashcards
Head-lease
Takes effect under the freehold (the only superior title)
Grant
Birth of a new lease
Assignment
The transfer of a leasehold
Fixed term lease
Leases granted for a specific period of time
Periodic lease
Leases granted for a period which will renew from one period to the next, until determined by a notice to quit
Legal lease requirement
- Deed - s52(1) LPMPA 1989
- Unless it falls within s52(2) LPA 1925
- Lease taking effect in possession for a term not exceeding 3 years at best rent may be made merely IN WRITING/ORALLY
Legal leases for a term of more than 7 yrs
Have to be registered with separate title no. If reversion is registered, grant amounts to dealing with registered title & lease must be registered with its own title
Legal leases for 7 yrs or less
If lease granted out of a reversion with registered title, takes effect as an overriding interest (sch 3 LRA 2002) whether or not tenant is in actual occupation
Equitable lease requirement
- Leases that haven’t been created by deed & not covered within s54(2) LPA 1925 may take effect as an equitable lease:
- Must be for value
- Must satisfy requirements of LPMPA s2
Consequences of not registering equitable lease as Class C(iv) land charge
If unregistered- void against purchaser of legal estate for money/money’s worth
liability of covenants for leases granted on or after 1 jan 1996
- OG parties have the benefit of the others covenants and the burden of their own covenants while they remain as landlord and tenant
- Assignment by tenant releases them from future liability unless they have agreed to an AGA (authorised guarantee agreement)
Authorised Guarantee Agreement
Outgoing tenant guarantees performance of the lease covenants by their immediate successor in title.
When is a tenant obliged to provide an AGA?
- Leases on commercial property where it has been agreed that an AGA is to be provided on assignment
- Landlord lawfully requires AGA for assignment
Do assignees get the benefit of a covenant
Assignees get the benefit of landlord covenants upon assignment s3(2)(b)LTCA 1995
Assignee bound by all tenants covenants except those expressly stated to be “personal” to the OG tenant s3(2)(a) LTCA 1995
Is OG tenant bound by covenants in leases granted before 1 jan 1996
- OG tenant remains bound by covenants for the whole contractual term under privity of contract
- Bound for any breaches they commit, but also for those committed by their successors in title
What is an assignee liable for under leases post 1996
Any assignee is liable for breaches for covenants which ‘touch and concern’ the land
When can a landlord pursue a former tenant?
s17 LTCA 1995- landlord can only pursue former tenant if they serve a default notice
When must default notice be served
Default notice must be served within 6 months of the sum falling due
Methods of determining a lease
- Effluxion of time
- Notice to quit
- Surrender
- merger
Break clause
Effluxion of time
Where contractual term ends
Periodic tenancy notice
- If tenancy terms do not provide for a notice period, common law implies the following lengths:
- Yearly tenancy- half a years notice expiring at the end of a completed year of tenancy
- Other periodic tenancies- one full periods notice (one quarter, one month etc.) expiring at the end of a completed period of the tenancy
Surrender
- Tenant yields their lease to immediate landlord, who accepts the surrender.
- Lease merges in landlord’s reversion & is extinguished
- Surrender must be by deed
Merger
- Tenant acquires immediate reversion on their lease (acquires landlord’s estate in land)
- Automatic merge & is extinguished
Break clause
- Some leases contain the option to determine the lease part way through contractual term
- Need to agree on: who can operate the break, at what point in the term it can be operated, and how much notice must be given to exercise it
Landlord remedies for breach of covenant to pay rent
- Debt action
- Limitation act 1980- action to recover must be within 6 years of the sum falling due
- Forfeiture
- Commercial Rent Arrears Recovery Procedure
- Collecting rent from sub-tenant
- S81 Tribunals, Courts and Enforcement Act 2007
- Bankruptcy & Winding up
- If debt exceeds £5k or £750 (for co), statutory demand can be served with a view to commence bankruptcy or winding up
- Pursue former tenant(s)
- Pursue guarantors of tenant
What is forfeiture
- The right to retake possession
- Prematurely determines the lease
Forfeiture requirements
- Right must be expressly reserved by the lease
- Right is enforced via
- Peaceable re-entry
- Court order
Forfeiture for other breaches
- s146 LPA 1925
- Landlord must serve a notice on tenant, which:
- Specifies the breach
- Requires it to be remedied
- Requires compensation
what must be given to tenant upon service s146 notice
reasonable time to remedy the breach
What is Commercial Rent Arrears Recovery
Landlord has the power to enter, remove & sell goods owned by defaulting tenant
Restrictions on CRAR
- Applicable to commercial premises only
- Only available in relation to ‘pure’ rent arrears (rent paid for possession and use of premises)
- At least 7 days outstanding rent
- Landlord required to serve enforcement notice on the defaulting tenant , giving 7 clear days notice of intention to enter premises
- On notice expiry, only enforcement agent can enter to claim goods
- Certain goods are exempt and cannot be seized (items or equipment up to 1,350 needed for their business)
- Enforcement agent must give tenant 7 days clear notice of any sale of goods
- Any provision in lease or contract purporting to allow seizure of goods for non-payment will be void
Another method to circumvent s146 limitation
lease contains a properly drafted self help clause allowing L to enter and carry out repairs if tenant has failed to do so
Documets L solicitor must provide tenants solicitor
- draft contract
- draft lease
- evidence of freehold title
- copies of relevant planning consents
- evidence of lenders consent to granting lease
what searches would tenants solicitor undertake
same as that of freehold
How are leases prepared
2 identical parts- lease and counter part
lease executed by landlord. counterpart by tenant- exchanged on completion
Is rent payable in advance
Yes- where completion takes place on a day rent falls due, proportionate amount calculated from date of completion until next payment day
What does L receive upon completion of a lease
counter part lease executed by tenant
premium payable for grant
apportioned sum representing rent payable in advance under lease
What does T receive upon completion of lease
executed lease
properly certified freehold title copy
certified copy of landlords lenders consent of transaction
Is a short lease capable of being registered at LR
legal lease for 7 years or less is not capable of being registered with its own title at LR
in unreg land, legal lease binding on all purchasers
Registrable lease
lease for a term over 7 years whether the freehold itself is registered(with own title number and title)
Time limit for registering lease
Where applicable, within relevant priority period/within 2 months of completion
