8. Grant + contents of lease Flashcards
What to check in LL’s official copies?
See how restrictive/flexible the lease is
How broad is the user clause?
What about the repair clause?
What is the alteration clause?
Assumptions + disregards
Lease dictates extent to which you can freely use the properly
report on title (compared to report on title for freehold)
SAME (reports on enquiries and searches and title)
BUT ALSO, 2 key differences:
ONE - agreement for lease (discusses key terms)
TWO - summary of leasehold obligations
three elements of repair in a commercial lease
ONE - repair
TWO - replace
THREE - decorate
consider repair obligations in conjunction with…
- definition of ‘premises’
- LL’s repair obligations and service charge provisions
- insurance provisions
- alterations provisions
LL’s objective for repair clauses
CLEAR RENT - so ensure T pays/reimburses L for running costs
CAPITAL VALUE TO RISE - so make sure T is under obligation to maintain premises adequately
T’s objective for repair clauses
REPAIR ONLY OCCUPIED AREAS - so make sure “Premises” defined to only include areas T anticipates to repair
AVOID LARGE EXPENDITURE - so ensure LL acts reasonably in repair and management of the rest of the building
Recommendation 7
Code for REPAIR
- recommends ‘maintain’ (so T only obliged to give premises back at the end of the lease in same condition)
(LL still prefer ‘keep’ because it means ‘put and keep’)
AMENDING REPAIR CLAUSES:
Meaning of ‘repair’
LL: ‘keep’ / ‘put and keep’
T: ‘maintain’ or ‘no obligation to put premises in a better state of repair than evidenced by the schedule of condition annexed to the lease’
AMENDING REPAIR CLAUSES:
Standard of repair
LL: ‘renew’, ‘replace and rebuild’
T: ‘fair wear and tear’
AMENDING REPAIR CLAUSES:
fixtures and fittings
T: ONLY if ‘beyond economic repair’ and ‘substantially similar’
AMENDING REPAIR CLAUSES:
Damage by insured risk
T:
- not liable to repair damage caused by ‘insured risk’
- reinstatement clause (and shortfall deal with too)
LL:
- agree BUT exception where insurers will not pay out because of an act or omission of T
AMENDING REPAIR CLAUSES:
Latent and inherent defects
T: exclude from its repairing liability and any obligation arising from an inherent defect
+ requires LL to assume responsibility
AMENDING REPAIR CLAUSES:
Decoration
LL: T decorate interior every 5 years and exterior every 3 years (if lease of a whole)
T: no veto over colours used and if every 2 years = not acceptable (amend)
T: NOT REQUIRED TO REDECORATE IN LAST YEAR OF TERM if redecorated within the previous 12 months
AMENDING REPAIR CLAUSES:
Reasonably
T: ‘acting reasonably’, and costs should be ‘reasonable and proper’
AMENDING REPAIR CLAUSES:
Covenant to ‘yield up’ in repair
LL: if T does not ensure premises is in adequate repair at end of term, serve schedule of dilapidations on T and draft yield up clause so T has to yield up to satisfaction of LL
T: make sure LL’s surveyor acts ‘reasonably’
Recommendation 9
INSSURANCE
policy terms should be fair and reasonable and represent good value for money
common in commercial leases for insurance to be…
LL to insure the whole building and
LL to recover a proportion of the cost from each T
T will want insurance to be effective with reputable insurer and ask to see a copy of insurance policy prior to grant of lease (to check insurance is good)
definition of ‘insured risk’
LL and T will want a comprehensive list of risks that will be insured against (and LL will want sweep up clause at the end - other risks as LL may from time to time reasonably consider necessary)
typical insured risk:
- fire
- flood
- riot
- storm
- burst pipes
- earthquake
(controversial = flooding and terrorism)
rent abatement/suspension in event of insured risk
T: wants rent suspension clause ‘if damage by an insured risk has caused the premises, or access to them, to be unfit for use’
T: wants this to apply to all sums reserved as rent (incl. service charge and insurance rent)
LL: ensure clause contains obligations on LL to insure for and recover cost from T for LOSS OF RENT for a certain amount of time
reinstatement clause (insruance)
T: insist on a covenant by LL to reinstate and make up any shortfall in insurance monies out of its own monies if there is damage by Insured Risk
right to terminate lease if reinstatment impossible after expiry of specified period
T may want a right to terminate the lease if reinstatement impossible after expiry of a specified period
LL - want this period to be as long as possible
T - want period to be no longer than duration of rent suspension
EXAM Q: is rent still payable after damage caused by X?
- check insurance clause (has LL insured against X)
- check for rent abatement/suspension clause (when does it apply, what does it cover, how long for)
- T should obtain copy of insurance policy to ensure it observes the conditons
EXAM Q: who is responsible for carrying out repairs (after damage caused by X)
- check repair clause (obligation on T to repair Premsies excludes disrepair caused by Insured Risk)
- Check definitions (what does Insured Risks cover)
- Check reinstatment clause (does L have to do it, when, who makes up shortfall)
- Check for termination clause
FORFEITURE/RE-ENTRY
only available as remedy if LEASE EXPRESSLY reserves (not automatic)
Remedy brings lease to an end before its expiry date + removes T from premises
