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(FLK2) Property Law and Practice > Alienation and Assignment > Flashcards

Alienation and Assignment Flashcards

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1
Q

What is Alienation?

A

Disposal of all or part of a Tenant’s interest in the Lease.

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2
Q

What are the Main Forms of Alienation?

A
  • Charging.
  • Assignment.
  • Underletting.
  • Sharing of Occupation.
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3
Q

What is the Position on Qualified Covenants against Alienation?

A
  • Such Covenants are Fully Qualified by operation of Law, subject to Express Conditions; and
  • The Landlord must give its decision on Consent within a reasonable time.
    • Think days and weeks. Longer than 28 Days from Application is almost certainly Unreasonable.

Long Residential Leases usually do not require Consent to Assign whatsoever.

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4
Q

Which Conditions in a Qualified Covenant are Automatically Reasonable?

A

Those Expressly Incorporated into the Lease, assuming:

  • The Covenant concerns Assignment.
  • The Lease is a New, Commercial Lease.
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5
Q

What is the Effect of the Landlord and Tenant (Covenants) Act (“LT(C)A”) 1995?

This only applies to Commercial Leases.

A
  • Assignment fully releases the Original Tenant from Liability, and all Tenant Covenants pass to the Successor Tenant.
  • Assignment under Old Leases practically requires an Indemnity Covenant between the Assigning Parties.

The LT(C)A applies to Leases granted on or after 01/01/1996 (“New Leases”).

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6
Q

What is an Authorised Guarantee Agreement (“AGA”)?

A
  • An Agreement wherein the Original Tenant Guarantees the Successor Tenant’s Obligations.
  • Subsequent Assignment terminates the Agreement.

There is no equivalent for Underletting.

If the Lease is silent on AGAs, the Landlord may only insist if it is reasonable.

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7
Q

What is the Pre-Exchange Procedure for Assigning a Lease?

A

Landlord’s Solicitor:

  • Take Instructions: Take instructions from the Landlord on Assignment.
  • Costs Undertaking Request: Request a Costs Undertaking from the Tenant.
  • Acknowledge Application: Confirm receipt of the Application to Assign and outline any conditions.
  • Draft Licence: Draft the Licence to Assign and send to the Tenant’s Solicitor for review.

Tenant’s Solicitor:

  • Take Instructions: Take instructions from the Tenant on Assignment.
  • Submit Application: Submit an Application to Assign to the Landlord, with a Costs Undertaking.
  • Draft Agreement: Draft the Agreement to Assign between the Tenant and Assignee.
  • Deduce Title: Deduce Title and send the Report to the Assignee.
  • Relay Licence: Upon receipt, relay the Licence to Assign to the Assignee.
  • Answer Enquiries: Answer the Assignee’s Pre-Contract Enquiries.

Assignee’s Solicitor:

  • Take Instructions: Take instructions from the Assignee on Assignment.
  • Raise Enquiries: Submit Pre-Contract Enquiries (CPSE1 & CPSE4) to the Tenant’s Solicitor.
  • Conduct Searches: Conduct standard Pre-Exchange Searches.
  • Review Transction Documents: Review the Draft Agreement, Report on Title, and Licence to Assign.
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8
Q

What is a Costs Undertaking?

A

A Promise by the Tenant to reimburse the Landlord for the its legal and surveyance costs.

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9
Q

What is the Exchange Procedure for Assigning a Lease?

A

Formula B.

Usually, no Deposit is payable unless it’s a Long Residential Lease.

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10
Q

What is the Pre-Completion Procedure for Assigning a Lease?

A

Landlord’s Solicitor:

  • Confirm Intention: Confirm the Landlord’s intention to Complete.
  • Engross Licence: Engross the Licence to Assign in triplicate.

Tenant’s Solicitor:

  • Confirm Intention: Confirm the Tenant’s intention to Complete.
  • Prepare Statement: Prepare a Completion Statement and send it to the Assignee.
  • Title Requisitions: Responds to Assignee’s Requisition on Title.
  • Review Deed: Review and approve the Deed of Assignment.

Assignee’s Solicitor:

  • Confirm Intention: Confirm the Assignee’s intention to Complete.
  • Raise Requisitions: Submit the Requisitions on Title to the Tenant’s Solicitor.
  • Conduct Searches: Conduct standard Pre-Completion Searches (OS1).
  • Gather Funds: Gather the Completion Funds as per the Completion Statement.
  • Draft Deed: Prepare the Deed of Assignment and send it to the Tenant’s Solicitor.
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11
Q

What is the Completion Procedure for Assigning a Lease?

A

Landlord’s Solicitor:

  • Execute Licence: Execute the Licence to Assign by having the Landlord Date and Complete it.

Tenant’s Solicitor:

  • Execute Licence: Execute the Licence to Assign by having the Tenant Date and Complete it.
  • Execute Deed: Have the Tenant execute the Deed of Assignment.
  • Confirm Receipt: Confirm receipt of the Completion Funds.

Assignee’s Solicitor:

  • Execute Licence: Execute the Licence to Assign by having the Assignee Date and Complete it.
  • Execute Deed: Have the Assignee execute the Deed of Assignment.
  • Transfer Funds: Transfer the Completion Funds.
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12
Q

What is the Post-Completion Procedure for Assigning a Lease?

A

Tenant’s Solicitor:

  • Notify Landlord: Send Notice of the Assignment to the Landlord’s Solicitor.

Assignee’s Solicitor:

  • File Taxes: Submit the SDLT / LTT return and pay tax.
  • Register Assignment: Register the Assignment with the Land Registry, if necessary.
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13
Q

What is Underletting?

A

The Leasing of all or part of the Property by the Tenant.

The Underlease must be shorter than the Original Lease.

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14
Q

What is the Position on Privity of Contract and Estate in Underleases?

A
  • The Landlord and Undertenant have no Privity; therefore
  • The Landlord will often require the Undertenant to give direct Covenants in the Licence to Underlet.
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15
Q

What is the Pre-Exchange Procedure for Underletting?

A

Landlord’s Solicitor:

  • Take Instructions: Take instructions from the Landlord on the Underlease.
  • Costs Undertaking Request: Request a Costs Undertaking from the Tenant.
  • Acknowledge Application: Confirm receipt of the Application to Underlet and outline any conditions.
  • Review Underlease: Review the Draft Underlease to ensure it mirrors the Tenant’s obligations
  • Draft Licence: Draft the Licence to Underlet and send to the Tenant’s Solicitor for review.

Tenant’s Solicitor:

  • Take Instructions: Take instructions from the Tenant on the Underlease.
  • Submit Application: Submit an Application to Underlet to the Landlord, with a Costs Undertaking.
  • Draft Underlease: Draft the Underlease between the Tenant and Undertenant.
  • Draft Agreement: Draft the Agreement to Underlease between the Tenant and Undertenant.
  • Deduce Title: Deduce Title and send the Report to the Undertenant.
  • Relay Licence: Upon receipt, relay the Licence to Underlet to the Undertenant.
  • Answer Enquiries: Answer the Undertenant’s Pre-Contract Enquiries.

Undertenant’s Solicitor:

  • Take Instructions: Take instructions from the Undertenant on the Underlease.
  • Raise Enquiries: Submit Pre-Contract Enquiries (CPSE1 & CPSE4) to the Tenant’s Solicitor.
  • Conduct Searches: Conduct standard Pre-Exchange Searches.
  • Review Transction Documents: Review the Draft Underlease, Agreement to Underlease, Report on Title, and Licence to Underlet.
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16
Q

What is the Exchange Procedure for Underletting?

A

Formula B.

Usually, no Deposit is payable unless it’s a Long Residential Lease.

17
Q

What is the Pre-Completion Procedure for Underletting?

A

Landlord’s Solicitor:

  • Confirm Intention: Confirm the Landlord’s intention to Complete.
  • Engross Licence: Engross the Licence to Underlet in triplicate.

Tenant’s Solicitor:

  • Confirm Intention: Confirm the Tenant’s intention to Complete.
  • Prepare Statement: Prepare a Completion Statement and send it to the Undertenant.
  • Title Requisitions: Responds to Undertenant’s Requisition on Title.
  • Prepare Leases: Prepare the Original and Counterpart Underleases, and send the latter to the Undertenant.

Undertenant’s Solicitor:

  • Confirm Intention: Confirm the Undertenant’s intention to Complete.
  • Raise Requisitions: Submit the Requisitions on Title to the Tenant’s Solicitor.
  • Conduct Searches: Conduct standard Pre-Completion Searches (OS1, OS2, or OS3).
    • OS1 for the Whole Property.
    • OS2 for Part of the Property.
    • OS3 for Unregistrable Leases.
  • Gather Funds: Gather the Completion Funds as per the Completion Statement.
  • Draft Deed: Prepare the Deed of Assignment and send it to the Tenant’s Solicitor.
18
Q

What is the Completion Procedure for Underletting?

A

Landlord’s Solicitor:

  • Execute Licence: Execute the Licence to Underlet by having the Landlord Date and Complete it.

Tenant’s Solicitor:

  • Execute Licence: Execute the Licence to Underlet by having the Tenant Date and Complete it.
  • Confirm Receipt: Confirm receipt of the Completion Funds.
  • Execute Deed: Have the Tenant execute the Original Underlease, then send it to the Undertenant.

Undertenant’s Solicitor:

  • Execute Licence: Execute the Licence to Underlet by having the Assignee Date and Complete it.
  • Transfer Funds: Transfer the Completion Funds.
  • Execute Deed: Have the Undertenant execute the Counterpart Lease, then send it to the Tenant.
19
Q

What is the Post-Completion Procedure for Underletting?

A

Tenant’s Solicitor:

  • Notify Landlord: Send Notice of the Underlease to the Landlord’s Solicitor.

Undertenant’s Solicitor:

  • File Taxes: Submit the SDLT / LTT return and pay tax.
  • Register Underlease: Register the Underlease with the Land Registry, if necessary.
20
Q

What is the Content of a Licence to Assign or Underlet?

A

Common Provisions:

  • The Licence is executed as a Deed.
  • The Tenant pays the Landlord’s costs.
  • The Transaction must be Completed by a certain date.

Provisions Specific to Underletting:

  • The Undertenant must Covenant to the Landlord to observe the Underlease’s Tenant Covenants.
    • This obligation ends upon Lawful Assignment.
  • The Licence will contain a draft of the Underlease.

Provisions Specific to Assignments:

  • In Old Leases, the Successor Tenant must Covenant to the Landlord to observe Tenant Covenants for its Term.
    • Although this is not strictly necessary in New Leases, it may be present nonetheless.
  • In New Leases, the Original Tenant may have to Guarantee the Successor Tenant’s Covenant compliance.
    • Alternatively, this may form a standalone Deed.
  • In New Leases, the Original Tenant may not be released from its outstanding obligations.
21
Q

What is a Notice of Dealing?

A

A Notice from the Assignee (Assignment), or the Tenant (Underletting), to the Landlord that the relevant Transaction has Completed.

  • There is a One-Month Deadline to give Notice and a fee for the Landlord’s Solicitor receipting Notice.
22
Q

What are the Practice Guidelines under 2020 Code for Leasing Business Premises

A

Leases should allow Tenants:

  • To Share Occupation with Group Companies without consent.
  • To Charge the Lease to a reputable Lender without consent (with limited exceptions).
  • To Assign or Underlet the whole of the Premises, with the Landlord’s consent not to be unreasonably withheld or delayed.
23
Q

What’s the Difference between ‘Reasonable Costs’ and ‘Reasonable and Proper Costs’?

A
  • Reasonable Costs: You must charge a reasonable cost for work done.
  • Reasonable and Proper Costs: You must charge a reasonable cost for work done reasonably promptly.

(FLK2) Property Law and Practice (7 decks)

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