alienation (week 8)

Question 1

who is the assignor?

Answer 1

the existing tenant

Question 2

who is the assignee?

Answer 2

the new tenant

Question 3

what is alienation?

Answer 3

a disposal of all or part of the tenant’s interest in the lease

Question 4

if the lease is silent on assignment - what is the effect of this?

Answer 4

the tenant is free to assign

Question 5

can a qualified covenant be converted into a fully qualified covenant for assignment?

Answer 5

yes the effect of s19(1)(a) means that it converts meaning the landlord must act reasonably if deciding to withhold consent. this restricts the landlord’s discretion

Question 6

what is privity of contract?

Answer 6

the ability of the original parties to a contract to enforce the obligations against each other, even after the contract has been assigned

Question 7

what is privity of estate?

Answer 7

ability of the landlord and tenant for the time to enforce the provisions of a lease against each other. however, not all obligations are enforceable under privity of estate

Question 8

what is a new lease?

Answer 8

leases granted on or before 1st January 1996

Question 9

what are the effects of liability for a new lease?

Answer 9

the original tenant is released from liability, and all of the tenant covenants are passed to the new tenant

Question 10

what is an authorised guarantee agreement? (AGA)

Answer 10

where the original tenant can agree to guarantee the obligations of the incoming tenant

Question 11

what are the liabilities for the incoming and outgoing tenant in an old lease?

Answer 11

The outgoing tenant remains liable, but the incoming tenant only becomes liable if it gives a direct covenant to the landlord.

Question 12

what is an undertaking for costs?

Answer 12

promise by a solicitor to pay costs - breaching this leads to disciplinary action by the SRA

Question 13

for a contract on assignment - who normally sees this contract eg, who is it between?

Answer 13

the old tenant and the new tenant

the landlord doesnt normally see this contract

Question 14

what pre-exchange searches will an assignee solicitor raise?

Answer 14

CPSE1 enquiries (as does the buyer’s solicitor in a commercial freehold transaction)
CPSE4 enquiries which are specific to the assignment of a lease

Question 15

when is an OS1 search carried out for assignment of the lease?

Answer 15

when the lease would be registered (eg, above 7 years)

Question 16

what is underletting?

Answer 16

basically subletting
it is a form of alienation and allows the tenant to grant an under lease to an under tenant

Question 17

what is the key difference between underletting and assignment?

Answer 17

in underletting the tenant does not pass the leasehold interest on entirely, instead grants an under lease to an undertenant

Question 18

what is the effect if a lease is silent on underletting? (what about commercial lease?)

Answer 18

it means the tenant is free to underlet
in a commercial lease they will impose a requirement of consent, and will want to vet any prospective under tenants

Question 19

can a qualified covenant against underletting be converted to fully qualified covenant?

Answer 19

yes, it is automatically converted and the decision must be made within a reasonable time

Question 20

is a landlord able to restrict underletting?

Answer 20

yes they are, in particular normally happens in a commercial lease

Question 21

how does privity of contract work in underletting?

Answer 21

-privity of contract exists between the landlord and the tenant
- it also exists between the tenant and the undertenant
- however, it does not exist between the landlord and the undertenant

Question 22

how does privity of estate work in underletting?

Answer 22

privity of estate exists between the landlord and the tenant
it also exists between the tenant and the undertenant
however, it does not exist between the landlord and the undertenant

Question 23

can a landlord enforce covenants against an undertenant?

Answer 23

no because there is no privity of contract or privity of estate

Question 24

is there requirement for an authorised guarantee agreement for underletting?

Answer 24

no because the tenant remains liable to the landlord in any case

Question 25

what is a lease by reference?

Answer 25

incorporates sections of the tenant’s lease by reference (for underletting)

Question 26

is a direct covenant from an assignee to the landlord needed for a new lease?

Answer 26

not strictly necessary wit the assignment of a new lease (but landlord may want it)

Question 27

for underletting does a landlord require a direct covenant from the undertenant?

Answer 27

yes as there is neither privity of contract or privity of estate

Question 28

what are the 3 key things in the 2020 code for leasing business premises on requirements on alienation?

Answer 28

1. lease should allow tenants to assign or underlet the whole of the premises with the landlord’s consent not to be unreasonably withheld or delayed
2. leases should allow tenants to share with group companies without consent
3. leases should allow tenants to charge the lease to a bank or reputable lending institution without consent (with a limited exception)

Question 29

what are examples of reasonable grounds for withholding consent (landlord giving consent on assigning the lease)

Answer 29

• unsatisfactory covenant strength
• proposed use would breach lease
• business that competes with landlord
• mixed-use policy (eg, shopping centre mixed uses of shops - cant have all the same shops)

Question 30

what is the only time you can use a authorised guarantee agreement (AGA)?

Answer 30

For new
new leases (after 1st Jan 1996)