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PLP > Contents of a lease > Flashcards

Contents of a lease Flashcards

1
Q

What is the preferred type of lease from a commercial LL’s perspective?

Why?

A

Full Repairing and Insuring Lease.

  • It provides ‘clear rent’ income stream.
  • Protects capital value - ‘good covenant strength’ of tenants - e.g. can uphold duties under lease
  • Degree of control via lease terms..
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2
Q

What’s an anchor tenant?

A

John Lewis, M&S etc….have better bargaining position with LLs…..urgh

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3
Q

What is covenant strength….?

A

T can pay rent and discharge obligations - LL investigates via 3 years of audited accounts, credit reports, references.

Maintain capital value.

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4
Q

Types of security

A
  • Deposit made at beginning of lease - rent deposit deed

- Guarantee - if new subsidiary parent company, less often bank or directors…

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5
Q

If a tenant sublets what would their lease be referred to as?

A

The ‘Head Lease’

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6
Q

What is involved in title investigation by T’s solicitor?

A
  • Check that LL is actually registered proprietor.
  • Any restrictions on title from a lender etc?
  • Any covenants that could affect the tenancy?
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7
Q

What sort of restriction is most likely to affect grant of lease?

A
  • Most likely be a restriction against the proprietorship reg that no disposition is to be made w/o consent of the lender.

The lending arrangement will require the LL must inform the lender of any dealings with the property.

Consent will be documented in a letter from the lender.

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8
Q

What is involved in pre-contract enquiries and searches?

A
  • Same as at SGS 2 for freehold
  • CPSE.1s

AND

  • CPSE.3s! = additional questions such as service charges, how calculated?, insurance policy, happy with this etc
    n. b. you would also need to ask to see copy of insurance policy prior to grant to ensure it is with a reputable insurer.
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9
Q

What is the purpose of an agreement for lease?

A
  • It is basically like the contract in freehold transactions - upon exchange of the agreement for lease the parties are bound to enter into the lease itself.

The agreement for lease and draft lease will be negotiated alongside each other as with contract and TR1 in freehold.

The agreement for lease will have draft lease annexed to it.

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10
Q

In what scenario would an agreement for lease not be necessary?

A

If LL property is vacant - will go straight to lease.

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11
Q

What happens between exchange and completion?

A

Pre-completion searches.

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12
Q

What is the engrossment of the lease?

A

This is the final form of lease ready to be signed by the parties - prepared by the LL’s sol.

The tenant will sign the counterpart lease.

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13
Q

What happens at completion?

A

The lease and counterpart are dated and exchanged.

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14
Q

What are the T’s sol’s post completion tasks?

A
  • SDLT payable - will send SDLT1 and money owed. Receive SDLT5.

Usually only payable on grant of Lease or UL, but also on assignment where a premium is payable by assignee to outgoing tenant.

  • IF for more than 7years long will need to be registered at the LR.

Docs to be sent are -

  • certified copy of the lease, SDLT5, AP1 and fee.

LR will issue TITLE INFORMATION DOCUMENT and lease will have a title number and OCs.

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15
Q

What do you need to ensure happens regarding drafting the repairing covenant?

A

The T will want to avoid clause worded with KEEP (implies PUT & KEEP).

‘To keep the Premises in good repair’

Will need to prepare a SCHEDULE OF CONDITION - prepped by specialist surveyor - attach to lease and be referred to in repairing covenant.

The Code also recommends use of Schedule of Condition.

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16
Q

What should you be aware of in clauses?

A

Anything vague/ uncertain - for eg ‘fair wear and tear’…

  • Or any wording like ‘renew’ or ‘replace’….these go far beyond obligations to maintain.
17
Q

How would you word a clause regarding fixtures and fittings?

A

Should not be requirement to replace with identical item, obligation to replace should only trigger when it is not more economic to repair rather than replace.

18
Q

Whose responsibility is it to insure prop?

What should be included in any clause regarding damage?

A

LL - T pays indirectly through service charge/ insurance rent.

‘The Tenant shall not be liable to repair the Premises to the extent that any disrepair has been caused by an Insured Risk….’

19
Q

Will also want to exclude liability for what re damage in a new build?

A

Latent or inherent defects…due to negligent construction etc….

20
Q

Decoration clause?

A

Not more than once in any 12 month period - avoid having to do this again at end of lease term….or ‘the tenant will not be req to redecorate in lst year of term if done so in previous 12 mths’

21
Q

What needs to be remembered regarding how insurance is paid for?

A

It is termed ‘Insurance Rent’…

22
Q

What three areas in the lease should insurance provisions be mentioned?

A
  • Definitions - Insurance Rent and Insured Risks will be defined terms

Need to check Insured Risks cover fire, riot, storm, burst pipes and earthquakes - flooding and terrorism dependent on areas…if not insurable the lease may provide for who bears the cost….

  • Rent suspension clause - where damage caused by Insured Risk and Premises unfit for occupation or use…the Rent will be suspended…until fit for use…
  • Tenant’s covenants - To pay Insurance Rent (check that all Rents suspended in case of damage)
  • Landlord’s covenants - To insure for Insured Risks and LOSS OF RENT

& to USE INSURANCE MONEY TO rebuild/repair - if there isn’t enough money from the Insurer to cover damage should be a clause stipulating the LL covers the shortfall.

  • Termination clause - where Premises remain unfit for occupation and use after 3 years.
23
Q

If tenant is only on one floor of building what does this mean for Insurance Rent?

A

They would pay towards their proportion of the rent for the whole building.

24
Q

What does the code say re insurance?

A

In part 9 - insurance terms should be fair and rep value for money.

25
Q

What other name can a forfeiture clause have?

Does a LL have this right automatically?

A

Right of re-entry.

For a LL to have this right it must be an express clause in the lease.

26
Q

In what circumstances must a s.146 LPA 1925 notice be served?

What are egs of ‘trigger events’?

A

Where a LL wishes to exercise right to forfeiture a s.146 notice must be served in all cases except for non-payment of rent.

Breach of covenant or insolvency.

27
Q

What does s.146(1) state must the LL do in order to ultimately be entitled to exercise right of re-entry/forfeiture?

A

s.146(1) requires that a LL serves a notice on the lessee-

a) specifying the breach
b) if capable of remedy, requiring T remedies breach
and
c) IN ANY CASE requiring the T pays compensation in money for the breach

IF the T fails to do the above within a reasonable time, or fails to provide reasonable compensation to satisfaction of the LL, the LL may exercise right of re-entry.

28
Q

What types of breach are incapable of remedy AT LAW and thus trigger automatic right of forfeiture?

A
  • Unlawful sub-letting or assignment.

- Use of premises for ‘immoral or illegal purposes’ that may have affected the building’s reputation…

29
Q

What types of breach are remediable?

A

Most…failure to repair - just carry out repairs!, breach of user provisions - merely cease non-granted use!

30
Q

What remedies are avail to LL in case on non-payment of rent?

A

What is adequate in the circs?

  • Forfeiture - provided rent has not been paid for period that triggers forfeiture as stipulated in lease - LL can forfeit W/O serving a s.146 notice.
  • Bring an action for proceedings in debt but costly and time consuming
  • CRAR - COMMERCIAL RENT ARREARS RECOVERY (following service of CRAR notice, agent can seize T’s goods to value of debt owed)
  • Security? Need to check terms of rent deposit deed/ guarantor arrangement.

-

31
Q

What is the special procedure req where LL wants to enforce right of re-entry on lease that is for at least 7 years with at least 3 years left to run?

NEED TO look at facts and lease!

  • What’s the breach?
  • If repair is there a forfeiture clause that entitles forfeiture upon breach of T’s covenants.
  • What is the lease term and where are we at point in lease?
A

s.146 is required BUT

per s.1 Leasehold Property (Repairs) Act 1938

IF the lease was granted for at least 7 years, and has at least 3 years left to run THEN

the LL must include wording in their notice that the T has right to serve COUNTER NOTICE upon the LL within 28 DAYS

If T does so then the LL has to get the COURT’S permission before proceeding with the forfeiture.

s.1(5) of the Leasehold Property (Repairs) Act 1938 gives circs where the court can allow LL re-entry.

32
Q

What are the restrictions on action for damages in breach of repair cov?

What else governs LL right to claim damages?

A

s. 18(1) Landlord and Tenant Act 1927 provides that the amount of damages a LL can recover for loss of value to their reversion caused by failure to repair, cannot exceed the reduction in value to their reversion.
e. g. value of property with full working AC is £1.1mill, w/o full working AC prop is worth £1mill, and cost of repair is £200k….LL can only recover £100k from T.

LL may also have to serve a special notice per the s.146 LP(R)A 1938 procedure.

33
Q

What does a ‘self-help’ (Jervis v Harris) clause enable the LL to do?

A

If there is ‘self-help’ Jervis and Harris clause in the lease, then the LL has the right to re-enter the building, make its own repairs and recover the cost as a DEBT from the T.

34
Q

What two other options (besides forfeiture, action for damages, self help) are avail?

A
  • Specific performance by order of the court..but v rare.

- Security - rent deposit or guarantor.

35
Q

What about any other breaches?

A

Remember -

  • Forfeiture - need s.146 notice
  • Action for damages, BUT must prove loss as damages are to put party in position would have been had no breach occurred
  • Specific performance - impossible to enforce - e.g. a shop to remain open 24/7/ injunctions - also impossible unless say have been tipped off of imminent breach - e.g. T is going to unlawfully assign….
  • Security/guarantor

PLP (22 decks)

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