Different Types of Transactions

Question 1

What are the 2 types of leases in leasehold transactions?

Answer 1

• Head lease
• Sublease

Question 2

For a lease to be registered at HMLR, for how long must it be?

Answer 2

More than 7 years

Question 3

What is a management company and what does it do?

Answer 3

It is a legal entity that is a party to the lease:
- It takes on certain responsibilities in the lease (e.g., maintenance of common areas)
- Charges reasonable service fees to tenants

Question 4

What are prescribed clauses?

Answer 4

A summary of the lease terms in a standard form

Question 5

When MUST a lease contain prescribed clauses?

Answer 5

When it is more than seven years long.

Question 6

What are some unacceptable covenants in a leasehold transaction

Answer 6

Unacceptable to Buyer:
- Absolute prohibitions on assignment (residential only)

Unacceptable to Lender:
- Forfeiture of the property to L on T’s bankruptcy
- A term of less than 80 years is not acceptable to a lender

Question 7

Can L refuse assignment of a commercial lease?

Answer 7

Yes, if L has reason to believe the incoming tenant will not be able to pay through the lease term.

Question 8

How does Rent Review work in a commercial lease?

Answer 8

Must be a provision in the lease to do this at specified intervals + valuation of property at time of review.

If L and T cannot agree to a figure, they can arbitrate if the lease provides.