Essentials of a lease

Question 1

What is the definition of a lease?

Answer 1

The grant of a right to the exclusive possession of land for a determinate term less than that which the grantor holds

Question 2

What are the essential ingredients of a lease?

Answer 2

1. Exclusive possession
   - not a license
   - tenant must be able to exclude strangers and the landlord from the premises
2. Fixed term or periodic tenancy
   - lease must be for a fixed term eg 5 years or a periodic tenancy eg yearly
   - generally cannot be for an indeterminate amount of time
3. Formalities
   - a legal lease must be created by deed if the term is over 3 years
   - a tenancy of 3 years or under may be created in writing or orally
4. Revisions
   - the revision is the interest that the landlord holds subject to the lease
   - at the end of the lease the property reverts to the landlord

Question 3

What is a lease?

Answer 3

A document that creates a leasehold interest

Question 4

What are landlord’s objectives in negotiating a lease?

Answer 4

Institutional landlords will insist on full repairing and insuring (FRI) leases meaning that any costs are met by the tenant

Means rent paid by tenant is cleared of any deductions

Landlord will want premises that are
- insured
- kept in repair
- only used for a permitted purpose

The landlord will also want:
- to control whom may occupy the premises
- have say over how the premises are latered by the tenant
- increase the rent in line with market rent

Question 5

What are the tenant objectives in negotiating a lease?

Answer 5

Allow the tenant to use premises for intended purpose

Has a contractual term that is satisfactory to the tenant

Provides some flexibility if circumstances change

Tenant will not want:
- onerous restrictions that prevent the tenant from using the premises for its intended purpose or that make it difficult to pass the lease on to a third party
- provisions that allow for a steep rise in rent
- excessively unfair provisions that favour the landlord