FLK2 Property Flashcards

Question

How is CGT calculated?

Answer 1

It is calculated by deducting the purchase price of the property from its current price. Some expenditure to acquire or improve the property can also be deducted. Annual exemption is then deducted and the tax is charged as per the rate set by the Government.

Answer 2

This is a relief that can be claimed to reduce CGT payable on a residential property.

Answer 3

It is their only or main residence. If an individual has more than one residence, they need to choose which one should qualify by making an election to HMRC. PPR also available to trustees if it is the beneficiary who’s house is the private residence. Must have occupied it for the whole period of ownership. Short periods of absence are allowed. If they own a garden of over 0.5 hectares, they have to pay CGT on the excess. This is unless they can prove that the extra garden was necessary for the reasonable enjoyment of the house. The relief may be lost if any part of the house is used exclusively for business.

Answer 4

Taxable supplies = some goods and services that are provided by a taxable person in the course or furtherance of business.

Answer 5

VAT will only be charged if the supplier is a taxable person. To charge and collect VAT, the supplier must be a taxable person i.e. turnover over the past 12 months has been over £85,000 (the registration limit).

Answer 6

It is collected from each supplier at the end of each VAT period which is usually 3 months. The supplier has to complete a VAT return online.

Answer 7

Output tax - income tax = net amount sent to HMRC This is the VAT that is charged by the supplier on its goods and services. The consumer pays this. The supplier has to mark out the VAT separately on its invoices when charging its customers. The supplier deducts the income tax it has paid against the output tax it has charged and only the net amount is sent to HMRC.

Answer 8

When the input is attributable to a taxable supply/output supply and there is an immediate and direct link between the two.

Answer 9

These are businesses that are exempt meaning they cannot register for VAT and therefore cannot recover an input tax. This means that any output tax cannot be offset against input tax and they end up not being able to recover costs that have gone into the supply goods or service. Insurance companies, banks and building societies make exempt supplies to customers.

Answer 10

Domestic fuel supplies and certain construction, conversion and renovation services.

Answer 11

They are still taxable supplies but are charged at a 0%. This means that no VAT is paid.

Answer 12

Most transactions do not involve payment of VAT. The sale of a new build house by a developer is a 0% rated supply so the buyer will not pay any VAT and the subsequent sale of a residential property by a private individual will not be in the course of business so the seller will not be charging VAT to the buyer in addition to the purchase price.

Answer 13

This depends on whether the commercial property is new or old. New commercial property (within 3 years of completion) is standard rated (20%). Old commercial property is exempt with the option to tax.

Answer 14

The sale of a Greenfield site is exempt, subject to option to tax. Sale of an old freehold building Grant of a lease

Answer 15

- Supply of construction services - Professional services - Sale of a new freehold building

Answer 16

They may want to do this to recover input tax incurred in relation to the building e.g. building work on it and professional fees incurred. The disadvantage is that they have to charge VAT on the purchase price when they sell. This is not an issue if the buyer makes taxable supplies and can recover input tax. But if the buyer is an exempt, the purchase price is effectively increased by the option to tax VAT. If the option to tax has been made before the date of transaction the VAT will count as chargeable consideration for SDLT/LTT purposes so there is effectively extra SDLT/LTT to pay.

Answer 17

Insert here the full names of all the people to whom the property is to be transferred. It is usual not to include the titles “Mr”, “Ms” or “Mrs”, but any other title (such as Doctor, Professor, etc) should be included. These details should also be reflected in the contract. Remember, that if the transferee is a company or LLP, you must complete the additional information in this panel. Look for the details in your assessment materials.

Answer 18

Insert here the full names (including all middle names) of those people who are going to transfer the property. This must be the names of the registered owners as set out in the Proprietorship Register, or any person acting on their behalf (such as an executor or a second trustee appointed to execute the Transfer where one of the joint owners has died). These details should also be reflected in the contract. Look out for a registered proprietor’s surname on the contract being different from that in the Proprietorship Register. You are likely to find the explanation in a deed poll (change of name deed), marriage certificate or civil partnership certificate supplied with your assessment materials. Remember, that if the transferor is a company or LLP, you must complete the additional information in this panel. Look for the details in your assessment materials.

Answer 19

Insert here for each transferee a correspondence address for Land Registry purposes. This must be a postal address either in the UK or abroad including any postcode or overseas equivalent. A buyer who has purchased the property to live in will usually want any relevant communications sent to their new address. If the property will be tenanted, the buyer may want communications sent to another address, such as a registered office in the case of a company.

Answer 20

£640,000 (six hundred and forty thousand pounds). This is the full amount being paid for the property as recorded in the contract. The separate consideration of £4,500 being paid for the contents should be ignored.

Answer 21

‘The transferee is more than one person and they are to hold the property on trust for themselves alone as tenants in common in the following unequal shares: (a) one third to Rebecka Jakobsson, and (b) two thirds to Valentina Bartoli.’

Answer 22

Charges register

Answer 23

They appear in the conveyance, often in or immediately after the first operative paragraph conveying the property to the purchaser. If the property is unregistered, a post-1925 restrictive covenant will only be binding against the buyer if it was validly registered as a D(ii) Land Charge against the name of the original covenantor. This can be checked with a Land Charges search.

Answer 24

Charges register

Answer 25

In the conveyance, often in or immediately after the first operative paragraph conveying the property to the buyer.

Answer 26

They can require them to provide an indemnity covenant. This only works if an indemnity covenant is given every time the property changes hands so that there is a chain of indemnity leading back to the original covenantor.

Answer 27

THE Purchaser hereby COVENANTS with the Vendors to observe and perform the covenants contained in the Conveyance and shall indemnify the Vendors from and against all actions costs proceedings and claims in respect of any future breach thereof.

Answer 28

No, because SC 4.6.4 and SCPC 7.6.5 state that, where the seller has such an ongoing liability in relation to the property, the buyer must give the seller a personal indemnity covenant in the transfer, i.e., they will require a covenant from the buyer to observe the covenants affecting the title and, should the buyer breach them, to indemnify the seller should they be sued as a result under their original covenant.

Answer 29

The transferee covenants with the transferor to: 11.1 (by way of indemnity only) observe and perform the covenants referred to in entry 1 of the charges register of title number ESX112233 (‘the Covenants’) so far as they are subsisting and capable of taking effect; and 11.2 indemnify the transferor against any liability incurred for any breach or non-observance of the Covenants occurring after the date of this transfer.

Answer 30

No, because a party to the deed cannot witness the signature of another party to the deed. Whilst the spouse, civil partner, co-habitee or relative of a transferor or transferee can act as a witness (if they are not a party to the deed), this is best avoided. The witness should be independent to counter any potential allegation of undue influence. One person may witness more than one signature but must sign and complete their details for every signature witnessed.

Answer 31

When a buyer buys property, they will want to check that the property has permission to be on the site its on and that it is being used for an authorised purpose. Planning permission is usually subject to conditions so need to check whether the conditions have been complied with.

Answer 32

Planning permission, once implemented, runs with the land forever and any conditions attached to it will burden the land forever.

Answer 33

If the change to the property qualifies as a ‘development’. A development is the a) carrying out of building, engineering, mining or other operations in, on, over or under land or b) the making of any material change in the use of any buildings or other land. Planning permission is basically needed whenever the development of land IS NOT one of the exceptions.

Answer 34

a) The maintenance, improvement or other alteration of any building or works which affect only the interior of a building b) The maintenance, improvement or other alteration of any building or works do not materially affect the external appearance of a building. c) Changes of use that are within the same class Some changes of use are not a development. E.g. a change within use class E (E(a) to E(c)) would not be a change of use. A change from B2 to B3 would require planning permission. E(a) – retail sale of goods, other than hot food E(b) – sale of food and drink for consumption on the premises E(c) – financial and professional services E(g) – uses which can be carried out in a residential area without detriment to its amenity, including offices to carry out any operational or administrative functions and research and development. Changes to and from sui generis will always require planning permission. Sui generis encompasses uses. That could potentially have adverse effects on the locality and include entertainment establishments, drinking establishments and take aways.

Answer 35

If the works do not constitute a development. Some acts may be a development but do not require express permission if it is set out in a General Permitted Development Order.

Answer 36

1. Developments within the curtilage of a dwelling house (e.g. extensions below a certain size) 2. Minor operations (e.g. painting outside of a building or installing CCTV) 3. Specified changes of between use classes and for changes from certain sui generis uses (should be checked on each occasion because changes frequently)

Answer 37

By an Article 4 direction. This needs to be checked in the latest version of the GDPO. This would be revealed by a local search.

Answer 38

If there is any uncertainty about whether the works or change of use are a development or permitted by a GDPO an application can be made to the LPA before commencement. The LPA will either a) issue a certificate to say that they are satisfied the proposals are not a development, b) they come under the GDPO or c) they refuse the application because express planning permission must be obtained.

Answer 39

Planning permission is only effective for planning purposes. It does not erase the need for other permissions such as building control regulation or allow the breach of an enforceable covenant.

Answer 40

It continues to exist for the benefit of the land and of all persons for the time being interested in it (unless otherwise specified in the planning permission itself).

Answer 41

A planning permission will usually state that it has to be implemented within a certain time and will lapse if not implemented in that time. In England, this is usually within 3 years of the date of the permission. Implementation is different to completion, there is usually no time limit on completion.

Answer 42

If a local authority believes that completion of building subsequent to planning permission **will not take place within a reasonable time,** they can serve a completion notice which states that the permission will cease to have effect if completion has not taken place by the expiration date stated in the notice.

Answer 43

The LPA can exercise **the right of entry into the property or serve a planning contravention notice**. This requires the recipient to provide information about operations, use, or activities being carried out on the land and any matter retain tot the conditions attached to a planning permission.

Answer 44

If the LPA decides to take action, it can serve an **enforcement notice on the owners, occupier and any other person having an interest in the land such as a mortgagee**. In England, from 25 April 2024 LPAs in England have the power to issue enforcement warning notices when it appears that there has been a breach of planning control. The enforcement warning notice is an invitation to the recipient to regularise the breach by applying for a retrospective planning permission.

Answer 45

28 days after service.

Answer 46

The alleged breach, the steps to be taken or the activities to be discontinued in order to remedy the breach and the timescale for this.

Answer 47

Anyone with an interest in the land can appeal the enforcement notice.

Answer 48

As an enforcement notice cannot become effective until 28 days after it has been served and its effect is suspended if the recipient appeals it, the LPA can serve a stop notice to bring the activities to an immediate halt before the enforcement notice takes effect.

Answer 49

An enforcement notice has to be served first. A stop notice cannot be served on its own. An LPA can serve a temporary stop notice for 28 days only to give it time to conduct an investigation. LPA could also apply for an injunction.

Answer 50

This can only be served where the breach is a breach of a condition associated with a planning permission. There is no right to appeal a condition notice.

Answer 51

To apprehend an actual or apprehended breach of planning control. This is a discretionary remedy so the LPA must show that an injunction is expedient and necessary and that the remedy is appropriate in the circumstances.

Answer 52

If there is a breach of planning control, the time limit for enforcement action will depend on whether the property is in England or Wales. In England, the LPA must take enforcement action within 10 years of the alleged breach. However, for breaches involving operational development (such as building works) or changing the use of a building to use as a single dwelling house that took place before 25 April 2024, the time limit is the one that applied before this date, which is within four years of the alleged breach. In Wales, for breaches involving operational development (such as building works) or changing the use of a building to use as a single dwelling house, the time limit for enforcement action is within four years of the alleged breach. The time limit for all other breaches of planning control is within 10 years of the alleged breach. An LPA can apply to a magistrates court for a planning enforcement order to enable enforcement action to be taken when the statutory time limits have expired and the breach of planning control has been concealed.

Answer 53

No further action can be taken in respect of the breach if not done during the time period.

Answer 54

Offence punishable by fine.

Answer 55

Building regulations are concerned with the health and safety aspects of buildings being constructed or altered and they control the materials and the construction methods used.

Answer 56

May need to apply for this even where planning permission is not necessary.

Answer 57

Apply to building control authority for building regulations consent. The work is inspected by a building control officer. After final inspection, the building control authority issues a certificate of compliance. Or if its a self-certification scheme, a separate application may not be required and they can self-certify and send the notification to the relevant body.

Answer 58

If building regulation control has not been sought out when it should have, the building control authority can prosecute for breach of building regulation control. The local authority can seek out injunctions which are not time limited if the work is unsafe.

Answer 59

Building control authorities can prosecute for breach of building regulations control. In **Wales** a prosecution must be brought within **two years** of the offence. In **England** there is now **no time limit** for bringing a prosecution: prior to 1 October 2023 the prosecution had to be brought within six months of the breach being discovered and within two years of completion of the building work.

Answer 60

A building control authority can also serve an enforcement notice requiring the work to be altered or removed. In **Wales** an enforcement notice must be served within **one year** of completion of the work. In England, the time limit is within **10 years** of completion of the work.

Answer 61

Prospective buyers will be concerned about the safety of the building if there is no building regulation consent. A lender may not agree to lend unless there is a full structural survey/they may keep some of the mortgage advance until the remedial works have been carried out.

Answer 62

Using the searches and enquiries usually carried out before exchange of contracts. The CON29 would reveal building regulations consents and any certificates granted as well as the enquiries of seller.

Answer 63

The buyer can ask the seller to obtain a regularisation certificate from the local authority which lists the work required to bring the building up to standard. Insurance could be obtained to cover the cost of future enforcement proceedings. This will not cover personal injuries or business interruption caused by a defective building.

Answer 64

If listed, the owner will require listed building consent to demolish, alter or extend the building in addition to planning permission. The higher the listing, the harder it is to obtain listed building consent from the local authority. It may be required, even where planning permission is not required. There are a number of classes of permitted development under the GDPO that do not apply to listed buildings so if this type of work is carried out to a listed building, express planning permission will be required.

Answer 65

All the features, listed or otherwise, within a conservation areas are protected by the conservation order. This would mean that it is more difficult to make changes to the property than would normally be the case: a) Changes to the external appearance of a building in a conservation area may require planning permission from the LPA that is not required elsewhere. b) Demolition or substantial demolition of a building. c) Any work planned to a tree in a conservation area must be notified to the LPA six weeks in advance so that the LPA may determine whether or how the work to the tree should take place.

Answer 66

Is there planning permission for the construction of the building or was planning permission not needed? Is the building current being used for its authorised purpose? Are there any planning conditions which would prevent the buyer’s future use or any proposed alterations? Are there any existing breaches of planning law for which action could be taken against the buyer after completion? Have any works been done which would have required building regulations consent? Is the building listed or in a conservation area?

Answer 67

These can be ordered from the Land Registry (the law firm will probably have an account) but more usual for the seller to ‘deduce’ title and provide the official copies to the buyer at their own expense. The official copies need to be less than 6 months old. It is usual for the buyer to only be able to raise questions about title before exchange of contracts and to be prevented by a clause in the contract from raising any more after exchange. The buyer’s solicitor will also need to investigate whether there are any overriding interests affecting the property. They can find this out through searches and enquiries.

Answer 68

The edition date is the date the LR last updated the official copies (probably when the property was last sold or issued a mortgage).

Answer 69

This is the date often referred to by conveyancers as the search from date, the specific date of the official copies showing the entries subsisting on the register at a certain time.

Answer 70

Description of the land including the address and the title plan, Indicate whether it is freehold or leasehold, May show that there are easements or rights benefiting the land and that the easements and rights are subject to obligations, May also show that rights that a buyer may expect to come with the land such as a right to light or air may not be included in the title I.e. they have been excluded.

Answer 71

Will state the current owners and their address, Identify the class of title (the State guarantees title and compensation in certain circumstances if a defect is found in a registered title). The class of title will be determined by the LR when the property is first registered. If the land has been sold since 1 April 2000 it may indicate the price paid for the land by the current owners, It will also show if the owners have given an indemnity covenant when they bought the land which will be evidence of a chain of indemnity covenants. Any restrictions (more powerful) or notices on the owners’ ability to sell.

Answer 72

The legal estate is subject only to entries on the register, overriding interests and if the proprietor is a trustee, minor interests of which they have notice such as the interests of the beneficiaries under the trust.

Answer 73

This is granted where the proprietor is in possession of the property but has lost the title deeds or is claiming through adverse possession and this means that the proprietor is also subject to all adverse interests existing at the date of first registration.

Answer 74

Given if there is a specific identified defect which the Registrar feels they cannot overlook or cure by granting absolute title.

Answer 75

Having any class of title that is not absolute may affect their ability to obtain a loan to purchase the property and/or sell it in the future.

Answer 76

A co-ownership restriction A lender restriction Court order restriction for course of litigation or family proceedings

Answer 77

a) Covenants affecting the property, positive or restrictive b) Easements affecting the land such as a right of way over the property c) Charges over the land e.g. mortgages d) Leases granted over the whole or part of the property e) Notices registered by third parties claiming an interest in the property

Answer 78

a) That there is no caution against first registration b) The property has not actually been registered

Answer 79

It is possible a third party has lodged a caution against first registration, warning any person attempting to deal with the land that they have an interest in the land such as an easement. When the application for first registration is lodged, the LR will warn the cautioner. This means that they have a limited period of time to establish their rights over the land and if they cannot, the registration will proceed and the cautioner will lose their rights.

Answer 80

An Index Map search at the LR on Form SIM (Search of the Index Map) accompanied by a plan of the property.

Answer 81

Need to examine the parchment or paper deeds that have been used to transfer ownership in the past. This usually includes conveyances, mortgages, assents (between PRs and beneficiary under a will), deeds of gifts and land charges searches. The seller’s solicitor will usually be able to obtain the title deeds from the client, if the property is free of mortgage or from the mortgage lender if it is subject to a mortgage.

Answer 82

If the title should have already been registered then the seller will be required to register it before any other transactions can proceed. The buyer’s lender is likely to insist on this.

Answer 83

A number of documents in a set of title deeds might be capable of being a good root of title but the seller solicitor must choose the single document that is most appropriate to be a good root of title for that sale. This is usually the most recent document that satisfies all of the requirements of a good root of title. Once it has been identified, most older documents than the root of title can be ignored. The only exception is where the root refers back to a third party right created in an earlier conveyance. This should be included. Conditions: a) Deal with or show who owns the entire interest (legal and equitable) that is being sold by the current owner, b) Contain a recognisable description of the relevant land, c) Do nothing to cast doubt on the seller’s title, d) Be at least 15 years old.

Answer 84

This is where the seller’s solicitor creates a bundle of documents from and including the root of title up to the present day. The documents should be numbered and listed in chronological order. They will be copies not originals. There should be an unbroken chain from the owner in the root of title to the present seller. There should be documentary evidence of every change of ownership as legal title can only be transferred in a deed. If PRs are listed in the transfer deed then the seller should check grant of probate identifying the PRs.

Answer 85

The solicitor should look out for incumbrances. E.g. Easements will often appear in a conveyance beginning with the words ‘EXCEPTING AND RESERVING’. The words ‘SUBJECT TO’ also are used to introduce an incumbrance.

Answer 86

Step 1 - Check first registration Step 2 - Find root of title Step 3 - Create epitome of title Step 4 - Checking each title deed listed in the epitome if title a) Chain of ownership b) Description of the land c) Stamp duty d) Incumbrances e) Execution f) Local charges search

Answer 87

An estate contract

Answer 88

Restrictive covenant

Answer 89

An equitable easement

Answer 90

A home right

Answer 91

The solicitor must ensure that valid searches have been made against the names of all the estate owners revealed in the epitome of title and the attached documents, even if their period of ownership pre-dates the root of title. A form K15 search should be made against each owner for the period that they owned the land.

Answer 92

A conveyance is preferable to a mortgage as good root of title as it is more likely to include a detailed description of the property by reference to a plan and more details of the incumbrances affecting the property. These will provide double guarantee (seller will have looked 15 years back and so will buyer so 30 years in total). If there are no mortgages or conveyances to use, can use a deed of gift or assent. However as there was no transfer for value, they will not be as good as they do not provide double guarantee.

Answer 93

The solicitor should look for a paragraph beginning with the word ‘WHEREAS’ stating that the Vendor (seller) is ‘seised of the property … for an estate in fee simple and is selling the same to the Purchaser’ (buyer). The conveyance should also state that the Vendor conveys the land as ‘beneficial owner … unto the Purchaser’. Such a conveyance is dealing with the entire legal estate and equitable interest in the land.

Answer 94

Easements are usually granted or reserved in the first operative paragraph of the conveyance.

Answer 95

This should appear in the Charges register. May also appear in the Property register if the LR has extracted the text from a conveyance and easements that burden the property are mixed with easements that benefit it. The Property register will also show the financial obligations that contribute attached to easements that benefit the property.

Answer 96

Usually granted or reserved in the first operative paragraph of the conveyance.

Answer 97

This means that the seller does not own any mines and minerals underneath the surface of the property and cannot transfer them to the buyer. The buyer should be informed and the enquiries made as to who is able to exercise the right and if it has ever been exercised in the past. All interests in coal are vested in the Coal Authority and a coal mining search should be carried out. Even if the registered, consider making an iNDEX MAP search at the Land Registry on form SIM to check whether mines and minerals are registered under a separate title as this will help to identify the owner of the mines and minerals and any associated rights.

Answer 98

This will be in the conveyance.

Answer 99

This will be in the Property register.

Answer 100

A landowner may sell off a piece of land and retain the other part with the intention of developing the retained land. In such a case they may preserve the right to the light and air over the sold land land in order prevent them from stopping the development of the retained land. Look for entries in the proprietorship register of a registered freehold property.

Answer 101

It can be assumed that the equitable interest is held as a joint tenancy unless a restriction appears in the Proprietorship register.

Answer 102

The conveyance to joint buyers will state whether the equitable interest is to be held as joint tenants or tenants in common.

Answer 103

If the title investigation shows that a property is jointly owned but is only being sold by one of the co-owners, it is necessary to make enquiries about the missing co-owner. If they are alive, they must be party to the contract and the transfer of the property. If they have died, the seller’s solicitor must provide a certified copy of the death certificate. As the only way to hold the legal title is by co-owners, they would have held the legal title as joint tenants. If the equitable title was also held as joint tenants then the surviving co-owner can transfer the property alone.

Answer 104

If the following conditions are met: a) There is no memorandum of severance endorsed on the conveyance of the property to the joint tenants, b) There are no bankruptcy proceedings registered against either of the joint tenants at the Land Charges Registry, c) The transfer by the surviving owner to the buyer contains a statement that the survivor is solely and beneficially entitled to the land.

Answer 105

If the equitable interest was held as tenants in common and there is only one surviving legal owner, a second trustee needs to be appointed to overreach the equitable interest of the deceased co-owner. The appointment of the second trustee can be made in the transfer of the property or by separate deed of appointment. As long as the buyer pays the purchase price to at least two trustees on completion, the equitable interest of the deceased co-owner will be overreached and the buyer will take the property free of the interest. The contract should provide for the appointment of a second trustee for the purposes of the transfer.

Answer 106

This can be proved by producing certified copies of the grant of probate and the assent from the PRs to the surviving co-owner as beneficiary.

Answer 107

This will appear in the Charges register.

Answer 108

This will appear in the conveyance, often in or immediately after the first operative paragraph conveying the property to the purchaser. Post-1925 restrictive covenant: This will only be binding against the buyer if it was validly registered as a D(ii) Land Charge against the name of the original covenanter. This can be checked with a land charges search.

Answer 109

a) Enquire with seller about who owns the property with the benefit of the covenant. Go to that person and ask if they can come to an arrangement over the proposed use such as a permanent release of the covenant or a one-off consent. This may not be the best option if the covenant is very old and the owner cannot be easily identified. b) Restrictive covenant insurance policy for the proposed breach of covenant. Common and cost-effective but not appropriate if the person who benefits is aware of the use and will object to it. This will not be possible if the person has been approached already. c) Apply to Upper Tribunal (Lands Chamber) to modify or discharge he covenant on the grounds that the covenant is obsolete or confers no practical benefit of substantial value or advantage or is contrary to public interest and the loss of the covenant can be compensated in money. Not a quick or cost-effective option.

Answer 110

This will appear in the Charges register.

Answer 111

This will appear in the conveyance, often in or immediately after the first operative paragraph conveying the property to the purchaser.

Answer 112

The original covenantor is bound.

Answer 113

The successor in title can only be bound indirectly through an indemnity covenant if there is a chain of indemnity. It is likely that the original covenantor required the buyer to give them an indemnity covenant so that if the buyer breached the covenant and the original buyer was sued directly for the breach, they could recover their losses from their buyer. This should have been repeated each time the property changed hands, resulting in a chain of indemnity from the original covenantor to the current seller of the property.

Answer 114

The indemnity covenant would be in the Proprietorship register.

Answer 115

The indemnity covenant would be in a conveyance.

Answer 116

If the seller did give an indemnity covenant when they purchased the property, they will require the buyer to give an equivalent indemnity covenant in the transfer of the property so the buyer will be liable to the seller in contract if they do not perform the positive covenant. It must be in a contract. If the seller is requiring an indemnity covenant from the buyer, the buyer’s solicitor should inform their client and instruct a surveyor to take stock of the condition of the subject of the indemnity covenant. They should also ask the seller whether they have been complying with the covenant and if not, if anyone has tried to enforce it. The covenant may be an extra expense the buyer has not foreseen.

Answer 117

There may be cases where the property is subject to covenants but the exact nature is unknown often because they were contained in an earlier deed that has now been lost.

Answer 118

An entry in the Charges register will make it apparent that the details of the covenant were not available when it was first registered.

Answer 119

The existence of covenants may be apparent on the face of a conveyance.

Answer 120

Assume the covenant is restrictive and will be binding on the buyer and consider options for dealing with that covenant. An indemnity insurance policy may be the most cost effective. An indemnity insurance policy may be the most cost-effective option. The seller should disclose this defect in title in the contract so the buyer can make an informed decision whether or not to proceed with the purchase.

Answer 121

Rarely a problem because the seller usually intends to discharge it using the proceeds of sale immediately after completion. The buyer will not commit to buying the property unless they are satisfied that the seller’s mortgage is discharged on completion of the sale.

Answer 122

There will be two entries in the Charges register, one giving the date and purpose of the charge and the other stating the identity of the lender. The lender may also have put a restriction in the Proprietorship register to prevent the borrower form making a disposition of the property without the consent of the lender.

Answer 123

The mortgage will appear as one of the title deeds listed in the epitome of title. The buyer will only be concerned by a mortgage that has not been paid off. If it has been discharged there will usually be a vacating receipt. If it is not discharged they will want it discharged on completion so that they do to take subject to it. The buyer’s solicitor should check that the contract states that the seller is selling the property free of the mortgage and that the seller’s solicitor gives and undertaking to discharge the mortgage immediately on completion.

Answer 124

The existence of a lease will only be an issue if the buyer is expecting the property to be sold with vacant possession.

Answer 125

If there is a lease is for a term of more than seven years or the disposition of a (previously unregistered) lease with more than seven years to run, this must be registered in their own right with their own title number but must also be registered against the landlord’s title. This will be in the Charges register. If they are protected by the date the transfer of the property to the buyer is registered then they will bind the buyer. If a lease for a term of more than seven years is not registered, then it will not bind the buyer but it may qualify as an overriding interest if the tenant is in occupation.

Answer 126

Potentially as overriding leases.

Answer 127

A legal lease should have been created by deed and should be one of the title deeds scheduled in the epitome of title. If it is a parol lease, this does not require any formalities and will be binding on the buyer whether they know about it or not.

Answer 128

The buyer’s solicitor should report it to the buyer and check that the existence of the lease and its terms are compatible with the buyer’s proposed use of the property.

Answer 129

A notice is an entry into the Charges register in respect of the burden of an interest affecting a registered estate or charge.

Answer 130

An agreed notice is where a notice is put on the register with the agreement of the registered proprietor.

Answer 131

Unilateral notices are used where the registered proprietor has refused to consent to the entry or has not been asked about it.

Answer 132

The entry of a notice does not guarantee that the interest is valid or exists and does not give the person who registers it any rights over the property. It just means that the interest is protected against any subsequent interests if it is indeed valid.

Answer 133

Ask the seller’s solicitor to what the notice relates to. Option 1: Walk away from the transaction. Option 2: Refuse to proceed any further with the transaction until the seller deals with the unilateral notice. The buyer should require the seller to get the notice cancelled by the LR before exchange of contracts.

Answer 134

This is a statutory right for a non-owning spouse or CP to occupy the matrimonial home. A home right does not create an interest in land.

Answer 135

A home right will bind a buyer if there is notice in the Charges Register by the date the transfer of the property to the buyer is registered.

Answer 136

Must be protected by Class F land charge in order to be binding on the buyer.

Answer 137

If discovered, seller should be required to obtain a release of rights to the property and agreement to vacate prior to completion in the form of a contract.

Answer 138

Due to the principle of caveat emptor, it is important that searches and enquiries are done before the property is bought. It is also important for a lender.

Answer 139

If the solicitor fails to make the correct searches and enquiries they could be sued for negligence from a buyer if they suffer a loss.

Answer 140

- Survey and personal inspection - The local search - Water and drainage search - Pre-contract enquiries of seller - Environmental searches - Flood search

Answer 141

Should always be recommended to a client. If the lender is relying on a mortgage to finance the transaction, the lender will require a survey. They will always require the borrower to pay for a valuation to assess whether the property is adequate security for loan but will not necessarily reveal much about the structure of the property. Solicitor may be asked to advise on the most appropriate type of survey. The most appropriate type depends on the age and location of the property. A full structural survey is a good idea if there are concerns about the structure or the state of the property. A home buyers valuation and survey is the basic structural survey that will contain advice on repairs and maintenance requirements. A personal inspection is also a good idea as it will reveal more than is evident from a plan but this is expensive on top of the cost of a survey.

Answer 142

LLC1 - Provides details of any financial charges or restrictions on land that have been imposed by public authorities under statute e.g. planning consents, tree preservation orders and conservation area designation orders. CON29 - Planning permissions, any restrictions on permitted development (such as an Article 4 Direction), whether land has been designated as contaminated land, liability of road repair. CON290 - Environmental and pollution notices and rights over common land. This only relates to the property and not the adjoining land.

Answer 143

Raised with a specific statutory undertaker on form CON29DW for residential properties and CommercialDW for commercial properties. The search establishes whether the drains and sewers are adopted. If they are adopted, this means that they are the responsibility of a statutory undertaker rather than the owner of the property. The search shows whether or not the property is connected to a public sewer for could and surface water drainage and whether it is connected to a public water supply. If the property does not drain into a public sewer then the buyer will be liable for the costs of maintaining the drains and sewers and may be liable for the costs of bringing them up to the adoption standard if the water authority decides to adopt them.

Answer 144

- Whether the seller has had any disputes regarding the property - Whether there are any third parties occupying the property - Compliance with any covenants contained within the title - Planning permission - Issues about boundary maintenance - In case of commercial properties, the VAT status of the transaction

Answer 145

The costs of cleaning up contaminate sites is high. The owner/occupier of the property may be subject to liability not just the original polluter. If the solicitor does not advise this, they could be found negligent. CON29 and CON90O contain some questions relating to environmental notices and entries but they are not sufficient to identify the environmental risks. There are different types of environmental search that differ in terms of scope and detail. The most basic is the desktop search which essentially looks at all plans of the area and any information published by the EA. If anything is found in the desktop search a physical search is a good idea. Insurance is also an option to for environmental liability.

Answer 146

Should be done in every property as not all properties are backed by insurance (not commercial usually) and whilst can enquire with seller, they may not reply under caveat emptor. A key thing to look at in any report is whether the property can be insured at normal rates. If there is a flood risk, a specialist report can be obtained to advise the buyer on flood risk and possible flood damage mitigation measures.

Answer 147

- Chancel repair - Mining searches - Canal and river trust search - Commons search - Railways - Highways - Unregistered land - Company search - Bankrupcy/insolvency search

Answer 148

Some properties may be liable to pay the cost of repairing the parish church if they are in a specific area.

Answer 149

Continues to bind if the transfer for value occurred before 13 Oct 2013.

Answer 150

This will only be required if the chancel repair liability is referred to in the title deeds or protected by a caution against first registration lodged prior to first registration. Because of this some firms may actually carry this search out as a standard search even where the transfer of value was after the 13 Oct 2013. Insurance is an alternative way to avoid the costs of the searches.

Answer 151

A coal mining search of the Coal Authority on a CON29M form will confirm whether the property is in an area where mining has taken place in the past or is likely to take place in the future whether there are shafts on the property, existence of underground workings or subsidence. It is important to find out whether there has been a claim for subsidence as this may prevent a future claim from being made. A mining search should definitely be done if there are a mines and minerals reservation revealed in the turtle investigation. Areas affected by mining activity: Cornwall (tin) Devon (tin) Somerset (tin) Cornwall (clay) Devon (clay) Dorset (clay) West Midlands (limestone) Cheshire (Brine and salt)

Answer 152

If the property is near a river or a canal, the buyer needs to find out whether they are liable for the repair or maintenance.

Answer 153

This is appropriate if the property is near an open space such as as village green as this may be affected by commons rights. This may affect the current enjoyment of the land or future development to the property so the. Buyer should raise optional enquiry 22 in the CON29O form.

Answer 154

Search should be done if the property is close to a railway to see if there are any obligations to maintain the boundary/any restrictions on development near the railway. Network rail will not answer general enquiries and the seller is not obligated to under caveat emptor so approaches should be made for any specific proposals. Optional enquiry 22 in the CON29O form may reveal whether the property is subject to a specific rail scheme.

Answer 155

Replies to enquiry 2 of CON29 will provide some information about the roads adjoining the property but not the verges and pavements. If the property is near a public highway, the buyer solicitor should send a plan to the relevant highways authority to ask about the boundaries of the publicly maintainable highways and the verges to be marked on.

Answer 156

Index map search (SIM) and Land Charges Department search against the seller and the previous estate owners.

Answer 157

This should be done if the seller is a company to confirm whether the seller has the capacity to enter into the contract, confirm the identity of the current officers of the company and see if there are any fixed and floating charges on the property that need to be discharged on completion. The search needs to be repeated just before completion to check for insolvency issues. If the property is unregistered, the searches should also be carried out against any corporate estate owners revealed in the epitome of title.

Answer 158

Solicitor acting for the lender should make a search against the borrower to ensure that there are no bankruptcy proceedings or insolvency proceedings affecting them. The searches must be made right before completion. Some firms also do them before exchange of contracts to allow for time to sort out any issues in good time. If the borrower is an individual then the search is on K16 form which is sent to the Land Charges department. If the borrower is a company, a company search is needed.

Answer 159

The buyer’s solicitor needs to check for any planning permissions and whether there are any planning conditions attached to the permission which would prevent the buyer’s proposed alterations or future use of the property and whether there are any existing breaches of the planning conditions for which action could be taken agains the buyer after completion. If an LLC1 search shows that there is a planning permission, the solicitor needs to contact the seller or the local authority to obtain a copy of the permission. The buyer’s solicitor needs to check the rest of the CON29 results (for enforcement and stop notices) and the CON29O results (for completion notices) to check no enforcement proceedings have been taken. Also need to enquire with the seller whether they have complied with the planning permission and any notices received about it from the local planning authority.

Answer 160

- Planning permission - Road adoption - Conservation orders - Tree preservation orders - Occupiers

Answer 161

The CON29 part of the local search should be checked for information about roads and public highways adjacent to the property.

Answer 162

This would be revealed by a LLC1 search. The buyer will need to be told about this as it is a criminal offence to chop down a tree that is subject to a TPO. The solicitor should raise pre-contract enquiries of the seller to obtain a copy of the TPO to establish the location of the protected trees and check that the TPO has been complied with.

Answer 163

This would be revealed in a LLC1 or CON29. The buyer should be informed as it will be more difficult to make changes to the property than would be the case normally.

Answer 164

In some circumstances, the occupier may be able to claim an equitable interest or a tenancy in the property. A non-owning spouse may have a protected home right and this will be revealed in the title investigation. If there is an adult occupier, the seller should be required to obtain a release of all rights in the property and agreement to vacate on or prior to completion - usually dealt with in a contract.

Answer 165

There is technically no need for a contract but there are many advantages for exchanging contracts. - There is some delay before completion is going to take place e.g. because buyer is finalising their financing arrangements - Parties need more time to organise practical aspects - Prevents either party from withdrawing from the transaction without being liable for breach of contract - If there are matters that are not technically to do with the transfer but require a binding contract to make them enforceable e.g. repair works - Time table for completion

Answer 166

Usually the seller’s solicitor. Then sent to the buyer’s solicitor as part of the initial pre-contract package. Need to decide whether to use a pre-printed form by a law stationers or to draft the contract in the firm’s preferred style. Either way it will have to incorporate a set of standard conditions, the Standard conditions of sale (SCs) or Standard Commercial Property Conditions (SCPCs). Whilst there are open contract rules which are derived from statute and common law to assist where the contract is silent, it is better to have express conditions in the contract which are known as standard conditions.

Answer 167

This is used for all residential transactions and some simple commercial transactions that have a straight forward title and a low price.

Answer 168

This is more suitable for high value commercial properties and contains more detailed provisions for the management of occupational leases with which the property is being sold.

Answer 169

- Headings relating to the description of the property and the terms of sale (particulars of sale). - Include information about the buyer, the price, the deposit and the fixtures and fittings. - Information about the seller which they need to cross check with the information in the proprietorship register in the official copies for a registered property or the title deeds for an unregistered property. - The title documents provide the details of the property, including address and whether the property is leasehold or freehold and whether the property has the benefit of any rights over adjoining properties such as a right of way. - In registered property, the title number and the class of title* need to be included which are found in the proprietorship register of the official copies. * The class of title can be incorporated into the address by the Property heading or typed in brackets after the (Title Number)

Answer 170

This is where the standard conditions are and they are designed to apply to all transactions. This is either the SCs or the SCPC which contain the details. These are the terms that govern the transaction unless the parties specifically agree something different. SCPC has two parts. Part 1 applies unless it is excluded and the Part 2 which only applies if it is specifically included.

Answer 171

These are the special conditions. They are specifically drafted to met the particular requirements of the transaction. There are some pre-printed suggestions at the top of the page and then a blank space into which the parties insert any requirements of their own.

Answer 172

These are property contracts specific to the firm but will include the usual details about the property, the financial terms and the special conditions. There will usually be a clause incorporating one of the two sets of standard conditions.

Answer 173

Incumbrances are third party rights that survive the transfer of the property to the buyer e.g. restrictive covenants, easements and obligations to contribute to shared facilities. If these are not specified the seller could be in breach of a special condition which states that the seller sells the property free of all incumbrances other than those specific in the contract or those listed in the Special Conditions of the SCPC and SC.

Answer 174

If the borrower is an individual then the search is on K16 form which is sent to the Land Charges department.

Answer 175

Company search

Answer 176

If it is not paid the transfer of the property to the buyer will not be registered by the Land Registry. Failure to file and pay on time will also attract penalties and interest.

Answer 177

Incumbrances are third party rights that survive the transfer of the property to the buyer e.g. restrictive covenants, easements and obligations to contribute to shared facilities.

Answer 178

If these are not specified the seller could be in breach of a special condition which states that the seller sells the property free of all incumbrances other than those specific in the contract or those listed in the Special Conditions of the SCPC and SC.

Answer 179

Those specified in the contract Those discoverable by inspection before the date of the contract Those the seller does not and could not reasonable know about Public requirements These need to be declared in SC 3.1.2 for the Standard Conditions and SCPC 4.1.2 for the Standard Commercial Property Conditions.

Answer 180

Those other than mortgages that the buyer knows about Entries made before the date of the contract in any public register, except for those maintained by the Land Registry, the Land Charges Department and Companies House

Answer 181

Matters other than mortgages that are disclosed or would have been disclosed by the searches and enquiries that a prudent buyer would have made before entering into the contract

Answer 182

The seller solicitor needs to list anything as a Specified Incumbrance in the contract that does not come under SC 3.1.2 and SCPC 4.1.2 Because the two sets of standard conditions are expressed differently, seller’s solicitors tend to list all incumbrances revealed by their title investigation whether or not they are covered by SC 3.1.2 and SCPC 4.1.2 This is to avoid the potential risk of not disclosing an incumbrance as this might result in the buyer having the right to rescind the contract and/or claim damages. The incumbrances will be revealed in the title documents but must be specified in the contract even though the seller will likely already have deduced title at an earlier stage. Registered property incumbrances usually appear in the Charges register of the official copies but Property register should also be checked as some may appear there e.g. if a right is given subject to an obligation to pay for it. Some solicitors do not refer to a positive covenant in the specified incumbrances as it does not run to successor in title but some solicitors may refer to them if they are a mixed covenant. The buyers solicitor should make sure that the seller’s mortgage is not included in the list of incumbrances to which the sale is subject as the mortgage should be discharged shortly after completion.

Answer 183

If the seller own's the entire legal and equitable title to the property. This implies more comprehensive implied covenants then would be the case with limited title guarantee. The seller also impliedly covenants that the is disposed free from incumbrances other than those the seller does not know about and could not reasonably know about. The LPMA 1994 limits this to exclude matters which have been made express, matters the buyer knows of at that time and matter that are on the registers of title. (Still a wider covenant than the limited title guarantee as the seller has not encumbered the property and is not aware that anyone has done this since the last disposition for value so a seller who purchased the land for value will only be covenanting the incumbrances that were created before the acquired the property)

Answer 184

This is given where the seller has limited knowledge of the property e.g. if seller is an executor or trustee. Both full and limited title guarantee The seller will be impliedly covenanting in the transfer of the property that they have be right to dispose of the land, they will do all they can to transfer the legal title and in the case of leasehold the lease is subsisting at the time of disposal and there is no breach of covenant making the lease liable to forfeiture.

Answer 185

If seller is a person appointed following the insolvency of the owner.

Answer 186

The contract rate is the rate of interest that is charged if a property is late in completing. The interest is charged on the purchase price (less the deposit if the buyer is in default). Most conveyancers opt for Law Society’s interest rate from time to time in force (currently 4% about base lending rate of Barclays Bank). This is what is provided for by the SCs and SCPCs. If parties are happy to use this rate then there is no need to fill in the gap but common practice to do so anyway. Sometimes the parties will specify a rate which is a specified percentage above the base rate of a different bank which is often the bank the used by the seller. The exact percentage is a matter of negotiation.

Answer 187

The SC and SCPC deposit is 10% of the purchase price and is paid to the sellers solicitor as stakeholder. This means that the seller’s solicitor cannot hand it over to the seller until completion.

Answer 188

If the SC are being used, it allows the seller to use the deposit as a deposit for a related purchase of a house for the seller so this is a slight modification of the terms of the stakeholder concept.

Answer 189

This arrangement can be varied e.g. a reduced deposit. If this is the case, can also incorporate a special condition that the deposit should be topped up to the full amount if there is a delay in completion.

Answer 190

The arrangement can be varied so the seller solicitor holds the deposit as agent instead. This means that the deposit can be released to the seller immediately after exchange and can be used freely by the seller. This is a greater risk for the buyer because the seller may not be able to return the deposit if the parties do not complete.

Answer 191

The deposit is paid on exchange of contracts.

Answer 192

Electronic or cheque (provided by SC). Electronic only (provided by SCPC).

Answer 193

The funds must come from an account in the name of a conveyancer at a clearing bank.

Answer 194

Pre-printed special conditions - need to be individually checked to see if they are relevant to the particular transaction Special condition 3 - whether the sale includes any contents or excludes any fixtures. Special condition 4 - whether the property is to be sold with vacant possession or subject to leases or tenancies. Special condition 5 - relevant where the time for completion has been altered by agreement and should be deleted I the parties have agreed that completion should take place by 2pm on the agreed day. Special condition 6 - should be left in as it makes clear to the parties that the should not rely on any representations that have not been made in writing. Special condition 7 - needs to be completed if there is a non-owning adult occupier of the property, if the occupier is agreeing to the sale and to give vacant possession win completion and releasing any rights they have in the property to allow the sale to take place.

Answer 195

The appointment of a second trustee for the purpose of the transfer Arranging for the seller to obtain or pay a restrictive covenant insurance policy Disclosing a defect in title Seller selling with limited or no title guarantee Deposit of less than 10% and/or for the deposit to be held as agent rather than stakeholder Payment of VAT Removal of fixture by the seller Inclusion of an indemnity covenant in the transfer to protect the seller from liability once they have lost physical possession the property * * An indemnity covenant will be necessary if there are positive covenants and the seller is the original covenantor or they have given an indemnity covenant to their seller when they acquired the property. SC and SCPC states that where a seller has an ongoing liability e.g. an indemnity chain, the buyer must give the seller a personal indemnity covenant in the transfer. As this is express in the SC, there is no need to include one but a lot of solicitors do to act as a reminder to check that the term has been included in the transfer.

Answer 196

Under both standard conditions, the risk of damage to the property passes to the buyer on exchange of contracts. Means that the buyer has to complete the purchase even if the property is damaged or destroyed between exchange and completion. Buyer should be warned of this as they may not be aware. Buyer and lender need to be satisfied that the insurance is adequate in terms of the value of the property and the estimated cost of reinstatement and the type of risks covered. If the property is covered by a mortgage, the lender may actually insure it but if not then the buyer should take out a new insurance policy. If the buyer already has other properties they may add a new property to it.

Answer 197

Both standard conditions state that there is no obligation to insure a freehold property unless required to do so by a special condition in the contract. It may be better to agree that the risk stays with the seller e.f. if they are in process of constructing it. If this is agreed then the specific conditions require the seller to maintain the policy until completion and if the property suffers damage then the proceeds of the insurance policy go to the buyer. Even if none of these cases apply, the seller may not cancel their policy in case something goes wrong. If a claim is then made there is the risk that the insurer will not allow reduce the proceeds because there is another policy. The standard conditions therefore provide that if this happens and the buyer cannot recover the full amount, the purchase price is reduced accordingly.

Answer 198

Not normally chargeable in residential transactions. The seller solicitor will usually choose to incorporate the SC (SC 1.4) that the purchase price and the contents price are inclusive of VAT because it is expected that no VAT will be charged or paid.

Answer 199

VAT is payable when the property is less than three years old or because the seller has exercise the option to tax.

Answer 200

a) VAT is charged so purchase price is exclusive of VAT and VAT will be added on top (SCPC 2) Appropriate for a standard rated supply of a commercial building within three years of constructions where the seller has no choice but to charge VAT. Also appropriate for sale of an old commercial property where the seller needs to opt to tax to recover VAT is has paid to refurbish or professional costs and the buyer is not VAT sensitive. b) VAT is not charged so purchase price is inclusive of VAT so that VAT if there is any cannot be added on top (SC 1.4 or special condition in a SCPC contract) If the supply is standard rated, the supplier will have to account to HMRC for the VAT out of the purchase price. Not appropriate if it is a new building or where seller has exercised option to tax as this will not charge VAT. But may be appropriate if the building is an old commercial building where the seller does not have input tax to recover so has not need to opt to tax. This will be a good option with VAT sensitive buyers who cannot recover VAT paid on the purchase price. This is however, still a risk if the law changes and an exempt supply becomes standard rated in which case the seller will have to take out VAT of the agreed purchase price. c) Purchase price is exclusive of VAT so in the event the law changes to make an exempt supply chargeable at the standard rate, the seller is contractually obliged not to opt to tax (SCPC Part 2, Condition A1) This is appropriate if the property is an old commercial building but the seller does not have input tax to recover so they do not need to opt to tax BUT they do not want to risk there being a change in the law regime. The parties should use the SCPC contract but incorporate one of the optional standard conditions in Part 2, condition A1 as this disapplies SCPC 2 and provides that the seller will not opt to tax the supply of the property before completion but will have the right to charge VAT before the completion if there is a change in the law.

Answer 201

A lender will want to set out their own specific instructions and requirements for a conveyancer in order to limit their exposure to the risk. Once the lender has completed their own checks, they will use a mortgage offer (residential and simple commercial loans) or commitment letter with term sheet attached (more complex commercial loans) which sets out the terms. These documents give details about the loan. If the loan requires conditions such as work the buyer has to do on the property there may be a retention from the mortgage advance until works are done. The borrower will therefore have to find the sum from other sources in order to complete. The mortgage offer may allow the lender to withdraw the offer even after the buyer has exchanged so the solicitor acting for the buyer has to make it clear that the buyer understands the terms of the mortgage offer before before exchange of contracts. Further documents required by lender: Most lenders will want a first legal mortgage (by deed and completed by registration) over the property owned by the borrower. This is important as a legal mortgage has a power of sale implied into it although most mortgage deeds will have an express power. The borrower’s solicitor is under and obligation to explain to the borrower what their obligations are under the mortgage deed and to advise on the consequences of defaulting on the mortgage payments and the powers of the lender in the event of default.

Answer 202

Even where the lender is separately represented, it is common for the buyer’s solicitor to report the results of the title investigation and the pre-contract searches and enquiries to the lender. The lender needs to know whether the borrower will have good title to the property as much as the buyer because they want to know whether they can sell the property in the future if they need to enforce the security. The buyer’s solicitor will be asked to prepare a certificate of title to disclose to the lender any problems with the property so the lender is can decide what actions it wants to take. Alternatively, the lender’s solicitor will obtain copies of title and searches from the borrower’s solicitor and report to the lender direct with the borrower paying the costs. There is a Handbook that most lenders use if they are part of a specific organisation which provides instructions on the type of information that lenders need and what they will and will not lend on. The lender’s requirements must be met before the conveyancer will be able to request that the mortgage funds are released.

Answer 203

The lender needs to know whether the property is adequate security for at the loan. They will also require a certificate from the solicitor that the property has good and marketable title.

Answer 204

In residential transactions the lender will usually require a certificate of title which aims to reduce the risk of conflict when a solicitor acts for both the lender and the borrower.

Answer 205

It confirms to the lender that there are no legal problems with the property so the lender can safely lend against it, confirms who will own the property once the sale is completed and the completion date when the funds are needed.

Answer 206

The lender will require a more detailed certificate of title. It is prepared by the buyer’s solicitor and is based on information from the pre-contract investigations. It reduces the paperwork to be reviewed and avoids the need for duplication of the title investigation and searches and enquiries so saves time and expense for the borrower and lender.

Answer 207

The certificate of title is a series of statements about the property e.g. there are no mortgages, charges or liens etc. If this is not the case, then there is a box to fill out what the property is subject to.

Answer 208

If the information is wrong then the lender can sue the firm that supplied it because there are warranties that are contained within it.

Answer 209

The certificate of title is provided right before completion of the loan. Drafts will be provided to the buyer/lender’s advisors earlier so they have warning of issues. The buyer’s solicitors will not exchange until they know that the lender is happy with the certificate and any disclosures.

Answer 210

Before exchanging, both solicitors need to obtain their client’s authority to exchange. The authority should be in writing and a note made on the file as the solicitor will be liable in negligence if they exchange without their client’s express or implied authority. The buyer should be informed of their liability upon exchange i.e. they can no longer withdraw without losing the deposit.

Answer 211

Must be in writing, incorporate all agreed terms, contained in one document*, signed by the parties. *If documents are exchanged, then must be in each copy of the contract. It is usual to exchange identical copies of the contract.

Answer 212

This is used where the solicitor holds both parts of the contract signed. This means that one of the solicitors has already sent their client’s signed part of the contract to the other side prior to exchange of contracts. The undertaking is that the solicitor who holds both parts signed will that same day send their client’s signed part of the contract to the other side by first class post, through document exchange or by hand duly dated. *The buyer’s solicitor undertakes to send the other side a banker’s draft or client account cheque for the agreed deposit with the client’s signed part of the contract if it is the buyer’s solicitor who holds both parts.

Answer 213

Solicitors in person, by post, over telephone.

Answer 214

This only works if there are arrangements in place to ensure that each solicitor forwards their client’s part of the contract to the other and the seller’s solicitor receives the buyer’s deposit. Law Society protocols: The Law Society has developed protocols to govern the process of exchanging over the phone. The advantage is that they involve undertakings from the solicitors so if they are breached they can result in disciplinary action against the offending party. The solicitors should record the exchange with details of the time of exchange and the formula used written by the solicitor on the front page of the contracts being exchanged. This is done at the time of the phone call exchanging contracts. A file note should be made for: - Date and time of exchange - Formula used and exact wording of any agreed variation to the formula - The completion date - Deposit to be paid Identities of the solicitors involved in the exchange

Answer 215

Used where each solicitor holds their own client’s signed part of the contract. Can be quicker because it does not require one side to send their clients signed part of the contract to the other side before an exchange takes place. The undertakings are that each solicitor holds their own client’s signed part of the contract and that each solicitor will send the signed part of the contract that they are holding to the other side by first class post, through document exchange or by hand duly dated. *The buyer’s solicitor undertakes to send the other side a banker’s draft or client account cheque for the agreed deposit. *If the parties have agreed to send the deposit electronically the relevant formula will have to be varied.

Answer 216

Most complex of all of them and used in residential transactions where there is a chain transaction i.e. when or more properties are being sold.

Answer 217

A binding contract exists and neither party can withdraw without incurring liability for breach. Seller retains the legal title in the property until completion but holds the beneficial interest on behalf of the buyer. The seller is entitled to remain in physical possession of the property although it is possible for the parties to agree that the buyer can occupy the property as a licensee (SC 5.2.2.) The seller must pay the outgoings such as the community charge or business rates until completion. Unless the contract states otherwise, the buyer bears the risk of any loss or damage to the property so need to ensure that insurance of the property is in place and is effective from the moment of exchange. Immediately after exchange, the solicitors should inform their clients and the estate agent that exchange has taken place and if exchange as taken place over the phone, comply with the undertakings relevant in Law Society Formula.

Answer 218

Buyer’s solicitor

Answer 219

As close to the completion date as possible.

Answer 220

a) To make sure the seller has not encumbered the title since investigation of title took place b) To check the financial circumstances of the borrower when acting for the lender c) To gain priority for the buyer and the lender over anyone else making an application before the buyer applies to register the change of ownership at the LR d) If the seller is a company to check the company has not gone into liquidation before the balance of the purchase price is paid over on completion

Answer 221

Often significant time between exchange and completion and need to check that the title has not been further encumbered.

Answer 222

LR search made against title number to see if any new entries have been made since the search from date I.e. date on which the official copies were produced. Form OS1 is used if the whole property is being sold. Form OS2 if the sale is of part only. A plan will normally also be needed for OS2.

Answer 223

Either OS will give details of the title number, the address of the property, names of the registered proprietors, name of the applicant and the reason for the search i.e. an intention to purchase, lease or charge the property. If the buyer is financing the purchase of the property with the aid of a mortgage, then the application for a LR search should be in the name of the lender and not the buyer. The results on priority will therefore be conferred on both the buyer and the lender since the mortgage is deemed to take place slightly after the purchase by the buyer. A search on behalf of the buyer will not protect the lender.

Answer 224

Set out in Form OS1R or an OS2R. It will reveal any new entry made since the search from date and confer on the applicant a priority period of 30 working days from the date of the search result. The priority period provides protection to the applicant against any subsequent entries which may be placed on the register after the date of the search but before the buyer is registered as proprietor. The buyer will take the property free from those encumbrances that have been attempted during the priority period but they must apply for registration by 12 noon on the last day of the priority period.

Answer 225

Land charges search is made on form K15. It is not necessary to search again against the names of the previous estate owners as no entries can have been registered against them after they parted with the property. The results will be returned on K18.

Answer 226

The priority period is 15 working days from the date of the result .

Answer 227

The searcher takes the property free of any entries made on the register between the date of the search and the date of completion, as long as completion takes place during the 15 working days. If there are adverse entries, the matter should be raised with the seller asap.

Answer 228

Apply for a land charges search against the name of the buyer and carry out the pre-completion Land Registry search against the property’s title number on K16. A lot of solicitors will not think it necessary to perform a bankruptcy search on an individual seller. This is because if there is no notice or restriction relating to the bankruptcy on the registered title, a buyer for value acting in good faith without notice of the bankruptcy petition or adjudication will take good title from the bankrupt seller even though legal title to the land has vested in the trustee in bankruptcy. However, the solicitor may want to do a bankruptcy search if the transaction is high value and there is reason to be concerned about the solvency of the individual seller.

Answer 229

Solicitor will already be making a land charges search against the seller so the name of the buyer will be added to the names to be searched on form K15.

Answer 230

A company search needs to be carried out. The solicitor acting for a lender should also carry out a company search against the seller prior to completion. This will reveal whether the seller is still in existence, whether it is solvent, whether it has created any fixed or floating charges. A company search has no priority period so should be carried out near day of completion so it remains relevant. If the transaction has a particularly high value/there is reason to be concerned about the solvency of a corporate seller or borrower, it is possible to do a telephone search at the Registry of Winding Up Petitions at the Companies Court on the day of completion.

Answer 231

Form TA13 Completion Information and Undertakings Purpose of form TA13 It asks the seller to confirm important information relevant to completion: a) Arrangements for handing over the keys b) The place and method of completion c) Documents to be handed over at completion d) Exact amount payable by buyer on completion e) Confirms the undertaking the seller’s solicitor gives to redeem the mortgage out of the completion money on completion and to send evidence of the discharge as soon as possible from the lender * * The form of undertaking should be agreed between the solicitors before the day of completion - form TA13 does this by asking the seller solicitor to list the mortgages and charges secured on the property and whether they undertake to redeem of discharge the listed items. A reply of ‘yes’ is treated as an undertaking.

Answer 232

a) Certificate of title to confirm that the property is adequate security for the loan being advanced b) A solvency search against the borrowers c) A clear OS1R in the name of the lender d) An executed but not completed mortgage deed

Answer 233

The solicitor for the buyer will need to send a Financial Statement to the client advising the client of the funds needed to complete. The statement will show the amount to be forwarded by the buyer to the solicitor and will include. The balance of the purchase price, any SDLT/LTT due, the registration fee, the amount outstanding for any other disbursements, the solicitor’s fees and any other amount owing e.g. restrictive covenant insurance policy premium. The solicitor needs to ensure that they have received the mortgage advance from the lender and the balance of the purchase price from the buyer client. The balance should be sent to the seller’s solicitor to the bank account specified in the replies to the Completion information form. The solicitor should notify the seller’s solicitor that the is on its way. Once the money has been received the seller’s solicitor will contact the solicitor acting for the buyer and completion will take place.

Answer 234

Solicitors need to inform the parties that they have exchanged. Will usually involve sending the client’s signed and dated part of the contract with the completion date inserted to the other side.

Answer 235

a) Prepare the transfer deed b) Pre-completion searches done c) Make practical arrangements for completion d) Ensure the finances are in order for completion

Answer 236

a) Deed b) Signed by parties c) Delivered d) Signature witnessed by an independent witness or company executes

Answer 237

a) Using company seal in accordance with the articles of association b) Having it signed by a director and the secretary, or by two directors of the company, provided that the deed is expressed to be executed by the company c) Having it signed by a single director in the presence of a witness who then attests that signature

Answer 238

The seller always executes the transfer deed. The buyer will also execute nut only if they are entering into an obligation or making a declaration in the TR1 e.g. giving an indemnity covenant or declaring a beneficial interest under a trust.

Answer 239

A document that makes it clear that it is meant to be a deed is presumed to have been delivered on execution but this can be rebutted by contrary intention. If the client has signed the transfer but does not intend for it to come into force yet, their solicitor needs to expressly say so in the covering letter when sending the deed.

Answer 240

TR1 for registered freehold title and TP1 for transfers of part. If unregistered, will be subject to compulsory first registration so the solicitors will often use a LR transfer firm although possible to use a conveyance.

Answer 241

The buyer’s solicitor usually executes the transfer deed and sends it to the seller’s solicitor for signing. In a straightforward sale, the seller’s solicitor may include it in the pre-exchange package sent to the buyer’s solicitor.

Answer 242

Panels 1 and 2: the title number and the address of the property should be checked against the details in the contract and the official copies.

Answer 243

Panel 3: the transfer will only be dated upon completion.

Answer 244

Panels 4 and 5: the names of the parties should be checked against the details in the contract and, in the case of the transferor, the official copies.

Answer 245

Panel 8: the purchase price should be written in figures as well as words. VAT?

Answer 246

Panel 9: on the front page of the contract the seller has stated they are selling with full title guarantee. In addition, SC 4.6.2 states the seller is selling with full title guarantee.

Answer 247

Panel 10: there is only one buyer so none of these boxes apply. The purpose of this panel is for co- owners to declare how they are going to hold the equitable interest in the property, as tenants in common or joint tenants.

Answer 248

Panel 11: there should be an indemnity covenant to observe the covenants in the charges register. This is provided for in the contract by SC 4.6.4 as the seller will remain liable on the restrictive covenants in the 1968 Conveyance which will appear in the official copies following registration of the client’s purchase

Answer 249

Panel 12: the signature of the seller, being an individual, must be witnessed Panel 12: the buyer should also execute the transfer as they are entering into an indemnity covenant.

Answer 250

Sends the balance of the purchase price and the release the deposit paid on exchange to the seller. They will usually arrange for the completion money to be sent electronically.

Answer 251

On receipt of the completion money, the seller’s solicitor will complete the transaction by dating the TR1.

Answer 252

Once TR1 has been dated, the lender’s solicitor will need to date the mortgage deed. This must be done after the TR1 has been dated.

Answer 253

Requires one solicitor, usually buyer’s solicitor, attending the office of the other solicitor. All parts of the transfer should have already been executed by the parties in anticipation of formal completion which will usually be with the seller’s solicitor since the seller normally executes the transfer last. Buyer’s solicitor The buyer’s solicitor will usually arrange for the completion money to be sent electronically. At the completion meeting, the buyer’s solicitor will check any title documents against the evidence of title previously sent to them. Seller’s solicitor In return for receiving completion money, the Seller’s solicitor hands over the title documents and other documents relating to the property such as planning permissions and guarantees and insurance policies. The seller’s solicitor will arrange for the release of keys to the property by whoever is holding them.

Answer 254

Law Society Code for Completion by Post which relies on undertakings given by the solicitors involved in order to be effective. Involves the seller’s solicitor acting as agent of the buyer’s solicitor for the purpose of carrying out the completion procedure. It is important that the buyer’s solicitor asks the seller’s solicitor to do whatever they would have done if they could have attended the completion in person. On receiving the completion money, the seller’s solicitor will carry out the instructions and complete the transaction. The seller’s solicitor should then contact the buyer’s solicitor to inform them that completion has taken place. The documents that would have been handed over to the buyer’s solicitor are send by first-class post or document exchange. Undertaking: Under the Law Society Code for Completion by Post the seller’s solicitor gives an implied undertaking to carry out the buyer’s solicitor’s instructions. This may be enforced through the courts.

Answer 255

Under the Law Society Code for Completion by Post the seller’s solicitor gives an implied undertaking to carry out the buyer’s solicitor’s instructions. This may be enforced through the courts.

Answer 256

The legal title passes to the buyer on completion.

Answer 257

The legal title does not pass to the buyer until the buyer is registered at the LR as proprietor of the land. (Purpose of priority period due to the registration gap)

Answer 258

This will have been agreed using the completion information form. The buyer will have agreed to allow the seller’s solicitor to discharge the mortgage after completion using the money received at completion, the buyer relying on the undertaking from the seller’s solicitor. The seller’s solicitor may ask the buyer’s solicitor to send the amount required to redeem the mortgage direct to the lender on the day of completion with only the balance being sent to the seller’s solicitor.

Answer 259

Once they have received the amount required to redeem the mortgage from the seller’s solicitor, they will either: a) Complete LR form DS1 and send it to the seller’s solicitor for onward transmission to the buyer’s solicitor b) Submit an e-DS1 electronic discharge through the LR portal* c) Use the Electronic Discharge system, sending an electronic message to the LR which automatically removes the charge from the register. * If these are used, the seller’s solicitor does not send the DS1 form on to the buyer’s solicitor. Instead, the seller’s solicitor send the buyer’s solicitor confirmation that notice of release or discharge in electronic form has been given to the LR.

Answer 260

Within 14 days of completion.

Answer 261

Within 30 days of completion.

Answer 262

The payment and the tax return will be sent the relevant authority which can be done online or using a paper application.

Answer 263

HMRC = SDLT5 form WRA = WRA certificate

Answer 264

Can lead to fines and penalties and any application to the LR to register the buyer as the new registered proprietor will be rejected unless the proof of payment certificate can be produced.

Answer 265

The lender’s solicitor needs to register the charge at CH within 21 days of completion to ensure constructive notice is given to other creditors of the company. The time limit is absolute and cannot be extended with a court order so failure to register renders the charge void against a liquidator or an administrator of the borrower and the borrower’s other creditors so would seriously prejudice the lender’s security.

Answer 266

This happens after stamp duty has been paid and after a charge has been registered at CH (if relevant). The buyer’s solicitor needs to apply to have the buyer registered as the registered proprietor of the land in the title. The lender’s solicitor who may also be acting for the buyer needs to apply to register the charge.

Answer 267

Made on LR form AP1. If the seller had a mortgage which has been electronically discharged, the entries in the charges register protection the mortgage will be automatically removed but if a DS1 has been used the buyer’s solicitor must apply for the mortgage to be discharged. All three of these applications can be made on AP1. What needs to be submitted with the application? A certified copy of the transfer, fee, SDLT/LTT certificate and the DS1 (if used). An applicant for registration must also set out any overriding interests that burden the title. These will be entered onto the register and will stop being overriding. If the buyer has created a new mortgage, the following documents also need to be sent with the application: a) Certified copy of the mortgage deed b) If the buyer is a company, a certified copy of the certificate of registration issued by CH c) If the buyer is a company, the solicitor’s/lender’s written confirmation that the enclosed certified copy mortgage deed is the same as the one filed at CH and to which the certificate of registration relates

Answer 268

Before the 30 working day priority period of the OS1 search expires.

Answer 269

This means that the buyer and the lender lose the benefit of the priority period and would take the property subject to the matters registered during that period.

Answer 270

This must be made within two months of completion of the transaction.

Answer 271

On Form FR1.

Answer 272

Application form FR1, the fee, documents listed in duplicate on form DL * should be sent to the LR. One copy of form DL will be returned to the applicant’s solicitor which will give an estimate of the likely time the LR expects to take to deal with the application. *Form DL a) All the documents which formed the evidence of title supplied by the seller’s solicitor b) All the buyer’s pre-contract searches and enquiries relating to the title with their replies c) The contract d) Requisitions on title with their replies e) All pre-completion search certificates f) The transfer deed g) The seller’s mortgage, duly receipted h) SDLT/LTT certificate i) Form DI

Answer 273

They need to investigate title on an application for first registration in order to decide which class of title can be allocated to the title. They need to have access to all the documents which formed the evidence of title supplied to the applicant by the seller’s solicitor. Conveyancers can lodge a first registration application made up of certified copy deeds and documents. Non-conveyancers must however submit the original deeds and documents with first registration applications. If the property is a value of over £5,000, the applicant must give details of the conveyancer acting for each party and where a party is not represented, provide evidence of that party’s identity. The LR will process the relevant applications for registration and insert the buyer as the new registered proprietor and the lender as the new registered proprietor of the charge. The LR will then forward an official copy of the entries on the register, known as the Title Information Document (TID) to the buyer’s solicitor. The buyer needs to keep this as evidence that they are the new owner. They should also check that the transfer and the mortgage have been correctly entered. Buyer’s solicitor needs to deal with the safe custody of TID and papers.

Answer 274

First step is look if there is an express clause in the contract. If there is no express clause, the SC and SCPC provide that the completion date is 20 working days after the date of the contract. The money due on completion must be paid before 2pm on the day of completion and if it is not, completion is to be treated as taking place on the next working day as a result of the buyer’s default. The parties can vary the completion time in the contract. In both sets of the SC and SCPC, the standard conditions provide that time is not of the essence unless a notice to complete has been served. Therefore there is no immediate right for a defaulting party to termite or rescind the contract on the contractual completion date. .

Answer 275

Both sets of standard conditions provide for contractual compensation to be paid. SCs - both the buyer and the seller can be asked to pay this compensation SCPCs - only the buyer can be required to pay compensation How is compensation calculated? The compensation is calculated at the contract rate specified in the contract on the balance of the purchase price minus any deposit paid if the defaulting party was the buyer for the period between the contractual completion date and the date of actual completion. The compensation is calculated as a daily rate so that it can be multiplied for the number of days of default. If the non-paying party was also at fault for some of that period then those days are ignored.

Answer 276

On completion.

Answer 277

Failure to complete on the contractual completion date is a breach of contract and the seller could make a claim for breach of contract under the normal contract law principles. Damages are assessed under Hadley v Baxendale. The measure is what would put the claim in the position they would have been in had the contract been correctly performed. Damages are awarded for losses naturally flowing from the breach as well as any reasonably foreseeable consequential loss. This could include wasted legal costs, putting furniture in storage, the cost of renting another property, the cost of bridging finance and rebooking removal costs. The seller receiving contractual compensation does not preclude the seller from claiming damages for extra losses for breach of contract in the normal way. But the contractual compensation the innocent party receives will be deducted from the damages.

Answer 278

The buyer will have to pay compensation on the balance of £300,000 less £30,000 which is £270,000. That sum is multiplied by the Contract rate, which is 8.5%. This produces an annual rate of compensation £22,950 which is turned into a daily rate by dividing it by 365. Once the daily rate is established, it can be multiplied by the number of days in default. Purchase price: £300,000 Less deposit: £30,000 = £270,000 X 8.5% = £22,950 divided by 365 = £62.88 x 3 days = £188.64

Answer 279

This is a notice sent to the other side once the contractual completion time on the contractual completion date has passed. The notice to complete makes time of the essence and gives the other party 10 working days to complete.

Answer 280

If the defaulting party fails to complete within 10 working days then the party who served the notice can rescind the contract. If the contract is rescinded and the defaulting party was the seller, the seller must repay the deposit to the buyer. The non-defaulting party can also claim damages for any losses they suffer as a result of the other’s default.

Answer 281

The SC and SCPC provide for rescission in specified circumstances. Specified circumstances: E.g. where a party has failed to comply with a notice to complete or where there has been a misrepresentation by the seller in a plan or statement in the contract or in the negotiations leading up the contract. When will rescission be allowed? Where the seller’s error or omission results from fraud or recklessness or the buyer would be obliged to accept a property differing substantially in quantity, quality or tenure from what the error or omission had led them to expect. Less serious misrepresentations only entitle the buyer to damages.

Answer 282

The lender’s solicitor will need to date the mortgage deed. This must be done after the TR1 has been dated.

Answer 283

From the date of the grant of the lease will be a depreciating asset. The landlord retains control and specifies what the tenant can and cannot do. There will be repairing obligations which may involve significant expenditure for the tenant.

Answer 284

Flexibility - they can move easily at the end of the lease and tenant’s can negotiate a break clause. Not capital outlay although some may have to pay a premium at the start of the lease. But the capital generally is not tied up in the property.

Answer 285

The tenant may prove unreliable and may not pay the rent. The tenant may not take care of the premises which would result in a depreciation of the landlord’s investment The income and capital are not guaranteed and are dependant on the state of the property market.

Answer 286

Positive covenants cannot be easily enforced against subsequent owners in freehold land. When buildings have multiple occupants, whether commercial, residential or a mixture of both, it is important that positive covenants in relation to repair can be enforced and this is difficult to achieve with freehold land. Landlord retains a capital interest in the freehold which, depending on the market, will be an asset. The landlord can retain control of the management of the building to ensure that the capital value is preserved. If the lease is drafted well, the landlord will be able to recover all expenditure by way of a service charge paid by the tenant. The landlord gets a steady income by renting the property at a market rent.

Answer 287

Prescribed clauses Commencement clause Interpretation clause Grant of the lease cause Ancillary rights Rights excepted and reserved clause Annual rent clause Rent review clause Tenant’s covenants clause Landlord’s covenants clauses Landlord’s right to enter on breach of repair covenant Re-entry and forfeiture clause

Answer 288

Leases that are granted on or after 19 June 2006 out of registered land and are compulsorily registrable must contain a standard set of clauses. These must be set out at the beginning of the lease or immediately after any front cover sheet and/or front contents page. What are they? The prescribed clauses are a summary of the important details in the lease and they bring together all the information that the LR needs to complete the registration. This saves time.

Answer 289

The lease starts with the words ‘this lease’ which is followed by the date of its grant and the names and addresses of the parties. If the lease is created out of a registered title, the document will carry the usual LR heading (country and district, landlord’s title number, brief description of the property and date) at the top its first page.

Answer 290

These are the definitions that are required to avoid having to repeat detail.

Answer 291

This is the operative part where the landlord grants the tenant the lease of the property for the term. The term can be fixed, periodic or at will.

Answer 292

These gives the tenants rights over land that allow them to use the property more effectively i.e. easements.

Answer 293

These are the rights that are in favour of the landlord over the leased property.

Answer 294

This is the rent payable to landlord. Usually shown quarterly. Other sums payable as insurance premiums may be reserved as rent and in the past it has been easier to exercise remedies for non-payment of rent rather than failure of other obligations.

Answer 295

Unless the term is short, the landlord will want to ensure that there is a mechanism to allow them to increase the annual rent in line with rises in rental value in the wider property market.

Answer 296

There are numerous obligations imposed on the tenant as to how they use and look after the property.

Answer 297

E.g. covenant to insure.

Answer 298

This gives the landlord the right to enter and inspect, give notice to the tenant to repair and if the tenant fails to do so within a certain period then the landlord can do the work themselves.

Answer 299

This allows the landlord to bring the lease to an end if the tenant fails to pay the annual rent or is in breach of one of the other tenant covenants in the lease. Lease of part of a property: This will confer additional ancillary rights such as rights to use common reception areas, lifts, corridors, stairwells to access the leased property to use shared facilities such as toilets or storage and parking. It will also have a mechanism for reimbursing the landlord for a proportionate part of the common repair and maintenance expenses I.e. service charge.

Answer 300

Fixed term: Longer leases will sometimes have a break clause. At the end of the fixed term, the lease expires without either the landlord or the tenant having to serve a notice. Periodic tenancy: Continues indefinitely from one person to another. The tenant knows it will not be less than the initial period but after that they wish to continue on a month to month or periodic basis. This type of lease will run until either party decides to terminate it by giving the other party notice that they want to bring the arrangement to an end. The notice should be the length of one period of the tenancy. But as an exception of the tenancy is a yearly periodic tenancy, the notice period is six months. Tenancy at will: The tenant occupies the property with the permission of the landlord on the terms that the tenancy may be terminated by either party at any time

Answer 301

The tenant cannot carry out the stated action according to the lease. The landlord may allow it as a one off consent or a permanent variation of the lease but the landlord has total discretion in the matter. It is not commercially acceptable for the landlord to place many absolute covenants in a lease and could have a detrimental effect when the rent is reviewed.

Answer 302

Allows the tenant to carry out the stated action but only if it obtains the landlord’s consent first.

Answer 303

Allows the tenant to carry out the stated action but only if it obtains the landlord’s consent first, but the landlord is not allowed to withhold consent unreasonably. This is the most preferable for the tenant so when negotiating a lease, the lessee’s solicitor will try to put in “reasonable” in covenants.

Answer 304

FRI’s protect landlords from incurring expenditure that they cannot recover from tenants. From the perspective of the landlord an FRI is an advantage because they get the full profit from the payment of the rent from the tenant but they do not have the responsibility for insuring, repairing and maintaining the property themselves. The onus of that is on the tenant. The property is therefore a very profitable type of investment for pension funds and insurance companies. These investors will often not want any other type of lease. The leases act to preserve the capital value of the property by a) keeping the building in good repair, b) the lease reserves a market rent throughout the term (with the ability to increase the rent at regular intervals) to ensure a steady income and c) the investment is readily sellable in the future.

Answer 305

If the tenant has a lease of the whole building, the terms of the FRI are usually for the whole building. If the tenant has a lease of part, the responsibility will usually be divided between landlord and tenant. The tenant will normally have responsibility for non-structural parts of the premise they have a lease for and the landlord will have responsibility for structural parts and common areas. A lease of part will usually contain provisions enabling the landlord to pass on the costs in maintaining the structure and common parts to the tenants via a service charge.

Answer 306

There is some discrepancy in case law. Case law argues that there must be disrepair first, before the tenant can be in breach of covenant to repair. So the physical condition must have changed from its previous physical condition. This poses issues if the building is brand new. Case law therefore states that the property does not need to be kept in perfect repair. It just needs to be repaired to a point that renders it fit for the occupation of a reasonably minded tenant of the class that is likely to take it. This suggests that circumstances come into play. Renewal and improvement goes beyond repair. Repair is construed as renewing or restoring a PART not the WHOLE. It is necessary to consider the fact and degree as well as the age and nature of the property at the date of the lease. A repairing covenant can oblige a tenant to repair an inherent defect in the design and construction of the building if that is the only way to repair it.

Answer 307

This wording means that the property also needs to be repaired even if this means that the property ends up being in better condition than at the start of the lease. It should be read as a covenant to put it in repair.

Answer 308

This is more onerous than just to ‘keep’ in repair. It means that the tenant can be obliged to carry out work even if there is no actual disrepair.

Answer 309

If the landlord has responsibility for insurance, the tenant should ensure that they are not responsible for damage from insured risks. This type of damage should be covered by the insurance provisions of the lease.

Answer 310

If the tenant has the lease of the whole building they usually have to insure the building. If the building is in multi-occupation, the landlord usually insures the building and then passes on the costs of the insurance to the tenant through a separate insurance rent.

Answer 311

A landlord will often have an insurance policy for insured risks for a commercial property. The landlord’s obligation to insure should be limited to that it does not include exclusions, limitations, excesses. If there is any shortfall in payout for these risks, the liability is passed onto the tenant. The property should be insured ‘to the full reinstatement value’. This is to ensure that the payout would pay for rebuilding if the whole property as destroyed.

Answer 312

The landlord will often ask the tenant to enter into a covenant to pay a sum referred to as insurance rent. The insurance rent will covers the landlord for the premium of the building’s insurance policy and an associated policy to cover the landlord for loss of the annual rent I.e. the income stream, during the period where the tenant is unable to use the building following the event of the insured risk.

Answer 313

A covenant like this is often expressed as a covenant to use insurance proceeds to reinstate property rather than an absolute obligation to reinstate even if the proceeds are insufficient. So the tenant would not have to dip into their own funds to reinstate if the landlord’s insurance policy does not payout enough. Ideally the provision would also include a provision for the landlord to pay for a shortfall as this reflects the landlord’s failure to insure the property to its full reinstatement value. There may also be a provision to deal with a situation where reinstatement is not possible I.e. there is nothing they can do to rebuild the building. There are essentially two options for such a provision: Option 1: the landlord has negotiated a provision that the landlord keeps the insurance monies. Option 2: it has been negotiated that the tenant keeps the insurance monies or that it will be shared between the landlord and tenant proportionate to their interests in the building. The tenant is the one who is paying the insurance monies so if they are in a strong position to negotiate they could demand this. A strong position would be a tenant proposing a long lease for which the tenant has paid a premium.

Answer 314

Unless there is an express term, the tenant will have to pay rent to the landlord regardless if the property is not usable. The tenant should therefore negotiate a provision for rent suspension if the property cannot be occupied following damage by an insured risk. A landlord will usually agree to this as they can recover the rent from the insurance policy. Although, the duration for rent recovery is usually limited to a certain period of time. Therefore, the landlord may want to limit the duration of the rent suspension.

Answer 315

The first option is an express provision in the lease for termination if the building is completely destroyed. Leases will often contain a provision that states the landlord has a right to terminate if reinstatement is impossible. The tenant should try to ensure that they also have the right to terminate. This is especially true when the rent suspension is limited in duration and they face having to pay rent for a property that is unusable to them. The provision should be drafted so that the tenant can terminate the lease if the property has not been reinstated by the landlord by the end of the rent suspension period. In absence of an express provision, the doctrine of frustration will only apply in exceptional circumstances so it is best not to rely on this.

Answer 316

Landlord has complied with covenants to insure the property to its full reinstatement value against the insured risks specified in the lease The landlord therefore can reinstate the property using the insurance proceeds from the building’s insurance policy. The premium will already have been recovered from the tenant through the insurance rent provision. The landlord will not receive rent whilst the reinstatement is taking place but will receive an equivalent sum under the loss of the rent insurance policy. This is also paid for by the tenant. Whilst the tenant may be inconvenienced and may have to find alternative accommodation, they are not paying rent on the property. Once the rent becomes payable again so when the rent suspension provision comes to an end they will hopefully be able to resume occupation. If they cannot resume occupation, they may be able to break the lease through a termination provision. If there is no break clause, they may have to pay rent again for a property they cannot use. Damage caused by risk not covered by policy: The landlord and tenant may have agreed not to insure the risk because a) it is an unlikely risk or b) the insurance for the risk carried a high premium. If the damage is the result of a uninsured risk or the tenant has done something that has resulted in the insurer being entitled to keep the payout, it is the tenant who has liability to repair the property due to the repairing covenant.

Answer 317

For structural and exterior alterations.

Answer 318

Even where a covenant is absolute, if the tenant can carry out what it deems to be improvements. To do so, the tenant has to serve a notice on the landlord detailing its proposals. (S3 LTA 1927) The landlord has three months to object.

Answer 319

The tenant has the right to apply to the court for authorisation to carry out the improvements. The court can authorise the improvement if they a) add to the letting value of the property, b) are reasonable and suitable to the character of the property and c) do not diminish the value of any other property of the landlord.

Answer 320

The landlord can offer to carry out the works themselves in return for a reasonable increase in the rent. The tenant does not need to accept the offer and they may withdraw the notice. But this also means they cannot apply to court. If it does so, the landlord has no right to carry out the works and increase the rent.

Answer 321

The tenant can lawfully carry the improvements out.

Answer 322

For non-structural alterations and changes to inside.

Answer 323

Usually in a separate document called a licence to alter.

Answer 324

Prohibits alterations without the landlord’s prior consent. A term is implied into a qualified covenant against making improvements, that the landlord cannot unreasonably withhold its consent. “Improvement” If the works in question increase the value or the usefulness of the property to the tenant, then they constitute an improvement even if they result in a reduction in value of the landlord’s reversionary interest.

Answer 325

With regards to a fully qualified covenant, the landlord cannot withhold their consent unreasonably to an alteration whether or not does amount to an improvement, whereas for a qualified covenant requires the works to constitute an improvement.

Answer 326

If a tenant has obtained prior authorisation to make improvements, they are entitled to claim compensation for the improvements they have made that have add to the letting value of the holding. The claim has to be made within the statutory time limits. This is rarely used because the section 3 procedure is rarely used and there is usually a clause in the lease that requires the tenant to remove all alterations and reinstate the premises at the end of the term.

Answer 327

A narrow user clause may depress the rent on any rent review for put of a tenant who may want to diversify business. The landlord may therefore impose a covenant, qualified or fully qualified covenant which allows for the possibility of changing the user by making use of the categories set out in the Use Classes Order 1987.

Answer 328

There is no statutory implication that the landlord’s consent cannot be unreasonably withheld. But the landlord cannot charge a fine or an increased rent as a condition of giving consent provided there is no structural alteration.

Answer 329

Both the landlord and the tenant should bear in mind that it may be necessary to obtain planning permission and consider the terms of any covenants affecting title to the property. It is common for the landlord to retain control of planning permission by inserting a covenant to state that the tenant cannot apply for planning consents without the landlord’s permission.

Answer 330

Assignment Underletting Charging Sharing occupation Parting with possession (catch all - encompasses underletting, assignment and any informal arrangements that would not otherwise be caught) Most leases will have an absolute covenant against alienation but then will allow it on controlled terms.

Answer 331

Statute implies into a qualified covenant the provision that the landlord cannot unreasonably withhold consent. This effectively converts it into a fully qualified covenant. Statute also allows a landlord and tenant to agree what would constitute ‘unreasonably’ withholding consent. The conditions are often that the assignor agrees to give an authorised guarantee agreement for the assignee or that the assignee agrees to provide guarantors. A circumstance could be that the assignor must be up to date on rent and or that the assignee is of sufficient financial strength to enable it to comply with the tenant’s covenants in the lease. Statute also implies that were there is a qualified covenant on assignment (whether or not the fact that consent is not to be held unreasonably is express or implied) and the tenant has made a written application for consent, the landlord must: a) Give consent unless it is unreasonable b) Service the tenant with notice of its decision - if consent is given the landlord must provide those conditions and if the consent is withheld the landlord must provide why it is withheld

Answer 332

A landlord is not allowed to refuse its consent to an assignment on grounds that have nothing to do with the relationship of the landlord and tenant in regard to the subject matter of the lease. It is not necessary for a landlord to prove that the conclusions which led it to refusing consent were justified if they were conclusions that might be reached by a reasonable person in the circumstances. Landlord can refuse on the grounds of the assignee’s intended use of the property even if this is not prohibited by the lease. Landlord generally only has to consider their own detriment. But if the detriment to the tenant would be disproportionately large in relation to the benefit gained by the landlord, then it would be unreasonable for the landlord not to consider this. Apart from the above considerations, each case is a question of fact. Examples of reasonably withholding a) The proposed assignees references were not satisfactory b) There was a longstanding and extensive breach of the repairing covenant by the assignor and the landlord could not be reasonably satisfied that the assignee would be in a position to remedy the breach c) Assignee would be in a position to compete with the landlord’s business d) Where the assignment would reduce the value of the landlord’s reversion - but this is not a good reason if they have no intention of selling it e) Where the proposed assignee intends to carry on a use that is detrimental to the premises or a use that is inconsistent with the landlord’s tenant mix policy f) Where the assignee would unlike the assignor acquire protection under Part 2 of LTA 1954 g) It will usually be reasonable for a landlord to withhold consent where an assignee’s proposed used of the premises would breach the terms of the lease - this is highly case specific Examples of unreasonably withholding a) Where landlord has refused consent in an attempt to obtain an advantage for themselves b) Where there are minor breaches of a repairing covenant c) Where premises had been on the market for 18 months, the rent was significant and the slight harm to the landlord would be outweighed by prejudice to the tenant d) Any reasons that are discriminatory under the Equality Act 2010

Answer 333

The property is temporarily surplus to its requirements The tenant could rent it out for more than it pays to its landlord so could make a profit Better than assignment if tenant wants the property back Also better to underlet if the landlord has concerns about the financial strength of the new occupier so would not give consent for an assignment of the headlease There is no-one who would agree to an assignment but would agree to an underlease of the property at a lower rent

Answer 334

It is possible that the landlord might end up with the undertenant as their direct tenant This could happen if the headlease is forfeited and the undertenant whose underlease would normally come to an end successfully applies for relief from forfeiture. Also a possibility if the head tenant’s lease is surrendered or disclaimed by the head tenant’s liquidator. Or if both leases expire and the undertenant exercises their statutory right to stay on in the property and apply for a new lease under the LTA 1954 but the head tenant does not. b) Landlord has limited control Whilst the head tenant is liable to the landlord for the acts of the undertenant the landlord does still have limited control. Any inspections will have to go through the head tenant.

Answer 335

The statutory provision applies that a qualified covenant (not to underlet without the landlord’s consent), consent is not to be unreasonably withheld. The statutory provision applies that a fully qualified covenant (not to underlet without the landlord’s consent which cannot be unreasonably withheld), that the tenant has to make a written application for consent and the landlord must within a reasonable time: a) Give consent, except in a case where it is not reasonable not to give consent b) Serve on the tenant written notice of its decision whether or not to give consent specifying in addition I) if the consent is given subject to conditions, those conditions and ii) if the consent is withheld, the reasons for withholding it.

Answer 336

It is likely that conditions for underletting will have been imposed in the alienation covenant.

Answer 337

Terms of the underlease mirror the terms of the headlease Annual rent of the underlease is as high as the annual rent of the headlease and the rent must be reviewed at the same time on the same terms That the under tenancy must exclude security of tenure for the undertenant so they cannot get stuck with the undertenant at the end of the lease That the undertenant enters into a direct covenant with the landlord to perform the tenant’s covenants in the underlease and the headlease apart from the annual rent That no further underletting of property is allowed

Answer 338

When the rent is payable (even if it is an annual rent, the payments are usually in quarterly instalments) Whether the rent is payable in advance or in arrears (if lease is silent it is deemed to be in arrears) How instalments are going to be apportioned (as it is unlikely that the lease will start perfectly on the day of rent - usually done on a daily basis) How the rent is to be paid VAT (if opted to tax then the VAT should can be added onto the agreed annual rent) Review of the rent (rent cannot change unless there are express provisions to that effect

Answer 339

Fixed increase Index linked Tenants receipts Open market rent review

Answer 340

It is possible to have a rent review clause that provides that at various set dates throughout the term, the rent will increase to a set amount. Not often used as hard to predict what rental levels are going to be like at a point in the future.

Answer 341

The rent is linked to an external index. This allows rent to be altered with inflation but does not track the property market specifically so it may not be that accurate.

Answer 342

This has the advantage of tracking the tenant’s financial health and ability to pay. There are downsides if the tenant’s business falters.

Answer 343

Rent is adjusted at regular intervals during the term by reference to the open market rental value of the premises at the time.

Answer 344

Assessment of what a hypothetical tenant would pay for a hypothetical lease of the property. Two elements to consider: a) The physical property and b) the terms of the lease itself The hypothetical assessment of what the property is worth should be based as closely as possible on the reality of the situation e.g. if the lease is onerous on the tenant this should be reflected in the rent review. If the premises are run down due to the fault of the tenant, this is not going to be adjusted in the rent review because it would be unfair on the landlord. If the tenant has voluntarily upgraded the property through renovation it would also be unfair if the rent was made higher. To deal with these issues, a well drafted rent review clause will make certain assumptions and disregards to try to balance out these issues.

Answer 345

There is a willing landlord and tenant The property is with vacant possession Provisions of the hypothetical lease are the same as the real lease (obviously not the rent as this is under discussion) The term of XYZ years - depends on how long is left on the lease and the economic conditions at that time I.e. unfair to review the lease as if it only had the whole lease term left when it does not Assumption that the tenant has fully complied with their obligations in the lease e.g. deals with the point that the tenant should not profit from its failure to repair the property Assumption that if the property had been destroyed or damaged, it has been fully restored - rent review goes ahead on the premise of an undamaged property but the tenant will not be disadvantaged, liability to pay the increased annual rent would be suspended

Answer 346

Tenants actual occupation is disregarded - to stop the landlord arguing that the tenant’s relocation would cost more than them paying an increased rent Any goodwill the tenant has created Any voluntary improvements made by the tenant or any reduction in value caused by the tenant

Answer 347

The assumptions and disregards for the hypothetical lease are a sort of checklist in deciding the rent in a rent review. The lease needs to outline a process for carrying out rent review by addressing the following points: a) Level of rent - Upwards only/upwards-downwards. FRI landlords will want upwards only. b) Frequency of review - Typically every 3-5 years on anniversary of commencement of lease c) Instigating the review - Parties will negotiate through their specialist valuers and usually reach an agreement in due course. Time is not of the essence and most leases will provide for the tenant to keep paying the existing rent, together with interest on any delayed increase when the rent review is eventually settled to compensate the landlord for the delay. d) Independent determination - If parties fail to agree the revised rent, the lease should make provision for the matter to be referred to an independent third party.

Answer 348

The code tries to introduce fairness and flexibility in leasehold transactions by advocating: a) Tenants having a choice of leasing terms b) Relaxation of alienation provisions c) Restrictions beyond consent not being unreasonably withheld should only be imposed where necessary to protect the landlord’s interest and in particular guarantees of the incoming tenant under a new lease (AGA) should only be required where the incoming tenant was of lower financial standing than the outgoing tenant.

Answer 349

a) Lease negotiations must be approached in a constructive and collaborative manner b) Any party not represented a RICS member or other property professional must be advised of the existence of the code and advised to obtain professional advice c) Transaction terms must be recorded in writing subject to contract and must summarise specified details as a minimum: I) Identity and extent of the premises, together with any special rights to be granted ii) Length of term including details of any renewal or break rights iii) Amount of rent, frequency of rent payments and frequency and basis of any rent review iv) Liability of payment of insurance premiums v) Ability to assign, underlet, charge or share the premises vi) Repairing, permitted use and alterations obligations The landlord is responsible for ensuring that heads of terms containing the specified provisions are agreed before the draft lease is sent to the tenant’s solicitor for approval.

Answer 350

It is a professional statement for the leasing of businesses and all RICs members must observe the parts that are mandatory and need a justifiable good reason to depot from other best practice statements. Failure to observe RICS Code will support a negligence claim against the surveyor and may lead to disciplinary action. Landlords not bound by the RICS code (although any in-house RICS surveyors will be) nor are the landlord’s solicitors, non-RICS surveyors and agents so they are free to agree non-compliant leases.

Answer 351

RICS members are allowed to depart from these in exception circumstances: a) Indentity of property should be clearly defined, lease plan provided and tenant should be granted all necessary rights for the intended use of the property. b) Length of term and break provisions should be stated c) Leases should allow either party to initiate the rent review process and tenants should be made aware of the process with reasonable time so they can consult professional advice d) Leases should contain standard provisions for assignment of whole and underletting of whole or part/charging or sharing with group companies e) Repairing obligations should be appropriate to the length of the lease and the condition of the premises f) Controls on alterations and change of use should be no more restrictive than necessary to protect the value of the property and any adjoining property/neighbouring land

Answer 352

Drafting the lease Agreement for lease (optional) Deduction and investigation of title Pre-contract enquiries and searches Licence to underlet (if relevant) Pre-completion formalities Completion and post-completion steps

Answer 353

Landlord’s solicitor will draft and will be sent to the tenant’s solicitor for approval. The tenant’s solicitor will probably make amendments. If the lease is an underlease, the scope for negotiating the document will be much more restricted as it is likely that the headless requires that the term of the underlease mirrors the terms of the headlease.

Answer 354

This is a contract which is useful if there is going to be a delay between agreeing the lease/underlease and actually granting it but one of the parties requires the other to be bound by the transactions. Agreement for lease is useful when: a) Landlord is in the process of constructing a property but wants the security of having a tenant to move in when it is completed b) The landlord is carrying out works of repair/refurbishment at the request of the tenant (in which case the landlord may not be able to secure funding for the works unless there is a legally enforceable commitment from the tenant’) c) The tenant is carrying out major works to the property prior to the grant of the lease d) The landlord requires the consent of a lender or a superior landlord to grant the lease e) The landlord is negotiating a surrender from a current landlord and wants to tie in the surrender with the grant of the new lease f) Tenant needs to obtain planning permission for the proposed use

Answer 355

The landlord’s solicitor. The particulars of sale must say that the property is a leasehold and must give the details of the term to be vested in the tenant. The final agreed form of the lease/underlease should be attached to the agreement with an obligation in the agreement for the tenant to take a lease/undertenant in that form on the date of completion. Incumbrances affecting the superior title must be disclosed and the attached lease should contain an indemnity in respect of future breaches of any covenants affecting the title. So the contract will be similar to that prepared in a freehold transaction. The standard conditions provide for the lease/underlease to be in the annexed form to the draft contract and for the landlord to engross the lease/underlease and supply the tenant with the engrossment at least 5 working days before the completion date.

Answer 356

Landlord’s solicitor investigates client’s title This is to ensure that the client is entitled to grant it and to anticipate any issues with the title and draft any agreement for lease. Where the property is subject to an existing mortgage, the mortgage will frequently contain a prohibition or restriction on the borrower/landlord’s ability to grant a lease of the property so the lender must be contacted and its permission obtained before the transaction proceeds.

Answer 357

They want to deduce the title to a freehold interest. This is important where a) premium is to be paid for the grant of the lease or b) where the property is being offered as security for a loan or c) where a tenant is paying a significant amount of rent.

Answer 358

Unless the freehold is already registered, the absence of the freehold title will usually prevent the tenant from obtaining an absolute leasehold title on the subsequent registration of the lease. Even where the freehold title is registered with absolute title, the tenant will want to see whether there is anything on the freehold title which will bind the new leasehold title.

Answer 359

The tenant is not entitled to call for the deduction of the freehold title unless the transaction is the grant of a lease for a term of more than seven years. If there is also an agreement for a lease, the landlord has to deduce the title that would enable the tenant to obtain a registration with absolute title at LR. If the landlord’s title is registered the tenant will be able to check the landlord’s title under the Open Register rules anyway.

Answer 360

There is no need to see the title of the freehold although the headlease and the official titles for the headlease must be reviewed. If the headlease is unregistered the general law allows the undertenant to call for the headlease and all subsequent assignments under which the headlease has been held for the last 15 years. Under general law the undertenant is only allowed to call for deception of freehold title where the transaction is for grant of a lease term that is longer than seven years. What if the head tenant did not deduce freehold title when they took the headlease? They will not be able to deduce the freehold title to the undertenant so they need to exclude this requirement by special condition in the contract.

Answer 361

a) Draft agreement for lease b) Draft lease/underlease c) Evidence of the freehold/headlease d) Copies of any relevant planning consents e) Evidence if the lender’s consent to the grant of the lease/underlease

Answer 362

Same as freehold. Some specific to leases e.g. tenant will want to see the details of the landlord’s insurance policy. Solicitor should inform their tenant client of their obligations and the danger of losing the lease through forfeiture for breach of covenant.

Answer 363

This is the formal consent to an underlet. It is structured as a tripartite agreement. The landlord’s consent must be given by or on completion of the underletting, otherwise the head tenant is likely to be in breach of the alienation covenant.

Answer 364

Usually the undertenant grants a direct covenant to the landlord to perform the covenants in both the underlease and the headlease. This typically excludes the headlease covenant to pay rent and only covers the covenants that are relevant to the underlease. The direct covenant creates a contractual relationship which enables the head landlord to sue the undertenant for any breaches of either the headlease or the undertenant. The landlord needs to get a new direct covenant for each assignment of the underlease.

Answer 365

a) Landlord consent to grant the underlease b) Direct covenant from undertenant to landlord d) Obligation on part of the head tenant to pay the head-landlord’s costs for approving the underletting and granting the licence

Answer 366

The lease and underlease are usually prepared in two identical parts, the lease and the counterpart. The lease is executed by the landlord and the counterpart is executed by the tenant. It is the engrossments that are exchanged. The counterpart should be sent to the tenant at least five days before contractual completion (as per standard conditions). These are exchanged on completion. As it is a legal lease of land, it must be crated according to lease formalities (execution of a deed). Apportionment should be agreed, unless the lease completion falls on the first day of rent.

Answer 367

a) Counterpart lease/underlease executed by tenant/undertenant b) Premium (less deposit on exchange of contracts) c) Apportioned sum

Answer 368

a) Lease/underlease executed by the landlord b) Properly marked or certified copies of the freehold title deeds (unregistered land only) c) A certified copy of the consent of the landlord’s lender to the transaction if relevant

Answer 369

The head landlord has given their consent the grant of the underlease usually in the form of a licence to underlet

Answer 370

In grant of lease SDLT is potentially chargeable on both the premium (calculated on the same basis as for the consideration on the sale of the freehold land) and the amount of the rent (complex formula used to identify the Net Present Value of the rent which is used for SLDT). SDLT is chargeable on the VAT inclusive amount. The SDLT1 and payment must be submitted to HMRC within 14 days of completion of the grant of the lease.

Answer 371

In grant of lease LTT is potentially chargeable on both the premium (calculated on the same basis as for the consideration on the sale of the freehold land) and the amount of the rent (complex formula used to identify the Net Present Value of the rent which is used for LTT. LTT is chargeable on the VAT inclusive amount. The land transaction return and payment must be submitted to WRA within 30 days of completion of the grant of the lease.

Answer 372

Not it is not capable of registration. It will take effect as an overriding interest whether the tenant is in actual occupation of the land. It is possible to note leases of over three years against the landlord’s title voluntarily.

Answer 373

This is binding on all subsequent owners irrespective of notice.

Answer 374

This is registrable in its own right with its own separate title and title number and, if the landlord’s title is registered, it will also be noted against the landlord’s title. The tenant’s application is for dealing with the freehold title and the application must be made within the priority period conferred by the OSR1 search.

Answer 375

If the freehold is unregistered, the tenant’s application to the LR is for first registration and the application must be made within two months of the grant of the lease. On first registration, the registered title may be classed as absolute leasehold, possessory, qualified or good leasehold title. Good leasehold title is given in this situation as the title to the freehold reversion is unregistered and the applicant for first registration of the leasehold title does not submit title to the freehold reversion with the application or where the freehold is registered with less than absolute title. Good leasehold title may be regarded as a title defect as it may make it difficult to sell or mortgage the lease.

Answer 376

Assignee’s solicitor will need to check the terms of the lease to make sure they meet the assignee’s requirements. The landlord may agree to vary the terms of the lease but this is at the landlord’s discretion. The landlord needs to consent to the assignment.

Answer 377

Investigates title Prepares the pre-contract package (draft contract, evidence of leasehold title, and possibly Landlord’s reversionary title, the lease) Apply for the landlord’s consent to the assignment and provide undertaking for Landlord’s costs

Answer 378

Liaise with assignor to obtain details Landlord will need to consider e.g. references Raise pre-contract enquiries and searches Investigate title (draft contract, evidence of leasehold title, and possibly Landlord’s reversionary title, the lease) Approve contract

Answer 379

Prepare purchase deed (transfer of deed of assignment) Raise pre-completion searched (possibly also against the Landlord’s reversionary title) Prepare for completion

Answer 380

Approve purchase deed Prepare for completion

Answer 381

Agree form of Licence to Assign with Landlord Completion (including completion of a licence to assign)

Answer 382

SDLT/LTT Registration of title Registration of assignment with landlord

Answer 383

Comply with any undertakings given on completion

Answer 384

Leases of commercial property usually provide for the landlord’s consent to be obtained before any assignment can take place. It is the assignor’s responsibility to apply for the consent and to use all reasonable endeavours to obtain it but both parties to the assignment need to be involved. Where the landlord’s consent is required this is usually given in a licence to assign.

Answer 385

Licence to assign is not finalised until completion but the assignor needs to check at the pre-exchange stage that the landlord will agree to the assignment in principle. The landlord will probably want references from the prospective assignee to ensure that they are solvent and financially strong enough to pay the annual rent and perform the other tenant covenants in the lease.

Answer 386

Assignee's current landlord Assignees bank Assignees employer Professional person such as an accountant or solicitor Person or company with whom the assignee regularly trades Three years audited accounts in the case of a company or a self-employed person or partnership

Answer 387

It is usual for the landlord’s solicitor to require an undertaking from the assignor’s solicitors for the payment of the legal and other professional costs involved in considering the proposed assignment and the licence to assign. The assignor’s solicitor should first seek the assignor’s authority to give the undertaking and it should be limited to reasonable costs incurred. A cap on such costs can be sought.

Answer 388

The landlord may require the assignee to provide a guarantor as a condition of the consent and/or the assignor to enter into an authorised guarantee agreement to guarantee the performance of the tenant’s covenants by the assignee. The landlord may not require a premium to be paid by the assignor as a condition of the grant of consent unless the lease specifically allows this.

Answer 389

Consent must be given by or on completion of the assignment, otherwise the assignor is likely to be in breach of the assignment covenant in the lease.

Answer 390

Either party may rescind the contract by notice if the consent has not been given three working days before the completion date or, if by that time, consent has been given subject to a condition to which the buyer reasonably objects. Whilst this technically means that contracts can be exchanged before the consent has been obtained, this should be avoided in cases where the timing of completion is important.

Answer 391

If the landlord’s consent has not been obtained by the completion date, completion is postponed until five working days after the assignor notifies the buyer that consent has been given. The contract may not be rescinded until six months have passed since the original completion date. Either party can rescind by serving notice on the other. If timing of completion is important, it is best not to exchange until the landlord’s consent has been obtained.

Answer 392

For the landlord to give consent to the assignment of the lease by the assignor to the assignee. If the assignment were to take place without consent, the assignor may be committing a breach of the tenants covenants and the lease itself could be liable for forfeiture.

Answer 393

It is produced by the landlord’s solicitor and sent to the assignor’s solicitor who coordinates with the assignee’s solicitor to amend or agree the draft.

Answer 394

If the assignor and assignee are entering into covenants then all three parties will be involved.

Answer 395

Deed. Often prepared in triplicate so on completion each party receives a signed and dated part. Any guarantors of the assignee or assignor also need to join in.

Answer 396

Consent to assign often time limited AGA if lease granted on or after 1 Jan 1996 Direct covenant if if lease granted before 1 Jan 1996 Assignor agrees to pay the landlord’s legal and professional costs

Answer 397

Assignee is liable under the doctrine of privity of estate for all the covenants in the lease which touch and concern the land but only for as long as the lease is vested in the assignee. The landlord will therefore want to extend the liability of the assignee by requiring it, as a condition of the landlord’s consent, to enter into a direct covenant to observe the covenants in the lease for the remainder of the term of the lease, which creates privity of contract between the landlord and the assignee. The direct covenant is usually in the licence to assign. If the landlord requires a direct covenant from the assignee, the covenant should be limited to the period that the assignee is actually tenant, not the entire remainder of the entire term. To compensate the landlord for the loss of privity for the whole term, statute allows the landlord to require the assignor to enter into an AGA instead. The assignee is liable for the breaches of covenant committed while the lease is vested in them. They are liable during that time for all the tenant’s covenants, not just those that touch and concern the land. On future assignment of the lease, the LTA 1995 automatically releases the assignee from all the tenant covenants of the tenancy.

Answer 398

If lease is a new lease, the landlord may have inserted a condition in the lease that an AGA is a condition for giving consent. Landlord can always insist the assignor enters into an AGA whether or not it is reasonable.

Answer 399

Landlord can only insist if its reasonable to do so.

Answer 400

Covenants by the assignor: a) Guaranteeing that the assignee will perform he tenant’s covenants in the lease including paying rent b) Promising to perform such covenants if the assignee does not c) Indemnifying the landlord for the assignee’s failure to pay rent or to observe the other covenants d) Promising to take the new lease if the liability of the assignee is disclaimed on insolvency The AGA should provide that the assignor’s liability does not extend beyond that of the assignee. It is more limited than that for the an old lease. On assignment, the assignee and the assignor are released from any further assignment of the lease.

Answer 401

Assignor’s solicitor should do this in the same way that a freehold title is investigated. Superior freehold title should be checked as well as leasehold title, as any covenants affecting the freehold will also bind the leasehold interest. Problems should be identified and any relevant incumbrances should be disclosed in the draft contract. Assignor’s solicitor should provide the assignee’s solicitor with copies of the lease and any licence that permits the assignment to the current and previous tenants.

Answer 402

a) If the assignor’s lease is registered with absolute title, they can obtain and provide the assignee with official copies of the register and the title plan in the usual way. No need to investigate as the lease title is guaranteed by the LR. b) Good leasehold title - assignee should insist to deduce freehold title although not entitled by law to do so. Without deduction, lease may be unacceptable to the assignee or the lender. If freehold is registered, can look it up on the open register. If not then unregistered land methods need to be used. No special conditions for this in the contract so deduction of freehold title needs to be a special condition. c) If the assignor’s lease is unregistered, under general law the assignee is entitled to call for the lease and all assignments that have taken place in the last 15 years, but not evidence of the freehold title. - Without deduction of the freehold title, unless the freehold is already registered with absolute title, the assignee will only obtain a good leasehold title on registration of the lease at the LR following completion. This may be unacceptable to the assignee and/or any lender. - If the freehold title is registered, either party could make a search under the open register rules. - Otherwise freehold title will be dealt with by special condition in the contract because neither set of standard conditions require the assignor to deduce the freehold title.

Answer 403

The assignee’s solicitor will need to investigate title and consider the terms of the draft contract. The terms of the lease should be checked to ensure that they will be acceptable to the assignee and any lender. It is important for the assignee’s solicitor to consider the length of the residue of the term, the permitted user, the rent, whether the landlord’s consent of the assignment will be required.

Answer 404

Same as freehold generally, some differences. Where there is only a short period left unexpired, the buyer may choose not to carry out some/all of the searches as the risk does not justify the cost involved. Differences Assignee’s solicitor should ask to see the insurance policy relating to the property and the receipt for the last insurance premium due. Assignee should also ask to se a copy of the receipt for the last payment of annual rent due under the lease to check that the assignor is not in brach of the lease. If there are any outstanding breaches, the landlord will be able to enforce the breach against the assignee.

Answer 405

It is usually prepared by the assignee’s solicitor.

Answer 406

TR1 needs to be used no matter how long the lease has left to run.

Answer 407

The assignment of a lease exceeding seven years in length will lead to compulsory first registration and a TR1 will be used although it is possible to use a deed of assignment similar in format of a conveyance of unregistered land.

Answer 408

The deed of assignment format will always be used for the assignment of a lease for seven years or less as the assignment will not trigger first registration.

Answer 409

Covenants for title: There is a conflict between covenants for title (made to landlord to comply with all covenants) and the principle of caveat emptor (assignee’s responsibility to check that all has been complied with and assignor does not need to make an promises). This can be resolved by modifying the covenants for title to exclude references to repair. This is covered in both sets of standard conditions in the contract but there must be an express modification of the implied covenants for the title in the transfer deed itself. This can be entered into Panel 9 of a TR1 but can also be put into panel 11 as an additional provision. Indemnity - Old leases: An indemnity covenant is implied except where for unregistered leases, value is not given by the assignee for the transaction. If value is not given by the assignee for the transaction, an express indemnity covenant will be inserted into the transfer deed if required by the contract and this is provided for in both sets of standard conditions. Indemnity - New leases: Assignor will usually be automatically released from future liability on assignment so will not require an indemnity. If assignor is to remain liable e.g. under the terms of an AGA, an express indemnity covenant should be included in the transfer deed. Both sets of standard conditions entitle the assignors to insert an indemnity.

Answer 410

OS1 search to check for new entries and to gain property period within which to register the transfer.

Answer 411

Land charges search to be made against the name of the assignor to check that no adverse entries have been made since the pre-exchange land charges search on all the previous estate owners was made and ensure that the priority period of 15 working days covers completion of the assignment.

Answer 412

Company search

Answer 413

Pre-completion searches Licence to assign Apportionments

Answer 414

Landlord’s solicitor will supply engrossments of the licence which must be by deed if it contains covenants.

Answer 415

If the assignee is to give a direct covenant to the landlord, the licence is usually drawn up in at least two parts and the landlord executing the original licence (this will be given to the assignor on completion for onwards transmission to the assignee) and the assignee executing the counterpart (this will be given to the landlord on completion.

Answer 416

The assignor’s AGA can be in the licence. If this is the case, then a third part need to be created. It can also be created in a separate deed. It should be drafted to take effect only on completion.

Answer 417

The assignor should supply a completion statement which shows the amounts due and explains how they have been calculated. Copies of the receipts or demands on the apportionments should also be provided so the assignee can check the sums.

Answer 418

Similar to a freehold transaction. Assignee pays the assignor the balance of the purchase price (if this is to be paid) and any other sums due including apportionment. Assignor hands over documents Assignee hands various documents to the assignor

Answer 419

The lease The transfer deed (TR1 or deed of assignment as appropriate) Licence to assign as executed by the landlord Evidence of the freehold title in accordance with the contract (lease not registered or not registered with absolute title) Evidence of discharge of the assignee’s mortgage Copies of duplicate notices served by the assignor and its predecessors on the landlord in accordance with a covenant in the lease requiring the landlord to be notified of any dispositions Insurance policy (or copy of insurance policy if effected by the landlord) and receipt (or copy relating to the last due premium Receipt for rent (and other outgoings for which the assignor wishes to claim reimbursement)

Answer 420

a) Money due in accordance with the completion statement b) Duly executed counterpart licence to assign A release of deposit (only likely where the assignee is paying a premium) Assignee must assume on production of the last rent due under the lease that the rent has been paid and covenants performed. This is subject to contrary suggestion. The assignee’s solicitor should inspect the receipt on completion and any receipts for other apportioned outgoings.

Answer 421

SDLT/LTT Registration (if relevant) Notice of assignment

Answer 422

Only payable on the purchase price charged by the assignor and is due same as a freehold transaction. No SDLT/LTT will be charged on the rent as it will have been paid when the lease was granted.

Answer 423

Application for registration of the transfer to the assignee should be made within the priority period given by the pre-completion search. This is irrespective of the length of the lease. Once registered, it continues to be registered until it expires. If freehold title is already registered, the lease will be noted against first registration against the freehold title, in order to protect their interests against a subsequent buyer of the freehold. If the lease has seven years or less unexpired, it is incapable of registration with separate title.

Answer 424

If the lease has over seven years left on the date of the transfer to the assignee, it will need to be registered at the LR within two months of the assignment or it will be void. Absolute title: An application for registration with absolute title can be made where the assignee can produce satisfactory evidence relating to the superior title. No satisfactory evidence of superior title: Can only obtain good leasehold title.

Answer 425

Given to landlord on completion of assignment if lease. Where the lease provides that notice of the assignment should be given to the landlord, the notice should be given in duplicate accompanied with the appropriate fee as set out in the lease. The landlord should be asked to sign one copy of the notice as acknowledgement of receipt and return the receipted copy with the sender to be kept with the title deeds.

Answer 426

Original tenant remains liable for the covenants under privity of contract under the lease for the full term of the lease regardless of the fact that they may have assigned it to another tenant.

Answer 427

Landlord can sue the current tenant for privity of estate.

Answer 428

The landlord may also sue any intervening tenants in privity of contract as it is common for the landlord to require each incoming tenant to provide a direct covenant on assignment. The landlord of an old lease is in a strong position to enforce the tenant’s covenants.

Answer 429

Original tenant is released from liability for covenants in the lease as soon as it assigns the lease to another tenant. So from the landlord’s perspective they are in a worse position than an old lease as they cannot sue the original tenant. To compensate for this loss of control, the landlord is allowed to define conditions for assignment in the lease before they give consent such as an AGA. The AGA ensures that the outgoing tenant will be liable for any breaches of the covenants in the last by the incoming assignee. The AGA only lasts for the duration of the assignee’s ownership of the lease and when the assignee assigns the lease to someone else, the tenant who gave the AGA will be released from it. The assignee (the current tenant) has to provide an AGA to the landlord on assignment.

Answer 430

Action in debt Commercial rent arrears recovery Pursue guarantors Rent deposits Forfeiture

Answer 431

First thing that needs to be checked is whether there is a covenant to pay rent in the lease and that the tenant has failed to pay this by the due date. If there has been a breach, there are a number of remedies.

Answer 432

This is a remedy for breach of covenant to pay rent. The debt can be recovered in the High Court or the County Court. There is a limitation period of six years.

Answer 433

This is a remedy for breach of covenant to pay rent. This permits the landlord to enter the property and sell goods belonging to the current tenant. The remedy only applies to commercial premises.

Answer 434

Must give seven days notice and must use an enforcement agency to remove goods. Landlord not allowed to remove goods including certain item or equipment worth up to value of £1350, which are necessary for the tenant’s business e.g. computers or phones. Can only take items that belong to the tenant so nothing that is hired. If the tenant does not pay the debt, the landlord may sell the goods, provided this is done at a public auction and that the tenant is given atleast seven clear days notice of the sale. It can only be used where the outstanding debt is for rent so could not be used for insurance rent for example. Atleast seven days of rent must be outstanding.

Answer 435

The guarantee of the former tenant is likely to extend through the duration of the lease so they can be pursued.

Answer 436

The guarantor is automatically released from liability on assignment of the lease by the guaranteed tenant. However, the landlord may have required the outgoing tenant to agree to an AGA in which the tenant’s guarantor would be indirectly on the hook.

Answer 437

The landlord needs to serve a default notice on the tenant or their guarantors requiring a fixed charge from them. This must be served within six months of the current tenant’s breach. This applies to both old leases and new leases.

Answer 438

If the landlord does serve a default notice, the person (tenant or guarantor) can regain control by paying the sum claimed under the default notice and calling for an overriding lease. This would make the former tenant/guarantor, the immediate tenant of the defaulting tenant.

Answer 439

If the landlord is concerned about the tenant’s ability to maintain rental deposits, it can require the tenant to deposit a cash sum as security for payment of the rent and performance of the tenant’s covenants. The landlord can withdraw money from it in circumstances that have been set out in the rent deposit deed and likewise the rent deposit deed will set out when it is repayable to the tenant. As soon as the tenant is in breach of a covenant the landlord can draw money upon the money.

Answer 440

This remedy brings a lease to an end and allows the landlord to gain vacant possession of the property. The lease must contain a forfeiture clause for this to be an option. The forfeiture clause may also be called a proviso or reentry clause.

Answer 441

The landlord is able to forfeit if the rent has been outstanding for 21 days whether the landlord has made a formal demand or not. Common law requires a formal demand to be made but the forfeiture clause in the lease may dispense with this. The landlord can take possession through peaceable re-entry or obtain a court order.

Answer 442

The tenant can apply for relief from forfeiture. The court has discretion to allow the lease to continue. This is subject to the condition that the tenant pays all the arrears and costs.

Answer 443

If the landlord demonstrates any act that indicates an intention to continue the relationship of landlord and tenant, they may waive the right to forfeit. Care needs to be taken not to demand or accept rent after the breach has occurred.

Answer 444

This depends on the cost of procedure, the time it will take, the effect on the continuing relationship with the tenant and the likelihood of the problem recurring in the future.

Answer 445

First step is to establish whether there is a repairing covenant and whether this has been breached.

Answer 446

Specific performance Damages Self-help/Jervis v Harris clause Forfeiture

Answer 447

This is an equitable remedy that will force the tenant to comply with the positive covenant. The court will only grant this if other remedies are not appropriate. Examples: a) The lease did not include a forfeiture or self help clause b) Damages not appropriate especially given the state of the property c) Genuine intention of the landlord i.e. not to harass the tenant

Answer 448

Always available for breach of covenant as a breach of contract. Statutory provisions that mean the landlord cannot recover the full costs of the repairs: a) Statute limits the amount of damages to the amount by which the value of the landlord’s reversion has diminished (may be less than the cost of the repairs so not good for the landlord) b) For leases of seven or more years with more than there years left to run there is a special procedure to sue for damages. Notice must be served on the tenant and the tenant has a right to serve a counter notice within 28 days and if the tenant does this, the landlord cannot proceed any further without leave of the court.

Answer 449

Most leases provide a contractual self help remedy for the landlord which allows the landlord to recover the cost of repairs as a debt and not a damages claim. This means that the landlord can avoid the statutory limitations for a damages claim. What does it do?: This allows the landlord to enter the property and check compliance with the tenant’s repair covenant. If there has been a breach, the landlord can serve a notice specifying the works required to remedy the breach. If the tenant fails to start the work within a specified period after service of the landlord’s notice or is not proceeding diligently with those works, the landlord can enter and carry out the work and recover the cost from the tenant as a debt. The damages claim is effectively converted into a debt.

Answer 450

Landlord must serve a s146 notice on the tenant: a) Specifies breach b) Requires the breach to be remedied within a reasonable time if it is capable of remedy c)Requires the tenant to pay compensation for the breach

Answer 451

The landlord can forfeit either by peaceable re-entry or by court order.

Answer 452

The tenant can apply for relief from forfeiture.

Answer 453

Requires the s 146 notice to include notification of the tenant’s right to serve a counter notice within 28 days. If the tenant serves a counter notice, then the landlord can only proceed with leave of court.

Answer 454

Forfeiture (no s146 notice) Injunction for breach of restrictive covenant e.g. user covenant or prevent an anticipated breach such as assignment of breach Specific performance - but only where the positive obligation is sufficiently precise, performance and supervision are not required and damages are not an adequate remedy Damages under normal contract rules Pursuing a former tenant or guarantor Deduction from rent deposit (but only if deposit deed provides for this for this type of breach)

Answer 455

Practical way for a landlord and tenant to resolve their issues. Requires a mutual act by the tenant and landlord which treats the lease as no longer being in existence. Can be done by handing keys back or deed of surrender (usual in commercial leases). Deed of surrender could deal with issues such as arrears and might be a good idea for a tenant as a way to terminate its obligations. Quicker and cheaper than forfeiture but depends on the willingness of both parties.

Answer 456

Effluxion of time: Applies where a lease is a fixed term lease and the contractual term has expired. Notice to quit: In a period tenancy, giving a period of notice. Surrender: Tenant yield up the lease to surrender. Can only be achieved through mutual agreement. The lease merges with the landlord’s reversion and is extinguished. Surrender must be made by deed. Merger: The tenant acquires the landlord’s estate in the land. Or when the third party acquires both the lease and the reversion. The lease is automatically extinguished.

Answer 457

Tenancy: There must be a tenancy. Not a licence to occupy. Occupied: Of a property that is occupied by a tenant. This can be by them personally or through the medium of an agent of a manager. Business purposes: The lease must be for business purposes. Business is widely defined and includes a trade, profession or employment and in the case of a body of persons any activity carried on by them.

Answer 458

Tenancy at will Fixed term tenancies not exceeding six month. This cannot be circumvented by granting consecutive six month tenancies or granting six month tenancy with renewal option. Agricultural holdings, farm business tenancies and mining leases Fixed term tenancies that are contracted out

Answer 459

Landlord must give the tenant notice in a prescribed form warning the tenant that they are agreeing to a lease without security of tenure and advising them to obtain professional advice. The tenant must then make a declaration in a prescribed form that they have received the notice and agree that the lease should be contracted out. If the tenant is given the notice less than 14 days before the grant of the lease, the tenant’s declaration must be made in the form of a statutory declaration before an independent solicitor. Reference to the service of notice and the tenant’s declaration must be contained or endorsed in the lease itself.

Answer 460

If the 1954 Act applies then a tenancy will continue until terminated in accordance with the 1954 Act and even then the tenant has the right to apply to court for a new tenancy which can only be opposed by the landlord on one of the seven statutory grounds contained in the s30.

Answer 461

By service of a landlord’s notice under s25 By service of a tenant’s request for new tenancy under s26 Forfeiture Surrender Tenancy gives landlord notice to quit (periodic tenancy) Tenant serving three months written notice on landlord under s27 as long as the notice does not expire before the contractual expiry date (fixed term lease) Tenant ceasing to be in occupation for business purposes at the end of the lease (fixed term lease)

Answer 462

A tenant can serve this notice on the landlord to terminate a lease that has security of tenure. Only the tenant can serve this notice, the landlord does not have this right. The lease must be a periodic tenancy.

Answer 463

They can do so by ceasing to occupy for business purposes by the end of the lease or by serving a s 27 notice giving the landlord three months’ prior written notice.

Answer 464

They may only do so by serving a s 27 notice giving the landlord three months notice or agreeing a voluntary surrender of the lease with the landlord.

Answer 465

Forfeiture or surrender. If there are no grounds for forfeiture and the tenant does not agree to a surrender, the only way a landlord can terminate a business tenancy under s 25.

Answer 466

Can be used to terminate or grant a new lease of either a fixed term or a periodic tenancy but the landlord must follow the correct procedure. The landlord does this regardless of whether they want the property back or want to grant a new lease. If the landlord wants to end the current tenancy to start a new tenancy on different terms (usually higher rent) then this needs to be stated in the s25 notice. If the landlord opposes renewal of the tenancy, the s 25 notice must state the s 30 grounds.

Answer 467

If the landlord wants to end the current tenancy to start a new tenancy on different terms (usually higher rent) then this needs to be stated in the s25 notice. If the landlord opposes renewal of the tenancy, the s 25 notice must state the s 30 grounds. The s 25 notice must state the landlord’s proposed termination date. This cannot be earlier than the date the tenancy could have been terminated under common law e.g. the date of the expiry of a fixed term. The s 25 notice has to be served no less than six months and no more than twelve months before the termination date specified in the notice. The date does not have to be the same as the date when a fixed term lease expires.

Answer 468

This cannot be earlier than the date the tenancy could have been terminated under common law e.g. the date of the expiry of a fixed term. The s 25 notice has to be served no less than six months and no more than twelve months before the termination date specified in the notice. The date does not have to be the same as the date when a fixed term lease expires.

Answer 469

The tenancy continues that extra time.

Answer 470

Tenant must apply to court before the expiry of the notice or they will lose their rights under the Act.

Answer 471

The landlord can apply for an order to terminate the lease on the grounds stated in the s 25 notice (but not if an application has been made by the tenant asking for the lease to be renewed). If the landlord indicates that it will not oppose the grant of a new tenancy, the parties will enter into negotiations for the grant of a new lease but the tenant should still apply to court within the time limit to safeguard their position. The time limit can be extended by agreement between parties. The application is usually made to county court.

Answer 472

a) The tenant can simply continue to occupy the property after the contractual expiry date; the tenancy will continue. b) Or they could wait until the landlord serves a s 25 request. c) Serve s 26 notice on tenant to bring the current tenancy to an end and constitutes a request for a new tenancy e.g. negotiate cheaper rent or tenant has plans to assign the lease and they believe a fixed term lease would be more attractive to a buyer.

Answer 473

It brings the current tenancy to an end of a lease subject to security of tenure and constitutes a request for a new tenancy e.g. negotiate cheaper rent or tenant has plans to assign the lease and they believe a fixed term lease would be more attractive to a buyer.

Answer 474

The date on which the tenant wants the new tenancy to begin. The tenants proposals for a new tenancy.

Answer 475

The tenant must give the landlord between 6 and 12 months notice of the date they want the new tenancy to start which cannot be earlier than the date the tenancy could have been terminated under the common law.

Answer 476

If the landlord wants to oppose the grant of a new tenancy, they must serve a counter notice on the tenant with two months notice of the service of the tenant’s s 26 request stating the s 30 grounds of opposition. Tenant response: The tenant must apply to the court for a new lease otherwise they will lose their rights under the 1954 Act. The application must be made prior to the commencement date of the new tenancy specified in the tenant’s s 26 request, unless the landlord agrees to an extension of this time limit.

Answer 477

The parties can negotiate the terms of the new lease. The tenant should make an application to the court before the commencement date of the new tenancy specified in the s 26 request to safeguard their position. The parties can agree to extend this time limit if negotiations are going well and it is usual for applications to proceed to a hearing.

Answer 478

a) Tenant’s failure to repair b) Tenant’s persistent delay in paying rent c) Tenant’s substantial breach of other obligations d) Tenant is an underletting of part The landlord has to establish the ground and then show that the tenant should not be granted the tenancy in view of the facts giving rise to the ground.

Answer 479

a) Landlord has offered alternative accommodation which is suitable to the tenant’s needs and on reasonable terms b) Landlord intends to demolish or reconstruct and could not reasonably do so with out obtaining possession c) Landlord intends to occupy the holding for its own business or as a residence Landlord simply has to prove the ground.

Answer 480

Landlord must have a firm and settled intention to carry out the relevant work e.g. planning permission and financial arrangements in place Intends to demolish or reconstruct Cannot reasonably carry out the work without obtaining possession

Answer 481

Landlord cannot rely on this ground unless they have owned their interest for at least five years before the ending of the current tenancy. This is to prevent a landlord from buying the reversion cheaply within five years of the end of the lease and then acquiring vacant possession using this ground. However, the ground will be available to a landlord who buys property with vacant possession, lets it and then seeks possession within five years of buying it. The landlord must have a firm and settled intention and must demonstrate at the date of the court hearing that it has considered and taken practical steps to occupy the property. The landlord must also have a reasonable prospect of achieving its intention, although it does not have to show that its business will be a success in that location.

Answer 482

The landlord has the right to insist that the new tenancy will be a tenancy of the whole of the originally demised property, including those parts underlet. The terms of the new lease will be as is reasonable in the circumstances but it cannot exceed 15 years. The term will not commence until three months after the proceedings are finally disposed of so when the time limit for appeal has elapsed. The new lease will therefore commence three months and four weeks after the order. The rent is the open market rent having regard to other terms of the tenancy. If there is no agreement on the new terms of the lease, the court will fix the terms taking into account the terms of the current tenancy and all other relevant circumstances.

Answer 483

a) The fact that the tenant and their predecessors have been in occupation b) Any goodwill attached to the holding c) Any effect on rent of any improvements voluntarily carried out by the tenant during the tenancy d) In the case of licensed premises, any addition in value due to the tenant’s licence The court can insert a rent review clause in the lease even though there was not one in the previous lease.

Answer 484

They can apply to court to have the order revoked.

Answer 485

The landlord does not have a right to apply to revoke, they can only appeal.

Answer 486

The tenant is not granted a new lease but is entitled to compensation. The amount of compensation is equivalent to the rateable value of the holding. If the tenant and their predecessors in the same business have been in occupation for atleast 14 years then it is x2 that value. Any agreement that seeks to exclude or restrict payment of compensation is void if the tenant and their predecessors have been in the business for more than 5 years. So a clause found in leases contracting out of the obligation to pay will only be enforceable if the tenant has been in occupation for less than 5 years.

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