Grant and assignment of commercial leases Flashcards
What is a lease (as opposed to an underlease)?
A lease is a lease granted by the freeholder (landlord) to the tenant
What is an underlease?
A lease granted by a leaseholder to an undertenant (shorter lease granted out an existing lease). If it was a longer term it would take effect as an assignment
Can a property be leased if it has a charge over it?
The terms of the charge will typically require the lender’s consent to the proposed lease and its terms. In registered land this will usually supported by a restriction in the proprietorship register in favour of the lender prohibiting any disposition or dealing without consent
When does the landlord need to deduce title when granting a lease?
If the landlord’s title is unregistered and the lease is to be granted for a term of more than 7 years and therefore will be substantively registerable - H M Land registry unable to register the lease with absolute leasehold title unless title has been deduced
In the case of an underlease, what needs to be deduced?
Title to the headlease
What do the standard conditions provide where a new lease is substantively registerable?
Title should be deduced so that the lease may be registered with absolute leasehold title
What is normally required in the case of the grant of an underlease?
A licence to underlet
What is the purpose of a licence to underlet?
Is to provide the superior landlord’s approval to the proposed underlease and to provide privity of contract between the head landlord and undertenant, that would otherwise not exist
On the grant of a lease, who usually drafts the lease?
The landlord’s solicitor who then submits it to the tenant’s solicitor for approval
What are the main concerns for the landlord and tenant with a lease?
Landlord - suitable control & institutionally acceptable
Tenant - enable it to occupy on reasonable terms without unduly onerous liabilities and restrictions
When may an agreement for lease by useful?
- where there is to be some delay in completion but parties wish to be formally committed to the transaction
- where both parties need to carry out works before the lease is formally granted
- where a third-party consent is required to grant the lease
- where another tenant is already in occupation and the surrender of their interest needs to coincide with the grant of a new lease
Is there always a need for an agreement for lease?
No, most commercial leases proceed straight to completion
Once the lease has been agreed, what needs to be prepared?
The landlord’s solicitor will prepare engrossments of the lease/underlease and counterpart lease/underlease for execution by the landlord and tenant as well as any other parties
How must the lease be executed?
As a deed unless it is for 3 years or less
What needs to be completed before completion of any underlease?
The licence to underlet and the tenant’s solicitor should also insist on seeing a copy of any lender’s consent
What are the main post-completion matters?
- SDLT/LTT
- H M Land registry formalities
- underlease - service of notice on the superior landlord
When must SDLT/LTT be paid?
SDLT - within 14 days of completion
LTT - within 30 days of completion
When will a lease or underlease need to be registered with H M Land Registry?
If it is for longer than 7 years:
- if landlord’s title is registered an application to change the register (AP1) must be submitted and H M Land registry will note the lease against the superior title
- if landlord’s title is unregistered tenant’s application for first registration of the lease (FR1) and must be within 2 months of completion
What are the H M Land registry formalities if the lease is 7 years or less?
- in registered land they will be an overriding interest
- in unregistered land, legal leases bind any owner of the land and will be an overriding interest on first registration of the superior title - tenant may consider lodging a caution against first registration
What is the assignment of a commercial lease?
The transfer of the unexpired residue of the term of an existing subsisting lease by the existing tenant to a new tenant
What is needed to assign the whole of the tenant’s interest?
The landlord’s written consent, under a qualified or fully qualified covenant
What is a key element to assigning a commercial lease?
A formal licence to assign
What is the purpose of a licence to assign?
The purpose of a licence to assign is to give the landlord’s formal written consent to the proposed assignment
What may be required from the assignor?
An authorised guarantee agreement
