grant of a lease (week 6)

Question 1

is a commercial lease usually on a long lease or a short term lease?

Answer 1

normally on a short term lease

Question 2

what is a private investor?

Answer 2

can be either an individual or a company, who makes a business out of letting premises

Question 3

what is an institutional investor?

Answer 3

they are financial institutions, typically, pension funds and life assurance companies who invest in property just as they would in the stock market

Question 4

why is commercial property attractive to institutional investors?

Answer 4

they are attractive because they offer income, potential for capital growth and is seen as reasonably secure.

Question 5

what is an FRI lease (full repairing and insuring lease)?

Answer 5

they mean that the tenant picks up the costs associated with the property, and the landlord receives the clear rent

Question 6

what is covenant strength?

Answer 6

this is an issue of concern for an institutional investor. a landlord will want to know that the tenant has the means to comply with its obligations, and also that it has assets that the landlord can recover breaches against.

Question 7

what is asset management?

Answer 7

this involves acting for an institutional landlord, and dealing with the legal work generated by the property asset on an ongoing basis.
involves assisting a commercial landlord with the day-to-day management of the estate

Question 8

what are the 3 essential ingredients for a lease?

Answer 8

1. must have exclusive possession
2. fixed term or periodic term
3. formalities

Question 9

if a lease is over 3 years what formalities must be adhered to? (how must it be created?)

Answer 9

it must be created by a deed if the term is over 3 years

Question 10

if a lease is 3 years or under what formalities must be adhered to? (how must it be created?)

Answer 10

it can be created in writing, or even orally

Question 11

what does reversion mean?

Answer 11

at the end of the lease term, the property reverts back to the landlord

Question 12

what is a lease?

Answer 12

the document that creates a leasehold interest

Question 13

who has the dominant negotiating position in a lease agreement?

Answer 13

the landlord

Question 14

when can a term commencement date start for a lease?
before, on the day, after the lease?

Answer 14

it can be all three

Question 15

what is a reversionary lease?

Answer 15

it is when the term commencement date starts after the lease is dated

Question 16

if the term of the lease is ‘from and including’ when does the lease term actually end?

Answer 16

it ends the day before
eg, a lease with a term date of 10 years from and including 24th march 2019 expires on 23rd march 2029

Question 17

is the term of the lease is ‘from’ a certain day - when does the lease start and when does it expire?

Answer 17

it starts the day after that and it expires on that day of the year

eg, lease with a term of 10 years from 24th march 2019 will start on 25th march 2019 and end on 24th march 2029

Question 18

what does a break clause allow the parties to do?

Answer 18

it means that the lease can be brought to an end before the end of the fixed term

Question 19

what are the traditional quarters for paying a lease?

Answer 19

25th December - 24th march
25th march - 23rd June
24th June - 28th September
29th September - 24th December

Question 20

what are the modern quarters for paying a lease?

Answer 20

1st January
1st April
1st July
1st October

Question 21

if a lease is silent on if rent is payable in advance - what does this mean?

Answer 21

it means that the rent is payable in arrears

Question 22

what is turnover rent?

Answer 22

rent mat be calculated based on the tenant’s turnover at the property

Question 23

what is index-linked rent?

Answer 23

rent is increased by reference to an agreed measure of inflation

Question 24

what is open-market rent review?

Answer 24

(most common type of rent review adopted in FRI leases) involves ascertaining the rent based on comparable premises and certain principles

Question 25

who do the code for leasing business premises apply to?

Answer 25

apply to members of the RICS and RICS regulated firms

Question 26

what are the rules in following the code for leasing business premises?

Answer 26

RCIS members and regulated firms MUST follow them UNLESS there are exceptional circumstances

Question 27

when is an agreement for lease needed?

Answer 27

where the parties want to commit to completing the lease, but either are not yet ready, or there are conditions that need to be satisfied

Question 28

is a deposit payable for a lease on exchange?

Answer 28

no deposit needs to be paid

Question 29

when is an OS1 search needed for a lease?

Answer 29

when there is a lease of whole

Question 30

when is an OS2 search needed for a lease?

Answer 30

when there is a lease of part

Question 31

when is an OS3 search needed for a lease?

Answer 31

if the lease is not registrable, it can be used. it doesnt confer priority but will check that the landlord is free (or not) to grant the lease

Question 32

what are the registration requirements for a lease of less than 3 years?

Answer 32

doesnt need to be registered
cannot be noted agains the landlord’s title

Question 33

what are the registration requirements of a lease that is between 3-7 years?

Answer 33

no register
can be noted against the landlord’s title

Question 34

what is the registration requirement for a lease that is more than 7 years?

Answer 34

must be registered at the land registry
will be noted against the landlord’s title

Question 35

is rent normally paid in arrears or in advance?

Answer 35

normally paid in arrears (default position)

Question 36

who pays insurance for a lease (landlord or tenant?)

Answer 36

landlord pays

Question 37

who pays insurance premiums for a lease (landlord or tenant?)

Answer 37

tenant