Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Property Law and Practice > Grant of Lease > Flashcards

Grant of Lease Flashcards

You may prefer our related Brainscape-certified flashcards:
MBE flashcards MPRE flashcards Civil Procedure 1L flashcards
1
Q

What are the advantages of a lease from a tenant’s prospective?

A
  • no need to spend capital upfront
  • not a permanent investment offering business flexibility
  • some premises that are attractive may only be freehold
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Who are commercial landlords?

A
  • private investors - individuals or companies that make a business out of letting premises
  • institutional investors - financial institutions - typically pension funds or life assurance companies
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is asset management work for solicitors?

A

Acting for institutional landlord and dealing with legal work generated on ongoing basis such as:

  • granting a lease to a new tenant
  • considering applications by the tenant during the lease eg to alter premises
  • advising on breaches on the lease, such as failure to pay the rent or letting the premises fall into disrepair
  • or dealing with the issues that arise when a lease comes to an end and the tenant is leaving and wants a new lease
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is a lease?

A

‘the grant of a right to the exclusive possession of land for a determinate term less than that which the grantor has himself in the land’

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is exclusive possession of a lease?

A

Tenant must be able to exclude strangers and even the landlord from the premises (except where landlord is exercising its right to enter the premises eg inspection)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is a fixed term or periodic tenancy?

A

Lease must be for a fixed term (6 months, 20 years)

Or

Periodic term (weekly, monthly, yearly)

Not for an indeterminate term (eg for a long as the tenant is an employee of the landlord)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What formalities are required for lease over 3 years?

A

Lease must be created by deed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What formalities are required for a lease of less than 3 years?

A

No requirement for lease to be created by deed

Can be created in writing or orally

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the reversion?

A

The reversion is the interest that the landlord hold subject to the lease. At the end of the lease term, the property reverts to the landlord

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a lease?

A

Document that creates a leasehold interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the landlord’s objectives in lease negotiations?

A

Will want to ensure premises are

  • insured
  • kept in repair
  • only used for the permitted purpose

Will also want

  • to control whom may occupy of the premises
  • to have a say over how the premises are altered by the tenant
  • to increase the rent in line with market rent over the contractual term of the lease (by way of rent review)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are the tenant’s objectives in lease negotiations?

A

Tenant will want lease that

  • allows the tenant to use the premises for its intended purpose
  • has a contractual term (say 10 years) that is satisfactory to the tenant
  • provides some flexibility if circumstances change

Tenant will not want

  • onerous restrictions
  • provisions that allow for a steep rise in rent
  • excessively unfair provisions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the meaning of ‘from and including’ with regard of the term commencement date?

A

Means term will expire on the day before that day at end of relevant period

eg ten years lease from and including 24 March 2019 expires on 23 March 2029

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the meaning of ‘from’ with regard of the term commencement date?

A

Term starts the day after that day and so expires on that day of the year in the relevant year

Eg ten years lease from 24 March 2019 expires on 24 March 2029

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a break clause?

A

Clause by which the lease can end before its full term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is a landlord break clause?

A

Only landlord can exercise break clause

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is a tenant break clause?

A

Only tenant can exercise break clause

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Must a break clause always specify a date?

A

No can be a rolling break clause so can be exercised anytime after relevant date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the two categories of rent?

A
  • short lease with market rent
  • long lease with a ground rent
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the most common form of rent for commercial leases?

A

Short leases with market rent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the most common form of rent for residential leases?

A

Long lease with a ground rent annually and a premium up front to pay to grant the lease

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How is rent usually payable in commercial leases?

A

Normally expressed as yearly sum but payable quarterly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What quarters are used for paying rent in commercial leases?

A

Traditional quarters:

  • 25 December to 24 March
  • 25 March to 23 June
  • 24 June to 28 September
  • 29 September to 24 December

Modern quarters:

  • 1 January
  • 1 April
  • 1 July
  • 1 October
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is stepped rent review?

A

Rent may periodically increase over the term of the lease eg

£25k for first two years
£30k for next two years etc

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is turnover rent review?

A

Rent may be calculated based on the tenant’s turnover at the property

26
Q

What is index-linked rent?

A

The rent is increased by reference to agreed measure of inflation such as retail price index

27
Q

What is open market rent review?

A

Most common - involves ascertaining the rent based on comparable premises and certain principles

28
Q

What happens with open market rent review?

A

Often landlord and tenant will try agree new rent between themselves

If they cannot agree, lease will set out mechanism for specialist valuer to determine rent review

29
Q

How will valuer determine open market value for rent review?

A

They will consider rent payable for comparable premises (size and location)

AND

terms of hypothetical lease - based on the actual terms of the lease but assuming certain matters and disregarding others

30
Q

What basic assumptions will a valuer make in determining the terms of the hypothetical lease for market review?

A
  • premises are vacant and available
  • willing landlord and willing tenant
  • tenant has complied with all its covenants under lease
  • landlord has complied with all its covenants under lease
  • on the terms of the actual lease other than rent payable
  • term of the hypothetical lease is term remaining of actual lease
  • if damaged or destroyed, premises have been repaired/rebuilt
31
Q

What disregards will a valuer make in determining the terms of the hypothetical lease for market review?

A
  • effect of tenant’s occupation on the rent
  • goodwill attached to the tenant’s business
  • tenant’s improvements (other than obliged under the lease)
32
Q

What happens after rent review?

A

New rent is documented in rent review memorandum which is signed by landlord and tenant.

Kept with lease for future reference

33
Q

Is further SDLT or LTT payable on rent review?

A

Yes, only if rent review is before 5th anniversary of term commencement date

34
Q

Who is bound by the Royal Institution of Charted Surveyors Code for Leasing Business Premises?

A

Members of RICs and RICs regulated firms

35
Q

What does the code contain?

A

Provisions on

  • negotiations
  • heads of terms
  • mandatory requirements
  • good practice
36
Q

Do RICS members and regulated firms have to follow provisions which a good practice?

A

Yes unless there are exceptional circumstances

37
Q

What are the mandatory requirements under RICS Code?

A
  • lease negotiations must be approached in a constructive and collaborative manner
  • an unrepresented party must be advised about the existence of the Code and recommended to seek professional advice
  • landlord is responsible for ensuring heads of terms compliant with the Code are agreed before the draft lease is circulate

Mandatory subjects in heads of terms include:

  • extent of premises
  • length of term and break rights
  • rent and rent review (including basis for rent review)
  • repairing obligation
  • rights to assign (transfer to a new tenant) or underlet the lease
  • permitted use of the property (and whether tenant can change it)
  • rights to alter the property and any obligations to put the property back in its original state
38
Q

What is good practice under the Code for provision for premises?

A

Premises should be clearly defined in heads of terms, lease plan provided and all rights tenants needs to use premises should be referred to

39
Q

What is good practice under the Code for provision for length of term, renewal rights and break rights?

A

Heads of terms should clearly specify the length of term and any break rights

40
Q

What is good practice under the Code for provision for rent and rent review?

A

Heads of terms should clearly state initial rent, frequency of payment, and whether VAT will be charged.

Rent review should be specified as to how it is to be done and how often

41
Q

What is good practice under the Code for provision for Landlord’s title?

A

Landlord should be responsible for obtaining any consent needed to grant the lease

42
Q

What is good practice under the Code for provision for repairs?

A

Tenant’s repairing obligation should be appropriate to length of term and condition of premises

43
Q

What is good practice under the Code for provision for insurance and damage?

A

Lease should suspend rent if the premises are damaged by insured risk (unless damage done by tenant’s negligence) or an uninsured risk

44
Q

If there is to be a pre-exchange step, what must the landlord’s solicitor do?

A
  • take instructions
  • prepare draft lease and if relevant, agreement for lease
  • deduce title and respond to any queries on title
  • answer any pre-contract enquiries
  • once agreed, engross the agreement for lease, obtain landlord’s signature and send counterpart to tenant’s solicitor
45
Q

If there is to be a pre-exchange step, what must the tenant’s solicitor do?

A
  • take instructions
  • review draft lease and agreement for lease and amend as required
  • investigate title and raise any queries on title
  • raise pre-contract enquiries and searches
  • arrange for tenant to sign counterpart
46
Q

Who drafts the lease and who reviews the lease?

A

Landlord’s solicitor will draft the lease and the tenant’s solicitor will review and amend anything that is unfair/onerous to tenant (balance it more to tenant’s interest)

47
Q

Will an agreement for lease be needed?

A

Not normally unless parties want to commit to completing the lease but neither party are ready yet or conditions need to be satisfied

Normally parties’s solicitors will therefore just complete once tenant’s solicitor is happy with title investigations and form of the lease is agreed

48
Q

What will tenant’s solicitor do to investigate title and searches and enquiries?

A
  • investigate landlord’s title deduction so they have title to grant lease and any covenants that will bind tenant
  • tenant’s solicitor will raise CPSE1 enquiries and CPSE 3 enquires (specific for lease)
  • tenant’s solicitor should raise the same searches as they would if buying the freehold
49
Q

What will landlord’s solicitor do to investigate title and searches and enquiries?

A

Landlord’s solicitor will deduce landlord’s title

50
Q

What happens on exchange of agreement for lease?

A
  • landlord’s solicitor and tenant’s solicitor exchange in similar manner as for a freehold contract
  • no deposit is usually payable
  • the agreement for lease may set a fixed completion date, but more likely will set out what conditions need to be satisfied and by when for completion to take place
  • the agreement for lease will usually have a draft of the agreed form of lease annexed to it, so it can only be exchanged once the terms of lease have been agreed
51
Q

What will the landlord’s solicitor do at pre-completion?

A
  • prepare original and counterpart lease, obtain landlord’s signature to original and send counterpart to tenant’s signature
  • prepare and send completion statement, detailing the money due on completion (eg any apportioned annual rent, service charge and insurance rent)
52
Q

What will the tenant’s solicitor do at pre-completion?

A
  • arrange for tenant to sign counterpart lease
  • obtain funds from client needed to complete as per completion statement
  • raise pre-completion searches
53
Q

What pre-completion searches should the tenant’s solicitor carry out?

A
  • OS1 search for lease of whole
  • OS2 search for lease of part
  • OS3 search is lease is not registrable (will not confer priority)
54
Q

What happens on completion of the lease?

A
  • tenant’s solicitor sends landlord’s solicitor the completion monies
  • landlord’s solicitor and tenant’s solicitor agree over the telephone to complete and date the executed leases that they are holding
  • the landlord’s solicitor and tenant’s solicitor send the completed original and counterpart to each other
55
Q

What must the landlord’s solicitor do post-completion?

A

Send summary of main provisions of lease to client

56
Q

What must the tenant’s solicitor do post-completion?

A

Arrange to submit SDLT or LTT return and pay appropriate SDLT or LTT if necessary

Register lease if necessary

57
Q

How is SDLT calculated on leases?

A
  • if premium paid, then on premium
  • if lease for market value then on lump sum equivalent to rent over the years (specific calculation)
58
Q

Can a lease of 3 years and under be registered?

A

No and cannot be noted on landlord’s title

59
Q

Can a lease of more than 3 years and up to 7 years be registered?

A

Does not have to be registered

Can be noted against the landlord’s title (will appear in the schedule of leases to the landlord’s freehold title)

60
Q

Can a lease of more than 7 years be registered?

A

Yes - it must be registered

Will appear in the schedule of leases to the landlord’s freehold title

61
Q

What is the procedure for registering a lease?

A

Tenant applies to register lease

  • form AP1 if landlord’s title is registered
  • form FR1 if landlord’s title is unregistered
62
Q

What additional step must be taken if landlord’s freehold title is charged?

A

Letter of consent from lender will also be needed

Property Law and Practice (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions