Grant of lease MCQs Flashcards
In which of the following situations would an agreement for lease not be necessary?
In a residential transaction for the sale of a newly constructed 999 year leasehold flat.
The tenant intends to take a high street premises for a restaurant, but first wants to apply for a premises licence which is essential for its business.
The parties to the lease are ready to proceed to completion as soon as the form of the lease has been agreed.
The tenant is taking a unit in a shopping centre that is currently under construction.
The landlord is in the process of buying an office block with a rental void, and the tenant has agreed to take a lease from the landlord once the purchase completes.
The parties to the lease are ready to proceed to completion as soon as the form of the lease has been agreed.
Which of the following may not be a valid lease term?
A lease to run as long as the tenant firm is employed as the landlord’s accountants.
A 10 year lease to start one year after signing the lease.
A lease to run for 10 years, but may be brought to an end earlier if the tenant firm is no longer employed as the landlord’s accountants.
A lease in which the tenant can occupy on a month by month basis, paying the rent monthly.
A 10 year lease with the option to renew the lease at the end of the 10 years.
A lease to run as long as the tenant firm is employed as the landlord’s accountants.
In negotiations to take a commercial lease in England, the prospective tenant asks for a 5 year lease term as the tenant knows that it will not need the premises for longer. The landlord offers a 10 year lease with a 5 year mutual break clause, saying this is just as good.
As the prospective tenant’s solicitor, what advice can you give?
A 10 year lease with 5 year break is better, as it gives the tenant a choice whether to leave at 5 years or 10 years. However, there may be more Stamp Duty Land Tax to pay.
Although the tenant can get out of the lease at 5 years, exercising a break is not straightforward. However, the Stamp Duty Land Tax calculation will not be affected.
Although the tenant can get out of the lease at 5 years, exercising a break is not straightforward, and there may be more Stamp Duty Land Tax payable on the longer term.
A 10 year lease with 5 year break is better, as it as it gives the tenant a choice whether to leave at 5 years or 10 years. The Stamp Duty Land Tax calculation will not be affected.
You cannot advise your client on this as it is regulated financial advice.
Although the tenant can get out of the lease at 5 years, exercising a break is not straightforward, and there may be more Stamp Duty Land Tax payable on the longer term.
Correct. Break clauses are generally strictly drafted, and if the tenant does not comply exactly with their requirements, the break notice will be invalid. As the length of the lease is relevant to SDLT calculations, there may be a greater amount of SLDT to pay.
What effect do the mandatory provisions of Royal Institution of Chartered Surveyors (RICS) Code for Leasing Business Premises (1st edition February 2020) have regarding leasehold transactions?
Following completion of a lease with an RICS regulated landlord, a tenant may apply to the court to strike out any provisions of the lease that do not comply with the mandatory provisions of the Code.
Solicitors who act for an RICS member or RICS firm must comply with the Code or face disciplinary sanctions by the Solicitors Regulation Authority.
Letting agents and other property professionals who are RICS members or in a RICS regulated firm must comply with mandatory provisions, and non-compliance may be taken into account in regulatory or disciplinary proceedings.
Letting agents and other property professionals must comply with mandatory provisions, and non-compliance may be taken into account in regulatory or disciplinary proceedings.
Following completion of a lease with an RICS regulated landlord, a tenant may apply to the court to strike out any provisions of the lease that do not comply with the mandatory provisions of the Code and are manifestly unreasonable.
Letting agents and other property professionals who are RICS members or in a RICS regulated firm must comply with mandatory provisions, and non-compliance may be taken into account in regulatory or disciplinary proceedings.
You are acting for a tenant who has agreed to take a 10 year lease of a unit in a shopping centre. The landlord is the freehold owner of the shopping centre.
Which one of the following best describes one of the pre-completion steps you will need to take before completion of the lease?
Submit a final certificate of title to the bank.
Apply to register the lease at the Land Registry using form AP1.
Carry out an OS1 search.
Request completion monies from the tenant.
Arrange for the tenant to sign the underlease.
Request completion monies from the tenant.
Correct. You will need to be in funds for all completion monies due, which usually will be the first quarter’s rent, service charge and insurance rent so this can be sent to the landlord’s solicitor at completion.
Question 1
A solicitor acts for the tenant of a lease of a commercial property granted in 2015. The
lease contains a tenant’s covenant not to assign the lease without the landlord’s consent.
The tenant has exchanged contracts for an assignment of the lease with a prospective
assignee and the completion date is in five working days’ time. The contract incorporates
the Standard Conditions of Sale without amendment. The landlord has not yet said whether
it consents to the assignment as it only received the references for the assignee yesterday.
Which of the following statements is the best advice for the tenant about what will
happen if the landlord’s consent has not been obtained by the completion date in the
contract?
A The contract will automatically terminate if the consent has not been obtained within
the next two working days.
B The completion date in the contract will be automatically postponed until five working
days after the assignor notifies the assignee that consent has been given.
C The assignment should proceed as the landlord is being unreasonable in withholding
consent.
D The assignor and the assignee can agree to defer completion to a later date when the
landlord’s consent has been obtained.
E The contract will automatically terminate if the consent has not been obtained by the
completion date in the contract.
Answer
Option D is correct. Under the SCs, either party may rescind the contract by notice if the
landlord’s consent has not been given three working days before completion date, but the
contract does not terminate automatically and the parties may choose not to rescind if they
both still want the assignment to go ahead and believe that the landlord’s consent will be
forthcoming after an acceptable delay. So option D is good advice and options A and E
wrongly state the contractual position.
In relation to option C, the covenant in the lease is a qualified covenant which is converted
into a fully qualified covenant by s 19(1)(a) Landlord and Tenant Act 1927, so the landlord’s
consent cannot be unreasonably withheld. Moreover, s 1 Landlord and Tenant Act 1988
applies, which means that the landlord must give consent within a reasonable time, except
in a case where it is reasonable not to give consent. However, the landlord is not acting
unreasonably if it only received the references yesterday. If the assignment proceeds in
breach of the alienation covenants in the lease, the assigning tenant will not be released
from liability under the lease and the lease itself may be liable to forfeiture.
Option B describes the position under the SCPCs (which is different to the SCs) and is, in
any event, subject to the right of either party to rescind the contract once six months have
passed since the completion date.
