Grant of New Lease Flashcards
How do term dates run?
“From and including 25 March” = starts 25 March and ends 24 March.
“From 25 March” starts day after and ends 25 March.
What are the ways in which rent may be reviewed?
- Stepped = increases year on year
- Turnover = based on turnover
- Index-linked = linked to agreed measure of inflation
- Open Market = uses hypothetical lease to compare rent paid by other similar properties in the area.
If review takes place before 5th anniversary of term, may have to pay further SDLT or LTT. If only agreed after some time, backdated and tenant pays additional sum and interest.
What are the assumptions in an open market rent review?
1) Premises vacant and LL / T both willing (fair)
2) Tenant has complied with all covenants under the lease (fair)
3) Landlord has complied with all its covenants (not fair)
4) On same terms as the actual lease
5) Remaining term of actual lease
6) If damaged or destroyed, premises have been repaired or rebuilt (fair).
What are the disregards in an open market rent review?
1) Effect of tenant’s occupation on rent (fair)
2) Goodwill attached to T’s business
3) T’s improvements.
These factors would be unfair to use against T to make them pay higher rent.
Who is responsible for repairs in commercial leases?
A commercial tenant is almost always responsible for repairing the demise.
If lease of whole, tenant responsible for interior, exterior and structural repair.
Lease of part = tenant responsible for demise, landlord responsible for exterior and structure. Landlord will recover costs through service charge.
What is a full repairing obligation?
To keep the premises in good repair = obligation to keep premises in good repair and put it in good repair if it was not so at the beginning of the lease.
Good idea to get survey so aware of major items of repair.
What is a qualified repair obligation?
“To keep the Premises in good repair but not to put the Premises in any better state of repair than it was in at the date of this lease as evidenced by the Schedule of Condition”.
Not to put premises in any better state of repair than evidenced in Schedule of Condition at date of lease
Not a FRI lease repair covenant + only likely to be accepted by institutional lender in exceptional circumstances
What are some typical limits to the repair obligation?
- if premises damaged beyond repair, this is renewal, not repair.
- “Good repair and condition” = more than just repair
- Inherent structural defects = may come to light over time and landlord should have warranties from contractors that it can rely on, should be excluded from tenant’s obligations.
- Insured risks = should be excluded from tenant’s obligations.
What is the typical insurance clause in a commercial lease?
A commercial landlord will almost always be responsible for insuring the building (even where a lease of the whole is taken). In keeping with the principles of an FRI lease, the cost of insuring will be recovered from the tenant under the lease:
* Lease of whole: landlord will insure the whole and the sole tenant will refund the landlord the whole of the insurance premium
* Lease of part: landlord will insure the whole and each tenant will refund the landlord a proportionate part of the insurance premium (“insurance rent”).
What are insured risks?
These are defined in the lease and usually include “fire, lightning, earthquake, storm, flood, bursting pipes, damage to oil or gas pipes …”. These are the risks which will be covered by the insurance policy taken out by the landlord.
They will also be excluded from the tenant’s repairing obligation, except in certain circumstances (i.e where the tenant’s negligence means that the insurance is not paid out).
