Granting a lease

Question 1

What are the essential ingredients of a lease?

Answer 1

• exclusive possession
• fixed term/periodic tenancy
• created by deed if over 3 years (otherwise can be writing or orally)

Question 2

Who is in the dominant negotiating position?

Answer 2

Landlord

Question 3

What will institutional Landlords insist on?

Answer 3

FRI lease

Question 4

What are the landlord’s objectives?

Answer 4

• keep premises insured
• keep premises in repair
• ensure only used for permitted purpose
• control of occupiers
• say in how tenant alters premises
• rent review

Question 5

What are the tenant’s objectives?

Answer 5

• allows intended purpose
• satisfactory term
• flexibility
• not onerous restrictions
• no steep rent rise
• no unfair provisions

Question 6

Can a lease commence before the lease is dated?

Answer 6

Yes

Question 7

What is a reversionary lease?

Answer 7

commences after dated

Question 8

When does a term expire when it says ‘from and including’

Answer 8

Day before ‘including’

Question 9

When is the start and expiry of a term that says ‘from’?

Answer 9

Starts - day after ‘from’
Expires - ‘from’ date in relevant year

Question 10

Who can a break clause be in favour of?

Answer 10

Landlord
Tenant
Mutual

Question 11

What are the two types of break clause?

Answer 11

specifies date
rolling break

Question 12

What type of rent and premium is paid on commercial leases?

Answer 12

rack rent (market rent)
no premium

Question 13

What type of rent and premium is paid on residential leases?

Answer 13

ground rent
pays premium

Question 14

What happens to the rent if the lease completes part way through?

Answer 14

Apportioned

Question 15

What are the different types of rent review?

Answer 15

• stepped rent
• turnover rent
• index linked rent
• open market rent review

Question 16

What is the usual first step for determining new rent on open market rent review?

Answer 16

L and T agree between themselves

Question 17

What happens for open market rent review where landlord and tenant cannot agree a new rent?

Answer 17

A specialist valuer determines

Question 18

What does a specialist valuer consider when determining new rent on open market rent review?

Answer 18

• rent payable for comparable premises
• terms of the hypothetical lease

Question 19

What are the basic assumptions for a hypothetical lease?

Answer 19

• Premises are vacant and available
• There is a willing landlord and tenant

Question 20

What is the common disregard for a hypothetical lease?

Answer 20

Ignore what tenant has done voluntarily

Question 21

Rent review made at what point will mean the tenant may pay further SDLT?

Answer 21

before 5th annviersary of commencement

Question 22

When are the code for leasing business premises mandatory requirements followed?

Answer 22

Must be followed by RICS members

Question 23

When are the code for leasing business premises good practice provisions followed?

Answer 23

must be followed by RICS members unless exceptional circumstances

Question 24

What are the CLBP mandatory requirements?

Answer 24

• Negotiations approached in constructive and collaborative manner
• Unrepresented party must be advised on existence of code/recommend to seek professional advice
• L responsible for enduring HOTs compliant with code and agreed before draft lease circulated
• Prepare written HOTs stating subject to contract

Question 25

What must be covered in the heads of terms according to the CLBP?

Answer 25

* Extent of premises * Length of term and break rights * Rent and rent review * Repairing obligation * Right to assign/underlet * Permitted use * Right to alter and obligations to return to original state

Question 26

What are the good practice points under CLBP for the premises?

Answer 26

o Define demise o Lease plan o All rights T will need

Question 27

What are the good practice points under CLBP for the break rights?

Answer 27

basic conditions to exercise break

Question 28

What are the good practice points under CLBP for the rent and rent review?

Answer 28

o Initial rent o Frequency of payment o VAT charged o Rent free period o How rent reviewed o How often rent reviewed

Question 29

What are the good practice points under CLBP for the landlord's title?

Answer 29

Responsible for obtaining any consent needed to grant

Question 30

What are the good practice points under CLBP for repairs?

Answer 30

o T’s repairing obligation appropriate length of term and condition o Schedule of condition required for qualified repairing obligation o New builds – T given appropriate protection against inherent construction defects

Question 31

What are the good practice points under CLBP for insurance and damage?

Answer 31

Suspend rent if premises damaged by insured risk or uninsured risk

Question 32

Who drafts the lease?

Answer 32

Landlord's solicitor

Question 33

What is the original and counterpart lease?

Answer 33

Original - signed by L Coutnerpart - signed by T

Question 34

When is an agreement for lease needed?

Answer 34

Parties want to commit to completing but not ready/conditions to be satisfied

Question 35

What will the landlord's solicitor do pre-exchange?

Answer 35

* Take instructions * Prepare draft lease (+ agreement for lease) * Deduce title * Respond to enquiries * Engross agreement for lease, L sign and send to T solicitor

Question 36

What will the tenant's solicitor do pre-exchange?

Answer 36

* Take instructions * Review draft lease and agreement and amend * Investigate title * Raise enquiries * Raise searches * Arrange for T to sign

Question 37

What method of exchange is usually adopted for leasehold?

Answer 37

formula B

Question 38

What enquiries are raised for leases?

Answer 38

CPSE1 and CPSE3

Question 39

What are the appropriate searches for leases?

Answer 39

OS1 search with lease of whole, OS2 search with lease of part OS3 if not registrable

Question 40

When will a lease need to be registered?

Answer 40

Term more than 7 years