Introduction to Leasehold Transactions Flashcards
What is a key reason a new business might take a lease instead of buying a freehold?
A. It reduces upfront capital investment and offers flexibility
B. Leases always come with statutory renewal rights
C. Freeholds require government licensing
D. Leaseholds allow unlimited alterations to the property
A – It reduces upfront capital investment and offers flexibility
Explanation: Leases allow businesses to save capital and relocate or adapt if their needs change.
A lease of 99 years with an annual rent of £2.50 is most likely to be:
A. A commercial lease in a shopping centre
B. An assured shorthold tenancy
C. A long residential lease
D. A short occupational licence
C – A long residential lease
Explanation: Long residential leases often run for 99 or 999 years and have a very low nominal rent.
Which of the following best describes an institutional investor’s approach to property ownership?
A. Owning property primarily for personal or family use
B. Owning property for charitable community housing
C. Treating property as an investment for income and capital growth
D. Buying property to use as business headquarters
C – Treating property as an investment for income and capital growth
Explanation: Institutional investors like pension funds view property as a stable income stream and long-term asset.
Which tenant would likely be considered to have weak covenant strength?
A. A government department
B. A newly formed company with no financial history
C. A multinational corporation with audited accounts
D. A long-standing high-street chain
B – A newly formed company with no financial history
Explanation: Weak covenant strength = risk of default. Landlords may ask for a guarantor or rent deposit.
A tenant wants to make structural changes to a leased commercial unit. This request falls under:
A. Freehold transfer
B. Asset management
C. Service charge negotiation
D. Lease registration
B – Asset management
Explanation: Asset management includes handling ongoing tenant matters like alteration requests and lease compliance.
What does a Full Repairing and Insuring (FRI) lease require of the tenant?
A. To maintain and insure the premises at their own cost
B. To vacate the property with no notice
C. To pay rent only during the summer months
D. To use the property exclusively for residential purposes
A – To maintain and insure the premises at their own cost
Explanation: FRI leases pass maintenance and insurance obligations to the tenant, leaving the landlord with net income.
A tenant is late on rent and has let the property fall into disrepair. What is the solicitor most likely advising on?
A. Planning permission for change of use
B. Renegotiating the lease terms
C. Marketing the property for sale
D. Breach of lease terms and potential remedies
D – Breach of lease terms and potential remedies
Explanation: The solicitor will advise on landlord remedies like enforcement or termination for breach of lease.
Which of the following most accurately describes a typical commercial lease?
A. A 999-year lease with a peppercorn rent
B. A 6-month lease with no formal documentation
C. A 10-year lease with market rent and FRI terms
D. A tenancy agreement protected by the Housing Act 1988
C – A 10-year lease with market rent and FRI terms
Explanation: Commercial leases are usually for short–medium terms (up to 15 years), at market rent, and with FRI obligations.
