Introduction to leases Flashcards
What is a Long Lease?
A lease with very low rent payable, such as £2.50 or £5 a year for old houses, and £150 a year for new houses or flats.
Long leases are typically associated with older properties and often have nominal rental amounts.
What are Assured Shorthold Tenancies?
Market rent leases typically on a 6/12 month basis
What characterizes Commercial Leases?
Usually for a relatively short term of up to 15 years, with market rent payable.
What are advantages of a Lease?
Advantages include:
* Not permanent
* No need to spend capital
* Tenant may be able to leave premises
* Some premises only available as leasehold
Who are commercial landlords?
Commercial landlords can be:
* Private Investors
* Institutional Investors
Institutional investors include financial institutions like pension funds and life assurance companies.
What is a Full Repairing and Insuring Lease (FRI)?
A lease where tenants pick up the costs associated with the property, allowing landlords to receive clear rent.
This type of lease is favored by institutional investors for its predictability in income.
What is covenant strength?
The ability of a company to comply with lease obligations and the existence of assets that the landlord can recover against breaches.
This is a crucial consideration for landlords when assessing tenants.
What is Asset Management in the context of commercial leases?
Acting for an institutional landlord and managing the legal work generated by property assets, including:
* Granting leases
* Considering tenant applications
* Advising on breaches
* Dealing with issues at lease end
Asset management ensures the property is well-maintained and generates income.
What is exclusive possession in a lease?
The tenant must be able to exclude strangers and even the landlord, except when the landlord has a right to enter.
What are the possible terms of a lease?
A lease must be for a fixed term (e.g., 6 months, 5 years) or a periodic term (e.g., weekly or monthly tenancy).
What are the formalities for creating a lease?
A deed is required for leases over a 3-year term. Leases of 3 years or under can be created in writing or orally.
What is reversion in the context of a lease?
Reversion is the interest that the landlord holds subject to the lease.
What is the lease itself?
The lease is the document that creates leasehold interest, stating the contractual term and rent payable.
What are the objectives of landlords?
Institutional landlords will insist on a FRI lease and want to ensure the premises are insured, kept in repair, and used for permitted purposes.
What additional controls may landlords want?
Landlords may want to control who occupies the premises, control alterations, and increase rent in line with market rent over the term.
What are the objectives of tenants?
Tenants want a lease that allows them to use the premises for its intended purpose, has a satisfactory contractual term, and provides flexibility if circumstances change.
What do tenants not want in a lease?
Tenants do not want onerous restrictions, provisions for steep rent increases, or excessively unfair provisions.
