Land 6 - Structure and contents of lease

Question 1

Leasehold covenants

Answer 1

Absolute

Qualified - consent

Fully qualified - consent unreasonably.

Question 2

Full repairing and insuring

Answer 2

Landlord gets ‘clear rental stream’
No repairs, maintenance or insurance contributions

Landlord does have obligation to insure.

Question 3

Reserved rent for insurance

Answer 3

Covenant to pay ‘insurance rent’.
As well as cost for obtaining valuation

Question 4

Reinstate

Answer 4

Landlords covenant to reinstate

Question 5

Rent suspension

Answer 5

Rent payable even where unusable.

Question 6

Alterations

Answer 6

S3 even if absolute covenant can perform internal and non-structural.

S3 - 3 months to object.
Authorise if add to letting value, reasonable and suitable to character of property.
Landlord can ask to do, tenant does not have to accept

License to alter.

If increase value or usefulness, does not matter landlords reversionary interest.

Entitled to claim compensation for adding letting value to the holding s1 LTA 27.

Question 7

Alienation

Answer 7

Assignment
Underletting
Charging
Sharing occupation
Parting with possession

S19(1)(a) - qualified not to be unreasonably held

S19(1A) - agree in advance conditions and circumstances which it would be unreasonable .

S1 LTA 88 - must within reasonable time, give consent, serve on tenant written notice of decision.

CA guidelines -
Unecessary to prove if reasonable people would meet
Intends to use even if not forbidden
Consider detriment

Question 8

Underletting

Answer 8

Headlease and underlease.

Direct tenant - forefeitted and underlease applies for relief to court.

S19 1(a) - qualified not to be unreasonably withheld

S1 LTA 88 -
reasonable time - written notice, consent withheld reasons for doing so.

Common conditions -
mirror headlease
annual rent same time, same conditions

Direct covenant.

Question 9

Rent review

Answer 9

Fixed increase -

Index linked - RPI

Tenants receipts - linked to tenants turnover.

Open market rent review -
Prepared to pay if property on the open market.

Common disregards on open market;
goodwill (customer flow etc..)
voluntary improvements.

Often upwards only.

If cannot agree - appointed to Royal Institute of Chartered Surveyors.

Question 10

RISC code

Answer 10

• AGAs where tenant of lower financial standing than outgoing.

Only RISCS surveyors bound by code.

Code;
Advised of existence
In writing

Can depart in exceptional circumstances;
-identity of property should be clearly defined
-length of term and break provisions should be stated
-leases should allow either party to start rent review process.
Standard provisions for assignments
Controls no more than necessary.

Question 11

Procedure

Answer 11

Consent -
Assignors to apply and use all reasonable endeavours.
License to assign.

References;
current landlord
assignee bank
assignee employer
professional person
person or company with whom regularly trades
three years audited accounts.

Landlord solicitor take undertaking from assignors for payment of legal and professional costs.

SC - rescind given three working days before completion if no consent.

SCPC - 5 working days.

If assignment without consent may breach alienation covenants and lease could be liable for forfeiture.
License to assign proceeded by landlord solicitor to assignor solicitor who coordinates to amend or agree draft.
If assignor and assignee to enter into contract all three parties to license (in form of deed).

Before 1996;
direct covenant
After 1996;
AGA

Question 12

AGA

Answer 12

Covenants by assignor that;
guarantee assignee will perform tenants covenants
promising to perform covenants if assignee does not
indemnifying landlord for assignees failure
promising to take new lease if liability of assignee disclaimed on insolvency.

Question 13

Superior freehold title should be deduced.

Answer 13

Absolute title;
No need, at land registry

Good leasehold title;
no guarantee.
If registered - open register rules
If not deduced by normal method for unregistered.

Unregistered -
entitled to call for lease and all assignment during last 15 years but no evidence of freehold.
Unless absolute only deduce good title on registration.
Must be condition neither SCs require assignor to deduct freehold

Question 14

If short bit left, may not deduce title as cost outweighs benefit.

Question 15

Transfer

Answer 15

TR1.
Assignee solicitor usually prepares draft.

If unregistered - over seven years lead to compulsory first registration.

If full or limited title guarantee - covenants for title include promise complied with tenants covenants in the lease.
Caveat emptor still applies.

Before 1996 - indemnity covenant implied, except unregistered value not given.

If AGA after 1996 - express indemnity covenants in deeds.

Question 16

Pre-completion formalities

Answer 16

Registered - OS1 should be carried out to check new entries and gain priority period.

Unregistered -
land charges search made against name of assignor to check no adverse entires.. 15 working day priority period.

Company search

License to assign -
Landlord does original and assignee does counterpart.

Apportionments -
Instalment apportioned on completion.
Assignor supply completion statement.

Question 17

Completion

Answer 17

Assignee pay assignor balance.

Will hand assignee -
lease
transfer deed (TR1 or deed of assignment
license to assign executed by landlord
evidence of freehold
discharge
duplicate notices served by assignor
insurance policy
receipt for rent

Assignee hands;
money due
duly executed counterparty license
release of deposit

On production of last receipt, assignee must assume (unless contrary appears), rent has been paid and covenants performed.
Assignee solicitor should inspect.

Question 18

Post-completion

Answer 18

Unregistered - register in two months (above 7 years).
If less incapable of registration on separate title.

Registered - in priority period.

SDLT/LTT

Notice of assignment to landlord. Given in duplicate accompanied by appropriate fee. Landlord asked to sign one copy of notice of acknowledgement and return receipt to sender to be kept with title deeds.