Land IV Leases

Question 1

Who is a lessor and who is a lessee?

Answer 1

In a leasehold transaction, the landlord (Lessor) will grant from his freehold estate a term of years absolute in favour of the tenant (Lessee)

Question 2

Meaning of reversion

Answer 2

After granting a lease, the landlord still retains the legal freehold estate. the landlord’s interest in the land is known as the reversion, and, should the landlord assign the interest, the person who buys the reversion is called the assignee of the reversion.

Question 3

What is a virtual freehold?

Answer 3

With a long lease of 999 years the tenant is effectively in the position of a freeholder and the lease is mainly aimed at ensuring that certain burdens attach to the land and can be enforced.

Question 4

The typical length of a lease for commercial property?

Answer 4

3 years, 7 years or 21 years

Question 5

Rules on break clause

Answer 5

A long lease might include a break clause allowing one or both parties to terminate the lease before the full term has expired. In the absence of such a clause, the term must generally be allowed to run its course

Question 6

Rules on rent review

Answer 6

A rent review clause is required to increase rent in a long lease

Question 7

Meaning of a reversionary leases

Answer 7

If the tenant is to enter a lease today but take possession of the property later, then the lease providing that the tenant is not to take possession until some date in the future is known as a reversionary lease.

A reversionary lease is invalid if there is a 21 years or more gap in between.

Question 8

Meaning of tenancy at will

Answer 8

The owner of land may allow a buyer to take possession of the land before entering into any written agreement to sell. This may create a tenancy at will.

This action does not create any estate in the land, but rather is a personal arrangement between the landowner and the prospective buyer which can be terminated at will by either party. If the tenant attempts to assign the tenancy, the will operate as a notice to terminate the tenancy as soon as the tenant notifies the landlord of the fact.

Paying rent will convert the tenancy at will to a periodic tenancy unless there is very clear evidence that the parties intended otherwise.

Question 9

Two situations where lease will be void for uncertainty

Answer 9

if the length of the term is uncertain

if the length of the term is certain but the starting date is uncertain

Question 10

Meaning of

‘best rent which can be reasonably obtained without a fine ‘

Answer 10

the lease is at market price and the tenant does not have to pay any upfront lumpsum or premium.

Question 11

How can a short lease be assigned?

Answer 11

a short lease may be created without a deed or any formality but it can be assigned only by deed.

Question 12

Rules on equitable leases

Answer 12

For leases that are not recognized legally, equity may help to recognize such interest as an agreement as a contract for the disposition of land.

if one party breaches the contract, the other party can seek specific performance.

Question 13

For a lease

how to protect an equitable interest in a registered/unregistered system

Answer 13

in the case of unregistered land, this should be done by the registration of Class C(iv) land charge.

In the case of registered land, by a notice on the charges register. The tenant’s occupancy will mean that his interest is an interest that overrides first registration and a registered disposition.

Question 14

The distinction between lease/license

Answer 14

if the agreement is a lease, the tenant has a raft of statutory protection available and potentially can leave the leasehold interest to another party or sell it.

A tenant will also have the security of tenure, which is the right to stay in the premises at the end of the lease term.

A licence offers none of those rights.

Question 15

What is a licence

Answer 15

A licence is a personal right to use land in some way. A licence creates neither an estate nor an interest in land.5 4

Question 16

What makes a tenancy a lease but not a licence?

Answer 16

Exclusive possession: the legal right to exclude all others from the demised property, including the landlord

For a fixed or periodic term certain; and

In consideration of a premium (such as lumpsum) or periodic payments: rent indicates a lease but is not necessary for a lease to exist.

Question 17

Meaning of not to derogate from grant

Answer 17

The covenant not to derogate from the grant is a landlord covenant which an obligation not to frustrate the purposes for which the premises were let.

ex: A landlord let a unit in a high-class development to a pawnbroker. The landlord may be held to have derogated from his grant.

Question 18

Meaning of forfeiture in terms of the lease

Answer 18

Forfeiture is the right for the landlord to bring the lease to an end in the event of default. Note that a forfeiture clause will not be implied into a lease.

Question 19

For commercial property, what is the remedy for non-payment of rent

Answer 19

Commercial rent arrears recovery (CRAR) is a statutory procedure that allows landlords of commercial premises to recover rent arrears by taking control of the tenant’s goods and selling them for leases from 6 April 2014.

A landlord must provide seven days’ notice of enforcement and after this time, a certificated bailiff or enforcement agent can enter the property seize the tenant’s goods.

the property must be wholly commercial and it cannot be used to recover any service charge arrears.

Question 20

How to stop a forfeiture application

Answer 20

There is statutory protection for the tenant, and the tenant has the right to settle the arrears and to apply for relief from forfeiture to avoid losing the premises.

Question 21

in what situation where a landlord may impliedly waive his right to forfeit

Answer 21

if a landlord is aware of the breach and then accepts or demands payment, this will waive the right to forfeit.

serving notice on the tenant requiring repairs to be done

carrying out distress for rent

Question 22

Self-help clause and Jervis v Harris Clause

Answer 22

A self help clause entitles a landlord to enter the premises and make repairs if a tenant has breached their covenant to maintain or repair the property.

the landlord can serve notice on a defaulting tenant requiring them to do the work, specifying any breaches of covenant. if that fails, the landlord can enter to carry out the works and then recover the costs.

a self-hlep clause is called Jervis v Harris clause regarding the 1995 case that landlord after carrying out repair works for dilapidations, could recover these costs from the tenant as a debt

Question 23

Explain s146 notice

Answer 23

A section 146 notice of the Law and Property Act 1925 is served by a landlord who wishes to commence forfeiture proceedings against a leaseholder following a breach of a lease. This notice must

specify the breach complained of,

importantly if the breach is capable of remedy, require the leaseholder to remedy the breach, and

in any case, require the leaseholder to make compensation in money for the breach.

Question 24

Explain continuing liability for covenants-landlord and tenant (covenant) act 1995

Answer 24

Under a lease made before 1 January 1996, the landlord can pursue either the original tenant or the new tenant unless one of them expressly releases the other

For leases made after 1 January 1996, tenants are automatically released from their covenants upon assignment. it is the date of the grant of the lease and not the date of the assignment that determines which rule applies.

Question 25

Define AGA (Authorised Guarantee Agreement)

Answer 25

As a condition of giving consent to an assignment, a landlord can require the outgoing tenant to enter into a written obligation called an Authorised Guarantee Agreement in which the outgoing tenant will act as guarantor for his immediate successor in title.

AGA is standard in commercial leases.

Question 26

Enforcement of covenants by the landlord towards subtenant

Answer 26

If a tenant creates a sublease, there is no relationship between the head landlord and subtenant.

it may be possible for the head landlord to enforce the covenants regarding the use of the premises against the subtenant, but only for a restrictive covenant.

since the original tenant will be liable for the actions, so they will want to ensure that the subtenant is under an obligation to perform the covenant in the head lease.

Question 27

Difference between assignment and sublease

Answer 27

The assignment is the sale/transfer of the entire interest in a lease.

A tenant, in contrast, can only sublet less than his entire interest in a leasehold.

Question 28

Describe absolute covenant and qualified covenant in relation to subletting

Answer 28

An absolute covenant against assignment means just what it sounds like. the covenant is a total bar to the assignment.

A qualified covenant against assignment means that the covenant is imposed subject to conditions. A qualified covenant prohibits the tenant from assigning unless the landlord has given his consent to the assignment, and/or unless certain conditions are met.

Under a qualified covenant, the tenant enjoys some statutory protection. The landlord’s consent may not be reasonably withheld or delayed.

Question 29

In what condition where a landlord can withhold consent for subletting

(3)

Answer 29

If a bank reference for the incoming tenant is not provided;

If the tenant’s proposed use would be in breach of a specified use covenant in the lease; and

If the landlord thinks that the incoming tenant will not be able to pay the rent.

Question 30

Meaning of privity of estate

Answer 30

Privity of estate refers to the legal relationship that two parties bear when their estates constitute one estate in law.

Privity of estate involves rights and duties that run with the land if original parties intend to bind successors, and the rights touch and concern the land

Question 31

Criteria for making an assignment of a lease

Answer 31

the lease must be made by deed

covenant obligations transferred to the incoming tenant. outgoing tenant liability will be subject to the date of lease and AGA.

if landlord refuses to consent to the lease, the assignment will still be effective but the assignor will be subject to breach. if landlord’s objection is unreasonable, then the best course of action should be to seek a declaration from the court. if the court finds nothing afoul, the tenant will still be in breach.

if the head lease is assigned with a sublease, the incoming tenant will be the new landlord for the sublease subject to the terms of the sublease.

Question 32

Ways of terminating a lease

5

Answer 32

1) Where a lease is for a fixed period, it will automatically come to an end at the end of the period.
2) A periodic tenancy can be terminated by notice. the length of notice must be at least one full period expiring at the end of a period.
3) in a lease without a break clause, termination can not be brought unilaterally. However, the parties can mutually agree to bring the tenancy to an end.
4) if a tenant is in breach of covenant, the landlord may be able to claim possession by forfeiture. If the property is a residential property, a prior court order may be needed.
5) Frustration in contract if there is no force majeure clause.

Question 33

Meaning of surrender and merger in mutual agreement to terminate a lease

Answer 33

If the parties agree the tenant will give up possession to the landlord, this is known as ‘surrender’

if the parties agree that the landlord will transfer the reversion to the tenant, this known as a merger.

All these transfers should be made by deed.

Question 34

Effect of termination on a sublease for the following situations
Expiry
Notice to quit
Forfeiture
Surrender
Merger

Answer 34

Expiry of the lease, notice and forfeiture will bring the sublease to an end.

sublease will subsist following a merger or a surrender. However, the head landlord will become the landlord of the subletter during a surrender whereas the nothing really changes during a merger as for as the subtenant is concerned.