Lease structure and content Flashcards
Lease of whole and of part?
Lease of whole
The definition of premises will refer simply to the title and postal addresses of the office block
Lease of part
Premises will specify the area. It will also go into more detail about the demise, such as including floor and ceiling coverings.
- Common parts – will be given rights to use common parts
In lease of whole – repair is solely the tenants
In lease of part other demises are responsibility of respective tenants, areas such as common parts are responsibility of the landlord.
Although landlord is responsible for repairing common parts – the landlord will cover the cost of doing so collectively from the tenants by way of service charge payments.
Types of repairing covenant? Full repairing?
covenant containing a full repairing obligation might say
‘To keep the premises in good repair’
But the word keep means that if the premises are not in good repair the tenant must put the premises in good repair. As such a tenant should obtain a survey so they’re aware of any major items of repair.
Repairing covenant - qualified repairing covenant?
‘To keep premises in good repair, but not put premises in any better state of repair than it was at date of the lease’
Schedule of condition will contain photographs documenting the state of the premises -USUALLY NOT ACCPETABLE FOR FRI LEASE
Limits on repairing obligation?
- Unless the lease otherwise states, tenant may generally choose whether to repair or replace the item of disrepair.
Latent and Inherent and structural defects - If newly built the defects may come to light over time – this may cause tenant to repair obligations, this is unfair as tenant is not responsible for them. Landlord should have warranties from contractors that the landlord can rely on.
Insurance and insured risk?
Insurance
- A commercial landlord is almost always responsible for the insurance of the building – cost of insuring will be recovered from the tenant under the lease.
Insured risks
- These are risks that will be covered by the insurance policy taken out by the landlord. Definitions may allow for landlord to add other risks to the list from time to time.
- Tenant under a FRI also deals with any shortfalls, or any valuation needed to get an insurance
- Damage from insured risk is EXCLUDED from tenants costs.
- Suspension of rent.
Alteration?
- These are changed to the premises, such as reconfiguring the internal walls. If the lease is silent on alterations, then the tenant is free to carry out alterations. Only restriction imposed by law is ‘waste’ to not alter in a way that reduced value.
Restrictions on alterations - In an FRI lease example:
- The types of alterations permitted.
- If they are permitted whether the landlord’s consent is needed.
- Whether they must be reinstated.
Absolute covenant?
- It means alterations are not permitted.
- If tenant wants to, can ask landlord, but landlord is under no obligation to consider such a request.
- Landlord can consent but does not need to act reasonably.
- Have to be careful about what land is demised to the tenant.
- Sometimes with permitted use – the qualified covenant is in the definition of permitted use. If that is the case then s19(3) for USE – you don’t get an upgrade it just prevents a landlord granting consent for a lump sum
Qualified covenant and fully qualified covenant?
Qualified covenant
- Means only permitted with landlord’s consent. Does not need to give consent.
A fully qualified covenant –
- Landlord must act reasonably in deciding to withhold consent
Improvements?
- If the lease contains a qualified covenant against alterations, s19(2) LTA1927 converts it to a fully qualified covenant insofar as the tenant’s proposed alterations are improvements from the point of view of the tenant. The conversion from qualified to fully qualified covenant
- If saying no, the grounds for refusal must be reasonable.
- If saying yes, any conditions must be reasonable.
License for alterations?
If landlord consents to alterations under a qualified covenant - consent will usually be documented in a licence for alterations.
- Sets out time limits and contain various tenant covenants
- Like carry out the works in compliance with landlords’ requirements, with good quality materials.
- Obtain all necessary consents
- Pay the landlords costs in dealing with license
Tenants statutory right to carry out improvements?
- Even if lease contains an absolute covenant against alterations the tenant may be able to circumvent this by using this statute:
- Under s3, LTA1927, the tenant serves notice on the landlord of its intention to carry out
- improvements.
- If the landlord objects, the tenant can apply for the court’s permission to carry out the
- improvements. The court will give permission if the improvements:
- add to the letting value of the property;
- are reasonable and suitable to the character of the property; and
- will not diminish the value of any other property belonging to the landlord.
- If the landlord does not object within three months, the tenant may go ahead and carry out
- the improvements.
- The landlord may offer to carry out the works itself and increase the rent, but the tenant does
- not have to agree to this. However, the tenant can then not ask the court for permission.
Use and change of use?
Use
- This refers to what the lease allows tenants to use premises for.
- If lease was silent, then tenant could use it for anything.
- The user may be very specific.
Change of use
- The lease may prohibit changes of use, in the same way as alterations. Absolute covenants, qualified covenants, and fully qualified covenant,
- UNLIKE alterations, statute does not convert qualified to fully qualified. But s19(3) of Landlord and Tenants act 1927 does mean that if the landlord decided to give consent, the landlord may not charge a lumpsum or increase rent, unless it requires structural alterations.
