Lease Structure and Content

Question 1

Who is responsible for repair?

Answer 1

Commercial tenant will almost always be responsible for repair of demise ie extent of the premises let to them

Question 2

How does the tenant’s responsibility to repair differ if the lease is for the whole or part of a building?

Answer 2

Lease of whole - tenant has repairing responsibilities for whole premises - internal and external

Lease of part - tenant will only have repairing responsibility for the part they rent of the building - normally just interior part. Landlord will maintain responsibility for common parts and recover costs through service charges

Question 3

What is the effect of a full repairing covenant?

Answer 3

Tenant under obligation to keep premises in good repair, including putting them in a good state of repair if they are not already

Question 4

What should a tenant do if they going to agree to a full repairing covenant?

Answer 4

They should obtain a survey so they are aware of what work may be needed

Question 5

What might a qualified repairing covenant require?

Answer 5

To keep the premises in good repair but not a better state than when date of lease

Question 6

What happens the tenant takes a lease of a new property with regards to repairing obligation?

Answer 6

Tenant should ensure that inherent and structural defects are excluded from their repairing obligations and service charge contributions

Question 7

Who is responsible for insuring a commercial building?

Answer 7

Landlord is responsible.

Tenant will refund insurance cost through rent.

Question 8

If the lease is silent, what alterations can a tenant make?

Answer 8

Any alterations which will not reduce the value of the premises

Question 9

What is an absolute covenant on alterations?

Answer 9

Tenant cannot make any alterations

Question 10

What is a qualified covenant alteration against alterations?

Answer 10

Tenant cannot make alterations without landlord’s consent - landlord does not have to consent

Question 11

What is a fully qualified covenant on alterations?

Answer 11

Tenant cannot make alterations without landlord’s consent. Landlord must act reasonably in deciding to withhold consent

Question 12

What effect does s 19(2) have on any qualified covenants against alterations?

Answer 12

Converts it to a fully qualified covenant insofar as the tenant’s proposed alterations are improvements from the point of view of the tenant

Question 13

If the landlord does consent to alterations, what will the landlord normally give the tenant?

Answer 13

A licence for alterations

Question 14

What will a licence for alterations typically detail?

Answer 14

• carry out the works in compliance with the landlord’s requirements, typically with good quality materials and a high standard of workmanship
• obtain all necessary consents - planning permissions and building regulations approvals
• pay the landlord’s costs in dealing with application for a licence for alterations
• reinstate the premises at the end of the lease term

Question 15

What statutory rights do tenants have to carry out improvements even if the lease contains an absolute covenant?

Answer 15

• tenant serves notice on landlord of its intention to carry out improvements
• if landlord objects, tenant can apply for court’s permission to carry out improvements.
• court will grant permission if improvements: adds to letting value of property; are reasonable and suitable to character of the property; and will not diminish value of property relating to landlord
• if landlord does not object within 3 months, then tenant may go ahead

Question 16

What happens to tenant’s statutory rights if landlord offers to carry out work themselves and increase the rent, but tenant refuses?

Answer 16

Tenant cannot rely on statutory rights to ask court for permission

Question 17

What happens if the lease is silence as to use?

Answer 17

Tenant can use premises for anything it likes.

Question 18

What different covenants can a landlord give with regards to change of use?

Answer 18

• absolute covenant
• qualified covenant
• fully qualified covenant

Question 19

What is the effect of s 19(3) of 1927 Act on landlord decision to give consent to change of use?

Answer 19

Where landlord gives consent for change of use, landlord cannot charge lump sum or increase rent for giving consent unless the change of use also includes structural alterations

Question 20

What else will lease normally insist on with regards to alterations and changes of use?

Answer 20

Use will normally insist tenant complies with relevant laws ie obtains any planning permission or building regs required

Question 21

Under the Code for Leasing Business Premises, what is good practice when it comes to alterations and changes of use?

Answer 21

• lease should only restrict alterations and change of use insofar as necessary to protect value of the premises and any adjoining or neighbouring premises of the landlord
• the Code requires a landlord to at least give the tenant a fully qualified covenant for internal non-structural alterations in a lease of part, and the tenant the ability to carry out the internal non-structural alterations without consent in a lease of whole
• if the landlord will require any alterations to be reinstated at the end of the lease, this should be made clear in the heads of terms