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(FLK2) Property Law and Practice > Leasehold Transactions > Flashcards

Leasehold Transactions Flashcards

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1
Q

c

What is a Full Repairing and Insuring Lease (“FRIL”)?

A

A Lease that obliges the Tenant to:

  • Insure the Property or reimburse the Landlord for the cost; and
  • Maintain the whole Property in Good Repair or reimburse the Landlord for the cost.
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2
Q

What constitutes ‘Good Repair’?

A

Repair to a reasonable standard.

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3
Q

How does Language determine the precise Day a Lease Expires?

A

“From…“:

  • Leases that begin from a certain date end on the day after.
    • E.g: A 10-year Lease beginning from 01/01/2000 ends on 02/01/2010.

“From and Including…“:

  • Leases that begin from and including a certain date end on the same day.
    • E.g: A 10-year Lease beginning from and including 01/01/2000 ends on 01/01/2010.

The term ‘Anniversary’ refers to the same day of commencement year.

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4
Q

What is the Typical Term of a Commercial Lease?

A

5-20 Years.

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5
Q

What are the Six Types of Rent?

A
  • Stepped Rent: Rent increases at fixed intervals.
  • Turnover Rent: Rent based on the Tenant’s Turnover at the Property.
  • Market Rent: The price the Property can commanded on the Open Market at execution.
  • Index-Linked Rent: Rent increases based on an (usually inflation) index.
  • Ground Rent: The sum the Leaseholder must pay to the Landlord or Freeholder.
  • Open Market Rent Review: Rent increases based on the (usually only upward) rates of comparable Properties.

Ground Rent is usually irrelevant for Commercial Leases.

Leases may include such things as insurance premiums or service charges into the definition of “Rent”.

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6
Q

How is an Open Market Rent Review conducted?

A

If the Parties cannot agree amongst themselves, a Specialist Valuer will be hired to consider:

  • Market Rents; and
  • The terms of the Hypothetical Lease.
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7
Q

What is the Hypothetical Lease?

A

A variation of the Lease that incorporates certain assumptions and disregards to guide the Valuation.

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8
Q

What are the Assumptions in the Hypothetical Lease?

A
  • Vacant and Available Premises.
  • Identical Term to the Current Remainder.
  • Identical Contractual Terms, barring Rent.
  • Landlord and Tenant Compliance with Covenants.
  • Willing Negotiations between Landlord and Tenant.
  • Full Repair or Reconstruction of any Damage or Destruction.
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9
Q

What are the Disregards in the Hypothetical Lease?

A
  • Goodwill attached to the Tenant’s Business.
  • Additional Benefits to the Tenant from Occupation.
  • Voluntary Tenant Enhancements or Improvements.

Improvements made under the Lease are considered in the Rent Review process.

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10
Q

What happens after an Open Market Rent Review?

A

Rent Review Memorandum:

  • This document serves as the official record of the new Rent, is signed by both Parties, and kept with the Lease.

Tax Implications:

  • If Review takes place before the Lease’s fifth anniversary, the Tenant may have to pay additional SDLT or LTT.

Backdating and Interest:

  • If the Rent Review concludes later than the date specified in the Lease, the New Rent is backdated and the Tenant must account for the differnece (plus interest).
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11
Q

What are the Two Quartely Rent Calendars?

A

Modern:

  • 1st January.
  • 1st April.
  • 1st July.
  • 1st October.

Traditional:

  • 25th December.
  • 25th March.
  • 24th June.
  • 29th September.

Rent is usually annualised but made payable on a Quarterly basis.

If a Lease is executed part-way into a Quarter, the Tenant will only pay the appropriate portion of the Rent for that Quarter.

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12
Q

When is Rent Payable if the Lease is silent on the matter?

A
  • In Arrears, i.e. after the service is rendered.
  • For this reason, Payment in Advance, i.e. before the service is rendered, is often expressly specified.
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13
Q

What is the Purpose of the Code for Leasing Business Premises (“CLBP”)?

A

To improve the efficiency, quality, and fairness of negotiations.

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14
Q

To whom does the Code for Leasing Business Premises apply?

A

Members of the the Royal Institution of Chartered Surveyors (“RICS”) and Firms regulated thereby.

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15
Q

What are the Mandatory Requirements under the Code for Leasing Business Premises?

A

Constructive Negotiations:

  • Negotiations must conducted constructively and collaboratively by all Parties.

Advice to Unrepresented Parties:

  • Unrepresented Parties must be advised about the existence of the Code and recommended to seek professional advice.

Heads of Terms (“HOTs”) Before Draft Lease:

  • The Landlord (or their Letting Agent) is responsible for ensuring compliant HOTs are agreed upon before the Draft Lease.

Contents of the HOTs:

  • The HOTs must be in writing, disclaimed with the words ‘subject to contract’, and address the following:
    • Repair obligations.
    • The boundaries of the Premises.
    • Rights to Transfer or Sublet (if any).
    • Rent and Rent Review mechanisms.
    • Lease Term and Break Rights (if any).
    • Permitted use(s) of the Property, including if and how the Tenant may change use.
    • Rights to Alter and any obligations to return the Property to its original condition.
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16
Q

What are the Good Practice Guidelines under the Code for Leasing Business Premises?

A

Defining the Premises:

  • The HOTs should clearly define the Premises, include a Lease Plan, and specify all rights the Tenant will need for the proper use of the Property.

Length of Term, Renewal, and Break Rights:

  • The HOTs should state the Term’s duration, if and how it may be renewed, and any Break Rights.

Rent and Rent Review:

  • The HOTs should state the initial rent, payment dates, how Rent Reviews will be conducted, whether VAT applies, and any Rent-Free periods.
  • The HOTs should clarify whether Rent Review is Upward-Only.

Landlord’s Title:

  • The Landlord should ensure that any necessary consents for granting the Lease are obtained beforehand.

Repairs:

  • The Tenant’s repair obligations should be proportionate to the Premises’ Term and condition, and should be supported by a Schedule of Condition.
  • If the Premises are newly built, the Lease should protect the Tenant against inherent structural defects.

Insurance and Damage:

  • The Lease should suspend rent payments if the Premises are damaged by an insured or uninsured risk, unless the Tenant is responsible.

These provisions must be followed unless exceptional circumstances justify deviation.

Protection in New-Builds is usually achieved by confirming the Landlord has warranties from the Contractors on structural defects.

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17
Q

What is the Pre-Exchange Procedure for a Leasehold Transaction?

A

Landlord’s Solicitor:

  • Take Instructions:
    • Gather instructions from the Landlord on HOTs and specific conditions.
  • Draft Transaction Documents:
    • Prepare the Draft Lease based on the HOTs, and if there are Conditions Precedent for Completion, prepare an Agreement for Lease.
  • Title Deduction and Lender Consent:
    • Provide evidence of the Landlord’s Title to the Property and ensure that any necessary Lender Consents are obtained.
  • Respond to Pre-Contract Enquiries:
    • Answer the Tenant’s Solicitor’s CPSE Pre-Contract Enquiries.

Tenant’s Solicitor:

  • Take Instructions:
    • Gather instructions from the Landlord on HOTs and specific conditions.
  • Review Transaction Documents:
    • Review the Draft Lease and Agreement for Lease for unfair or onerous terms and negotiate amendments accordingly.
  • Investigate Title:
    • Investigate the Landlord’s Title to verify:
      • Its ability to Grant the Lease.
      • The absence of problematic Covenants.
      • Whether Mortgagee consent is necessary.
  • Raise Pre-Contract Enquiries and Searches:
    • Conduct Pre-Exchange Searches.
    • Raise CPSE 1 & 3 Pre-Contract Enquiries.
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18
Q

What is the Exchange Procedure for a Leasehold Transaction?

A

Landlord’s Solicitor:

  • Prepare for Exchange:
    • Ensure that the HOTs and Lease Rerms are agreed upon and that the Landlord is ready to proceed with Exchange.
  • Confirm Terms of the Agreement for Lease:
    • Where an Agreement for Lease is used, ensure all conditions are documented and that the Draft Lease is annexed thereto.
  • Prepare for Exchange:
    • Engross the documents and send a Counterpart Lease to the Tenant’s Solicitor.
  • Execution:
    • Have the Landlord sign the Original Lease.

Tenant’s Solicitor:

  • Complete Title Investigation and Final Lease Review:
    • Complete the Title Investigation and confirm that the Lease Terms are fully agreed and satisfactory to the Tenant.
  • Prepare for Exchange:
    • Confirm all Pre-Contract matters have been resolved and prepare to Exchange Contracts.
  • Execution:
    • Have the Tenant sign the Counterpart Lease.
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19
Q

What is the Pre-Completion Procedure for a Leasehold Transaction?

A

Landlord’s Solicitor:

  • Prepare Completion Statement:
    • Prepare a detailed Completion Statement and send a copy to the Tenant’s Solicitor.

Tenant’s Solicitor:

  • Pre-Completion Searches:
    • Conduct Pre-Completion Searches (OS1 & OS2) and ensure that no issues have arisen on the Title since Exchange.
  • Obtain Funds for Completion:
    • Arrange for the Tenant to provide the Completion Funds, as per the Completion Statement.
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20
Q

What is the Completion Procedure for a Leasehold Transaction?

A

Landlord’s Solicitor:

  • Receive Completion Monies:
    • Confirm receipt of the Completion Funds from the Renant’s Solicitor.
  • Date and Complete the Lease:
    • Alongside the Tenant’s Solicitor, agree to Complete by dating the Original Lease.

Tenant’s Solicitor:

  • Transfer Completion Funds:
    • Transfer the Completion Funds to the Landlord’s Solicitor.
  • Agree to Completion:
    • Alongside the Landlord’s Solicitor, agree to Complete by dating the Counterpart Lease.
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21
Q

What is the Post-Completion Procedure for a Leasehold Transaction?

A

Landlord’s Solicitor:

  • Send Lease Documents:
    • Send the now-signed Original Lease to the Tenant’s Solicitor and keep the now-signed Counterpart Lease on file.
  • Provide a Summary to the Client:
    • Debrief the Landlord and ensure all documents are properly recorded.

Tenant’s Solicitor:

  • Pay Tax (SDLT1):
    • Prepare, submit, and pay the necessary SDLT or LTT returns.
  • Registeration (Form AP1 / FR1):
    • Term Below 3 Years: Unnecessary, cannot be noted against the Landlord’s Title.
    • Term Between 3-7 Years: Unnecessary, can be noted against the Landlord’s Title.
    • Term Over 7 Years: Necessary, will be noted against the Landlord’s Title. Send SDLT5 with.
    • If the Freehold Title is Charged, a Letter of Consent from the Lender is necessary.

If the Lease is Registrable, it must include Prescribed Clauses that allow the Land Registry to Register the Lease.

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22
Q

What is the Extent and Standard of the Tenant’s Repair Obligations in a Lease of the Whole Property?

A

All Repairs, both internal and external, fabric and structure, to the standard of Good Repair.

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23
Q

What is the Extent and Standard of the Tenant’s Repair Obligations in a Lease of Part of the Property?

A

Interior Repairs only to the standard of Good Repair.

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24
Q

What are the Two Types of Repair Covenants?

A

Full Repair Covenant:

  • The Tenant must continuously maintain the Demise in Good Repair, even if it is in disrepair at Commencement.
  • A Structural Survey is strongly advised before agreeing to a Full Repair Covenant.

Qualified Repair Covenant:

  • The Tenant must continuously maintain the Demise to its condition at Commencement, as per the Schedule of Condition.
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25
Q

What are the Limits of the Obligation to Repair?

A

Replacement:

  • Replacement is only necessary if an item is beyond economic repair.

Renewal:

  • Renewal constitutes the need to rebuild due to major structural damage rendering the Premises unusuable.
  • Repair does not constitute Renewal unless explicitly stated, and such provisions should be avoided.

Good Condition:

  • Good Repair only obliges that the Premises remain functional and safe, not that it remain clean or presentable.
  • The wording ‘Good Repair and Condition’ would impress that further obligation.
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26
Q

Who is Responsible for Insuring the Property?

A

The Landlord, although they typically pass on the whole cost in the Rent.

For Leases of Part of a Property, each Tenant is required to contribute to the cost of insuring the whole building in proportion to their Demise.

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27
Q

What is an Alteration?

A

Any change to the Premises.

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28
Q

What is the Default Position on Alterations if the Lease is silent?

A

The Tenant is free to perform any Alterations, so long as they do not reduce the Premises’ value.

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29
Q

What are the Different Types of Alteration Covenants?

A

Leases may use different Covenants for different issues.

  • Absolute: No Alterations are permitted.
  • Qualified: Alterations are only permitted with the Landlord’s consent.
  • Fully Qualified: Alterations are only permitted with the Landlord’s consent, which cannot be unreasonably withheld.
    • Any Conditions attached to consent must also be reasonable.
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30
Q

When does a Qualified Alteration Covenant become Fully Qualified by Operation of Law?

A

The Tenant’s proposed alterations are improvements from its perspective.

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31
Q

How can the Tenant circumvent an Absolute Covenant to perform Improvements?

A

Step 1 — Notice:

  • The Tenant Serves Notice on the Landlord of its intention to perform Improvements.
  • If the Landlord does not object within three months, it is deemed to have given permission.
  • The Landlord may offer to perform the Improvements itself and increase the rent; and
  • Although the Tenant need not agree, if it declines, it cannot later seek the Court’s permission if the Landlord objects.

Step 2 — Application to the Court:

  • If the Landlord objects, the Tenant may apply for the Court’s permission, which it will grant if the Improvements:
    • Add to the Property’s letting value;
    • Are reasonable and suitable to the Property’s character of the property; and
    • Will not diminish the value of the Landlord’s other Properties.
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32
Q

What is a Licence for Alterations?

A

The Document certifying the Landlord’s consent to Alterations.

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33
Q

What are the Contents of a Licence for Alterations?

A
  • Details of the Works consented to.
  • Deadline for performing the Works.
  • Promise to Reinstate the Premises at the Term’s end.
  • Promise to obtain all necessary consents for the Works.
  • Promise to compensate the Lender for the cost of the Licence.
    • Typically the Solicitor’s and Surveyor’s costs.
  • Promise to perform the Works in compliance with the Landlord’s requirements.
    • Typically good-quality materials and a high standard of worksmanship.
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34
Q

What is User?

A

The Tenant’s permitted uses of the Premises under the Lease.

35
Q

What is the Default Position on User if the Lease is silent?

A

The Tenant is free to use the Premises as it wishes.

36
Q

What are the Different Types of Change of Use Covenants?

A

Leases may use different Covenants for different Uses.

  • Absolute: No Change of Use is permitted.
  • Qualified: Change of Use is only permitted with the Landlord’s consent.
  • Fully Qualified: Change of Use is only permitted with the Landlord’s consent, which cannot be unreasonably withheld.
37
Q

When may a Landlord put a Price on its Consent to Change Use?

A
  • Usually, the Landlord cannot impose a Rent increase or a lump sum in exchange for consent; unless
  • It would require Structural Alterations.
38
Q

What is Good Practice on Alterations and Change of Use?

According to the Code for Leasing Business Premises.

A

Restriction Scope:

  • Leases should only limit Alterations or Change of Use as needed to protect the value of the Property and neighbouring Premises.

Reinstatement at Termination:

  • Requirements to Reinstate should be specified in the Heads of Terms. Otherwise, Reinstatement should only be required if reasonable.

Non-Structural Alterations:

  • Leases of Part: Use a Fully Qualified Covenant.
  • Leases of Whole: Do not use a Covenant.
39
Q

What is Security of Tenure?

A

The Right to remain in Occupation at the Lease’s end.

This is called ‘Hold Over’.

40
Q

What are the Requirements to Claim Security of Tenure?

A

Existence of a Tenancy:

  • There must be a Tenancy.
  • Neither a Licence nor a Tenancy at Will may suffice.

Commercial Occupation by the Tenant:

  • The Tenant must Actually Occupy the Premises for Commercial Purposes.

Non-Application of an Exclusion:

  • The Tenancy must not be one of the following:
    • Mining Lease.
    • Service Tenancy.
    • Agricultural Tenancy.
    • Fixed-Term Tenancy of less than Six Months, unless they are successive.

Such Tenancies are called ‘Protected Tenancies’.

41
Q

Which Type of Lease can be Exclude the Application of Security of Tenure?

A

Fixed-Term Lease.

42
Q

What is the Procedure for Contracting Out of Security of Tenure?

A

1 —Landlord’s Warning Notice:

  • The Landlord must Serve a Warning Notice on the Tenant, in prescribed form, that it Intends to exclude Security of Tenure before Lease Completion.

2 —Tenant’s Declaration:

  • The Tenant must Serve a Declaration on the Landlord, in prescribed form, assenting to exclusion before Lease Completion.
  • If Completion is at least 14 days from the Warning Notice, the Declaration may simply be signed.
  • If Completion is less than 14 days from the Warning Notice, the Declaration must be made before an Independent Solicitor.

3 —Lease Drafting:

  • The Lease must explicitly exclude Security of Tenure and refer to both the Notice and the Declaration.

From hereon, assume this is between the Tenant and the Competent Landlord, i.e. the Landlord with a Reversionary Interest.

Landlords can only Contract Out of compensation for a §25 Notice if the Term is less than five years.

43
Q

How can a Lardlord Terminate a Protected Tenancy?

A

Forefeiture:

  • Forefeit the Lease if:
    • It so allows; and
    • The Tenant has Breached a Covenant.

§25 Notice:

  • Serve a §25 Notice, which shows an Intention to either:
    • Renew the Lease (‘Friendly Notice’); or
    • Recover the Premises (‘Hostile Notice’).
  • This bars the Tenant from Serving a §26 Notice.
44
Q

By When must a Landlord Serve a §25 Notice?

A

Between 6-12 months from the Lease’s Termination Date.

45
Q

What are the Statutory Grounds for Serving a Hostile §25 Notice?

A

Discretionary, Non-Compensatory:

  • Persistent delays in paying Rent.
  • Serious Breach of the Tenant’s Repair Obligations.
  • Persistent and Serious Breach of Tenant Covenants.

Mandatory, Non-Compensatory:

  • Offering of suitable alternative accommodation.

Mandatory, Compensatory:

  • Intention to Occupy the Premises for itself, if it has held the Reversion for at least 5 years.
  • Firm and Settled Intention to Demolish, Reconstruct, or undertake Significant Works that reasonably require Possession.

If Compensatory and Non-Compensatory Grounds are proven, the Tenant is not compensated.

46
Q

If a Tenant is Served a Hostile §25 Notice, and it is Entitled to Compensation, how is it calculated?

A
  • Occupation for Less than 14 Years: 1x the Premises’ Rateable Value.
  • Occupation for More than 14 Years: 2x the Premises’ Rateable Value.

The Rateable Value is the Annual Rental Value, as calculated by the Local Authority.

The Tenant can include the time the Busniess was performed by a Previous Tenant, provided it took over the same Business and there was a transfer of Goodwill.

47
Q

How can a Tenant Terminate a Protected Tenancy?

A
  • Vacate the Premises at the Lease’s end.
  • Serve a §26 Notice to Renew the Tenancy.
  • Serve a §27 Notice to Vacate the Premises.
  • Serve a Notice to Quit if the Tenancy is Periodic.
  • Surrender the Lease with the Landlord’s consent.
48
Q

What are the Requirements for a Valid §26 Notice?

A

Current Lease’s Duration:

  • The Current Lease’s Term is at least one year.

Timing of Notice:

  • The Notice is Served between 6-12 months from the Proposed Commencement Date of the Renewal Lease.

Content of Notice:

  • The Notice is in the Prescribed Form and outlines the Renewal Lease’s essential Terms, particularly Rent and Premises.

These also apply to Friendly §25 Notices.

49
Q

By When must a Landlord respond to a §26 Notice?

A

Within 2 months, specifically with a Counter-Notice on one or more of the Statutory Grounds.

50
Q

What is the Effect of a Valid §26 Notice on the Current Lease?

A

The Current Lease will Terminate the day before the Proposed Commencement Date of the Renewal Lease.

51
Q

By When must a Tenant Serve a §27 Notice?

A
  • Within 3 months of the Intended Termination Date; which
  • Must be no earlier than the Lease’s Termination Date.

Once a §27 Notice has been Served, the Tenant cannot Serve a §26 Notice nor can the Landlord Serve a §25 Notice.

52
Q

Regarding Security of Tenure, what is the Deadline for Applying to Court?

A
  • §25 Notices: Either Party may Apply:
    • After the Notice; but
    • Before the Specified Termination Date.
  • §26 Notices: Either Party may Apply:
    • After the Counter-Notice or 2 months have elapsed from the §26 Notice; but
    • No later than the day before the Proposed Commencement Date.
53
Q

Regarding Security of Tenure, what is the Procedure once Notices have been Given?

A

Negotiation of Renewal Lease:

  • The Court can grant:
    • Open Market Rent.
    • A Term up to 15 years.
    • Any other provisions, with the Original Lease as the benchmark and relevant circumstances as reasons for variation.

Interim Rent:

  • During Hold Over, the Tenant continues to pay Rent as it was last reviewed by the Lease.
  • Either Party may Apply to fix an interim Rent that is based on the Open Market Rent.
    • This is upwards or downwards.
    • This is payable from the earliest date that could have been specified on either type of Notice.

Court-Ordered Renewal:

  • Either Party may Apply for an Order to grant a Renewal Lease.
    • If granted, this Terminates the Current Tenancy within 3 months and 21 days of the Order; and
    • The New Lease will start the day after.
  • If the Tenant is unhappy with the Terms, it has 14 days to apply for Revocation.
    • This extinguishes the Tenant’s right to renew.

Court-Ordered Termination:

  • The Landlord Party may Apply for an Order to Terminate the Current Lease.
    • If granted, this Terminates the Current Tenancy within 3 months and 21 days of the Order.
54
Q

How can a Lease be Terminated?

A
  • Merger.
  • Surrender.
  • Notice to Quit.
  • Effluxion of Time.
  • Use of the Break Clause.
55
Q

How is a Lease Terminated through Merger?

A
  • The Leasehold and Freeholder Interests unite under one Owner; thereby
  • Extinguishing the Former and leaving only the Latter.
56
Q

How is a Lease Terminated through Surrender?

A

The Tenant voluntarily Surrenders its Leasehold Interest to the Landlord.

Any Premium paid by the Tenant in doing so is called a Reverse Premium.

57
Q

Regarding Lease Termination, what are the Two Types of Surrender?

A

Express Surrender:

  • A Deed of Surrender between the Tenant and Landlord.

Surrender by Operation of Law:

  • The Tenant and Landlord act ways inconsistent with the Tenancy’s continuation.

If the Tenancy is Protected and the Parties use an Agreement to Surrender preceeding the Deed, they must follow a simliar procedure to that of Contracting Out.

58
Q

How is a Lease Terminated by Notice to Quit?

A
  • Either Party in a Periodic Tenancy Serves Notice to Quit the Lease.
  • The Tenant must vacate the Property on either the First or Last Day of the Tenancy Period.
59
Q

Regarding Notice to Quit, what are the Minimum Notice Periods?

A
  • Weekly, Non-Residential: 1 Week.
  • Weekly, Residential: 4 Weeks.
  • Monthly: 1 Month.
  • Quarterly: 1 Quarter.
  • Yearly: 6 Months.
60
Q

Regarding Notice to Quit, what is the Position if the Tenancy is Protected?

A

The Landlord:

  • The Notice to Quit will only Terminate the Tenancy, not the Tenant’s Holdover Rights.
  • A Hostile §25 Notice may double as a Notice to Quit.

The Tenant:

  • The Notice to Quit will Terminate the Tenancy and any Holdover Rights.
  • The Tenant cannot Serve a §26 Notice.
61
Q

After Effluxion, what are the Positions of the Landlord and Tenant?

A

The Tenant:

  • The Tenant must Vacate the Property or become a Trespasser.

The Landlord:

  • If the Landlord consent to the Tenant’s presence, a Tenancy at Will arises.
  • If the Landlord accepts Rent from the Tenant, a Periodic Tenancy arises, which itself may be Protected.
62
Q

What is the Effect of Using a Break Clause on the Lease?

A

For the Landlord:

  • Activation will only Terminate the Lease, not the Tenant’s Holdover Rights, unless they were Contracted Out of.

For the Tenant:

  • Activation will Terminate the Tenancy and any Holdover Rights.
63
Q

What are the Landlord’s Remedies for the Tenant’s Breach of the Lease?

A
  • Damages.
  • Action in Debt.
  • Awards in Equity.
  • Use of a Security, Indemnity, or Guarantee.
  • Using the Commercial Rent Arrears Recovery.
  • Using the Rent Deposit or Authorised Guarantee Agreement.
64
Q

How does the Recovery of Damages differ if the Breach is of a Repair Obligation?

A

Standard Procedure:

  • The Tenant has 28 Days to serve a Counter-Notice, and the Landlord must Enforce through the Court.
  • The Landlord must inform the Tenant of these facts in the §146 Notice.
65
Q

What is the General Limitation of Recovery of Damages in Leasehold Transactions?

A

The Landlord cannot recover beyond the loss of value to its Reversion.

66
Q

What is the Statute of Limitations on Actions for Rent Arrears?

A

6 Years.

67
Q

What are the Equitable Remedies available to Landlord?

A
  • Injunctions.
  • Specific Performance.
68
Q

When would Specific Performance be Awarded for a Breach of a Repair Obligaiton?

A

Only under exceptional circumstances, such as when the Lease contains no Remedy for Repairing Breaches.

69
Q

If the Landlord Withdraws from the Rent Deposit to Remedy Arrears, what must the Tenant do?

A

Top up the Deposit.

70
Q

What is Commercial Rent Arrears Recovery?

A

A Right that allows the Landlord to recover Rent Arrears by appropriating the Tenant’s Goods.

71
Q

What are the Elements of Commercial Rent Arrears Recovery?

A

Commercial Premises Only:

  • The Premises cannot be wholly or partly Residential.

Minimum Arrears:

  • At least 7 Days’ Principal Rent must be oustanding. Service Charges or other sums attributed as ‘Rent’ will not suffice.

Continuity of the Lease:

  • The Lease must still be in effect.
72
Q

What is the Procedure for using Commercial Rent Arrears Recovery?

A

Appointment of Enforcement Agent:

  • The Landlord must appoint an Enforcement Agent that is certified or exempt from certification.

Notice of Enforcement:

  • The Landlord must Serve Notice on the Tenant at least 7 Clear Days before Appropriation.
  • The Notice must detail:
    • The Debt’s value and how to pay.
    • The Landlord’s Enforcement powers and its Agent’s contact information.

Appropriation:

  • If the Tenant fails to pay during the Notice Period, the Agent may enter the Premises and Appropriate Goods.
  • The Agent may only Appropriate up to the Debt’s value, plus Interest and VAT.

Notice Before Sale:

  • The Landlord must Serve Notice on the Tenant at least 7 Clear Days before Sale of the Appropriated Goods.
73
Q

What is Forfeiture?

A

The Landlord’s Right to Retake Possession of the Premises.

74
Q

Is Forfeiture an Automatic Right?

A

No. It must be expressly included in the Lease.

75
Q

What is the Procedure for Forfeiture?

A

Preconditions — Non-Payment of Rent:

  • The Landlord may Forfeit as soon as permitted by the Lease, without needing to Serve a §146 Notice.

Preconditions —Any Other Breach:

  • The Landlord must first Serve on the Tenant a §146 Notice.
  • The Notice must detail:
    • The alleged Breach.
    • How the Breach can be Remedied.
    • The Remedial Grace Period, which must be reasonable.
    • The consequences of failing to Remedy and requested compensation.
  • If the Tenant does not to Remedy the Breach within the Notice Period, the Landlord can Forfeit.

Enforcement:

  • A Baliff enters the Premises, changes the locks, and posts a Notice of Forfeiture.
  • The Landlord applies to for an Order of Forfeiture before instructing the Baliff, to mitigate the risk of Wrongful Enforcement.
76
Q

How does the Procedure for Forfeiture differ if the Tenant Breaches a Repair Obligation?

A

Lease Preconditions:

  • The Lease’s Term is at least 7 Years and has at least 3 Years remaining.

Changes to Standard Procedure:

  • The Tenant has 28 Days to serve a Counter-Notice, and the Landlord must Enforce through the Court.
  • The Landlord must inform the Tenant of these facts in the §146 Notice.
77
Q

What is a Jervis v Harris Clause?

A

A Clause entitling the Landlord to:

  • Enter the Property;
  • Perform Repairs; and
  • Recover the Costs from the Tenant;

If there is a Breach of a Repair Obligation, following a Notice and a reasonable Grace Period.

There is no need to Serve a §146 Notice, and the Costs are treated as a Debt.

78
Q

When will a Landlord Impliedly Waive its Right to Forfeit?

A

Unequivocal Act:

  • The Landlord performs an act that recognises the Lease’s continuation.

Knowledge of Breach:

  • The Landlord is aware of the Breach at the relevant time.

Communication:

  • The act is communicated to the Tenant.

The Landlord’s Intention is irrelevant.

79
Q

Regarding Forfeiture, what are the Practical Differences between Once-And-For-All and Continuing Breaches?

A

Once-And-For-All Breaches:

  • A Breach that occurs at a specific moment and is not ongoing.
  • If the Landlord Waives such a Breach, it cannot later Forfeit on that specific basis.
  • Examples include: Rent Non-Payment, Insolvency Events, or Unlawful Alienation.

Continuing Breaches:

  • A Breach that is continuing, constituting a new Breach with each day.
  • The Landlord regains the Right to Forfeit every day the Breach persists.
  • Examples include: Breach of User Covenants, Repair Covenants, or Insurance Obligations.
80
Q

Is there Relief from Forfeiture for Tenants?

A

Yes. If granted by the Court, it restores the Parties to their original positions prior to Forfeiture.

81
Q

What is the Procedure for Relief from Forefeiture?

A

Precondition:

  • The Landlord has Served a §146 Notice or initiated Forfeiture Proceedings.

Conditions for Relief:

  • Rent Non-Payment: The Tenant must pay outstanding Arrears and the Landlord’s reasonable costs.
  • Any Other Breach: The Tenant must Remedy the Breach promptly, and may need to provide assurance or undertakings on future conduct.

Fairness and Justice:

  • The Court will only grant Relief if it is fair and just. Accordingly, it will consider:
    • The Breach’s severity.
    • The Tenant’s conduct.
    • Prejudice to the Landlord.

Parties with an Interest derived from the Tenant’s Lease, e.g. Mortgagees or Undertenants, can also apply for Relief.

82
Q

What is the Difference between ‘From…’ and ‘From and Including…’ when counting Dates?

A

‘From…’:

  • Start counting from the following day.

‘From and Including…’:

  • Start counting that specific day.
83
Q

What is the Corresponding Date Rule?

A

Any Period expressed in Months or Years:

  • Ends on the same Numerical Date in the Final Month or Year as the Commencement Date; unless
  • That Date does not exist in the Final Month or Year.

(FLK2) Property Law and Practice (7 decks)

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