Leaseholds

Question 1

Security of Tenure

What tenancies cannot be contracted out of security of tenure?

Answer 1

Periodic tenancies

Question 2

Security of Tenure

What rights does a periodic tenant not have in relation to security of tenure?

Answer 2

Cannot serve s.26 notice!

Question 3

Commercial Landlord’s Remedies

What remedy does a Jarvis v Harris clause provide?

Answer 3

Allows landlord to enter property, carry out the repairs, and recover the costs from tenant as a debt.

Question 4

Commercial Landlord’s Remedies

What additional information will a section 146 forfeiture notice need to include, and when is it required?

Answer 4

For leases with a term of 7 years of more where there are 3 years or more left.
* Notice needs to inform tenant of their right to serve a counter-notice within 28 days.
* if counter-notice is served, then landlord needs leave from court to proceed.

Question 5

Commercial Landlord’s Remedies

When will a landlord serve a s.146 notice for forfeiture, and what information must be included?

Answer 5

Applies to breaches of all covenants except non-payment of rent.

Notice must - (i) specify the breach, (ii) require remedy of the breach within reasonable time, and (iii) require the tenant to pay compensation for the breach.

Question 6

When might a tenant apply for relief from forfeiture?

Answer 6

• Before re-entry for court proceedings
• A reasonable time after re-entry for or in peaceable re-entry

Question 7

What landlord remedies are available for breaches of repair covenants?

Answer 7

1. Damages
2. Forfeiture
3. Self-help
4. Specific performance

Question 8

What procedure must be following for Commercial Rent Arrears Recovery?

Answer 8

Tenant must owe a minimum of 7 days of unpaid rent.

1) L appoints enforcement officer to serve tenant with notice of re-entry if it fails to pay-up;
2) T has 7 clear days to pay-up and if it fails to E.O can enter 🏠 and seize T’s stock; and
3) Give T additional 7 days notice if it intends of selling any of seized goods.

• cannot seize goods up to the value of £1350 that are necessary to tenant’s business.
• must be sold at a public auction.

Question 9

What outstanding sums can a landlord recover by using the Commercial Rent Arrears Recovery procedure?

Answer 9

Annual rent + interest + VAT

❌ cannot recover service charge!

Question 10

How is rent payable under a commercial FRI lease?

Answer 10

expressed annually, but paid quarterly.

Question 11

Does a landlord have an implied right to increase rent?

Answer 11

No, the lease must expressly provide for open market rent review.

Question 12

How is an open-market rent review conducted?

Answer 12

market is ascertained on basis of comparable premises and characteristics

• tenant’s breaches of covenants, tenant’s voluntary improvements are not considered.
• Landlord’s breaches are taken into account.

Question 13

Security of Tenure

What is the earliest and latest date of termination of a lease when a landlord serves a section 25 notice?

Answer 13

Latest - 6 months from date notice is service.
Earliest - 12 months from date of service.

Question 14

For a post-1996 lease, what two documents will the landlord solicitor need to draft to execute an assignment of lease?

Answer 14

Licence to assign and AGA

Question 15

Security of Tenure

How can a landlord oppose a section 26 notice?

Answer 15

Serve counter-notice on tenant
within 2 months and set out statutory ground of opposition.

If counter-notice is not served, landlord loses right to oppose the new tenancy.

Question 16

Security of Tenure

How can a tenant renew their tenancy following service of a s.26 notice?

Answer 16

apply to the court before the specified date of commencement for the new tenancy but after counter-notice period has expired.

if tenant fails to apply, then landlord can apply for termination of tenancy.

Question 17

Security of Tenure

What is the notice period to serve a section 27 notice?

Answer 17

Tenant’s notice to terminate.

Give landlord not less than 3 months notice to terminate.

Good practice, but not needed, unless holding over has begun, then must serve with 3 months notice.

Question 18

Security of Tenure

What two types of section 25 notices can a landlord serve, and what are their practical implications?

Answer 18

• s.25 ‘friendly’ notice - landlord wishes to renew lease.
• s.25 ‘hostile’ notice - landlord wishes to terminate lease.

Question 19

Security of Tenure

What are the statutory grounds a landlord can rely on when serving a ‘hostile’ s.25 notice?

Answer 19

1) breach of repairing obligation (serious)
2) other substantial breaches of tenant obligations
3) persistent delay in paying rent
4) availability of suitable alternative accommodations;
5) landlord intends to occupy premises
5) intention to demolish and reconstruct premises or carry-out sustantial construction

Mnemonic - BOPALI

Question 20

Security of Tenure

What statutory grounds to oppose renewal of lease are discretionary versus mandatory, and what are there respective implications?

Answer 20

Discretionary - if ground is made, court ‘may’ accept landlord’s application.
- breach of repair obligations
- other susbtantial breaches of tenant obligations.
- persistent delay in paying rent

Mandatory - if ground is made out, court ‘must’ find in favour of landlord.
- availability of alternative accomodation.
- landlord intends to occupy premises.
- intention to demolish/carry out substantial works

BOP (Disc) ALI (mandatory)

Question 21

Security of Tenure

Following termination of a periodic tenancy, how much compensation is payable by the landlord?

Answer 21

Only available if mandatory grounds (save for alternative suitable accomodations are made out)

If the tenant occupied:
- less than 14 years - 1x rateable value
- 14 or more years - 2x rateable value

Question 22

Security of Tenure

Can a lease exclude the right to receive compensation following termination of a protected tenancy?

Answer 22

Yes, but will be void if the tenant or their predecessors in the business have been in occupation for 5 years or more at the date of termination.

• Key difference between date of termination vs. date notice is served.

Question 23

Security of Tenure

What is the procedure to contract out of security of tenure?

Answer 23

1) Landlord must serve a health warning notice on the tenant before completion of the lease.

2) Tenant must provide a declaration before completion.
- signed declaration (at least 14 days before completion)
- statutory declation (if less than 14 days until completion).

Question 24

Security of Tenure

What is the extent of the court’s powers to renew a lease in a secured tenancy?

Answer 24

Grant a term up to 15 years to begin three months after proceedings are disposed of.
* Order for open market rent to be paid
* Any other suitable term with regard to the current tenancy and circumstances.
* New terms - provided these are fair and reasonable, with burden falling on person seeking to impose new clause to prove.

Question 25

# Security of Tenure How might a court take into account the status of a old lease when exercising its powers to renew a secured tenancy?

Answer 25

By renewing tenancy, old lease will become a new lease. * Loss of privity of contract may still be considered in determining the rent payable (s.34(4)).

Question 26

# Security of Tenure What information should a **section 26 notice** contain?

Answer 26

Served by **tenant to renew lease.** Set out terms of renewed lease in notice to landlord and state the date of commencement of new tenancy. cannot be served later than 6 months and earlier than 12 months **before** proposed date of commencement.

Question 27

# Security of Tenure What is **interim rent**?

Answer 27

Court has the power to fix a new rent based on an open market rent review. * Either party can apply. * court considers what would be a reasonable amount for tenant to pay. Effective either from earliest date of termination that could've been specified in either a s.25 or s.26 notice (6 months in both cases). * Where s.25 is served - rent is calculated at 10-15% reduction less than market value. * Where s.26 is served - rent is at market value.

Question 28

# Security of Tenure How many days does an unhappy tenant have to apply for **revocation** of a **court's ordered tenancy** and what is the **effect of doing so**?

Answer 28

14 days * By doing so, tenant gives up its right to renew entirely.

Question 29

# Security of Tenure How does the **five-year rule** restrict a landlord's statutory grounds for opposing a renewal of a secured tenancy?

Answer 29

a landlord must have **owned their superior title for at least 5 years** to rely on statutory ground to of **intended reoccupation.** (s.30(1)(g)). Designed to prevent landlords from buying property's subject to existing tenancies, with the aim of eventually vacating the premises. * note - exclusion does not apply if landlord bought the property with vacant possession.

Question 30

# Lease Termination What are the five ways a lease may be terminated?

Answer 30

1) effluxion of time 2) break clause in contract 3) notice to quit by tenant 4) surrender 5) merger of leasehold/freehold interest

Question 31

# Lease Termination How might a sublease be affected by surrender of the headlease?

Answer 31

subtenant becomes the immediate tenant of the head landlord on the terms of the sublease.

Question 32

# Commercial Landlord's Remedies What are the six remedies for **breaches for covenant to pay rent**?

Answer 32

- damages - action in debt or insolvency proceedings - look to gurantor/rent deposit (s.17 notice) - commercial arrears rent recovery - forfeiture - equitable remedies

Question 33

# Commercial Landlord's Remedies What is the limitation period to enforce a tenant's debt?

Answer 33

6 years

Question 34

# Commercial Landlord's Remedies When might a landlord be granted an injunction against a tenant?

Answer 34

where a tenant is attempting to unlawfully assign their lease.

Question 35

# Commercial Landlord's Remedies Does a landlord have an automatic right to forfeiture?

Answer 35

no, lease must expressly provide for it.

Question 36

# Commercial Landlord's Remedies When is a landlord at risk of waiving their right to forfeit?

Answer 36

when it acknowledges a breach has occured, but fails to take action against it. - whether a landlord's intended to do so is immaterial.

Question 37

# Tax Where a long-lease lease is granted at a premium (ie. base purchase price), how will the SDLT be calculated?

Answer 37

against the premium only, and not the ground rent. cf. short term leases - consider the NPV of total lease.

Question 38

# Security of Tenure Where **security of tenure** is not expressly contracted out of the lease, what are the **four conditions** for it to apply?

Answer 38

1) Must be a tenancy 2) Occupied by the tenant - will lose right if they underlet or premises is vacant. 3) For purpose of business - requires a form of income stream or supports that purpose; 4) Not be expressly excluded via statute

Question 39

# Security of Tenure What are the four excluded tenancies that cannot benefit from security of tenure?

Answer 39

1) Agricultural tenancies 2) Mining leases 3) Service leases (ie. security guard's apratnemnt rented from employer); 4) Fixed term lease of **6 months or less**; * note - landlord cannot circumvent this by granting successive 6 month tenancies. * Qualify as protected tenancy if tenant has been in occupation for more than 12 months via successive tenancies, or where tenancy contains a provision allowing renewal beyond 6 months.

Question 40

# Alienation How long after serving notice of assignment to the landlord must completion take place?

Answer 40

within a month of notice

Question 41

# Alienation What are the three main provisions expressed in the 2020 Code for Leasing Business Premises regarding alienation?

Answer 41

- Where covenant is qualified for assignments and underletting of the premises are automatically upgraded to FQC - Group companies can share occupation without consent. - Tenant can obtain a charge over its lease from a bank/reputable lending institution.

Question 42

# Alienation Where the lease is silent regarding the tenant's right to alienation, what is the default position?

Answer 42

tenant is free to do what they want.

Question 43

# Alienation What pre-completion steps must be taken when assigning a lease?

Answer 43

Assignee's solicitor will draft the **deed of assignment** using a TR1 form, which tenant will then sign. Landlord's solicitor will engross the **licence to assign** and arrange for all parties to execute a copy (3 copies in total) at completion. * landlord will likely request an AGA. * licence must be by deed if it contains covenants. Apportionment of rent - unlikely that completion will take place day that annual rent is due, so necessary to work out how much assignee needs to pay assignor.

Question 44

# Alienation Where the lease being assigned is unregistered (7 years or less), which title will the assignee's solicitor need to deduce?

Answer 44

landlord's (cf. where lease is registrable the tenant's title suffices)

Question 45

# Alienation Where a lease is assigned, can any of its pre-existing terms be changed?

Answer 45

No unless a **deed of variation** is entered into.

Question 46

# Commercial Landlord's Remedies When might a tenant succeed in applying for relief from forfeiture?

Answer 46

relief might be granted if tenant succeeds in showing *breach is capable of remedy* and landlord would not be materially affected. * Also rely on s.147 LPA if concerned with internal decorative repairs.

Question 47

# Commercial Landlord's Remedies Who can apply for relief from forfeiture?

Answer 47

sub-tenant or mortgagee also have standing to apply as forfeiture of the headlease will automatically forfeit the under-lease. (cf. surrender will only end headlease)

Question 48

# Commercial Landlord's Remedies What are the limitations of relying of an action in damages for breach of repair covenant?

Answer 48

1) Statutory ceiling for damages * decrease in reversion's value * no damages if on termination of lease, landlord plans to demolish or structurally alter the premises. 2) Leave to sue * Required if lease is of 7 years with at least 3 years left to run. * Notify of right to serve counter-notice (as w/ forfeiture). (cf. Jarvis v Harris clause)

Question 49

# Commercial Landlord's Remedies Where a tenant is in rent arrears, can a landlord exercise their right to CRAR against their subtenant?

Answer 49

yes, but must give subtenant 14 *clear* days notice. * 7 days extra.

Question 50

# Commercial Landlord's Remedies When must a **section 17** be served, against whom, and in what context?

Answer 50

Served against a former tenant or gurantor when seeking to recover *liquidated* sum owed by existing tenant. * only recover rent arrears from past 6 months.

Question 51

# Commercial Landlord's Remedies When might a tenant be entitled to **relief from forfeiture** following **breach of covenant to pay rent**?

Answer 51

Apply up to six months after recovery of possession from landlord. * Typically granted where tenant agrees to repayment.

Question 52

# Commercial Landlord's Remedies How does an **Avonbridge clause** affect a landlord's liability for tenant's covenant breaches?

Answer 52

**limits landlord's liability** for duration reversion is vested in them, as otherwise, they are not automatically released. * Post-1996 leases do not have same effect as with original tenants in terms of releasing them from liabiliy.

Question 53

# Commercial Landlord's Remedies What is the procedure to **forfeit** a **residential** lease?

Answer 53

First, need to apply for a **court order.** * Needed if premises are mixed business/residential.

Question 54

# Commercial Landlord's Remedies What purpose is a **rent deposit deed** intended to serve?

Answer 54

Deed entered entered into by a tenant, and gives the landlord the **right to draw from the rent deposit** for arrears of rent.

Question 55

# Commercial Landlord's Remedies Where the tenant does not dispute rent arreas, what alternative court action can a landlord take or threaten to recover the sum owed?

Answer 55

Start insolvency proceedings * Individual - debt owed must be at least £5000 * Company - debt owed must be at least £750

Question 56

# Commercial Landlord's Remedies What procedure must a landlord selling their reversion interest subject to a lease do to be released from subsequent liability?

Answer 56

Apply for release to tenant by serving notice. * Tenant has four weeks to respond. * If no response is given, then landlord is automatically released. * If tenant objects, the landlord may apply to the Country Court for a declaration that release would be reasonable.

Question 57

# Alienation What forms need to be filed at HMLR following completion of assignment?

Answer 57

Registered lease - AP1 (to be submitted within OS1 priority period). Unregistered lease with more than 7 year left - first registration of lease using form FR1.

Question 58

# Alienation When is an express indemnity granted in the context of assignments?

Answer 58

Given by the assignee to the assignor under SC/SCPC for old-leases. Express indemnity is not strictly required as it is implied in transfers for value or if lease is registered. * Still set out in SC/SCPC. * except where lease is unregistered and no value given by assignee for the transaction (express indemnity is always needed as not automatically implied).

Question 59

# Alienation What are two ways a tenant can persuade its landlord to consent to underlet the premises?

Answer 59

* By offering to increase rent deposit - provides additional security for landlord if rent is not paid. * Tenant references or personal gurantee from an individual or group company.

Question 60

# Alienation What is the procedure for deducing title in an underlease context?

Answer 60

If headlease is registered with absolute leasehold title, do not need to deduce freehold title. If headlease is registered with good leasehold title, freehold title should be deduced. * if headlease qualifies for absolute title, the headtenant should be asked to apply to HMLR to upgrade class of title. * If not possible, indemity insurance will be necessary for undertenant/lender.

Question 61

# Alienation What documents are involved in the granting of an underlease?

Answer 61

1) Licence to underlet (to be executed before completion of the underlease) 2) Underlease

Question 62

# Alienation What effect is the licence to underlet intended to have?

Answer 62

Undertenant **covenants directly with the head landlord** to observe and perform the tenant covenants in both the headlease (so far as they relate to the property and other than the covenant to pay rent) and underlease. Effect of **creating privity of contract** between the head landlord and undertenant.

Question 63

# Alienation Under what terms will an underlease generally be granted?

Answer 63

same or similar terms as headlease. * head landlord will generally want to see a copy of the underletting agreement beforehand.

Question 64

What purpose does a licence to assign serve?

Answer 64

Sets out the landlord's formal written consent to the proposed assignment. * new leases - contain AGA * old leases - direct covenant between landlord and assignee (party in whose favour lease is being assigned).

Question 65

# Alienation What undertaking will an assignor's solicitors typically be required to give?

Answer 65

To pay the landlord's legal fees and other professional costs arising from the propsoed assignment, whether or not the matter proceeds to completion. * note as a professional conduct point - only do this once client consents [assignor].

Question 66

# Alienation What key provisions will be contained in the licence to assign?

Answer 66

* Time window for landlord's consent * New lease - AGA/Old Lease - direct covenant with assignee to observe tenant covenant *for the remainder of the term* (upgrades privity of estate to privity of contract). * Agreement that assignor pay the landlord's costs. * Obligation to serve notice of the assignment on the landlord (*notice of assignment*)

Question 67

# Grant of commercial leases What provisions will generally be contained in a commercial lease regarding **insured risks**?

Answer 67

* Landlord's covenant to (i) insure for the full reinstatement value against insured risk and (ii) apply insurance proceeds/repair/reinstate * Tenant's covenant to pay insurance rent. * Rent suspension where premises are unsuitable or unfit for occupration or use. * Termination of lease if repair/reinstatmeent has become impossible or impractical.

Question 68

What is commoly included in the list of insured risks?

Answer 68

Damge/destruction caused by: * fire * explosion * lightning * flood * storm * tempest * overflowing or burst pipes * impact by vehicles or aircraft articles dropped therefrom. Note - terrorism is not an insured risk but Code for Leasing Premises includes required as "good practice"

Question 69

When will a tenant typically not benefit from rent supension where damage from an insured risk arises?

Answer 69

if the insurance policy has been vitiated by tenant or anyone else at the property with their authority.

Question 70

# Alienation In what case will a qualified covenant not be upgraded to a fully qualified covenant by the LTA?

Answer 70

Change of use * only restriction is that landlord cannot agree to give consent in return for higher rent or fine where no structural alteration is involved.

Question 71

What is the difference between how **improvements** are assessed under a qualified covenant and absolute covenant for alterations?

Answer 71

1) Qualifed covenant - favours the tenant. * Whether the alternations would increase the value or usefulness of the property from the tenant's point of view. 2) Absolute covenant - favours the landlord. * Test is relevant if tenant applies to court for an order authorising the works (s.3 of LTA) * Need to add to the letting value of the property, be reasonable/suitable to the property's character, and not diminish value of any other property owned by their landlord. * tenant can be compensated for improvements made via s.3 LTA where they add to reversion's value.

Question 72

# Alienation For a FQC relating to alterations, does a landlord need to give consent *within reasonable time*?

Answer 72

No, unlike FCQ for assignments, this is not implied by statute so parties need to expressly provide for this in their agreement.

Question 73

# Alienation What are reasonable reasons for a landlord to refusal for assignment in context of a FCQ?

Answer 73

* Tenant's proposed use and potential conflict with landlord's own business or tenant-mix polict. * Significant breaches of the lease * Concerns regarding assignee's covenant strength.

Question 74

# Alienation Will a commercial lease allow charging of the whole of the property?

Answer 74

No - generally only by way of a floating charge, but in any case, lenders are unlikely to find it to be attractive security due to forfeiture clause. * insolvency - specified as forfeiture grounds. * Lack of capital value

Question 75

# Alienation What pre-completion searches must be carried out when granting an underlease?

Answer 75

If **underlease** is registrable * OS1 search - if underlease of all of headlease * OS2 - if underlease in part If **underlease** is not registerable. * OS3 search - gives no priority period but ensures no adverse entries against headlease.

Question 76

What is the effect of an absolute covenant against alterations?

Answer 76

Section 3 of the Landlord and Tenant Act 1927, allows a tenant of business premises to make improvements even if the lease includes an absolute prohibition against such improvements. * notice on landlord - giving it 3 months to respond. * if landlord objects - court permission can be sought. * court considers whether alterations are beneficial from POV of landlord (i.e. value of property) rather than tenant - as is the case for FQC. * if tenant makes alterations using s.3, then at end of lease can claim compensation for improvements in so far as 'added to the letting value of the holding' under section 1 of LTA. * if landlord is silent - then can proceed with works notwithstanding qualified covenant.

Question 77

# Alienation What is the effect of Section 19 of the Landlord and Tenant Act 1927?

Answer 77

upgrades qualified covenant on assignment into a fully qualified covenant. * Consent not be unreasonably withheld.

Question 78

What is the effect of Section 19(1A) of the Landlord and Tenant Act 1927?

Answer 78

Allows for the landlord and the tenant to agree in advance conditions and circumstances in which it would not be unreasonable for the landlord to refuse consent * often to give AGA, be up to date on rent etc. * Effect is that such pre-agreed conditions and circumstances are deemed reasonable

Question 79

How can a tenant apply for consent to assign its lease?

Answer 79

* Tenant - make written application to landlord. * Landlord - respond within reasonable time, and specify in written notice its decision to give consent or not. If subject to conditions, specify these. If consent is withheld, reasons for witholding it.

Question 80

What option does a landlord have it is unhappy with the new lease ordered by the court?

Answer 80

Appeal (Cf. tenant cannot apply for order to be revoked)

Question 81

How should a tenant proceed once they have served a section 26 request?

Answer 81

Should apply to the court for a new lease to be granted, even if landlord appears willing to negotiate a new lease. * If tenant does not apply to court to renew its tenancy (and landlord does not respond by proposed renewal date specified in notice), lose right to renew and will need to vacate. * landlord can also apply to court to oppose notice, unless tenant has already done so.

Question 82

What must be done for a lease to be legally surrendered?

Answer 82

Surrender must be by deed.

Question 83

When can a tenancy protected by security of tenure come to an end other than by serving relevant notices?

Answer 83

* surrender * forfeiture

Question 84

How might surrender be useful in cases of tenant breaches?

Answer 84

Not strictly a landlord's remedy, but entering a deed of surrender can enable parties to work out difference. * quicker and cheaper than forfeiture. * requires willingness to compromise form tenant's perspective.

Question 85

What is a key distinction between forfeiture in the context of breaches of repairing covenant and all other breaches?

Answer 85

Notification of a tenant's right to serve a counter-notice if lease is of 7 years or more with at least 3 years remaining is only relevant for breaches of repair covenants.

Question 86

What are the limitations to exercising the right to self-help under a Jarvis v Harris clause?

Answer 86

Tenant could refuse to reimburse landlord, which means to recover sums court action will be necessary. * result in time and added costs. If tenant is in financial difficult, may be unable to reimburse landlord.

Question 87

When is specific performance generally granted as a remedy for breach of repair covenant?

Answer 87

case law shows that, court is willing to exercise its discretion where: * the lease does not contain a forfeiture or landlord’s self- help clause; * Damages are not an adequate remedy, particularly where the condition of the property is deteriorating; * application is made in good faith by landlord, not simply to harass or pressure the tenant.

Question 88

What are the limitations of recovering unpaid rent via section 17 notice on former tenant?

Answer 88

* only recover rent arrears from past 6 months.

Question 89

What are the limitations of exercising CRAR?

Answer 89

need to consider type of business carried out by tenant as tools of trade cannot be seized unless valued at more than £1350. * also cannot seize property where someone else has an interest (i.e. tenant is loaning the property).

Question 90

What post-completion steps must be taken in respect of an assignment unregistered lease with over 7 years remaining?

Answer 90

Need to be registered at the Land Registry within two months of the assignment or will be void in respect of the legal estate. * same principle as unregistered freehold.

Question 91

What do the standard conditions provide whether the landlord has not consented to the assignment?

Answer 91

SC – either party can rescind the contract by notice if landlord consent has not been given three working days **before** the completion date. SPCS - if landlord consent is not obtained by the completion date, the completion is postponed until five working days after the assignor (seller) notifies the buyer that consent has been granted. * Rescission is possible if six months pass without obtaining the landlord’s consent.