Leases

Question 1

What is a lease?

Answer 1

A lease is a temporary transfer or grant of possessory interest in a property to another (lessee) by the owner (lessor) for a definite time in consideration for rent which may be money or money’s worth.

Question 2

What are the essential elements of a valid lease?

Answer 2

The essential elements of a valid lease include certainty of parties, certainty of property, certainty of term, exclusive possession, and proper creation of the lease.

Question 3

What does ‘certainty of parties’ mean in a lease?

Answer 3

It means that the parties must be juristic persons and must be adequately described.

Question 4

What is meant by ‘certainty of property’ in a lease?

Answer 4

The property must be in existence at the commencement date and must be sufficiently described; otherwise, the agreement is void.

Question 5

What is ‘certainty of term’ in a lease?

Answer 5

There must be a definite time frame for the lease’s commencement and termination; it cannot inure in perpetuity.

Question 6

What is exclusive possession in a lease?

Answer 6

There must be exclusive possession by the lessee, even against the lessor unless a clause allows the lessor to enter the premises.

Question 7

How must a lease be created if it is for a period above 3 years?

Answer 7

It must be created by deed; if it is for 3 years or below, it need not be by deed but by a tenancy agreement.

Question 8

What is the difference between a lease and a sale of land?

Answer 8

A lease is the transfer of occupation or possession while the lessor retains the title, whereas a sale involves the transfer of title/ownership.

Question 9

What is rent in a lease?

Answer 9

Rent is the consideration paid by the tenant to the landlord for the term granted; payment of rent is not a strict requirement for a valid lease.

Question 10

What are the types of rent?

Answer 10

Types of rent include rack rent, premium rent, and ground rent.

Question 11

What is rack rent?

Answer 11

Rack rent is an economic rent charged and paid for the improvements and developments on the land.

Question 12

What is premium rent?

Answer 12

Premium rent is a lump sum usually paid in addition to other rents and is considered a fine, prohibited in some states.

Question 13

What is ground rent?

Answer 13

Ground rent is rent paid to the government over the bare land itself.

Question 14

How may rent be collected?

Answer 14

Rent may be charged in arrears or in advance, though charging rent in advance is not advisable due to tax implications and inflation.

Question 15

What are implied covenants in leases?

Answer 15

Implied covenants are essential covenants inferred by law, regardless of whether the lease makes provision for them.

Question 16

What are some implied covenants on the part of the landlord?

Answer 16

Implied covenants include quiet enjoyment, non-derogation from grant/title, and the property must be fit for human habitation.

Question 17

What are usual covenants in leases?

Answer 17

Usual covenants are common covenants based on the facts or evidence presented before the court, such as quiet enjoyment and payment of rent.

Question 18

What are express covenants?

Answer 18

Express covenants are those that are specifically agreed upon and not implied by law.

Question 19

What is the rationale for a covenant to pay rent?

Answer 19

A lease should provide for the payment of rent, which must be certain or ascertainable.

Question 20

What is a covenant to pay rates and outgoings?

Answer 20

This covenant stipulates that the lessee is responsible for recurrent rates and outgoings while the lessor pays non-recurrent bills.

Question 21

What is a user covenant?

Answer 21

This covenant stipulates the use for which the demised premises will be put by the lessee.

Question 22

What is a covenant to repair?

Answer 22

It is an implied term that the tenant must keep the premises in tenantable repair, excluding reasonable wear and tear.

Question 23

What is a covenant against assignment?

Answer 23

This covenant restricts the tenant’s right to assign their tenancy or create subleases without the landlord’s consent.

Question 24

What is a covenant to insure?

Answer 24

This is an undertaking to insure the demised premises, detailing who is to insure and the risks covered.

Question 25

What does the covenant against assignment ensure?

Answer 25

It ensures that the Landlord is in control of tenants occupying the premises.

Question 26

What is an example of an absolute bar/prohibition in a covenant against assignment?

Answer 26

The Tenant/Lessee shall not assign or part with possession of the demised premises.

Question 27

What is the implication of an absolute bar on the lessee?

Answer 27

It is harsh on the lessee as it does not protect his interest at all.

Question 28

What is an example of a conditional/qualified prohibition in a covenant against assignment?

Answer 28

The lessee shall not assign, sublet, charge or part with possession of the premises or any part of it without the written consent of the Landlord.

Question 29

What is the implication of a conditional/qualified prohibition?

Answer 29

The test for granting or refusing consent is subjective, and the landlord is not bound to disclose reasons for refusal.

Question 30

What is a balanced/ideal clause in a covenant against assignment?

Answer 30

The lessee shall not assign, underlet, charge or otherwise part with the possession of the demised premises or any part of it without the written consent of the landlord on every occasion first obtained and such consent not to be unreasonably withheld in the case of reasonable and responsible persons.

Question 31

What is the implication of a balanced/ideal clause?

Answer 31

It ensures a balance of the competing interests of the parties, allowing the landlord to refuse consent only for lawful reasons.

Question 32

What are some uses of the covenant against assignment?

Answer 32

It helps guide against nuisance to neighbours, prevents illegal or immoral subletting, protects the lessor’s reversionary interest, and enables the lessee to recoup expenses.

Question 33

What remedies does the lessor have upon breach of the covenant?

Answer 33

Claim of damages, action for forfeiture, entry into the demised premises to carry out repairs, action for specific performance of the covenants.

Question 34

What constitutes a reasonable and responsible person in the context of subletting?

Answer 34

A reasonable and respectable/responsible person is one with good financial standing.

Question 35

What can a lessee do if the lessor refuses consent to sublet to reasonable persons?

Answer 35

The lessee may sublet and obtain an injunction restraining the lessor from interfering or bring an action for the refusal to be declared unreasonable by the court.

Question 36

What are the grounds for a refusal to be considered reasonable?

Answer 36

The personality of the intended user, the nature of the property, or the intended use being against the user covenant.

Question 37

What is an option to renew clause?

Answer 37

It is a lessor’s covenant made to the lessee that a new lease will be created at the expiration of the lease based on agreed terms.

Question 38

What is the purpose of an option to renew clause?

Answer 38

It may prevent the need to draft a new Deed of Lease or Tenancy Agreement.

Question 39

What are the contents of an option to renew clause?

Answer 39

Time for application, manner of exercise, conditions precedent, and terms of the new lease.

Question 40

What happens if the tenant does not exercise the option to renew?

Answer 40

The option becomes a mere interest and is terminated.

Question 41

What is an abatement of rent clause?

Answer 41

It preserves the rent paid by a lessee during periods where the premises cannot be used due to natural occurrences.

Question 42

What is a rent review clause?

Answer 42

It allows the lessor to adjust rent based on property appreciation, especially in long-term leases.

Question 43

What should a rent review clause contain?

Answer 43

Method of initiating review, time frame, calculation method, and dispute resolution procedure.

Question 44

What are the methods to determine a lease or tenancy?

Answer 44

Effluxion of time, merger, notice to quit, surrender, disclaimer, frustration, and forfeiture.

Question 45

What are the conditions for forfeiture?

Answer 45

Express provision in the lease document, rent must be reserved, and landlord must make a formal demand.

Question 46

What particulars are needed to prepare a lease?

Answer 46

Parties’ details, commencement date, property description, lease duration, rent payable, covenants, insurance duties, and witnesses.

Question 47

What are the formal parts of a deed of lease?

Answer 47

Commencement, date, parties, recitals, testatum, parcel clause, habendum, reddendum, covenants, provisos, testimonium, and execution.