Licence to underlet drafting Flashcards
What do you need to be able to address
The issue of privity of contract and how each licence deals with this, as well as the key provisions of each licence.
Structure
1) Heading
2) Parties
3) Definitions
4) Recitals/Background
5) Consent to Underlet
6) Undertenant’s covenants
7) Tenant’s covenants
8) The Right of Re-entry in the lease
9) Indemnity
10) Third Party Rights
11) Law and Jurisdiction
12) Execution
Heading
THIS DEED IS DATED [DATE]
HM Land Registry
Landlord’s title number
Tenant’s title number
Parties
(1) Landlord
(2) Tenant
(3) Undertenant
Definitions
(a) Lease means the lease of [address] dated [date] made between the Landlord and the Tenant and all documents supplemental or collateral to that lease.
(b) LTA 1954 means the Landlord and Tenant Act 1954.
(c) Property means [address] as comprised in the Lease.
(d) Tenant Covenants has the meaning given to it by the Landlord and Tenant (Covenants) Act 1995 (LTCA 1995).
(e) Term means the term granted by the Lease.
(f) Underlease means an underlease of the whole of the Property to be entered into between the Tenant (1) and the Undertenant (2) in the form attached to this Licence.
(g) Underlease Term means the period commencing on [and including] [date of commencement] and expiring on [date of determination].
(h) Underletting Date means the date of the grant of the Underlease to the Undertenant.
Recitals/Background
(a) This Licence is supplemental and collateral to the Lease and Underlease.
(b) The Landlord is entitled to the immediate reversion to the Lease.
(c) The residue of the term granted by the Lease is vested in the Tenant.
(d) The Tenant intends to grant the Underlease to the Undertenant and, under the terms of the Lease, requires the consent of the Landlord to that underletting.
Consent to Underlet
In consideration of the obligations entered into by the Tenant and the Undertenant in this Licence, the Landlord consents to the Tenant granting the Underlease to the Undertenant.
This consent is subject to and upon the terms of this Licence.
This consent is valid for [three months] from (and including) the date of this Licence. If this consent ceases to be valid before the Underlease is completed, all the terms of this Licence (except this consent) shall remain in force.
Nothing in this Licence shall operate to waive or be deemed to waive any subsisting breach of any of the Tenant Covenants of the Lease.
The Underlease shall be in the form of the draft annexed to this Licence.
Undertenant’s Covenants - First point - Not to occupy or take possession
The Undertenant covenants with the Landlord:
- Not to occupy or take possession of the whole of the Property or any part of them before the Underletting Date.
Undertenant’s Covenants - Second point - AGA
- At all times while bound by the Tenant Covenants of the Underlease and while bound by an authorised guarantee agreement:
(a) to pay the rent reserved by the Underlease and observe and perform the Tenant Covenants contained in the Underlease;
(b) to observe and perform the Tenant Covenants contained in the Lease except the covenant to pay the rent reserved by the Lease; and
(c) on or before any assignment of the Underlease, to procure that the assignee enters into a direct covenant with the Landlord on the same terms as this clause.
Why do you need an AGA/Direct covenant
As there is no privity of estate between the head landlord and the undertenant, the head landlord would not otherwise be able to enforce the covenants in the underlease and the undertenant would not be liable for the rent reserved by or under the covenants contained in the headlease. Check the headlease as it will normally expressly require a direct covenant from any undertenant (and its subsequent assignees).
Undertenant’s Covenants - Third point - Give to the landlord
- Within [number] days after the grant of the Underlease, to give the Landlord:
(a) written notice of the date on which the grant of the Underlease was completed;
(b) a certified copy of the Underlease; and
(c) the registration fee [specified in clause [number] of the Lease].
Tenant’s Covenants - First part - Occupation
The Tenant covenants with the Landlord:
- Not to allow the Undertenant to enter into occupation or possession of the whole or any part of the Property before the Underletting Date.
Tenant’s Covenants - Second part - Enforcing tenant’s covenants
To enforce the Tenant Covenants of the Underlease and not release any of them nor waive any breach of them.
Tenant’s Covenants - Third part - Varying terms of underlease
Not to vary the terms of the Underlease or accept a surrender of the Underlease without the consent of the Landlord (such consent not to be unreasonably withheld).
Tenant’s Covenants - Fourth part - Paying landlord’s costs
On completion of this Licence to pay the [reasonable] costs and disbursements of the Landlord’s solicitors and its managing agents in connection with this Licence. This obligation extends to costs and disbursements assessed on a full indemnity basis and to any value added tax in respect of those costs and disbursements except to the extent that the Landlord is able to recover that value added tax
