PLP - Grant of a lease

Question 1

What are the advantages of a lease over a freehold from a tenant’s POV?

Answer 1

No need to spend capital
Not a permanent investment - flexibility
Some premises are only available as a leasehold

Question 2

Who are commercial landlords?

Answer 2

Private investors + insitutional investors

Question 3

What distinguishes institutional investors?

Answer 3

Pension funds, life insurers, etc. Invest in property like they do in stocks—for income and capital growth.

Question 4

What impact does the Leasehold and Freehold Reform Act 2024 have?

Answer 4

New houses can only be sold freehold. Leaseholds restricted to flats (with limited exceptions).

Question 5

What is an assured shorthold tenancy (AST)?

Answer 5

A short-term tenancy (usually 6–12 months) with market rent. Common for houses/flats. Not the focus for commercial conveyancing.

Question 6

What are commercial leases typically like?

Answer 6

Usually up to 15 years, market rent payable, used for offices, shops, factories, etc.

Question 7

What type of lease do institutional investors favour?

Answer 7

a full repairing and insuring (FRI) lease - the tenants pick up the costs associated with the property, and the landlord receives the clear rent

Question 8

What is an FRI lease and why do institutional landlords prefer it?

Answer 8

Full Repairing and Insuring lease—tenant pays all maintenance and insurance; landlord receives clear rent.

Question 9

What is ‘covenant strength’ and why does it matter?

Answer 9

The tenant’s ability to pay rent and meet obligations. Weak covenant = higher risk; landlord may ask for a guarantor or rent deposit.

Question 10

What tasks might a commercial property solicitor carry out in asset management?

Answer 10

Granting new leases
Approving tenant consents
Advising on breaches
Handling lease-end issues

Question 11

How does Woodfall define a lease?

Answer 11

Exclusive possession of land for a determinate term less than the landlord’s own interest.

Question 12

Why is a 999-year lease still a lease and not ownership?

Answer 12

Because it is still for a fixed term that’s less than the freehold, which is perpetual.

Question 13

What are the three essential ingredients of a lease?

Answer 13

1. Exclusive possession
2. Fixed or periodic term
3. Formalities (depending on lease length)

Question 14

What does “exclusive possession” mean in a lease?

Answer 14

Tenant can exclude strangers and even the landlord (except for inspection rights).

Question 15

Why is exclusive possession important?

Answer 15

It distinguishes a lease from a licence.

Question 16

What’s required for a valid term in a lease?

Answer 16

A fixed term (e.g. 6 months, 5 years) or a periodic term (e.g. weekly, monthly). It can’t usually be for an indefinite period.

Question 17

Can a lease be created orally?

Answer 17

Yes, if it’s for 3 years or less.

Question 18

When must a lease be made by deed?

Answer 18

If it’s for more than 3 years.

Question 19

What is the ‘reversion’?

Answer 19

The landlord’s interest that remains during the lease. The property reverts to the landlord at the end of the lease term.

Question 20

What does a lease create?

Answer 20

A leasehold interest in land.

Question 21

What are the core contents of a simple lease?

Answer 21

Contractual term and rent payable.

Question 22

Who usually has stronger negotiating power in commercial leases?

Answer 22

The landlord.

Question 23

What will a landlord want the lease to require?

Answer 23

Premises that are:
- Insured
- Kept in repair
- Only used for the permitted purpose

Question 24

What additional controls will a landlord often want in a lease?

Answer 24

Control over who occupies (e.g. restrict assignment)
Control over alterations to premises
Right to increase rent within market range via rent review

Question 25

What will a tenant usually want from a lease?

Answer 25

Use for intended purpose Contractual term that suits business (not too long/short) Flexibility if circumstances change

Question 26

What provisions will a tenant try to avoid?

Answer 26

Harsh restrictions on use or assignment Rent clauses allowing sharp increases Terms heavily skewed in landlord’s favour

Question 27

Why might a landlord prefer a 20-year lease with no break clause?

Answer 27

It protects the value of the reversion by ensuring a long period of uninterrupted rent.

Question 28

Why might a tenant reject a 20-year lease with no break clause?

Answer 28

Too long-term—especially if business future is uncertain. Tenants often prefer 5–10 years with break options.

Question 29

Why do landlords like upward-only rent review every 5 years?

Answer 29

It protects them from rent decreases if market dips.

Question 30

What are typical fixed terms in commercial leases?

Answer 30

3, 5, 10 or 15 years—depending on business sector and planning cycles.

Question 31

Why are short leases becoming more popular?

Answer 31

Match business plans (often 5 or 10 years) Lower or no Stamp Duty Land Tax / Land Transaction Tax

Question 32

What is the "term commencement date"?

Answer 32

The date the lease term starts—may be before, on, or after the lease is dated.

Question 33

What is a reversionary lease?

Answer 33

A lease where the term starts after the lease is executed—used to extend occupation after a current lease ends.

Question 34

Can a lease start in the past?

Answer 34

Yes. The lease may say the term began earlier. The tenant usually doesn't have to pay rent for the unused period.

Question 35

If a lease term is ‘from and including 24 March 2019’ for 10 years, when does it end?

Answer 35

23 March 2029.

Question 36

If a lease term is ‘from 24 March 2019’ for 10 years, when does it end?

Answer 36

24 March 2029.

Question 37

What's the difference between ‘from and including’ and just ‘from’?

Answer 37

'From and including' – expiry is day before anniversary 'From' – expiry is on the anniversary

Question 38

What is a break clause?

Answer 38

A clause allowing early termination of the lease by one or both parties.

Question 39

What are the three types of break clauses?

Answer 39

Landlord-only break Tenant-only break (most common) Mutual break

Question 40

What is meant by an “anniversary” in a lease context?

Answer 40

The same calendar day in a future year—e.g. the 5th anniversary of 8 Sep 2030 is 8 Sep 2035.

Question 41

What does it mean for a lease term to be “determinate”?

Answer 41

The lease must have a fixed or periodic term (e.g. 6 months, 5 years, weekly). It cannot be indefinite.

Question 42

What are two common formats of break clauses?

Answer 42

Fixed-date break – e.g. 5th anniversary of term start Rolling break – anytime after a set date (e.g. 5th anniversary)

Question 43

Why might a landlord offer a 10-year lease with a 5-year tenant break, but not a 5-year lease?

Answer 43

The tenant may choose not to exercise the break. Valuers may treat the longer lease as more valuable to the landlord’s reversion.

Question 44

What are the two main types of lease rent?

Answer 44

Short lease with market rent Long lease with ground rent or peppercorn

Question 45

What is “rack rent” in commercial leases?

Answer 45

Market rent—commonly paid under leases up to 15–20 years.

Question 46

Do commercial tenants usually pay a premium on the grant of the lease?

Answer 46

No. They usually just pay annual rent.

Question 47

Example: How might a commercial lease be structured?

Answer 47

Rent of £20,000 per year; no upfront premium.

Question 48

What is a ground rent in residential leases?

Answer 48

A small annual rent (e.g. £150) usually imposed on long leases (e.g. 99 or 999 years).

Question 49

What’s changed about ground rents since 30 June 2022?

Answer 49

New residential long leases must usually be peppercorn (zero or token rent only).

Question 50

What is a “peppercorn rent”?

Answer 50

A very small cash payment used to satisfy the requirements for the creation of a legal contract

Question 51

What happens to ground rent clauses in leases granted before 30 June 2022?

Answer 51

They still apply, even if the lease is extended.

Question 52

When might a commercial long lease be used?

Answer 52

E.g. land for electrical substations

Question 53

How is rent paid in a commercial FRI lease?

Answer 53

Rent expressed as a yearly figure but payable quarterly, with rent due in advance on the quarter day - e.g. 25th March for the whole period up to and including 23 June The lease must state if the rent is payable in advance - if the lease is silent, the rent is payable in arrears

Question 54

What are the traditional quarter days?

Answer 54

25 December to 24 March 25 March to 23 June 24 June to 28 September 29 September to 24 December

Question 55

What are the modern quarter days?

Answer 55

1 January 1 April 1 July 1 October

Question 56

What happens if the lease is silent on if the rent is payable in advance?

Answer 56

The rent is payable in arrears (more common with residential long leases)

Question 57

What are the types of rent review?

Answer 57

Stepped rent, turnover rent, index-linked rent, open market rent review