PLP (+ Land) Flashcards

Question

Unregistered Land -- The chain of title

Answer 1

A good root of title will satisfy the requirements of s 44 of LPA 1925, but if the person to whom the property was transferred in the conveyance is not the most recent owner, it is not sufficient. A chain of title will be needed, with each subsequent conveyance to establish title to the current owner (the seller).

Answer 2

Any document under which a seller was empowered to sign a conveyance. For example, if the seller was an executor, we would need to see the grant of representation. If the seller was an attorney, we would need to see the power of attorney. If a property has passed to a surviving co-owner by survivorship, then we would need to see the deceased owner’s death certificate. If any owner mortgaged the property following the date of the root of title, then these mortgage deeds should be included. Hopefully they will have been discharged. This will be clear if the relevant mortgage deed has a vacating receipt attached. This confirms that the lender has been repaid in full.

Answer 3

· Documents that only affect the beneficial interest (such as declarations of trust) · Expired leases · Old land charges searches are not required, but the seller’s solicitor will often provide them as they will be helpful to the buyer’s solicitor. · There are various documents such as planning permissions, old searches, correspondence, etc that are not needed. These may, however, be relevant to replies to enquiries.

Answer 4

The buyer’s solicitor investigates unregistered title by checking the epitome of title and its copy documents. The buyer’s solicitor will want to ensure that the seller is entitled to sell the property, and identify any issues that could affect the value of the property or the buyer’s use of the property. These are the same issues that the buyer’s solicitor will want to investigate for registered property, but the difference is that the buyer’s solicitor needs to analyse the documents rather than relying on official copies.

Answer 5

It is worth checking that the land is actually unregistered, or that neighbouring registered titles do not encroach on its boundaries. It will also reveal a caution against first registration, which may indicate that someone believes they have a claim in the property.

Answer 6

X6 clear, signed, witness, (sealed), delivered + STAMPEd Each deed will need to have been validly executed. This is complicated a little by the fact that the execution needs to comply with the law as it was then. As most unregistered deeds will be dated before 1 July 1990, when the Law of Property (Miscellaneous Provisions) Act 1989 came into effect, this means the following: · Clear on its face that it is a deed · Signed as a deed and witnessed · Sealed · Delivered as a deed – this usually takes place by inserting the date

Answer 7

The deed should also be correctly stamped. This indicates that the correct Stamp Duty was paid on the deed. Deeds after 1931 should have a “Particulars Delivered” stamp which confirms that they have been properly stamped. If there is any doubt, the buyer’s solicitor may need to check the Stamp Duty rates that were in force at the particular time.

Answer 8

Similar issues may arise with unregistered land as with registered land. The principles of co-ownership, and the passing of beneficial title by survivorship, apply equally to unregistered land. Instead of looking for a Form A restriction (registered land only), however, you would need to look through the deeds to see if it states whether co-owners hold as beneficial joint tenants or tenants in common. It is also possible that there is a notice of severance or declaration of trust that changes the beneficial title. Having established, however, that you are dealing with a surviving sole owner, the principles are similar. For a surviving beneficial joint tenant, you will need to see the death certificate of the deceased joint tenant. For a surviving tenant in common, you will additionally need a trustee to be appointed, just as you would with a registered title.

Answer 9

Land Charges Dept of Land registry search against individual (not property) can rely on previous search With unregistered land, certain rights against a property will be registered at the Land Charges Department of the Land Registry. This is a separate register and does not apply to registered land. The land charges registers are searchable by individual or company name, rather than the property address. It is therefore a case of searching against previous owners for the period of their ownership, and identifying whether any charges have been registered against them. If so, then further investigation may be required. As searches are for a period of ownership, a search against a previous owner will not need updating. If the seller’s solicitor provides a search, say, for the person who owned the property between 1980 and 1985, you can rely on that.

Answer 10

same as registered BUT first mortgage not registered at land charges dept as mortgagee holds deeds! so check both deeds and land charges dept As with registered title, mortgages are not usually a matter of concern, but the buyer’s solicitor will need to check that they will be discharged on completion. If the mortgage has already been repaid in full, there should be a vacating receipt attached to it. If this is the case, then the mortgage need not concern the buyer. However, if not, then as with registered title, the buyer’s solicitor should elicit from enquiries that the seller intends to repay it, and make sure that this is covered by both the contract and replies to requisitions on title. Note that a first mortgage is not registered at the land charges registry. This is because a first mortgagee of unregistered land will hold the deeds. This gives them protection that the property cannot be sold without their knowledge. A lender on a second or third mortgage, ie, ranking below the first mortgage, will not have this advantage, as only one lender can hold the deeds! Instead, they would register their mortgage with the land charges register. It is important therefore to check both the deeds and the land charges register for mortgages.

Answer 11

Unlike in a registered title, where rights are neatly set out in the register, or in documents that are referred to, in an unregistered land, a variety of rights can appear in different deeds at different times. The root of title should refer to any documents that contain covenants or easements. However, if there is any pre-root document that is not referred to in the root of title, then the seller’s solicitor is not required to provide that document, even if it may contain covenants or easements. This may seem an odd rule, but in practice, the root of title will cover the major issues.

Answer 12

-ve bind if registered as d(ii) land charge +ve not registrable as land charge: B sol checks deeds (as with R if chain of IC broken, ignore) Covenants present similar issues for unregistered land. Restrictive covenants will only bind the property if they are registered as a d(ii) land charge. Positive covenants are not registrable as land charges, and instead the buyer’s solicitor must check the deeds for positive covenants. However, as with registered land, if the chain of indemnity covenants has been broken, then the positive covenant can be ignored by the buyer’s solicitor.

Answer 13

If a deed is known to have contained covenants and is missing, then this is a title issue. It should be raised with the seller, and if necessary, indemnity insurance will be needed. It is always a matter to be reported to the buyer and possibly the lender.

Answer 14

There are other interests, such as easements and leases, and these should be apparent from the deeds.

Answer 15

The principle of caveat emptor (buyer beware) means that it is incumbent on the buyer (and therefore their solicitor) to inform themselves of any issues affecting the property. Searches and enquiries are an essential part of this. The buyer’s solicitor carries out pre-contract searches and enquiries. In contrast to title investigation, which is generally limited to the title that is provided, there is almost no limit to the searches and enquiries that can be raised. Although there are standard searches and enquiries that should be raised in every transaction, when it comes to additional searches and enquiries, this is a matter for the buyer’s solicitor’s judgment. We will look at the standard searches first and then the optional searches.

Answer 16

x6 Drainage and water search Desktop environmental search Chancel repair search Title searches Local search (x2) the local search comprises two parts a search of the local land charges register LLC1; and · the local authority’s replies to enquiries CON29. It is possible to order the component parts of the search separately, but usually you will need both anyway. Knowing which matters are covered by the LLC1 and CON29 is good to know for multiple choice questions (less critical in real life, where you would read the whole search).

Answer 17

x6 debt by local authority successful planning permission planning enforcement notice art 4 (disapply GDPO) conservation + listed miscellaneous LLC1 shows matters that have been entered on the local land charges register affecting the property. These include: · debts against the property for work that the local authority has carried out – for example, to repair or demolish dangerous buildings or clean properties that are a risk to public health; · planning permissions that have been granted (but not planning applications that have been refused); · planning enforcement notices; · Article 4 directions (which you will remember disapply or modify the General Permitted Development Order); · conservation areas and listed building designations; and · tree preservation orders and other miscellaneous charges that you can research if and when they come up in practice.

Answer 18

overlap w/ LLC1 x5 planning consent granted, pending, refused building regulation approval adopted roads land for public purpose contamination (not replacing environment search) There is some overlap between the LLC1 and the CON29 replies to enquiries. The CON29 replies show planning consents granted, but also show applications which are pending or refused and building regulations approvals. The CON29 replies include many matters but some important ones are: · details of adopted roads and pavements and public rights of way; · land that is required for public purposes – this means that it may be compulsorily acquired by the local authority in future; · information about contaminated land insofar as the local authority are aware, but this is limited and does not replace an environmental search.

Answer 19

The drainage and water search checks whether the property is connected to a public sewer and water supply. Form CON29DW for residential property Form CommercialDW for commercial property

Answer 20

contamination likely? flood risk? Land contamination should be considered a potential issue in all property transactions. This is because an owner may have to pay the costs of cleaning up contaminated land, whether or not they were responsible for the contamination. The CON29 replies will indicate if the local authority has served a notice requiring such remediation, but will not confirm that the property is free from contamination. The desktop environmental search is so-called because it is computer generated from existing records, and nobody actually gets up to visit the site. A desktop environmental search will advise if the property is likely or not to be contaminated based on historic maps and records. It would therefore not pick up contamination which would not be recorded, such as illegal dumping of waste. The desktop environmental search result also identifies the risk of flooding. Note that the drainage and water search does not contain information about flooding.

Answer 21

if risk = insurance Chancel repair is the historic right of a parish church to claim contributions to the cost to the repair of the church chancel, which is the area near the altar. If the search reveals a risk of chancel repair liability, it is usually possible to insure against it. The parish church should register its interest, and if a sale for value takes place without it being registered, then they can no longer claim. However, there are some twists to this rule, and so the search remains a standard search and is likely to do so for some time to come.

Answer 22

index map search + land charges search There are also searches that relate to the title, and so are a bit different from the other pre-contract searches. One is the index map search. This is not needed if only a single registered title is being acquired, as the register can be taken as conclusive. However, an index map search will be needed for unregistered title, or a number of titles, or where there is an exception of mineral rights. In these cases, the index map search is used to check all of the registered titles within the boundaries searched. The other is the land charges search (don’t confuse this with the local land charges LLC1 search), which again forms part of the investigation of title, and should be carried out against the seller and previous owners in the chain of title. However, often the seller will provide previous land charges searches, and these can be relied upon as to previous owners, meaning that only the current owner needs to be included in the buyer’s solicitor’s search.

Answer 23

There are further optional enquiries that can be raised in the local search (CON29O). These are usually not necessary for residential properties, but are often relevant in a commercial context. For example, if there is open land, it is important to raise enquiry 22, which asks about commons and village greens. These are land over which the public has rights, and may not be developed. This search can be carried out as an optional enquiry to the local search, but search providers also offer standalone commons registration searches. Either is fine. There are various other optional enquiries, but we do not need to look at them in detail for the purposes of this course.

Answer 24

optional search Another search related to the local search is the highways search (CON29R). The local search (CON29) will identify that the roads listed are adopted. This is usually fine for residential purposes, where it will usually be clear that the house abuts the public highway. However, for land for development and other commercial property, it is important to get a highways search. This provides a plan that can be used to check that the public highway abuts the boundary of the property. If there is a gap, then further investigation will be needed to ascertain what private rights are in place.

Answer 25

optional search A coal mining search should be carried out if the property falls within a coal mining area. There is a gazetteer of areas that are affected, and with online search providers, they will indicate at the time of ordering whether the coal mining search is required. This search is important to ascertain the risk of subsidence from coal mining. Other areas of the country are affected by specific types of mining: · a brine subsidence search is needed in certain areas of Cheshire; · a tin mining search may be needed in Cornwall or Devon.

Answer 26

optional search If the property has a river or other waterway running through it or next to it, then a waterways search with the Canal and River Trust should be carried out to enquire about any obligation to maintain the banks of the river or waterway. Note that a waterways search does not provide information about flooding.

Answer 27

option search The desktop environmental search provides flooding information, but if this is an issue, then a specific flood search can be carried out, which gives more detailed information on the risk of flooding.

Answer 28

optional search As we have seen, the desktop environmental search is limited in its scope, as it examines historic records and maps. Where contamination is likely to be an issue, whether revealed by the desktop search or by other information (such as replies to enquiries), then environmental surveys should be undertaken. There are two categories: · a Phase 1 survey involves a site inspection, and if this indicates possible contamination, then: · a Phase 2 survey is carried out, which involves taking soil and water samples to test for actual contamination.

Answer 29

optional search There is no standard railway search with NetWork Rail. Searches can be made with Transport for London (TfL) about Crossrail and other TfL transport schemes

Answer 30

optional search For development sites, or newly built property, further utilities searches, such as electricity, gas and telecommunications may be needed.

Answer 31

The buyer’s solicitor should consider if there have been any: · building works or alterations at the property; or · a change of use. This may be apparent from the seller’s replies to enquiries or the buyer’s survey. The buyer’s solicitor should check the searches for any necessary consents, and if they haven’t been obtained, then consider whether enforcement action is still a risk. If works or alterations have been carried out by the seller, the two types of consents the buyer’s solicitor needs to think about are planning permission and buildings regulations approval.

Answer 32

Planning permission is needed for development. This includes building works and demolition, but excludes works which only affect the interior of the building.

Answer 33

Some development will be permitted under a General Permitted Development Order. When considering historic development, refer to the GPDO that was in force at that time, not now. If the work falls within that GPDO then planning permission would not have been needed, provided that the GPDO was not disapplied.

Answer 34

Building regulations ensure that building work complies with standards of structural soundness, safety, environmental protection, etc. External or internal building works require building regulations approval, whether or not planning permission is needed. Building regulations approval is a two step process: 1. Full plans and specifications must be submitted to the building control department of the local authority for approval. 2. After completing the works, building control inspect the work and issue a certificate of compliance.

Answer 35

pp not needed within same class sui generis (no category) = dev !! BR not needed for pure change of use but needed if works (but will need pp) GDPO can allow certain changes between categories If replies to enquiries or the survey indicate that the property has been subject to a change of use, then the buyer’s solicitor needs to think about planning permission. Property uses are classified under the Town and Country Planning (Use Classes) Order 1987, as amended in September 2020. However, again, looking at historic changes of use, you would need to refer to the Order as it stood at the relevant time. Use classes are grouped by capital letter, such as E, and then subdivided. This used to be by number, eg A1, A2, B1, etc, but confusingly the modern use classes adopt lettering, so E(a), E(b), etc. The main thing to remember is that changes within the same use class, ie, uses sharing the same capital letter, do not require planning permission. Note also, that there are sui generis uses, which do not fall into any use class. Any change to or from these sui generis uses will be considered development. The GPDO allows for certain changes of use between different use classes. Building regulations are not needed for a pure change of use. Usually, however, a change of use will also necessitate building works or alterations, in which case building regulations approval will be needed.

Answer 36

If looking at ‘permitted development’, then remember that local planning authorities can disapply parts of the GPDO by making an Article 4 Direction. The LLC1 part of the local search will show if there is an Article 4 Direction in place, and when it took effect, which could be important for historic development. If an Article 4 Direction had disapplied the GPDO as to the particular permitted development under consideration, then planning permission would have been needed. You are more likely to find an Article 4 direction has been made in a conservation area.

Answer 37

If the local planning authority consider an area of special architectural or historical interest, they can designate it a conservation area. This helps preserve the character and appearance of the area. The local search will identify if the property falls within a conservation area. (In most cases, this will be the LLC1 result, but before a certain date, it would appear on the CON29 result. All you need to know is that it will be somewhere in the local search.) It is likely that there will be extra planning controls in place in a conservation area, particularly an Article 4 Direction. It may also be that planning permissions that are granted will be subject to stricter conditions, such as the colour and type of bricks that are used to extend a property.

Answer 38

Having considered whether any development has taken place, and whether it would have necessitated planning permission or building regulations approval, the buyer’s solicitor next needs to check whether such consents have been obtained. For planning permissions, the LLC1 is the best place to check, as this shows planning permissions that have been obtained. The CON29 also shows planning permissions that have been refused. Building regulations approvals are not shown in the LLC1, so you will need to look in the CON29.

Answer 39

Planning permission deadlines: 4/10 yrs v conceal 4 years for: · Building works carried out without planning permission; or · Change of use to a single dwelling house. 10 years for: · Any other change of use; or · A breach of a condition to a planning permission. NB The local authority can take enforcement action after these deadlines if the breach has been deliberately concealed. Building regulations deadlines: 2 yrs, 12 m, 6m There are time limits on the local authority’s statutory powers to take enforcement action: · 6 months after discovering a breach to prosecute a person responsible for the works for up to two years from the date of completion of the works · 12 months to serve an enforcement notice. There is no time limit on their seeking an injunction through the courts. It is likely that the local authority will only be inclined to pursue the most serious breaches of building regulations through the courts, but the risk should not be ignored. Case law has confirmed that a solicitor who does not take all reasonable steps to obtain copies of building regulations approvals and certificates may be found negligent.

Answer 40

If there is still a risk of enforcement action for planning issues then the options are: · An indemnity policy to cover the financial losses caused by enforcement — this should be provided at the cost of the seller · Retrospective planning permission · Compliance with a condition (if this is the breach) These may be made conditions of the contract. For building regulations breaches, the options are: · An indemnity policy to cover the financial losses by enforcement. · A regularisation certificate and remedying any non-compliant work. For minor or trivial breaches, an indemnity policy may be considered sufficient. However, it should always be borne in mind that work that does not comply with building regulations may not be safe. Indemnity policies do not cover the risk of a structure collapsing or personal injury or death.

Answer 41

x4: P enforcement N (restore) stop N (stop further breach) breach of condition N (comply) injunction There are various remedies available to the local authority for a breach of planning permission or a planning permission condition: · A planning enforcement notice requires that the land be restored to the condition it was in before the unauthorised development took place. · A stop notice can only be served with an enforcement notice and prohibits the carrying out of further activities in breach of planning control. · A breach of condition notice is similar to a planning enforcement notice but requires compliance with conditions imposed by a planning permission. · The local authority can also seek an injunction from the court if they consider it necessary.

Answer 42

majority of residential contracts: Standard Conditions of Sale commercial contracts: Standard Commercial Property Conditions. features x5 property address the parties the deposit - Both 10% deposit by default - If buyer is giving a 5% (= short deposit), standard conditions provide a full 10% deposit if buyer delays completion. title guarantee - full title guarantee: seller guarantees their right to sell the property, and that it is free of all encumbrances (rights against the property) other than those disclosed in the contract, or which the seller didn’t and couldn’t have known about. - Limited title guarantee is similar but just means that no such encumbrances have been created during the seller’s period of ownership. - No title guarantee means that the seller does not give any guarantee that the property is free of encumbrances or even that the seller has the right to sell the property. This is a risk for a buyer, although insurance is available. -Generally, most sellers will give full title guarantee, and this is the default of both sets of standard conditions. An executor selling a property that they are not familiar with will sell with limited guarantee. -An administrator or liquidator will offer no title guarantee. -Don’t confuse the title guarantee with the class of title in the Land Registry official copies. The title guarantee is a contractual guarantee given by the seller. The class of title (such as title absolute or possessory title) is the Land Registry’s guarantee as to the quality of title. Both are important. completion date and time - If the completion date is left blank, then both sets of standard conditions of sale provide for completion in 20 working days. It would be rare for this provision to be used in practice. - Related to the completion date is the completion time, which is 2 pm by default under both sets of standard conditions. If there are no related transactions, this can be left. However, if the money being used for the purchase is coming from a related sale, then the times must be staggered to allow for the money to be forwarded.

Answer 43

We have seen that for both sets of standard conditions, risk passes to the buyer at exchange. This seems strange, as if the property is damaged or destroyed before completion, the buyer must still pay the full purchase price and complete. Why? Think of a chain transaction. If the seller of that property is using the money to buy a property, and the seller of that property is buying a further property, etc, then imagine what would happen if the buyer could simply refuse to complete. It would mean that every transaction in the chain above the seller would also be unable to complete, and create a mess for all of the parties involved. By contrast, although it is inconvenient for the buyer to buy a property that is damaged or destroyed, provided the buyer has insurance (as they should have), then they will suffer inconvenience, but not financial loss. All the other parties in the chain are unaffected.

Answer 44

The standard templates for the residential and commercial contract provide proforma special conditions that can easily be amended as required. These cover the most common amendments. More complicated special conditions can be drafted for almost any situation. Examples might be if the seller has agreed to provide or pay for an indemnity policy, or the parties have agreed to keep the transaction confidential. In a commercial transaction, they may go into detail about such matters as rents payable by occupational tenants, the treatment of employees such as caretakers, transfer of service agreements for lifts and air conditioning.

Answer 45

There are different types of VAT treatment depending on the type of property. Residential: -- exempt (VAT on legal services) --unless new ----taxable but zero rated ---- seller does not charge VAT on sale price but can recover VAT incurred constructing property Commercial -- newly: standard-rated and VAT must be paid on the purchase price. -- over 3 years old: exempt unless owner opts tax. If owner opts, then VAT on sale price at 20%. Standard Conditions: purchase price inclusive of VAT. Option to tax affects all the owner’s dealings with the property. So, if they have occupational tenants, then they must charge VAT on the rent. Previous owners’ option to tax does not affect the buyer after completion. If the buyer wishes to continue to charge VAT on the occupational rents, they must submit a fresh option to tax.

Answer 46

Law Society Formula B telephone exchange solicitors confirm hold signed contracts solicitors confirm key details first class post of DX that evening if not that evening tell other solicitor Law Society Formula B is the most common method of telephone exchange, and involves the solicitors giving each other undertakings that allow the telephone conversation to be the point of exchange. Each solicitor confirms that they are holding their client’s signed contract, and then confirm to each other the key details inserted in the contract. Formula B provides that each will send the contract either in first class post or document exchange that evening. If either solicitor thinks that they will be unable to get their signed contract in that evening’s post, for example because of a secretarial backlog, they should tell the other solicitor.

Answer 47

The pre-completion stage is concerned with both seller and buyer’s solicitors ensuring that everything is in place for completion to take place smoothly. Whereas in the pre-exchange stage, the buyer’s solicitor may find serious problems that would prevent the transaction proceeding, generally the pre-completion stage is more procedural. However, it is no less important. The issues that need to be addressed are: · The transfer deed · Pre-completion searches · Replies to requisitions

Answer 48

drafted by buyer (traditionally) or seller (usually) checked by both executed by seller! buyer executes if x3: IC for +ve; buyer cov or ease; any other obligation by buyer The tradition of the buyer’s solicitor drafting the transfer persists in both sets of standard conditions, but these days sometimes the seller’s solicitor will draft the transfer, perhaps even at the same time as the contract. The seller’s solicitor will also want to draft the transfer if selling plots on a newly developed estate to ensure that they are consistent. Whether it is buyer’s solicitor or seller’s solicitor who drafts the transfer, the other of them will need to approve it. Once approved, the seller will always need to execute. The buyer will need to execute if: · There is an indemnity covenant to observe positive covenants · The buyer is giving covenants or easements over the property · The buyer is agreeing to any other obligations

Answer 49

Unlike pre-contract searches, where it is normal to expect some adverse entries, pre-completion searches are a check and in the vast majority of cases will come back clear. OS1 search Land charges search (K15) Bankruptcy search (K16) Company search

Answer 50

R: OS1 at land registry from date of official copies from seller confirm no changes from official copies OS1 gives priority period of 30 working days - if register within then priority over previous apps within period even if apps before B's app no extension! reapply but no priority between apps For registered land, an OS1 search is carried out at the Land Registry. This search is carried out from the date of the official copies provided by the seller’s solicitor, and confirms that there are no changes to those official copies. The search offers a priority period of 30 working days. Provided that the buyer’s application for registration is made within that window, it will take priority over any other application, even if it dates before the buyer’s application. OS1 searches cannot be extended. If the registration application is not submitted within the priority period, priority is lost. A new OS1 search can be obtained, but it will not take priority over applications made before it.

Answer 51

unregistered against full name(s) of seller(s) 15 working days priority For unregistered land, a land charges search is carried out against the full name or names of the seller. This identifies any adverse matters against the seller that affect the property. If it is clear, then again, it offers priority to the buyer against any applications made within the priority window. However, the priority window is half that of the OS1 search, being 15 working days.

Answer 52

if B sol for mortgage lender bankruptcy search against B before completing protects loan from claim by trustee in bankruptcy 15 working days If the buyer’s solicitor also acts for the buyer’s mortgage lender, then the buyer’s solicitor will need to carry out a bankruptcy search against the buyer before completing. This protects the mortgage lender against the mortgage advance being claimed by a trustee in bankruptcy. Like the land charges search, this confers priority of 15 working days.

Answer 53

re completion procedural matters: keys, meter readings seller undertaking re mortgage Requisitions on title traditionally were a document in which the buyer’s solicitor would raise any issues that arose from the investigation of title. However, they now contain procedural matters regarding completion, such as the location of keys and meter readings. Importantly, however, they contain the seller’s solicitor’s confirmation that they will adopt the Law Society Code for Completion by Post and undertake to discharge mortgages affecting the property. The replies to requisitions must therefore be checked to ensure that all appropriate undertakings have been given.

Answer 54

Law Society Code for Completion by Post only seller undertaking (SRA/Court enforce) undertaking = safe for buyer solicitor to send money AM completion x6 (B1 / S5) - buyer S sends money - seller S confirms completion to buyer solicitor - seller S calls seller (+ seller agent) to release keys - seller S discharges mortage/charge - related transaction? if so, send to seller n2 S - seller S deducts fees/disbursements and return balance The Law Society Code for Completion by Post is usually adopted by the parties to govern the process of completion. The buyer’s solicitor is given guidance on what is required from them, and only the seller’s solicitor gives undertakings that are enforceable by the Solicitors Regulation Authority, and if necessary, by the courts. The seller’s solicitor’s undertakings allow the buyer’s solicitor to know that it is safe to send the money to them. On the morning of completion, the buyer’s solicitor sends the full completion monies to the seller’s solicitor. The seller’s solicitor calls the buyer’s solicitor to confirm that they have completed, and dates the signed transfer deed. The seller’s solicitor will then call the seller and the seller’s agent (if appropriate) to release the keys. The seller’s solicitor will send the money needed to clear any mortgage or charge (the redemption monies). If the seller has a related purchase, the necessary completion monies will be sent to the seller’s solicitor on that transaction. After deducting the seller’s fees and disbursements, any balance will be sent to the seller.

Answer 55

In most cases, completion is straightforward and happens on time. Some examples of reasons why the parties may be unable to complete on time: · The buyer has not been able to get the balance of purchase money to their solicitor on time · An administrative error, so that the mortgage lender has not sent the funds in time for completion – usually the funds are requested for the day before so that such problems do not appear at the last minute · A related transaction has not completed – in the case of a buyer, they do not have the money from their related sale, and in the case of a seller, they do not have a property to move into It is possible that either party may have simply changed their mind since exchange. However, given the serious financial consequences of failing to complete, this is rarely sufficient to lead to completion not taking place at all.

Answer 56

delay: (no notice) interest per calendar day (both standards) if same day but after time = next working day (eg Friday then Monday) residential: reasonable expenses (but deduct interest!) Once the completion time has been missed by the defaulting party, interest starts to accrue under either set of standard conditions. If completion takes place on the completion date, but later than the completion time, it is treated as having taken place on the next working day. Note, however, that interest is calculated for each calendar day. Let’s say that a buyer does not complete until 3.30 pm on a Friday, and the completion time was 2 pm. The completion is treated as not having taken place until the following Monday. There would be three days of interest payable – Saturday, Sunday and Monday. This may seem harsh, but if the seller has not received the money until 3.30, they may not have time to redeem their mortgage and will owe their mortgage lender interest on the loan over the weekend. Removers may also charge overtime for going beyond their booked slots. Note also, that interest accrues automatically. In the example above, the seller did not need to serve notice to complete. Under the Standard Conditions of Sale, then the non-defaulting party may claim for expenses. So a residential buyer who finds themselves homeless over the weekend may reclaim their reasonable expenses for accommodation. (A budget hotel would be considered reasonable, a luxury hotel would not.) Interest payable under the conditions of sale must be deducted from any such claim.

Answer 57

cannot walk away until time of essence non-defaulting party gives notice time of essence 10 work days after first work day notice given binds both parties! interest: calendar (not working days) Whilst these remedies apply automatically under both sets of standard conditions, neither party is allowed to walk away from the contract unless time is of the essence. It is rare for a contract to make time of the essence. The non-defaulting party will therefore want to serve notice to complete to ensure that the failure to complete does not go on indefinitely. The notice to complete is a mechanism provided by both sets of standard conditions that makes time of the essence and gives ten working days to complete. The ten working days are counted from the first working day after the notice is given. The notice to complete is binding on both parties, so the person serving it should make sure that they will also remain ready to complete. Again, interest is calculated including non-working days.

Answer 58

if B fails to comply with notice S can walk away (rescind) under both standards: keep deposit, resell, claim damages If the buyer fails to comply with a notice to complete, then the seller may rescind (walk away from) the contract and under both sets of standard conditions: · Forfeit and keep the deposit and any accrued interest · Resell the property and any contents included in the contract · Claim damages

Answer 59

if S fails to comply with notice B rescinds + deposit back with accrued interest + damages If the seller fails to comply with a notice to complete, then the buyer may rescind the contract and: · Require the return of the deposit with accrued interest As the standard conditions also say that for either party they retain other rights and remedies, the buyer could also make a claim for damages based on breach of contract. From a buyer’s point of view, they may be able to show they incurred a loss if, for example, they are only able to buy a similar property at a higher price due to a climbing market, but this might be tricky. It may be easier for a seller who has resold their property at a lower price in a falling market.

Answer 60

Stamp Duty Land Tax and Land Transaction Tax Companies House Land registration Closing the file

Answer 61

B sol submits form (e) + payment by bank transfer 14 days: SDLT 30 days: LTT to avoid delay/penalty: B sol prepare before/include tax in completion monies Stamp Duty Land Tax (SDLT) in England, and Land Transaction Tax (LTT) in Wales, are taxes charged on the purchase price of property. On completion the buyer’s solicitor submits the form (usually electronically) and pays the tax by bank transfer using a unique reference number. Both submission of the form and payment of the tax must be done within 14 days of completion for SDLT and 30 days of completion for LTT to avoid a penalty. To avoid delay, the buyer’s solicitor should have prepared the form for the buyer’s approval and arranged for the buyer to pay the necessary amount as part of the amount needed to complete before the completion date.

Answer 62

if company secures loan by legal charge: register at CH within 21 days if delay, court order to register (CH no discretion) If the buyer is a company, and the company is taking a loan secured by legal charge, then that legal charge must be registered with Companies House within 21 calendar days of completion of the charge. This deadline is strict, and Companies House have no discretion to waive it. If the deadline is missed, then the charge can only be registered by court order. This application will involve significant time and expense. Note that if there is any issue with the application, Companies House may reject the application, and if they do this towards the end of the 21 day period, it may be necessary to get a courier to ensure that it is received by Companies House within the deadline.

Answer 63

registered no deadline but danger so w/i priority period of OS1 (30 work days) unregistered: 2 months deadline (registrar discretion) or void! ideally w/i priority period of land charge (15 work day) For registered title, there is no deadline as such, and provided that no application has been lodged in the meantime, the buyer can lodge their application whenever they want after completion. However, until the buyer’s application is lodged, there is the risk that a third party will enter an application against the title. It is therefore important to lodge the application within the priority period given by the OS1 search, namely 30 working days. For unregistered title the application should be lodged within 15 working days of the land charges search. However, for unregistered title, there is a deadline of two months. The first application registration should be lodged within this time, or the transaction is treated as void. The Land Registrar has discretion to extend the deadline here, but it is best not to rely upon this. In any case, it is best to aim to lodge the application within the priority period of the land charges search.

Answer 64

once land registry application back send official copies to client for their records END When the Land Registry application comes back (usually within a couple of weeks for registered titles, but it may be several months for a first registration), the official copies should be sent to the client for their records. This usually marks the end of the transaction.

Answer 65

tenant full repair + costs during eg consents landlord: insure but recover by insurance rent + cover initial granting of lease control alienation + upward rent review An FRI lease has the following features: · The tenant is responsible for keeping their demise in full repair – if they have a lease of part, then the landlord will recover the costs of repairing any common areas from the tenants collectively · The landlord will normally insure the property, but will recover the costs of doing so from the tenants in the form of insurance rent · If there are any services, then these will be paid for by the tenant by way of service charge. · Although the landlord will meet their own costs of finding a tenant and granting a lease, any costs during the lifetime of the lease (such as applying for consents) are met by the tenant. · It will tightly control alienation, whom the lease can be assigned or sublet to · It will contain upwards only rent reviews

Answer 66

In typical investment properties, such as shopping centres, industrial estates and office blocks, the landlord will want the leases to be in FRI form. The landlord’s solicitor will usually draft the lease heavily in favour of the landlord, with the expectation that the tenant’s solicitor will negotiate it back in the tenant’s favour. This negotiation will depend on the bargaining strength of the parties, and whether the market at the time favours landlords or tenants. If the landlord has struggled to fill a unit, then they are more likely to be amenable to letting some points go to the tenant. In shopping centres and retail parks, there will usually be a tenant who will bring customers to the site regardless of the other shops available; for example, M&S. If a landlord can sign a retailer like this up to an agreement for lease, then other retailers will have the confidence to follow. It is therefore very important for the landlord to secure such a tenant, which is known as the anchor tenant. An anchor tenant will be aware of this, and will have a stronger negotiating position than other tenants to negotiate their lease.

Answer 67

cov strength: ability to pay rent + comply with obligations add safeguards: rent deposit + guarantor bad: new company with no refs good: established company refs from bank/other landlords The FRI lease aims to maximise the income stream from investment property. However, the FRI lease will only achieve this if the tenant is in a position to pay the rent and comply with its obligations. This ability is referred to as the tenant’s covenant strength. In a similar way that a bank will do a credit check before offering you a loan or mortgage, a landlord will carry out checks on prospective tenants to ensure that they are good for the obligations they are undertaking. A well-established company with good references from the bank and other landlords is likely to be acceptable. A newly started company with no assets to its name will not. If the tenant’s covenant strength is not sufficient, then the landlord may nonetheless be prepared to accept the tenant with additional safeguards, which may be: · A rent deposit (documented by a rent deposit deed). This is usually between three and six months’ rent. If the tenant falls behind with rent or other obligations, the landlord can dip into the fund. · A guarantor. In the case of a company, this could be a personal guarantee from the directors or a guarantee from a parent company. In either case, the guarantor will then need to be assessed for their covenant strength.

Answer 68

Once the property agents have agreed the terms of the lease, then they will send heads of terms to the landlord’s and tenant’s solicitors. The landlord’s solicitor will draft the lease and send it to the tenant’s solicitor. There will likely be a precedent lease already prepared for other lettings on the property, and this will be used as the base, making the necessary changes.

Answer 69

Unlike in freehold transactions, where it is usual to have a contract, in the grant of a commercial lease, it is only usual to have an agreement for lease where there is a good reason to do so. Agreements for lease are used when the parties want to bind themselves to granting/taking the lease, but are not yet ready to do so. For example, if a retail park is being developed, then the landlord will find retailers early on, and they will enter into agreements for lease. The terms will be that the landlord will finish building the development, and the tenant will complete the lease once the retail park is ready for them to move into. There is not usually a deposit payable, because there is not usually a premium payable on a commercial lease. However, the agreement for lease will be exchanged in similar fashion to a contract for the sale of freehold land. The agreement for lease will contain a final form of the draft lease, so will only be exchanged once the lease negotiations have been finished.

Answer 70

It is fair to say that sometimes the tenant will not bother with legal representation at all, especially small businesses (whether an individual, partnership or company). However, there are risks involved in not engaging a solicitor: · The tenant is likely to sign up to a lease which is at best drafted heavily in favour of the landlord, and at worst may contain provisions that are unfair or excessively onerous to the tenant. · The tenant may not be fully aware of all their obligations under the lease. Small businesses can get into financial trouble, and may not realise, for example, that they cannot just give the keys back and walk away if things go wrong. They may also not realise that they will still remain liable for their covenants even if they assign or sublet the lease. · There may be issues which would be revealed by searches and enquiries that would affect the tenant’s use of the property. By contrast, if a solicitor is appointed, then they should: · Attempt to negotiate the lease to a more balanced form. How successful they are will depend on the bargaining strength of the parties, but also to a degree by the negotiating skill of the respective solicitors. · Investigate the landlord’s title and carry out searches and enquiries in similar way to acquiring the freehold. · Advise on Stamp Duty Land Tax or Land Transaction Tax and registration, and make sure that these are attended to (an unrepresented tenant will not necessarily know, which can cause problems)

Answer 71

L sol sends completion statement completion statement: rent, insurance rent (+ service charge) apportioned L executes OG T executes counterpart switch L holds counterpart executed by T T holds OG executed by L The landlord’s solicitor will send a completion statement showing the rent, insurance rent and service charge (if appropriate) payable on completion. These figures may be apportioned if the tenant’s lease starts part way through a quarter. In other words, if the tenant is due to pay rent only for the third month of the quarter, then they would pay a third of the full quarter’s rent. The lease itself is usually prepared as an original (to be executed by the landlord) and a counterpart (to be executed by the tenant). The parties will need to return the executed leases to their respective solicitors. On completion, the landlord’s solicitor acknowledges receipt of the completion monies, and they agree to date and send each other the executed original and counterpart lease. The tenant therefore holds the original lease executed by the landlord, and the landlord holds the counterpart lease executed by the tenant.

Answer 72

L sol sends money to L S sol: tax and registration (easy if L's title is R) The landlord’s solicitor will send the money to the landlord or their agents. Institutional investors will likely also want a standard summary or short form report setting out the important terms. Otherwise, the landlord’s solicitor can raise their bill, and their work is finished. The tenant’s solicitor, however, now has to attend to payment of Stamp Duty Land Tax and registration of the lease. This should not be complicated if the landlord’s title is registered, as it almost always would be.

Answer 73

Commercial leases are lengthy documents running to many pages of provisions. Other than Land Registry prescribed clauses, which are required for any lease that is registrable, there is no standard form of lease.

Answer 74

demise = extent of property lease of parts: include interior/exclude structure of building property w/ many leases of parts: tenants right to use common parts but not leased to any one tenant common parts remain responsibility of landlord The demise is the extent of the property that is being let. A lease of whole is a lease of the whole of the property that the landlord holds. This is usually simpler than a lease of part. A lease of part is a lease of part of the landlord’s property; for example, a floor of an office block or a unit in a retail park. The demise of a lease of part has to be defined, so will include the inner surfaces of walls, ceilings, floors, etc, but will exclude the structure of the building. A property that is subject to a number of leases of parts will usually have common parts, which are the areas that all the tenants need to use. In an office building, this will be the entrance and lobby, the lifts, toilets etc. A tenant under a lease of part will be given rights to use the common parts but they will not be leased to any one tenant and will remain the responsibility of the landlord.

Answer 75

The term is how long the lease is for. Commercial tenancies are usually for a fixed term rather than periodic (eg monthly) tenancies. Lease terms are often multiples of 5 years, eg, 5 years, 10 years, 15 years, etc.

Answer 76

usually strict: notice 6m + not in breach of cov + up to date rent As most commercial leases are for a fixed term, sometimes the parties will negotiate a tenant’s break clause. From the tenant’s point of view, this is a useful escape mechanism if after, say five years, the business is not performing as anticipated. From the landlord’s point of view, they would rather sign up a tenant to a ten year lease with a break at five years rather than a five year lease. This is because not all tenants exercise their break, and the ten year lease with break is likely to be more valuable than the five year lease. Break clauses are strict. A tenant must typically give six months’ prior notice, and be up to date with rent. The landlord will often try to impose a condition that the tenant is not in breach of any of its covenants, but the tenant should resist this, as any trivial breach could be grounds to block the break.

Answer 77

The rent for a commercial lease will usually be the market rent (or rack rent) payable quarterly. There is usually no premium payable upfront, and the landlord may even offer a rent-free period (typically three months) as an inducement for a tenant to take the premises, which also allows the tenant time to fit out the premises for their purposes. With an FRI lease, the tenant will contribute towards the insurance and any service charge (either all in a lease of whole or a proportionate part in a lease of whole). These payments are usually classed as part of the rent. For a residential lease (say 99 years) of a house or flat, the buyer usually pays a premium (the price of the house or flat), and from then on there will be a relatively small ground rent (say £150) payable each year.

Answer 78

FRI lease: upwards assumptions: tenant complied (but not landlord) disregard tenant improvement procedure: agree if no --> agree on valuer if no--> RICS FRI leases will include rent review provisions, which will be upwards only. This means that the rent will be increased if open market rents have increased, but will stay the same if open market rents have decreased. Typically for a 10 year lease, the rent review will be on the 5th anniversary of the start of the lease. The rent review clauses will usually provide that the landlord and tenant will try to agree the new rent in advance of the rent review date, but if they cannot, then it is referred to a valuer whom they agree. If they can’t agree on a valuer, then they are appointed by the president of the Royal Institute of Chartered Surveyors. The rent review clauses will set out in detail the basis on which the valuation is to be made. This is usually a hypothetical lease, which will be similar in some respects to the actual lease, but with a certain set of assumptions to counter the unfairness that could result from valuing the actual lease.

Answer 79

assume tenant complied but not landlord For example, if the tenant has not complied with the repairing covenant, the premises will not be in as good a state of repair as they should be. If the valuer took account of this, then it would decrease the amount of rent a hypothetical tenant would pay. In other words, the tenant would be rewarded for not complying with their obligations! For the hypothetical lease, it is therefore assumed that the tenant has complied with its obligations. Note, however, that the same does not apply to the landlord’s covenants. To take an example, a landlord owns an office block, and does not comply with its obligation to keep the lobby and lift areas in good repair. A tenant would not be prepared to pay as much rent. In this case, the hypothetical lease should not assume that the landlord has complied with its obligations, as it is unfair for the tenant to pay the landlord the full amount when the state of the lobby and lift areas do not justify this.

Answer 80

disregard tenant alterations/improve Closely related to assumptions on rent review are disregards. These are matters that disregarded for the purposes of reviewing the rent. One example would be where the tenant has spent money on alterations that make the premises more desirable to a prospective tenant. This should be disregarded, as otherwise the landlord will benefit and the tenant will suffer from a higher rent.

Answer 81

Once the reviewed rent has been agreed, it is backdated to the rent review date. This means that it is not in the interests of either party to delay unnecessarily. The tenant will have to pay interest on the backdated rent. The tenant will want this to be no more than base rate, as the landlord should not be rewarded for delay.

Answer 82

Latent and inherent defects are problems that emerge from a newly built building and are due to errors of design or workmanship. A tenant should not be obliged to repair these matters. The landlord should accept these risks as they would have a remedy against the relevant contractor (architect, builder, engineer etc) under their respective warranties.

Answer 83

After the essential provisions of demise, term and rent, probably the next most important provision is the repairing obligation. This is the landlord’s assurance that the landlord’s income stream is not affected by having to repair the tenants’ individual demises. In a full repairing obligation, the tenant covenants ‘to keep the premises in repair. This is stricter than it sounds, as it means that if the premises are not in repair, the tenant is obliged to put the premises in repair. A tenant taking on a full repairing lease, therefore, would be advised to obtain a survey to identify whether there are any wants of repair at the beginning of the lease. The landlord may phrase it as “good and substantial repair”. It is unclear whether this adds anything, but a tenant may want to resist anything other than “in repair”. The obligation may also refer to “condition”, ie, “to keep the premises in good repair and condition”. This does go further than a simple repair obligation. For example, if there is condensation in the premises, this would need to be corrected if the tenant has covenanted to keep the premises in good condition, but not if just good repair. A tenant would prefer to have a qualified repairing obligation, which is not to put the premises in any better state of repair and condition than they were at the beginning of the lease. This is evidenced by a schedule of condition, being a photographic catalogue of the premises and any damage. A qualified repairing obligation, whilst appealing to a tenant, does not meet the standards of an FRI lease and is generally not acceptable to an institutional lender.

Answer 84

In an FRI lease, the landlord will insure the premises, and recover the cost from the tenant (if a lease of whole) or tenants (leases of part). The lease will usually set out insured risks, such as fire, explosion, lightning, earthquake etc. Most of these risks are standard. However, the tenant’s solicitor should check whether terrorism is included. The landlord will usually also have the right to insure against other risks as they choose. The insurance should provide for the full costs of reinstatement (ie, rebuilding) of the premises. As well as being responsible for the premium, the tenant under an FRI lease also bears any shortfall due to excesses, exclusions and conditions imposed by the insurer, and pays the cost of any valuation that the landlord needs to obtain for insurance purposes.

Answer 85

The tenant’s solicitor should check what the lease provides if the premises are damaged or destroyed by an insured risk. The following are what would be considered normal: · Damage or destruction by an insured risk is excluded from the tenant’s repairing obligation (unless the insurance is not payable because of something the tenant has done or not done). · If the tenant is unable to occupy the premises, then the rent is suspended for a period (usually up to three years) until the damage has been repaired. · The landlord covenants to use the insurance monies to repair the premises. · If the landlord reasonably considers that it is impossible or impractical to reinstate the premises, then the landlord may give notice to end the lease. · If the premises have not been repaired by the end of the rent suspension period, then the tenant may give notice to end the lease. If the premises are damaged or destroyed by an uninsured risk (either because it is a risk that was not covered by the policy, or because the insurer has refused to pay out due to the tenant doing or not doing something), then the tenant will be responsible for repairing the premises under the repairing obligation, and there would not be a suspension of rent.

Answer 86

If the lease were silent, then the tenant would be free to alter the premises as they saw fit, provided that they do not do anything to reduce the value of the premises. However, the landlord will want to retain control over alterations, and therefore there will be a tenant’s covenant that restricts their power to alter. The landlord will be more concerned about alterations that affect the exterior or the structure of the premises, and they will often be treated differently. Covenants may be classified as absolute covenants, qualified or fully qualified covenants.

Answer 87

Absolute covenant An absolute covenant, for example against external and structural alterations, means that the tenant cannot carry out those alterations at all. Qualified covenant A qualified covenant means that the tenant can carry out alterations with consent. On the face of it, this means that alterations are at the complete discretion of the landlord. However, if the tenant’s proposed alterations amount to improvements, then it is implied ((under section 19(2) of the Landlord and Tenant Act 1927) that the landlord cannot unreasonably withhold consent. An improvement means that the premises become more useful or valuable to the tenant, even if the landlord’s interest is diminished in value. Fully qualified covenant However, rather than rely on this statutory provision, a tenant will prefer a fully qualified covenant. This will expressly state that the landlord’s consent cannot be unreasonably withheld. Therefore the tenant does not have to prove the alteration is an improvement. Note that if the tenant wants the landlord’s consent “not to be unreasonably delayed” then this wording must be included, as this is not implied by statute (as it is for alienation covenants).

Answer 88

Unlike alterations clauses, however, there is no statutory implication which converts a qualified covenant to a fully qualified covenant; that is, the Landlord does not have to act reasonably in giving or refusing consent to an alternative use. The only restriction on the landlord’s discretion is that they are not allowed to increase the rent or a sum of money for giving consent (s19(3) of the Landlord and Tenant Act 1927) unless the proposed change of use also involves structural alterations. Planning permission may be needed for a change of use. As this could prejudice future tenants, the tenant will usually covenant not to apply for planning permission without the landlord’s consent.

Answer 89

The Royal Institution for Chartered Surveyors (RICS) has released a code in 2020 which promotes transparency and fairness of negotiations. It is a similar idea to the Law Society Conveyancing Protocol that we saw for freehold transactions. However, unlike the protocol, it is aimed at the negotiation process rather than the legal process. It affects RICS members (which property agents will often be) rather than solicitors. Unlike the previous code that they released, this has principles that are mandatory on RICS members. Other principles are not mandatory and indicate good practice, but RICS members may be called upon to justify why they haven’t observed those principles.

Answer 90

Mandatory requirements include the following: · Lease negotiations must be approached in a constructive and collaborative manner. · A party not represented by an RICS member or other property professional must be advised by the other party or its agents about the existence of the code and must be recommended to obtain professional advice · The agreement as to the terms of the lease must be recorded in written heads of terms and set out a number of provisions; for example: · It must define the premises and any rights to be granted · The length of the term · Break rights · Requirements for a guarantor or rent deposit · How much the rent is and how often it is payable, and whether subject to VAT · Rent review provisions · Service charge and insurance · Repairing obligations · Rights to make alterations

Answer 91

Some principles of good practice relevant to this element include the following: · Unless the parties have agreed stricter conditions in the heads of terms, a tenant’s break should be conditional only upon the tenant paying all basic rent (ie, not insurance or service charge), giving up occupation, giving up occupation and leaving no-one in occupation. · Repairing obligations should be appropriate to the length of the term, the condition of the premises and the financial terms. · If the tenant’s repairing obligations are limited to the initial condition of the premises, a schedule of condition should be prepared. · The tenant’s repairing obligation should exclude inherent construction defects for newly built property. · In a lease of a whole building, the landlord should not normally prohibit or require consent for internal non-structural alterations. · The lease should provide that terrorism will be covered in the landlord’s insurance policy provided that it is available at reasonable rates.

Answer 92

A lease can be terminated by: x6 · Effluxion of time · Notice to quite · Break clause · Surrender · Merger · Forfeiture

Answer 93

At the end of the contractual term, the lease comes to an end, unless the tenant remains in occupation. With a protected tenancy, the tenant can hold over, and then the tenancy can only be brought to an end with one of the prescribed notices (s25, s26 or s27 notice). With other tenancies, if the tenant remains in occupation with the consent of the landlord, then the tenancy becomes a tenancy at will. However, if rent is paid periodically, then it may become an implied periodic tenancy.

Answer 94

For a periodic tenancy, the landlord may serve notice to quit on the tenant. The notice period depends on the period of the tenancy: Yearly tenancy – six months’ notice Quarterly tenancy – a quarter’s notice Monthly tenancy – a month’s notice Weekly tenancy – a week’s notice, but for a residential tenancy, it is four weeks’ notice Conversely tenant can serve notice on the landlord to bring the tenancy to an end – similar notice periods apply.

Answer 95

The landlord and tenant can bring the lease to an end if they both agree. If the landlord wants to end early, then they may need to pay a premium to the tenant to compensate for the loss of premises. The landlord is effectively paying to have the leasehold interest surrendered back to it. If the tenant wants to end early, then they may need to pay a reverse premium to the landlord to compensate for the loss of rent. It is called a reverse premium, because the tenant is giving up its leasehold interest and paying the landlord to do so. However, this makes sense because the tenant is also released from its obligations. If both parties want the lease to end early, then there may be no premium. The surrender releases both landlord and tenant from their ongoing obligations under the lease, but care needs to be taken not to release previous obligations unless they have been met in full (eg, the tenant has paid any rent and other sums owing up to the date of surrender).

Answer 96

If the leasehold and freehold interests are held by the same party (eg, if the tenant buys the freehold), then the interests are merged into the superior interest, and the lease is extinguished. This can also happen if a third party buys both the freehold and leasehold.

Answer 97

Remedies for non-payment of rent Commercial Rent Arrears Recovery (CRAR) Remedies for breach of repairing obligation Any breaches Forfeiture (also known as re-entry)

Answer 98

· Debt action in courts – can claim up to six years’ arrears · Claim debt from former tenant (either by privity of contract with an old lease or AGA for new lease) · Take money from the rent deposit · Commercial Rent Arrears Recovery

Answer 99

Can only be used to recover the rent itself (plus VAT and interest), not service charge or insurance premiums (even if labelled as additional rents) · Must be a minimum of 7 days’ rent owing · Maximum of 6 years’ arrears · Must serve 7 days’ clear notice of intention – can then seize goods up to value of rent · Cannot be used after the lease has been forfeited. Using CRAR waives the right to forfeit the lease.

Answer 100

· Normal damages are limited by a statutory cap to amount by which landlord’s reversion has been reduced in value. Therefore, if it costs £10,000 to repair the damage, but the landlord’s interest has only been reduced in value by £1,000, then the landlord can only recover £1,000 It is normal to have a self-help clause in the lease (also called a Jervis v Harris clause) · If the tenant breaches repairing obligation, then the landlord can serve notice requiring the tenant to repair, and if the tenant fails to do so by specified time, the landlord can enter the premises and make the repairs and recover the cost from the tenant as a debt · As it is a debt, not damages, the landlord can recover the full amount from the tenant (it is not restricted by the statutory cap)

Answer 101

Common law damages are available for any breaches Specific performance and injunctions may be available in limited circumstances, but these will be rare.

Answer 102

This must be included in the lease – the landlord has no right to forfeit if the lease does not provide for it. Typically, the landlord will have the right to forfeit the lease if payment of rent has been delayed for, say, 21 days. The landlord should have made a formal written demand, but the lease may specify that this is unnecessary. There may also other triggering events, such as a breach of the repairing covenant, or the insolvency of the tenant. When this provision is triggered, the landlord may re-enter the premises and bring the lease to an end immediately. This also ends the interests of anyone who derives an interest from the lease, such as undertenants or mortgagees. Any of the tenant, undertenants and mortgagees can apply to the court for relief from forfeiture. If the court grant relief, then the lease is brought back to life.

Answer 103

The landlord can forfeit the lease by peaceable re-entry or court order. Peaceable re-entry involves using a bailiff to change the locks and exclude the tenant from the premises. This cannot be used if the premises, or any part of them, are residential. This can be very effective against a commercial tenant, as it causes embarrassment and interruption to their business. However, there are risks if the tenant disputes that it has been done lawfully. The landlord can therefore also apply to the court for forfeiture. The advantage of this is that if the court grants the order, the legal validity of the forfeiture is already tested. Forfeiture: s146 needed unless it is for rent there needs to be a forfeiture clause in all cases Repair: counter notice available if lease complies (OG for 7 years or more and still 3 years left)

Answer 104

If the landlord continues to accept rent or otherwise behaves in a way that acknowledges the existence of a continuing tenancy, then they are taken to have waived the right to forfeit the lease. This does not apply to accepting rent arrears that form part of the breach the basis of forfeiture, only to continuing rent. There is a distinction between “once and for all” breaches and continuing breaches. For example, if the tenant has unlawfully underlet the property, and the landlord acts in a way to waive the breach, the landlord can no longer forfeit for that breach. However, if the breach is of the repairing obligation, then each day that the breach continues, the landlord can choose to forfeit – its behaviour on previous days cannot be treated as waiver of this type of breach.

Answer 105

Relief from forfeiture is an equitable remedy and is discretionary. The tenant (or person deriving interest from the tenant) must show the court why it would be equitable to grant relief. The effect of relief is to restore the lease and any underleases.

Answer 106

A lease grants an estate in land, and therefore a proprietary interest. It gives exclusive possession. A licence is a personal permission given by the landowner to allow you to use the land. However, it does not give exclusive possession. It is not a proprietary interest, and does not bind new owners of the land. An example of a licence is when you stay for a few nights in a hotel room. A tenancy at will falls somewhere between a licence and a lease. The words “at will” signify that the tenancy lasts only as long as landlord and tenant wish, and either can bring it to an end at any time. Like a licence, it does not bind third parties, but unlike a licence it does grant exclusive possession (although it is easily taken back). It is commonly used when landlord and tenant are still in the process of negotiating a formal lease, but it is in their mutual interests for the tenant to take occupation. Only a lease, not a licence or tenancy at will, is capable of obtaining security of tenure.

Answer 107

The Landlord and Tenant Act 1954 gives business tenants in certain situations security of tenure. Where they have acquired this protection, it means that: · They can continue in occupation past the contractual term of the lease (ie, what was agreed between the parties) · They can apply to the court for a new tenancy to be granted. Why is security of tenure important to some tenants? · They can invest in the property and their business knowing that the premises are likely a long term prospect. · They know that they will be able to continue to pay a market rent. Otherwise, a landlord might take advantage of their investment in the premises to demand a higher than market rent. · It gives tenants the confidence that they can reap the benefit of any goodwill they build up at their location.

Answer 108

Not all tenancies acquire security of tenure. It must meet the following conditions: · It must be a lease, not a licence or tenancy at will. · The tenant must occupy at least part of the premises. If the premises are left permanently empty, then they cannot acquire security of tenure. Note also that if the tenant has underlet the whole of the premises, then the tenant does not have security of tenure. · It must be used for the purposes of a business (a trade, profession or employment). Purposes of a business is interpreted quite widely. Sports clubs and charities can qualify. The following tenancies do not have security of tenure: · Tenancies of 6 months or under · Service tenancies · Mining tenancies

Answer 109

In some cases, a landlord may be happy for the tenant to obtain security of tenure. After all, for an institutional landlord, the main focus is the income stream. Having security of tenure may encourage a tenant to become a long term prospect. It may also benefit rent review – ie, the market rent may be higher for a lease with security of tenure. However, in other cases, the landlord will want to exclude security of tenure. For example: · If the landlord knows that they will want the premises back at the end of the contractual term to redevelop the property or for any other reason. · If the landlord and tenant agree a lease with a short contractual term (less than 10 years), then it is likely that the landlord will want to exclude the security of tenure provisions. · An undertenant’s lease will usually be excluded. It is not difficult to contract out, but the procedure must be followed strictly. A notice must given to the tenant in prescribed form, and then the tenant must give a declaration to the effect that they understand the implications of excluding the security of tenure provisions. If the notice is given more than 14 days in advance, then the tenant can sign an ordinary declaration. If, as is more common, the notice is given just before completion, the tenant must make a statutory declaration before a solicitor. The lease itself must state that the security of tenure provisions have been excluded, and refer to the notice and declaration or statutory declaration (as appropriate). A contracted-out lease will end on the contractual expiry date, and the tenant has no right to stay in the premises beyond that, nor to require a renewal lease.

Answer 110

The tenant may wish to leave the premises at the end of the contractual term, and they may do so. If they do, then the lease comes to an end. However, they do not have to leave, and if they stay, then they do so on the terms of the lease. This is called holding over. The lease will usually provide that if the tenant falls behind with rent (say over 21 days) or is in breach of its covenant or is made insolvent, then the landlord may forfeit the lease. This means that the landlord can re-enter the premises and bring the lease to an end. This applies equally whether or not the lease is protected.

Answer 111

Once a tenant has started holding over, then under the Landlord and Tenant Act 1954, other than forfeiture, the lease can only be brought to an end by one of three notices. These are a section 25 notice by the landlord, or a section 26 or 27 notice by the tenant.

Answer 112

A section 25 notice gives notice to the tenant that the current tenancy is to come to an end on a date specified in the notice (the Date of Termination or DOT). It must be in the prescribed form. A “friendly” section 25 notice indicates that the landlord is willing to grant a new tenancy. If so, the proposed terms of the tenancy will be set out in the notice. Once this notice has been served, either the landlord or the tenant can apply to the court for the new tenancy. However, they will generally try to agree the terms between themselves first to avoid unnecessary costs. They must make this application before the Date of Termination (DOT), but they can agree to extend the time limit between themselves, which means that they do not need to make a court application just because they are still negotiating.

Answer 113

This is similar to the friendly section 25 notice in that it gives notice to bring the tenancy to an end on the specified date (again the DOT). However, in this case, the landlord indicates that the landlord is opposing the grant of a new tenancy. The landlord may only oppose the grant of a new lease on specified grounds.

Answer 114

Landlord’s grounds for opposition There are seven grounds for opposing a new tenancy. Some of these are mandatory, meaning that if the ground is established, the court must allow them to oppose the tenancy. Others are discretionary, meaning that the court will be able to decide. The mandatory grounds are: · The landlord is making suitable alternative accommodation available to the tenant. This must be reasonable, having regard to the tenant’s business and goodwill. · The landlord intends to demolish or reconstruct the premises or a substantial part of it, and cannot do this without obtaining possession. · The landlord intends to occupy the premises for its own business or residence. They must show a firm and settled intention. This is subject to a five year rule, meaning that the landlord must have owned the reversion (usually the freehold) for more than five years before the date of termination. The discretionary grounds are: · A serious breach by the tenant of a repairing obligation · Persistent delay by the tenant in paying the rent – this must be serious and persistent · Other substantial breaches by the tenant of their obligations under the lease – again, they must be serious and persistent · In the case of an underlease of part, possession is required to let or dispose of the property as a whole If the landlord is successful in opposing the tenancy, then compensation is payable unless either the ground is based on the tenant’s fault (serious breach, etc) or the tenant has been offered suitable alternative accommodation. Compensation is a sum equal to the rateable value, or if the tenant has been in occupation for 14 years or more, twice the rateable value. The award of compensation cannot be excluded or reduced unless the tenant has only been in occupation for less than 5 years. The court can award further compensation if it later turns out that the landlord has obtained possession based on misrepresented or concealed facts.

Answer 115

This is different to the section 25 notice in that the tenant specifies a date for the proposed start of the new tenancy. The notice will set out the tenant’s proposals for the terms of the new tenancy. It is also needs to be in the prescribed form. The existing lease will terminate the day before the start of the new tenancy. Again, the parties need to apply to the court before the DOT if they cannot reach agreement, but again, they can agree to extend the deadline. If the landlord objects, they can serve a counter notice to the section 26 notice – similarly with a hostile section 25 notice, they must set out the grounds on which they are opposing a new tenancy.

Answer 116

This is used by the tenant when they just want to bring their lease to an end, and do not want a new tenancy. Unlike the other two notices, this is not in prescribed form, and could take the form of a letter. The tenant can, of course, leave the premises on the expiry of the contractual term under their existing lease, but as soon as they start holding over, they must serve a section 27 notice (unless a section 25 notice has been served).

Answer 117

25/26: 6 < x < 12 months 27: 3 months Section 25 notice – must be served no less than 6 months and no more than 12 months before the proposed date of termination of the current tenancy. If the landlord intends for the existing tenancy to expire on its contractual expiry date, therefore, the landlord will need to serve the section 25 notice at least six months (but no more than 12 months) before the contractual expiry date. The proposed date of termination cannot fall before the contractual expiry date. -- Section 26 notice – similarly, this must be served no less than 6 months and no more than 12 months before the proposed commencement date of the new tenancy that the tenant is request. It may be served up to 12 months before the contractual expiry date if the tenant intends that the new tenancy starts the day after the contractual expiry date. Because this notice is concerned with the date of the new tenancy, the existing tenancy actually ends a day earlier than with the section 25 notice. In this case, the proposed commencement date therefore cannot fall earlier than the day after the contractual expiry of the lease. -- Section 27 notice – must be served at least three months before the tenant’s stated date for the termination of the current tenancy.

Answer 118

Where a new tenancy is to be granted, the landlord and tenant will usually try to negotiate it between themselves. This can take time, and either landlord or tenant can apply to the court to fix an interim rent. This reduces the likelihood that either of them will try to stall negotiations to keep a higher than market rent (landlord) or lower than market rent (tenant). Where the landlord is willing to grant a new lease, the interim rent is set at the market level. Where the landlord is opposed, the interim rent will be 10 to 15% lower than the market rent.

Answer 119

Terms of the new lease · Unsurprisingly, the premises are the same as those occupied by the Tenant for the business at the date of the court order. · The new term cannot exceed 15 years. · Rent is that reasonably expected in the open market. The Tenant’s goodwill and any voluntary improvements are disregarded. · Other terms are determined by the court with regard to the current tenancy and other circumstances. Although the current tenancy will be the starting point, it may need updating (eg, to take account of changes in statutory references, use classes, etc).

Answer 120

x2 assignment underletting

Answer 121

A tenant may decide that they no longer want the leased premises. If they are nearing the end of the tenancy or a break clause, then they can wait for the lease to expire or exercise the break accordingly. However, if they have some years left to run, they remain facing the liability of rent and repair obligations. The landlord may agree to bring the lease to an end early, but is likely to demand a substantial sum to do this. The other alternative is to find someone who is interested in taking over the lease. If they can do so, and provided the new tenant pays the rent and performs the obligations, the original tenant may be able to get out of a lease which they didn’t want with relatively little cost.

Answer 122

Underletting means the tenant granting a lease to a subtenant. There are various reasons why a tenant might want to do this. Say a tenant has a lease of three floors of an office block, and they decide that they only need two floors. If they can find a tenant interested in taking just one floor. If they can do this, then that tenant (the undertenant) will pay rent on that floor. The tenant can use this rent to offset the cost of the rent of three floors that they must pay to the landlord. Another possibility is that the tenant decides that they don’t need the premises for the next two years, and they find someone who is only interested in taking a two year lease. In this way, the tenant can keep hold of the premises until they need them, and receive a rental income to offset against the rent they will continue to pay the landlord.

Answer 123

Under an FRI lease, the landlord will want to keep strict control on alienation. This is because they need to maintain the covenant strengths of their tenants. Usually, the lease will allow assignment of the lease as to the whole premises, but not part. It will usually allow underletting of the whole, and may allow underletting of part (particularly if, as in our office example, the tenant has taken two or more floors or units which are capable of being let separately). Alienation covenants may be absolute, qualified or fully qualified. Absolute covenant There is usually an absolute covenant against assignment of part of the premises. This means that it is forbidden, and the landlord does not have to consider a request to do it. Qualified covenant A qualified covenant against assignment or underletting means that the tenant can only do it with landlord’s consent. Fully qualified covenant As to assignment or underletting, a qualified covenant is converted to a fully qualified covenant by section 19(1)(a) Landlord and Tenant Act 1927. This means that the landlord cannot unreasonably withhold consent. Section 1 of the Landlord and Tenant Act 1988 goes one step further and provides that the landlord cannot unreasonably delay consent either. Given that these statutes convert a qualified covenant into a fully qualified covenant with the additional provision on unreasonable delay, it is usual for the covenant to be drafted in this form in any case.

Answer 124

For either assignment or underletting, the tenant’s solicitors make a formal written application to the landlord or their solicitors requesting consent. The landlord’s solicitors will request an undertaking from the tenant’s solicitors to cover the landlord’s legal and surveyor’s costs. The surveyor will assess the covenant strength of the proposed assignee or undertenant.

Answer 125

· Assignee or undertenant is of unsatisfactory covenant strength. · The assignee or undertenant’s proposed use of the premises would be a breach of the lease. · The assignee or undertenant are in a business that competes with the landlord’s and would affect nearby business of the landlord. · Where the landlord has a policy on the different uses of different units (eg in a shopping centre) and the proposed assignee’s or undertenant’s use would conflict with that policy.

Answer 126

In either case, if the landlord gives consent, they will want to do so within a formal licence deed. This is for two reasons: 1. It formalises the landlord’s consent. 2. It creates privity of contract between the landlord and the assignee or undertenant. Note that for the assignment of a new lease (on or after 1 January 1996), it is not necessary to create this privity of contract, as the Act automatically binds the incoming tenant to the terms of the lease. However, as a belt and braces approach, landlords will still want to see it. This does not apply to the case of a subletting, though, and the landlord will want to secure direct covenants from the undertenant in the licence.

Answer 127

They have the following common features: · The landlord gives formal consent to the proposed dealing · The assignment or underletting must take place within a prescribed time (usually 3 months) · The consent is specific to that particular dealing – it does not allow the tenant to assign or underlet to another party other than that mentioned, or in any terms other than those specified · The tenant covenants to pay the landlord’s professional costs (although this is not usually strictly necessary as there will be an undertaking to pay them anyway) Features specific to a licence to assign: · Unless the assignment is of an old lease (before 1 January 1996), it will usually require an authorised guarantee agreement from the outgoing tenant. This means that the outgoing tenant guarantees the obligations of the incoming tenant. This guarantee only lasts as long as the incoming tenant is the tenant. · The outgoing tenant is not released from any existing obligations, such as arrears of rent, breach of repairing obligations, etc. Features specific to a licence to underlet: · The underlease must be in the form of the agreed form (a draft is annexed to the licence) · The undertenant covenants directly with the landlord to observe and perform the covenants in the underlease and the headlease (except the covenant to pay the rent in the headlease as otherwise the undertenant would have to pay the rent twice!)

Answer 128

Proprietary rights = property rights Land (= real property) treated differently at law than others forms (= personal) of property

Answer 129

Remedies Proprietary: use/possession of the right can be recovered Personal: use/possession of the right cannot be recovered — damages as only remedy Third parties Proprietary right: burden of the land — can bind future owners Personal right: can only bind original parties — not a burden on the land

Answer 130

Given their nature, proprietary rights are a burden on the peace of land affecting value/use Strict rules limiting proprietary rights: land should not be unnecessarily burdened

Answer 131

Method x4 1) Is it on the fixed list of recognised proprietary rights in the land? Closed list Two legal estates: Leasehold and freehold And the recognised legal and equitable interests in land 2) Does the right satisfy any substantive characters for the proprietary Not all proprietary rights have substantive characteristics/definitional requirements Lease and easements do! 3) Has it been created/acquired in accordance with the formalities for the right (if any)? Formalities vary according to right in question To create a legal interest in the land you must use a deed 4) If a right is proprietary, you then need to ask if it is enforceable against a third party (ie new owner of the burdened land) If proprietary right has been created, it will only be enforceable against a new owner of the burdened land if protected in accordance with the enforcement rules There are two systems of land enforcement: registered and unregistered land Rules depend on whether land is registered or unregistered land

Answer 132

Proprietary rights to possess the land are known as estates Two most proprietary rights you can own in a piece of land: freehold and leasehold Freehold: proprietary right to possess land indefinitely (landowner) Leasehold: right to possess the land for the duration of the lease over the whole or just part a piece of land can be subject to multiple leaseholds but only one freehold estate A lease is a proprietary right in the land, which the freehold owner will own their rights subject to it: if freeholder tried to stop leasehold from occupying the land, leaseholder can recover possession for the duration of the lease

Answer 133

Proprietary rights of possession Unlike the estates in land, they do not give holder the right to possess the land Instead, interests are proprietary rights to use/enjoy the land 1) Is it on the fixed list of recognised proprietary rights in land? x6 Mortgage interest over land granted by a borrower as security for a loan Powerful bundle of rights over the land includes right to possess and sell the land if borrower defaults in mortgage repayment Easement Right to use or enjoy land belonging to someone else Right of way/drainage on land belonging to someone else Right to entry Legal right to enter/end(?) the lease Landlord’s right to end the use prematurely (forfeiture) is an example Only need to know this right in context of forfeiture Restrictive covenant Promise not to do something on the land Can affect value of the land Commonly relates to use eg only use land for residential purposes/not sell alcohol Interest in a trust of land Exists where there is a trust of land Piece of land is often held on trust: split in legal and equitable ownership Legal ownership held by trustees for the benefit of the beneficiary(s) Equitable/beneficial ownership help by the beneficiary(s) Beneficiary is regarded as having equitable interest in the land subject to the trust Estate contract Contractual right to an estate in the land If you have entered into a valid contract to buy or lease a piece of land, you have an estate contract provided the contract can be enforced by an equitable order of specific performance, i.e. you comply with the equitable maxims Capable of being legal: mortgage, easement, right of entry Only in equity: restrictive covenant, interest in a trust of land, estate contract A piece of land may be subject to a number of different competing proprietary rights

Answer 134

High degree of formality Three stage process: 1) Exchange of contracts voluntary point at which parties become contractually committed to the deal Pre-exchange parties can walk away without incurring any liability Estate contract —buyer has an equitable interest in the land Buyer can ask court to enforce contract and order by specific performance Binds third parties: if seller decides to sell to someone else, contract can bind 3rd p 2) Completion of deed Compulsory to effect legal transfer Deed must be used to transfer the land Deed: doc intended as a deed, validity executed by seller and delivered (dated) Individual executes a deed by signing it in the presence of a witness who must also attest their signature Buyer does not need to execute the deed (no legal requirement but common in practice eg if buyer is entering into a covenant in resect of the land it is buying) x3: In writing + Contain all agreed terms + Signed by both parties Variation must also comply with the requirements Incorporation of all terms can be included by reference to another document Common for both parties to sign identical copies of identical documents which are then physically exchanged Completion is practically when the buyer pays the purchase money and collects keys If land registered, the buyer is still not regarded legal owner If unregistered, then legal title passes at this point Sale of unregistered land triggers requirement to register land for the first time Unregistered land need only be registered for the first time if a trigger event occurs If not registered within 2 months of completion: legal title regents back to the seller! 3) Registration Compulsory Registered land: registration is when the buyer is regarded as the legal owner of the land Registered and unregistered land

Answer 135

Registered land: land that has been registered and the land registry Registry lists proprietary rights which benefit and/or burden a piece of land Overriding interests: proprietary rights that bind new owners even though not protected or registered OI override the registered title Eg legal lease of 7 years or less: land subject to short lease but no reference to it on title Prospective buyers must make enquiries beyond just looking at the official copy Unregistered land: ownership proved by producing a bundle of old title deeds for land

Answer 136

Statute definition is broad If own freehold: ground below up to 300m Lower airspace: such height as is reasonably necessary (eg trespass with crane/signs even if not touching or causing damage) Includes fixtures and benefit of proprietary rights eg easements Fixture or chattel? Degree of annexation: how firmly is an item attached to the land More firmly and more damage, likely a fixture Purpose of annexation (rebut degree of annexation presumption) Enjoy item as chattel? Or enhances the land? Part of architectural design? Yes = fixture Would be destroyed by removal? Yes = fixture eg shed

Answer 137

Proprietary right in the land granted as security for a loan Grants powerful right to the lender: possess and sell in the event of default Capable of being a legal interest in the land if correct formalities are complied with Mortgage must be granted by deed and registered in order to be properly created Grant of first legal mortgage = trigger to register land for first time if unregistered Consequence of registration = legal mortgage will be enforceable against third party In practice, it will be discharged when paid off or the land is sold Interest in land intended to last for the duration of the owner’s ownership of the estate Equitable mortgage if mortgage fails with formalities But doc must be in writing, signed by both parties and contains all the terms

Answer 138

x5 Formalities Rights of the borrower: any classes in mortgage that breach right of borrower Undue influence Rights and duties of the lender default: advise on rights and duties of lender Priority: which lender has priority in event of default

Answer 139

x5 The equity of redemption The equitable right to redeem No postponement or prevention No collateral advantages No unconscionable terms Terms agreed between parties can be declared void: mortgage should be a security for a loan and nothing more

Answer 140

A borrower cannot repay/redeem mortgage loan until legal date of redemption Date specified in mortgage Equity intervened in common law so now borrower has an equitable right to redeem anytime the legal date of redemption has passed = equitable right to redeem Residential: date usually within first 6 months yet usually takes 20/30 years

Answer 141

Prevent = void Postpone: depends! Could be valid or void Estate mortgaged — leasehold estate is depreciating asset so if there is little time left on the lease after the date then courts more likely to declare void Commercial context: court more willing to uphold as recognised more equal bargaining power esp if borrower received favourable terms in exchange Circumstances are key! Options to purchase may be void affords the lender to purchase the land Mortgage should be security for loan only Clause if exercised would prevent borrowers right to redeem Court looks at true substance to arrangement If mortgage and option are truly independent of each other then may be valid If separate agreements are used then consider if they are artificially separated to make it look like they are unrelated transactions

Answer 142

A term which confers a benefit on the lender over and above the security may be void Eg to provide favourable treatment to lenders business Not every collateral advantage will fail Context is key! If commercial context/advantage ends within mortgage term then valid

Answer 143

More than unreasonable Courts strike down oppressive or unconscionable clauses Morally reprehensible manner Key cases re interest rates Consider equality of bargaining power+ commercial context + need for loan

Answer 144

Mortgage loan can be set aside if undue influence Issue where mortgage is not for a party’s direct benefit + relationship of trust/confidence Relationship: parent/child; partners; friends The lender granting loan must ensure it takes precautions to notify the other party of risks Requiring party to seek independent legal advice If yes, then lender’s interest in property will rank in priority And other party cannot argue they have been unduly influenced

Answer 145

Right to posses Technically arises as soon as mortgage has been granted but practically right is postponed in agreement until borrower is in default Lender can exercised self help - Unless premises are empty/unoccupied, lender should seek court order - If residential or part, application to court by lender will start statutory protections for borrower to ask the court to postpone possession order for such periods that court considers reasonable — court must be satisfied that borrower can pay arrears and any interests accrued within a reasonable period which is remainder of mortgage term Power of sale No court order This is a right of lender - Expressly contained in mortgage loan - Implied by statute -- Arises as one portion of capital is due --Interest only loan: at the legal redemption date If statutory, right to sell becomes exercisable if -notice requiring payment of the whole is served and borrower defaults on this notice OR -interests on the loan is in arrears of at least two months OR -There is some other breach of the mortgage loan agreement Lender under duty to - Sell property at market value -Seek expert advice as to manner of sale Lender does not have to Wait to sell property Or improve property

Answer 146

Land owner may grant more than one mortgage over the land Issues of priority when loan is in default and there is not enough money on the sale to pay back all the lenders Determine status of mortgage: legal or equitable (formalities!) Legal (registered as part of creation) will rank ahead of Any subsequently granted mortgages AND Where there is more than one registered mortgage priority is governed by the order in which the mortgage was registered Any unprotected equitable interests Equitable interests do not need to be registered as part of creation But can be protected by a notice on the charges register If an equitable interest has not been protected in this way, a legal mortgage will rank ahead of it BUT not pre-existing overriding interest Equitable mortgages (do not ned to be registered as part of creation) As between competing equitable interests the order of creation determines priority If protected by a notice, the equitable mortgage will rank ahead of subsequent legal mortgages

Answer 147

private rights over land belonging to another eg right of way, right of park, right of storage Easements can be legal or equitable interests Legal or equitable: depends on term — if uncertain only ever equitable! Grant v reservation Grants: where land is sold/lease and easement is granted to buyer or tenant Reservation: where land is sold/lease and easement is reserved for benefit of seller/landlord Easement v licence Easement: proprietary right Licence: personal right This affects remedies available and enforceability if burdened land transferred to another

Answer 148

x5 What is an easement? (vs licence) Is the right claimed capable of being an easement? Is the right claimed defeated by any of the 3 P’s? Has the right been acquired as an easement? Is the right enforceable against a third party?

Answer 149

Re ellenborough park criteria x3 1) is there a piece of land that benefits / is burdened by the right? (Owned/occupied by different owners) 2) does the right benefit the dominant land and is there proximity between the dominant and servient (does not need to adjoin but needs to benefit land as opposed to owner personally) 3) is the nature and extent of the right clear? Has it been judicial recognised?

Answer 150

No permission: if dominant land owner has to exercise permission then not an easement No exclusive possession: is servient land owner left with reasonable use of the land (right to park where there a are multiple spaces v one space) No payment: the right must not impose a positive obligation on servient land owner (eg to repair, maintain or supply something)

Answer 151

High degree of formality but can be express or implied Method 1) Has the right been expressly required? Legal easement: deed + registration If not, consider if complies with s 2 LP(MP)A 1989 = equitable easement If uncertain term only capable of equitable easement: writing and signed 2) if not, circumstances exist which mean it could have been acquired impliedly? Always implied into a document eg transfer deed, contract Easements status from document it is implied into (eg legal lease = legal easement) Modes of acquisition x4 + prescription - Necessity: grant + reservation - Common intention: grant + reservation - Wheeldon v burrow: grant only - S62 LPA 1925: grant only Necessity: where the land is otherwise incapable of use (strict court approach only for right of way where land is otherwise landlocked and would be otherwise inaccessible) Common intention: necessary for dominant land owner to make use of land for a definite/particular purpose agreed when land was sold or leased — there must have been a stated purpose AND land cannot be used for that purpose w/o easement Wheeldon v burrows: where land was divided for the first time by either transfer or lease newly transferred/leased land becomes the dominant land where there is a right that was exercised by the servient land owner (seller/landlord) at the time of the sale/lease the right enhances the land in some way -- Right must be used regularly -- Right must be discoverable on a reasonably careful inspection of the land S62 Upgrades informal permission into formal permission when land is sold or leased Prescription Not a mode of implied acquisition Means by which exercise of a freeholder over land (at least 20 years) Reasonably regular use Without force, secrecy or permission

Answer 152

Will it bind a new owner of the burdened land (re sale/gift) Rules depend on express or implied easement Rules re registered Express If express legal, needs to be registered Express equitable can be created w/o registration but must be protected by notice for enforceability Implied Legal easement: overriding interest providing reasonable inspection in last year or purchases knows about it Equitable easement: notice on charges register or will not bind a purchaser for value

Answer 153

Do not confuse easements with freehold covenants (similar terminology) Covenant: means of private control over land ie a promise re land Common freehold covenant relate to use Enforceability may be a legal issue — benefit/burden passes if certain requirements Valid : In writing + Signed by grantor/covenantor Restrictive covenant (like all equitable interests) does not have to be registered for creation but should be on charges registered on burdened land in order to be enforceable to third parties Unregistered land: covenant protected by entry of land charge at land charges registry

Answer 154

(can be a mix!) Hand in pocket test Spend time, energy, money = positive Burden of positive covenant cannot pass using the equitable rules No an interest in the land/does not have proprietary status like -ve Status of covenant determines which rules applied Negative/restrictive covenant can be complied with by inaction Equitable interest in land Proprietary status by courts

Answer 155

Enforceability issues Two sets of rules: common law and equitable rules Depends what set of rules you are able to use to pass the burden Cannot mix and match equitable and common law rules eg if pass burden using equitable rules cannot pass benefit using common law rules — must use equitable rules for benefit Consider equitable rules first!

Answer 156

Burden of a covenant can run in equity (it cannot run at common law) If positive: common law (so not equitable rules) If negative: burden can pass if (Tulk v Moxhay) - Negative - covenant accommodates the dominant land -- The covenantee and success in title must hold an interests in land at the time of creation and enforcement: there must be a piece of land that benefits from the covenant as the convenant to the land and not the owner -- Covenant must touch and concern (benefit) the dominant land: affect the nature, quality or use of dominant land + benefit land owner only in capacity as land owner — would cease to benefit dominate land owner if land was sold — cov must benefit land -There must be intention --Express: wording of covenant drafted with intention of binding successors/land --Implied s79 unless covenant is drafted as being personal to a specific party - There must be notice: --if registered land then in charges register of burdened land ----if not will not bind purchaser for value ----but will bind a donee (someone gifted/inherited) --Unregistered land: covenant should be protected by way of a land charge otherwise will not be binding on someone who purchases the burdened land If burden passes in equity then may need to consider if benefit passes in equity --If the dominant land has been sold, benefit of covenant passes --The covenant must touch and concern the land (ie benefit the land) and pass by x3 ---Annexation; or Occurs at the time the covenant is created So providing it occurs it will pass to each successive owner Preferable to assignment (most common way to pass benefit) Express: wording of covenant (benefiting land known as … Implied: s78 LPA 1925 + case law: annexed unless expressly excluded or covenant expressed as being personal to a specific party ---Assignment; or Relay race analogy Each time the land the land is sold, assignment of the benefit must occur ---A building scheme Only relevant for sale of a number of plots at the same time

Answer 157

If the covenant is positive (or does not satisfy talk v moxhay) must use common law Burden — General rule: burden does not pass -Remains with original covenantor -Original covenantor can be sued long after the burdened land is sold -Original covenantor can recover damages from person it sold to if indemnity covenant -If there is a complete chain of indemnity = indirect chain of enforcement -Exceptions: burden can pass --Halsall v brizell: 3 conditions --Associated benefit that this successive covenantor is taking --Doctrine of mutual benefit and burden --Eg if covenant is to pay towards maintenance of shared driveway then burden can pass ----Close link ----Conferred in same transaction ----Genuine choice to accept benefit: theoretical opportunity to renounce the benefit rather than actual chance of doing so — no choice = claim fails Benefit -- Express assignment: in writing and signed by covenantee and notice given in writing to original covenantor --Implied assignment ----More common ----P&A Swift x4 ------Would any owner benefit from the covenant? ------Intention for benefit to pass — express wording in drafting ------If not, intention implied s78 LPA unless drafted personal to party ------At time covenant was granted, covenantee must have held a legal estate in the benefited land the successive covenantee looking to enforce must not hold an estate in the land (ie freehold or leasehold)

Answer 158

If you can pass benefit/burden Remedy depends on nature of covenant breached and whether it has passed Injunction / damages common

Answer 159

Enforcement relevant to both those holding an interest and new owners Interest in land is a proprietary right so can affect value Buyer of land bound by Properly protected interest: ID from registered title — registered title Overriding interests over the land Donee: not purchaser for value All properly created interests Does not matter if they have been protected with enforcement interest Interest holder = person who has benefit of leasehold, mortgage, easement, right of entry, restrictive covenant, estate contract, beneficiary of interest in the land

Answer 160

Registrable dispositions: legal interests and estates over registered land Interest protected by entry: equitable interest in the land Overriding interests

Answer 161

Legal interests and estates over registered land Leasehold / Mortgage /Easement /Right of entry: all capable of being legal General rule: must be created by deed and substantively registered to be valid Transactions that must be completed by registration in order to create legal estate/interest Exceptions for legal leases of 7 years or less or implied legal easements Entry is made in the charges register on the registered title of the burdened land

Answer 162

Equitable interest in the land Must be protected to bind purchaser of burdened land Would still be binding on a donee if not protected --Restrictive covenant, interest in a trust of land, estate contract: validly created and exist w/o registration requirement — Only take effect in equity --Easement equitable if term uncertain — Only take effect in equity --Failed legal lease / easement or mortgage if in writing, contains all the terms and signed by both parties = estate contract — Only take effect in equity Entry either notice in charges register or a restriction in the proprietorship of burdened land --Notice: easement for uncertain term, -ve covenant, estate contract --Restriction: interest in a trust of land ----To ensure process of overreaching for trusts of land ----Process by which beneficiary’s interest in the land is removed to money paid ----At least paid to two trustees = remove equitable interest from the land ----Failure: beneficiary’s interest remains in the land --------Binding? Depends if beneficiary is in actual occupation and claim OI --------If beneficiary not in actual occupation of registered burdened land, interest will remain but will be unenforceable against buyer/lender

Answer 163

Unregistered land: land not registered at land registry Seller proves ownership by providing title documents eg old conveyancing deeds to trace Enforceability over unregistered land depends on nature of the right (legal v equitable)

Answer 164

Puisne mortgage? No: pre and post 1927 legal interests bind the world and will be enforceable against a new owner of the burdened land Yes: the interest must be protected as a land charge — failure = interest will not be binding on purchaser of the burdened land

Answer 165

a second or subsequent mortgage of unregistered land of which the title deeds are retained by a first mortgagee.

Answer 166

pre or post 1926 Equitable interest created post 1926 (majority): Interest in a trust of land that has not been overreached? NO The interest must be protected as a land charge — failure = interest will not be binding on purchaser of the burdened land Land charges department only for unregistered land: reveals any land charges --Search against name of unregistered land owners as it appears in title deeds --Protection of interest by way of land charge does not confirm validity but assuming interest is valid it will be binding on future owner of burdened land --Failure to protect by relevant land charge ----not binding on future owner even if the consideration paid is nominal and/or purchases new about interest before completion ----still binding on donee (gift/inherits) Practical: Inspect title deeds and Land charges search against name -------------------- Equitable interest created pre-1926: The interest is subject to doctrine of notice and will be binding on everyone except ‘equity’s darling’ — rare This included trusts of land that have not been overreached Equity’s darling: bona fide purchaser for value of a legal estate without notice Bona fide: good faith Purchaser: any person who acquires an interest in the land by operation of law (eg intestacy) For value: money or money’s worth and includes nominal consideration (adequacy of value is not investigated) — donee will never be equity’s darling Of a legal estate: freehold or leasehold or charge by legal mortgage WITHOUT NOTICE: most buyers will not be without notice -- Actual notice -- Constructive notice: buyer will have notice a reasonably prudent person would (eg interest of trust of land not overreached if evidence of interest holder occupation on the land) -- Imputed notice: agent — eg buyer’s solicitor finds out/should have found out Equity’s darling = not bound and interest is lost forever

Answer 167

The date of the result of the priority search, to avoid subsequent entries being made on the title which bind the purchaser.

Answer 168

process by which a beneficiary's interest in a trust of land is detached and removed from the land as it is transferred to the monies paid (if monies paid to at least two trustees). This removes the equitable interest from the land into the monies being paid for the purchase. Failure to do this (eg only one trustee) then equitable interest remains in the land. unregistered land depends on the application of the doctrine of notice which binds everyone but equity's darling.

Answer 169

RARE but if so then equitable interest is lost forever bona fide purchaser for value of a legal estate without notice bona fide: good faith purchaser: any person that acquires an interest in the land (or by operation of law eg intestacy) for value: includes nominal consideration (adequation not investigated but donnee not ok) legal estate: freehold or leasehold WITHOUT NOTICE!! most buyers will not be without notice - actual (literal) - constructive: if a reasonable person by making reasonable enquiries eg evidence of occupation on the land - imputed: actual or constructive notice that the agent has or should havemor

Answer 170

proprietary right in the land granted as security for a loan