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SQE general > PLP WK 6 > Flashcards

PLP WK 6 Flashcards

1
Q

What are the three main types of leases discussed in the source?

A

Long-term residential leases, Assured Shorthold Tenancies (ASTs), and Commercial Leases.

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2
Q

What is a key characteristic of long-term residential leases?

A

They typically have terms like 99 or 999 years with low rent.

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3
Q

What are ASTs typically used for?

A

Short-term (6-12 months) residential property lets.

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4
Q

What distinguishes commercial leases from ASTs in terms of focus?

A

While both involve rent payments, commercial leases differ in key aspects beyond rent.

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5
Q

What types of properties are commonly leased under commercial leases?

A

Offices, factories, warehouses, and shops.

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6
Q

What is a primary advantage of leasing for tenants, especially new businesses?

A

Capital conservation, as it avoids large upfront investments in buying property.

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7
Q

How does leasing provide flexibility for tenants?

A

It allows businesses to relocate as their needs change without being tied to property ownership.

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8
Q

Why might leasing be the only option for tenants seeking certain properties?

A

Some properties, particularly in prime locations like shopping centers, are only available as leaseholds.

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9
Q

What are the two main categories of commercial landlords?

A

Private investors and institutional investors.

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10
Q

What are some examples of private investors in commercial property?

A

Individuals, companies, and even small-scale shop owners who rent out premises.

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11
Q

What types of institutions are typically involved as institutional investors in commercial property?

A

Pension funds and life assurance companies.

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12
Q

Why do institutional investors view property as a stable investment?

A

It provides consistent rental income and potential for capital growth.

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13
Q

What type of lease structure do institutional investors often prefer?

A

Full Repairing and Insuring (FRI) leases, as they provide clear rental income without property-related costs.

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14
Q

What is covenant strength in the context of commercial leases?

A

The tenant’s financial capacity to fulfill their lease obligations.

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15
Q

Why is covenant strength crucial for landlords?

A

It assures landlords of rent payment and responsible property management.

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16
Q

How do landlords assess the covenant strength of new businesses?

A

They may require guarantors or rent deposits to mitigate risk.

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17
Q

What are some post-pandemic trends that might impact the commercial property market?

A

Remote work trends could affect demand for office spaces and influence rental rates.

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18
Q

What are some key aspects of asset management in commercial property that involve legal work?

A

Granting new leases, handling tenant applications, advising on lease breaches, and dealing with lease-end issues.

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19
Q

What are some examples of tenant applications that landlords need to manage?

A

Requests for property alterations or subletting.

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20
Q

What are some examples of lease breaches that solicitors advise on?

A

Non-payment of rent or failure to maintain the property in good repair.

21
Q

What legal support is required at the end of a lease term?

A

Solicitors advise on exit procedures or lease renewal negotiations.

22
Q

According to Woodfall’s Law of Landlord and Tenant, what defines a lease?

A

The grant of exclusive possession of land for a fixed term, less than the grantor’s interest.

23
Q

What is a key distinction between a lease and a license?

A

Exclusive possession, giving the tenant the right to exclude others, including the landlord (except for specific rights of entry).

24
Q

What is a reversion in a leasehold context?

A

The landlord’s retained interest in the property, meaning it reverts to them at the end of the lease term.

25
Q

What are the formal requirements for creating a lease over three years?

A

It must be created by deed.

26
Q

How can leases of three years or less be created?

A

In writing or even orally.

27
Q

What type of lease structure do landlords, especially institutional ones, typically aim for?

A

Full Repairing and Insuring (FRI) leases to maximise clear rental income.

28
Q

What are some ways landlords seek to control the use of their premises?

A

Ensuring insurance and maintenance, limiting alterations or lease transfers, and implementing periodic rent reviews.

29
Q

What is a key tenant objective regarding the use of leased premises?

A

Ensuring the lease permits the intended business activities.

30
Q

Why do tenants seek flexibility in lease terms?

A

To align the lease with their business needs, potentially including options for lease assignment or property alterations.

31
Q

What are some examples of onerous lease terms that tenants try to avoid?

A

Prohibitive rent reviews or restrictive clauses on assignment or alterations.

32
Q

How might a landlord and a tenant view a 20-year lease with no break clause differently?

A

Landlord: Favors the stability of long-term income. Tenant: Might seek a shorter term or a break clause for flexibility.

33
Q

Why might a tenant be wary of an upwards-only rent review every five years?

A

It lacks flexibility to lower rent if market rates decline, while the landlord benefits from guaranteed rent increases.

34
Q

Why might a tenant desire the ability to alter the leased property?

A

To adapt the space to suit their business needs.

35
Q

What is a determinate term in a lease?

A

A fixed or periodic duration for the lease, like six months, five years, or 999 years.

36
Q

What types of leases typically have fixed terms?

A

Full Repairing and Insuring (FRI) leases.

37
Q

What is a reversionary lease?

A

A lease with a start date after the signing date, commonly used to extend occupancy before the current lease ends.

38
Q

How is lease expiry calculated when using the “from and including” phrasing?

A

he lease ends the day before the same calendar date it started. For example, a lease from March 24, 2019, to March 23, 2029.

39
Q

How is lease expiry calculated when using the “from” phrasing?

A

The lease starts the day after the stated date and ends on that calendar date in the ending year. For example, a lease from March 24, 2019, to March 24, 2029.

40
Q

What is a break clause in a lease?

A

A provision allowing the tenant (or potentially the landlord) to end the lease early.

41
Q

What are the different types of break clauses based on who can exercise them?

A

Tenant-only, landlord-only, or mutual break clauses.

42
Q

What is the most common rent payment frequency in commercial leases?

A

Quarterly payments, with the yearly rent divided into four equal installments.

43
Q

What are quarter days in the context of rent payments?

A

Traditional dates for rent payment, often March 25, June 24, September 29, and December 25.

44
Q

What is rent apportionment?

A

Adjusting rent for partial quarters if a lease starts or ends mid-quarter.

45
Q

What is stepped rent in a lease?

A

Predetermined rent increases at set intervals, such as £25,000 per year for two years, then £30,000 per year for the next two years.

46
Q

What is an open market rent review?

A

Rent is determined based on prevailing market rates for comparable properties, using a hypothetical lease scenario.

47
Q

What is a hypothetical lease used for in rent reviews?

A

It assumes a vacant property with a willing landlord and tenant, disregarding tenant improvements and goodwill.

48
Q

What is a rent review memorandum?

A

A document recording the new rent after a review, signed by both the landlord and tenant.

49
Q

What happens if a new rent is agreed upon after the rent review date?

A

The tenant pays the rent difference (backdated rent) with interest, but this is not considered a penalty.

SQE general (24 decks)

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