PLP WK 6 Flashcards
What are the three main types of leases discussed in the source?
Long-term residential leases, Assured Shorthold Tenancies (ASTs), and Commercial Leases.
What is a key characteristic of long-term residential leases?
They typically have terms like 99 or 999 years with low rent.
What are ASTs typically used for?
Short-term (6-12 months) residential property lets.
What distinguishes commercial leases from ASTs in terms of focus?
While both involve rent payments, commercial leases differ in key aspects beyond rent.
What types of properties are commonly leased under commercial leases?
Offices, factories, warehouses, and shops.
What is a primary advantage of leasing for tenants, especially new businesses?
Capital conservation, as it avoids large upfront investments in buying property.
How does leasing provide flexibility for tenants?
It allows businesses to relocate as their needs change without being tied to property ownership.
Why might leasing be the only option for tenants seeking certain properties?
Some properties, particularly in prime locations like shopping centers, are only available as leaseholds.
What are the two main categories of commercial landlords?
Private investors and institutional investors.
What are some examples of private investors in commercial property?
Individuals, companies, and even small-scale shop owners who rent out premises.
What types of institutions are typically involved as institutional investors in commercial property?
Pension funds and life assurance companies.
Why do institutional investors view property as a stable investment?
It provides consistent rental income and potential for capital growth.
What type of lease structure do institutional investors often prefer?
Full Repairing and Insuring (FRI) leases, as they provide clear rental income without property-related costs.
What is covenant strength in the context of commercial leases?
The tenant’s financial capacity to fulfill their lease obligations.
Why is covenant strength crucial for landlords?
It assures landlords of rent payment and responsible property management.
How do landlords assess the covenant strength of new businesses?
They may require guarantors or rent deposits to mitigate risk.
What are some post-pandemic trends that might impact the commercial property market?
Remote work trends could affect demand for office spaces and influence rental rates.
What are some key aspects of asset management in commercial property that involve legal work?
Granting new leases, handling tenant applications, advising on lease breaches, and dealing with lease-end issues.
What are some examples of tenant applications that landlords need to manage?
Requests for property alterations or subletting.
What are some examples of lease breaches that solicitors advise on?
Non-payment of rent or failure to maintain the property in good repair.
What legal support is required at the end of a lease term?
Solicitors advise on exit procedures or lease renewal negotiations.
According to Woodfall’s Law of Landlord and Tenant, what defines a lease?
The grant of exclusive possession of land for a fixed term, less than the grantor’s interest.
What is a key distinction between a lease and a license?
Exclusive possession, giving the tenant the right to exclude others, including the landlord (except for specific rights of entry).
What is a reversion in a leasehold context?
The landlord’s retained interest in the property, meaning it reverts to them at the end of the lease term.
What are the formal requirements for creating a lease over three years?
It must be created by deed.
How can leases of three years or less be created?
In writing or even orally.
What type of lease structure do landlords, especially institutional ones, typically aim for?
Full Repairing and Insuring (FRI) leases to maximise clear rental income.
What are some ways landlords seek to control the use of their premises?
Ensuring insurance and maintenance, limiting alterations or lease transfers, and implementing periodic rent reviews.
What is a key tenant objective regarding the use of leased premises?
Ensuring the lease permits the intended business activities.
Why do tenants seek flexibility in lease terms?
To align the lease with their business needs, potentially including options for lease assignment or property alterations.
What are some examples of onerous lease terms that tenants try to avoid?
Prohibitive rent reviews or restrictive clauses on assignment or alterations.
How might a landlord and a tenant view a 20-year lease with no break clause differently?
Landlord: Favors the stability of long-term income. Tenant: Might seek a shorter term or a break clause for flexibility.
Why might a tenant be wary of an upwards-only rent review every five years?
It lacks flexibility to lower rent if market rates decline, while the landlord benefits from guaranteed rent increases.
Why might a tenant desire the ability to alter the leased property?
To adapt the space to suit their business needs.
What is a determinate term in a lease?
A fixed or periodic duration for the lease, like six months, five years, or 999 years.
What types of leases typically have fixed terms?
Full Repairing and Insuring (FRI) leases.
What is a reversionary lease?
A lease with a start date after the signing date, commonly used to extend occupancy before the current lease ends.
How is lease expiry calculated when using the “from and including” phrasing?
he lease ends the day before the same calendar date it started. For example, a lease from March 24, 2019, to March 23, 2029.
How is lease expiry calculated when using the “from” phrasing?
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.
What is a break clause in a lease?
A provision allowing the tenant (or potentially the landlord) to end the lease early.
What are the different types of break clauses based on who can exercise them?
Tenant-only, landlord-only, or mutual break clauses.
What is the most common rent payment frequency in commercial leases?
Quarterly payments, with the yearly rent divided into four equal installments.
What are quarter days in the context of rent payments?
Traditional dates for rent payment, often March 25, June 24, September 29, and December 25.
What is rent apportionment?
Adjusting rent for partial quarters if a lease starts or ends mid-quarter.
What is stepped rent in a lease?
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.
What is an open market rent review?
Rent is determined based on prevailing market rates for comparable properties, using a hypothetical lease scenario.
What is a hypothetical lease used for in rent reviews?
It assumes a vacant property with a willing landlord and tenant, disregarding tenant improvements and goodwill.
What is a rent review memorandum?
A document recording the new rent after a review, signed by both the landlord and tenant.
What happens if a new rent is agreed upon after the rent review date?
The tenant pays the rent difference (backdated rent) with interest, but this is not considered a penalty.
