PP 8 - Grant of lease Flashcards
What are the three essentials of a lease?
- Exclusive possession
- Fixed or periodic term
- Proper formalities (deed or no deed)
When must a lease be created by deed?
If it lasts over 3 years.
What formalities for a lease 3 years or under?
Can be in writing or orally
What are the key objectives of a landlord in lease negotiations?
Clear rent with no deductions, Tenant repairs and insures, Control over use and assignments.
What are the key objectives of a tenant in lease negotiations?
Use premises as intended, Flexibility (break clauses, assignment), Avoid unfair terms and repair costs.
How to calculate expiry date?
- From and including a date - expires day before that date in final year
- From a date - expires on same date in final year
What is a break clause?
- A provision allowing early termination by landlord, tenant, or both.
- Can be a fixed break date or rolling break
- Landlord prefer longer lease with a break clause instead of shorter leases bc of reversion value
What is a Full Repairing and Insuring (FRI) lease?
A lease where tenant covers rent, repairs, and insurance.
What are four rent review mechanisms?
Stepped rent, Index-linked rent (e.g., RPI), Turnover rent, Open market rent.
* Stepped rent - fixed rent increases over time
* Index-linked rent - adjusted based on inflation (retail price index)
* Turnover rent - adjusted based on tenant’s turnover
* Open market rent review.- usually upwards only; rent based on comparable properties; if market rates have fallen, rent stays the same
What are common rent review assumptions - open market rent?
Premises are vacant, Tenant complied with covenants, Lease terms apply (except rent), Rebuilt if destroyed.
What are common disregards in rent review - open market rent?
- Tenant’s occupation
- Tenant’s goodwill
- Tenant’s voluntary improvements
What is RICS Code of Leasing and who must follow it?
- Promote fairness in lease negotiations and make drafting more efficient.
- RICS members and regulated firms.
- Does not apply to landlords/solicitors unless RICS members.
Name 3 mandatory requirements under the RICS Code.
- Constructive & collaborative lease negotiations
- Unrepresented parties advised to seek legal advice
- Heads of terms must be compliant
What must the tenant and landlord do pre-exchange?
What is an ‘engrossment’ in lease transactions?
The final, signed copy of the lease prepared for execution.
When is an agreement for lease needed?
Will set out what conditions are needed to be satisfied and by when for completion to take place- pre-completoin step
What are the key lease pre-completion searches?
- OS1: Lease of whole ; 30 working day priority period, msut register within this period
- OS2: Lease of part ; 30 working day pp
- OS3: Non-registrable lease - doesnt confer priority
What happens at lease completion?
- Tenant sends completion money
- Solicitors date and exchange leases
- Documents sent to each other
What happens at post completion?
- Landlord’s solicitor sends summary of lease provisions to the landlord
- Tenant’s solicitor arranges to submit and pay SDLT/LTT return
- Tenant’s solicitor registers the lease if necessary
When is a lease registrable at the Land Registry?
- > 7 years → Must be registered
- ≤7 years → Not registrable
What forms are used for lease registration?
- AP1: If landlord’s title is registered
- FR1: If landlord’s title is unregistered
- Certified lease copy submitted
What must a tenant’s solicitor do post-completion?
- Submit SDLT/LTT return
- Register the lease (if >7 years)
- Receive official copies of leasehold title
