Procedural Steps

Question 1

What are the initial steps for granting a lease (8)?

Answer 1

1. Deduction of title: Landlord’s solicitor investigates and deduces freehold title; tenant’s solicitor checks the title and ensures the landlord can grant the lease.
2. Drafting the lease: Landlord’s solicitor drafts the lease. A draft agreement for lease may also be prepared if the landlord must carry out works or the tenant needs planning permission or other consents.
3. Pre-contract searches & enquiries: Tenant’s solicitor conducts standard searches (LLC1, CON29, water & drainage, environmental, flood risk, and survey) and raises enquiries as needed.
4. Landlord’s pre-contract documents: Landlord provides the draft lease, agreement to lease (if any), title evidence, planning consents, and evidence of lender’s consent (if applicable).
5. Insurance: Tenant’s solicitor must check the landlord’s insurance policy if the tenant is required to contribute or if the landlord insures.
6. Completion: Landlord sends engrossed lease 5 working days before completion. On the day, the landlord executes the lease, the tenant executes the counterpart, pays rent/VAT/premium, and leases are exchanged.
7. Post-completion – SDLT: Tenant’s solicitor must submit an SDLT return and pay SDLT (if due) within 14 days of completion; SDLT is charged on top of any VAT.
8. Post-completion – Registration: If the lease is over 7 years (or triggers compulsory registration), it must be registered within 2 months of completion and within the 30-day priority period of the OS1.

Question 2

What are the initial steps for granting an underlease (6)?

Answer 2

1. Deduction of title:

• The undertenant’s solicitor (UT’s solicitor) will check that the tenant (T) has good leasehold title, ideally absolute leasehold title.
• If the headlease is unregistered, the UT’s solicitor can require evidence of title for the past 15 years (e.g. copies of assignments and documents proving T’s title).

2. Drafting the underlease:

• The tenant’s solicitor (as sub-landlord) will draft the underlease.

Draft agreement (optional):

• A draft agreement for underlease may be prepared if the undertenant (UT) needs to obtain landlord’s consent before the underlease can be granted.

3. Pre-contract searches (carried out by UT’s solicitor):

• LLC1 – to check for entries in the local land charges register, including planning permissions.
• CON29 – reveals local authority issues (e.g. highway repair, enforcement notices, building control).
• Water & drainage
• Flood risk
• Environmental search
• Survey (optional but recommended)

4. Consent to grant underlease:

• The landlord’s consent is required to grant the underlease if the headlease contains a restriction on underletting.
• Consent is given via a licence to underlet (a tripartite document between landlord, tenant, and undertenant).
• The licence usually includes a direct covenant from the undertenant to the landlord to observe and perform the tenant’s covenants in the headlease.

5. Completion:

• The undertenant receives the executed underlease and licence to underlet.
• The tenant receives the counterpart lease and any rent/payment due from the undertenant.

6. Post-completion – SDLT:

• SDLT is payable on the grant of a commercial underlease (if the rent/premium exceeds the threshold).
• It must be paid within 14 days of completion.
• SDLT is charged on top of VAT, if applicable.

Question 3

What are the steps for the assignment of a lease (6)?

Answer 3

1. Deduction of Title:
   The assignees’ solicitor must investigate the assignor’s leasehold title.

• If the lease is unregistered, the assignee may require copies of the lease and all assignments for the past 15 years.
• If the assignor has absolute leasehold title, no major concerns arise.
• Assignee can request to inspect the freehold title for defects, but the assignor has no obligation to provide it.

2. Pre-Contract Searches:
   Assignee’s solicitor conducts the standard searches:

• Local Land Charges Search: LLC1 (local land charges and planning)
• Local Authority Search CON29 (e.g. roads, notices, building control)
• Water & drainage, flood risk, environmental, and survey (if needed)

3. Insurance & Rent:

• Assignee’s solicitor should obtain receipts showing that the current tenant has paid:
• Insurance premiums
• Rent and any service charge

4. Licence to Assign:

• If required under the lease, landlord’s solicitor drafts the licence to assign and sends it to Assignees solicitor for approval.
• All parties must sign (landlord, Assignor, and Assignee).
• Consent timing:
• Residential lease: Landlord’s consent must be obtained at least 3 days before completion.
• Commercial lease: Completion can take place up to 5 working days after consent and within 6 months of consent.

5. Landlord Requirements:

• Landlord may require:
• References and financial checks on NT
• Undertaking from current tenant to reimburse landlord’s legal costs
• An Authorised Guarantee Agreement (AGA) from the assignor, guaranteeing assignee performance under the lease
• Alternatively, for pre-1996 leases, a direct covenant from NT to landlord

6. Completion:

• Landlord receives: Signed licence to assign and AGA (if required)
• Assignee receives: The assigned lease, executed TR1 transfer deed, licence, and receipts
• Assignor receives: Rent, signed counterpart of the licence, and confirmation of completed assignment

7. Post-Completion Steps:

Post-completion steps are required in the following situations:

• Lease is over 7 years or already registered:
  ➤ The assignment must be registered at the Land Registry using Form AP1, within 30 working days.
• SDLT is payable (e.g. consideration exceeds threshold):
  ➤ SDLT return must be filed and tax paid within 14 days of completion.

Question 4

What are the key provisions in an underletting license (6)?

Answer 4

1. Landlord’s consent to the specific underletting arrangement, often with conditions.
2. Direct covenant by the undertenant to the landlord, agreeing to observe and perform the tenant’s covenants in the headlease (important for post-1996 leases).
3. Tenant’s covenant to comply with ongoing obligations in the headlease.
4. Undertaking from the tenant to reimburse the landlord’s legal costs in connection with granting the licence.
5. Confirmation that the underlease will comply with restrictions in the headlease (e.g. term length, rent review clauses, alienation restrictions).
6. Sometimes includes warranty that there are no existing breaches of the headlease.

Question 5

What are the key provisions in an assignment license?

Answer 5

1. Landlord’s formal consent to the lease assignment.
2. AGA from tenant (assignor): Required for leases granted on or after 1 January 1996, making T guarantee assigneess performance and indemnify L for breaches.
3. Direct covenant from assignee: Used for pre-1996 leases, where assignee covenants directly with L to perform tenant covenants.
4. Assignor covenants to reimburse landlord’s legal and administrative costs for the licence.
5. Assignee covenants with T to give notice of the assignment to the landlord after completion.
6. Tenant and Assignee jointly indemnify L for any liabilities arising from the assignment.

Question 6

What is the procedure for the sale of a property- key steps from pre-contract to post-completion (8)?

Answer 6

1. Deduction of Title:

• Seller’s solicitor investigates and deduces title using official copies and supporting documents (e.g. copy lease, leasehold title, deeds of variation), sending the title pack to the buyer’s solicitor.

2. Drafting Contract of Sale:

The seller’s solicitor prepares and sends to the buyer’s solicitor:

Draft contract of sale

Title documents, including:

• Official copy of the register of title
• Title plan
• Copies of charges, leases, deeds of variation, covenants, etc.

Replies to standard enquiries:

Property Information Form TA6 / TA10 (residential) — e.g.

• “No disputes known to the seller”
• “The seller is not aware of any flooding”

Commercial Property Standard Enquirieis (CPSE) — e.g.

• “The seller is not aware of any environmental issues”
• “Planning permission granted in 2015 for rear extension – see enclosed”

3. Pre-Contract Enquiries & Searches:

• Buyer’s solicitor reviews the contract and title, raises pre-contract enquiries, and orders searches (LLC1, CON29, water/drainage, environmental, etc.).

4. Mortgage & Survey:

• Buyer arranges a mortgage (if required) and a survey of the property; lender’s solicitor also checks title and contract.

5. Exchange of Contracts:

• Once all enquiries are resolved and funding is in place, contracts are exchanged — buyer pays deposit (usually 10%), and the completion date becomes legally binding.

6. Pre-Completion Steps:

• Buyer’s solicitor obtains pre-completion searches (OS1/OS2 and bankruptcy search), drafts the TR1 and sends it to sellers solicitor ahead of completion for approval, prepares financial statements, and requests mortgage funds.

7. Completion:

• On the completion date, purchase money is transferred, seller’s solicitor sends signed TR1 and any keys are released; legal ownership passes to the buyer.

8. Post-Completion – SDLT & Registration:

• Buyer’s solicitor submits the SDLT return and pays any SDLT due within 14 days, then registers the buyer as proprietor with HM Land Registry within the 30-day OS1 priority period (required for leases over 7 years and all transfers of land).