Procedural steps for granting a least/underlease

Question 1

Who is the pre-completion contract drafted by?

Answer 1

Landlord

Question 2

When is a tenant entitled to ask for a deduction of title?

Answer 2

When the lease is for more than 7 years (if for less, then not entitled to it)

Question 3

If the headlease is unregistered, what proof of title can the tenant taking an underlease ask for?

Answer 3

The headlease and its assignments in the last 15 years
Can only call for freehold title deduction if the sublease is for over 7 years

Question 4

Which searches and enquiries should be carried out?

Answer 4

Similar as for freehold transaction
Some extra ones, such as details of the landlord’s insurance policy

Question 5

What is a licence to underlet, and who are the parties to it?

Answer 5

Landlord’s formal consent to underletting
The landlord, original tenant, and undertenant

Question 6

3 usual terms of a licence to underlet

Answer 6

1. landlord’s consent to underletting
2. undertenant enters a direct covenant with the landlord to perform covenants in the lease and underlease
3. the original tenant will pay the landlord’s costs for approving the underletting and granting the licence

Question 7

Which sum/s is SDLT payable on?

Answer 7

Any capital sum: same rates as for freehold
Rent: calculate “net present value” (total rent due - 3.5% per annum)

Question 8

SDLT rates on “net present value” of rent

Answer 8

Up to 150,000: 0%
150,001-5m: 1%
Above 5m: 2%

Question 9

What is the deadline for paying SDLT?

Answer 9

14 days after completion

Question 10

LTT rates on “net present value” of rent

Answer 10

Up to 225,000: 0%
225,001-2m: 1%
Above 2m: 2%

Question 11

What is the deadline for paying LTT?

Answer 11

30 days after completion

Question 12

Which leases must be registered?

Answer 12

Leases over 7 years long, whether the land is registered or not

Question 13

Which case is the self-help remedy for the landlord called after?

Answer 13

Jervis v Harris

Question 14

What is the effect of the landlord’s self-help remedy?

Answer 14

The landlord can recover the cost of repairs as a debt, not as a damages claim

Question 15

What is the procedure for the landlord’s self-help remedy clause?

Answer 15

The landlord can serve a notice specifying the works required- if the tenant doesn’t start them within the specified period, the landlord can carry out the works and recover the cost from the tenant as a debt

Question 16

To be legal, how must a surrender be made?

Answer 16

By deed

Question 17

What are the 3 conditions for the LTA 1954 to apply?

Answer 17

1. there’s a tenancy,
2. tenant is in occupation,
3. for business purposes

Question 18

When does the LTA 1954 NOT apply?

Answer 18

• tenancy at will,
• tenancy for under 6 months, where the tenant hasn’t been in occupation for the past 12 months
• if the landlord and tenant contract out of it

Question 19

How can the LTA 1954 be contracted out of?

Answer 19

The landlord must serve a notice in prescribed form, and the tenant must make a declaration in the prescribed form agreeing
If there’s less than 14 days notice to the tenant before the grant of lease, the tenant must make the declaration before an independent solicitor

Question 20

What is the effect of the LTA 1954 applying?

Answer 20

The tenancy won’t end, unless terminated using a LTA provision

Question 21

If rent is annual and split into 4 instalments, what are the 4 dates on which it’s usually paid?

Answer 21

25.3.
24.6.
29.9.
25.12.

Question 22

What is open market rent review?

Answer 22

When the rent is adjusted at regular intervals (usually every 3-5 years) based on the open market rental value, taking into account the physical aspects of the property and the terms of the lease

Question 23

What is commonly disregarded in open market rent reviews?

Answer 23

• any effect of T being in occupation (can’t increase rent for benefit of tenant not having to move)
• any goodwill attached
• any effect on rent of any improvements made by the tenant voluntarily

Question 24

Can the landlord require a premium from the original tenant for allowing assignment?

Answer 24

No, unless the lease expressly provides for it

Question 25

Rules for rescinding an assignment contract under the SC

Answer 25

Either the tenant under assignee can rescind by notice if the landlord’s consent isn’t given 3 days before the completion date, or the assignee reasonably objects to the conditions of it

Question 26

Rules for rescinding an assignment contract under the SCPC

Answer 26

If the landlord’s consent isn’t obtained by the completion date, completion is postponed until 5 days after the tenant notifies the assignee the consent has been given
Nobody can rescind until 6 months after the completion date

Question 27

Which document is used to assign a lease?

Answer 27

Registered lease: TR1
Unregistered lease of over 7 years: TR1 or deed of assignment
Unregistered lease of 7 years or less: deed of assignment