Procedural steps for the assignment of a lease

Question 1

Who deduces title & who investigates title?

Answer 1

Deduction: assignor’s solicitor

Investigation: assignee’s solicitor

Question 2

If the lease is registered, which title needs to be deduced as part of the assignment process?

Answer 2

Depends on title

• If lease registered with absolute title: leasehold title only
• If lease registered with good title (or if lease unregistered): leasehold title & superior freehold title
  (Provision for deduction of freehold title must be included as special condition in contract)

Question 3

If the lease is unregistered, which title needs to be deduced as part of the assignment process?

Answer 3

leasehold title & superior freehold title
(Provision for deduction of freehold title must be included as special condition in contract)

Question 4

Can the assignee insist on the deduction of superior freehold title?

Answer 4

No (no general entitlement in law)

→ Provision for deduction of freehold title must be included as a special condition in the contract

Question 5

What extra queries might the assignee’s solicitor have as part of the pre-contract searches & enquiries?

Answer 5

Insurance

Receipt of last payment of annual rent due under lease (to ensure assignor not in breach)

Question 6

Whose responsibility is it to apply to the landlord for consent to assignment?

Answer 6

Assignor

Question 7

When must consent to assignment be given by?

Answer 7

By or on completion (otherwise assignor will be in breach of assignment covenant in lease)

Question 8

Can the contract be rescinded if the landlord has not given consent by completion?

Answer 8

Depends whether SC or SCPC

SC: either party may rescind contract by notice if
a. Consent not been given 3 working days before completion date or
b. Consent has been given subject to condition which buyer reasonably objects to

SCPC: if consent not obtained by completion, completion postponed until 5 working days after assignor notifies assignee consent has been given
⇣
Either party can only rescind 6 months after original completion date

Question 9

What are the rules under the SC about rescinding contract for assignment re landlord’s consent?

Answer 9

SC: either party may rescind contract by notice if
a. Consent not been given 3 working days before completion date or
b. Consent has been given subject to condition which assignee reasonably objects to

Question 10

What are the rules under the SCPC re rescinding contract if don’t obtain landlord’s consent by completion?

Answer 10

SCPC: if consent not obtained by completion, completion postponed until 5 working days after assignor notifies assignee consent has been given
⇣
Either party can only rescind 6 months after original completion date

Question 11

Who drafts the licence to assign & what form must it be in?

Answer 11

Landlord’s solicitor

Must be in form of deed if contains covenants

Question 12

Who are the parties to a licence to assign?

Answer 12

1. Landlord
2. Tenant (Assignor)
3. Assignee)

Question 13

What are the 3 key terms in a licence to assign (pre Jan 1996 & post Jan 1996?

Answer 13

i. Landlord grants consent (often time-limited)

ii. If lease granted before 1 Jan 1996: covenant by assignee with landlord to observe & perform covenants in lease for remainder of term of lease
If lease granted 1 Jan 1996 onwards: assignor gives authorised guarantee agreement to landlord

iii. Assignor covenants to pay landlord’s costs

Question 14

Under the licence to assign, what is the liability of the assignee for the lease covenants for a lease granted before 1 Jan 1996?

Answer 14

Lease granted before 1 Jan 1996: where have entered into direct cov in licence to assign, the assignee is liable for all covenants for the remainder of term of lease (privity of contract)

(Without covenant, assignee liable under privity of estate for covenants which touch & concern the land only for as long as lease vested in them)

Question 15

If the assignee does not make a covenant in the licence to assign, what is their contractual liability for a lease granted before 1 Jan 1996?

Answer 15

Without covenant, assignee liable under privity of estate for covenants which touch & concern the land only for as long as lease vested in them

Question 16

Under the licence to assign, what is the liability of the assignee for the lease covenants for a lease granted after 1 Jan 1996_?

Answer 16

Assignee liable for all covenants but only for as long as lease vested in them

(Automatically released on future assignment of lease)

Landlord will seek AGA with assignor to compensate for loss of privity of contract for whole term with assignee

Question 17

Who are the parties in an Authorised Guarantee Agreement?

Answer 17

Covenants by assignor to landlord

Question 18

What are the 4 main covenants made by the assignor in an Authorised Guarantee Agreement?

Answer 18

I. Guaranteeing assignee will perform tenant’s covenants in lease (incl cov to pay rent)

II. To perform any covenants if assignee doesn’t

III. Indemnifying landlord for assignee’s failure to observe any covs (incl rent)

IV. Promising to take new lease if liability of assignee disclaimed on insolvency

Question 19

What form should be used for the deed of assignment (transfer deed)?

Answer 19

TR1 where registered lease or unregistered lease for 7+ years

Question 20

Does an express indemnity covenant need to be included in the deed of assignment?

Answer 20

New lease: only where assignor remains liable (eg. under terms of AGA)

Old lease: only where lease unregistered & value not given by assignee for transaction

Nb. indemnity cov implied into all old lease

Question 21

How must the covenants for title in the deed of assignment be amended?

Answer 21

Must be expressly modified to exclude references to repair

Question 22

Does the assignee need to pay SDLT?

Answer 22

Only on any purchase price charged by the assignor

(Must be paid within 14 days - or 30 days for LTT)

Question 23

Does the assignment need to be registered?

Answer 23

If lease registered: need to register transfer of lease within the priority period

If lease unregistered with 7 yrs or less left to run: need to register transfer of lease within priority period

If lease unregistered with over 7 years left to run: must be registered within 2 months

Question 24

When might an assignee lodge a caution against first registration?

Answer 24

Where the lease is unregistered with over 7 years left to run AND the freehold is unregistered