Procedural steps for the grant of a lease or underlease

Question 1

Drafting the lease/underlease

Answer 1

Landlord’s solicitor will draft the lease. The terms of the underlease should mirror those of the headlease

Question 2

Purpose of an agreement for lease

Answer 2

Agreement for lease = a contract. Will be useful where this is going to be a delay between agreeing the lease/underlease and actually granting it but one or both of the parties requires the other to be bound into the transaction. Will be drafted the same as a contract for freehold property transaction

Question 3

Deduction of title

Answer 3

Landlord’s solicitor will need to investigate the client’s title to ensure that the client is entitled to grant it. If there is a mortgage there may be a prohibition or restriction on the borrower/landlord’s ability to grant a lease of the property so the lender must be contacted and its permission obtained before the transaction proceeds. Tenant will want the landlord to deduce title to the freehold interest.

Question 4

Pre-contract enquiries and searches

Answer 4

Landlord’s solicitor should provide the tenant’s solicitor with the following documents:
- Draft agreement for lease
- Draft lease/underlease
- Evidence of the freehold/headlease title
- Copies of any relevant planning consents
- Evidence of the lender’s consent to the grant of the lease/underlease
Tenant’s solicitor will do the same searches as for freehold transaction

Question 5

Pre-completion formalities

Answer 5

The lease is executed by the landlord and the counterpart by the tenant. On completion these are exchanged so that each party has a copy of the lease signed by the other.

Question 6

Completion and post-completion steps

Answer 6

On completion in addition to matters relevant to a freehold transaction the landlord will receive:
- The counterpart lease/underlease executed by the tenant/undertenant
- Any premium payable for the grant
- An apportioned sum representing rent payable in advance under the lease/underlease
The landlord should give the tenant:
- The lease/underlease executed by the landlord
- Certified copies of the freehold title deeds

Question 7

What are the considerations for the landlord

Answer 7

The reliability of the potential tenant. The landlord will accept a tenant based upon the tenant’s ‘strength of covenant’ ie. their ability to pay the rent and perform the covenants.

Question 8

What may the landlord ask for

Answer 8

In their consideration for the tenant they may ask for:
1) References from a previous landlord
2) Guarantee
3) Rent depost

Question 9

What must the landlord obtain

Answer 9

They must check the terms of their own lease and see what is permitted. They will probably need the consent of the superior landlord

Question 10

Licence to underlet

Answer 10

This is a tripartite document entered in to by the head-landlord,
headtenant and undertenant by which the head-landlord gives consent to the headtenant to underlet the property to the undertenant. The undertenant is to enter into a direct covenant with the head-landlord to perform the covenants in both the underlease and the
headlease.