Property 1: Types of Transactions - Leases

Question 1

How can terms of lease be changed in different types of leases?

Answer 1

New Lease
- terms of lease can be negotiated between seller and buyer
- if granted for over 7 years then must be registered

Assignment
- terms cannot be negotiated
- only OG lease holder can try to renegotiate terms with OG landlord and get a Deed of Variation

Question 2

What is the role of a management company in leasehold

Answer 2

May be used for maintenance of common areas

• buyers may take share in management company
• landlord (if developer) may covenant to transfer freehold to management company when last leasehold is sold
• typically for tenants to pay service charges to management company

Question 3

Examples of unacceptable covenants in leasehold transactions // effect

Answer 3

Theses are unacceptable to lender

• clause on absolute prohibition on assignment
• forfeiture on bankruptcy of tenant

New Lease
- should negotiate to remove these
Assignment
- insist on current tenant asking landlord to remove these in deed of variation

• if not removed should advise client to buy

Question 4

What is a rent review clause and how can a landlord exercise it?

Answer 4

Allows for landlord to change rent at specified intervals.
- on date should serve notice
- parties to negotiate and agree on new rent
- otherwise go to arbitration (if provided for in lease)