Property Flashcards
Solicitor’s aims when acting for the buyer?
- Check that S has the right to sell the property
- Check that the property fits the needs of B
- Identify all rights benefitting property
- Identify rights of 3Ps affecting property
- Check that no charges on property or that these will be removed on completion
- Check that finances are sufficient to complete transaction
Is S obliged to disclose anything to B about property?
General rule is CAVEAT EMPTOR so no
BUT S has to disclose
1. Latent incumbrances (e.g. something that would not be apparent on inspection)
2. Defects in title
What should initial advice cover re property transaction?
- Timing
- Costs
- Surveys
- Co-ownership
- Tax
- B’s aims
Main difference between JT and TIC?
JT = single entity and survivorship rule applies
TIC = severable interest and can be passed under will in event they die or through intestacy rules
Formalities for declaring a trust of land:
- In writing
- Signed by the declarant
(Box for this on the TR1 form)
3 types of survey?
- Basic valuation - L will insist on this as minimum
- Homebuyers report - goes into more depth and is recommended for most properties less than 150y old/not had extensive construction work done
- Full structural survey - spenny but needed where property listed, has had extensive renovations or alterations are planned
When must SDLT be paid?
14 days after completion UNLESS B moves into property sooner then from date went into occupation
Who deduces who investigates title? What does this mean?
S deduces title - means that proves S has right to sell
- Official Copies and title documents inc title plan
- Sends copies to B sol
B sol investigates title
- checking copies and raising enquiries
What is in the property register?
- Whether property is freehold or leasehold
- Details of property with reference to plan
- Rights benefitting property e.g. rights of way
4 things to think about with a right of way:
- Registration - the burden must be registered against the servient land
- Adequacy - is the right adequate for the buyer’s purposes for the land
- Maintenace - is there any provision for B to provide maintenance - could be costly
- Adoption - if a private road, chance LA may adopt and B has to pay to bring up to standard AND has less control
4 different classes of title that can be shown on the proprietorship register:
- Absolute - no defects in title
- Qualified - specific defect e.g. a deed known to contain covenants is missing
- Possessory - can show possession but no title deeds e.g. squatters rights
- Good leasehold - can show lease but can’t prove landlord’s title
CHECK WITH LENDER if anything but absolute as L may not accept
What is included on the proprietorship register?
- Class of title
- Any restrictions on disposition (charges or if held as TIC)
- Indemnity covenant
- Price paid if acquired after April 2000
Action needed to be taken when selling a property owned by co-owners?
- All co-owners living - should be asked to execute the transfer deed
- Surviving JT - should sign and provide death certificate of dead JT
- Surviving TIC - another trustee should be appointed to sign with the surviving TIC to overreach the interest AND should provide death certificate
What interests might show up in the charges register?
- Mortgages
- Leases
- Rights of way where land is the servient land
- Covenants may be listed in charges register - if it is on charges then property has the burden not the benefit
What is required to create an effective mortgage?
- created by deed
- registered at LR (if not registered does not take effect and B takes free of mortgage)
Typical problems for buyer in relation to COVENANTS?
- B’s proposed use would be in breach
- S’s current use is in breach
Are positive covenants binding?
They do not run with the land but they could be contractually binding if B enters into an indemnity covenant (this will be listed in the proprietorship register)
- if not in P reg can assume chain is broken and B can take free from covenant
Buyer’s options for dealing with covenants where existing or proposed use would be in breach:
Existing use in breach
- Obtain indemnity insurance policy AT S’S EXPENSE or
- Approach person with benefit and ask them for written consent [NB: once done this can’t approach insurer]
- Application to Upper Tribunal to remove covenant - time consuming and costly
Proposed use in breach
- Can try get indemnity insurance but more spenny as higher risk of objection
- Approach PWB
Can’t apply to UT for positive covenants
What should B’s solicitor do if property is unregistered but the last transaction took place after the final date for compulsory first registration (1 December 1990)?
B’s solicitor should insist that the Seller registers the property at its own expense
What is a good root of title?
- at least 15 years old
- adequate description of the property
- deals with the legal and beneficial title
- does not cast doubt on S’s title
As B sol what do you need to watch out for when looking through the chain of title?
- Check that there is a good chain between root and title
- Check that deeds have been correctly executed and validly stamped to reflect ad valorem stamp duty
- If no stamp duty was payable (e.g. gift) that there is a certificate of value
IF NO STAMP DUTY PAID then need to insist S pay the stamp duty due and provide proof of this
When can you assume there is a joint tenancy in the absence of explicit wording in unregistered land? (where one co-owner has died)
- Conveyance stating S entitled to whole of property
- No severance order
- No bankruptcy order
if above conditions not met then treat as TIC
How do you search for charges/interests over unregistered land
Do a land charges search (K15) against the names of owners of property
Common interests:
c(i) - puisne mortgage
c(iv) - estate contract
d(ii) - restrictive covenant
d(iii) - equitable easement
F - home right
Are covenants binding on transfer of unregistered land?
- Positive - only if there is a chain of indemnity (check previous deeds)
- Restrictive - only if registered as a d(ii) land charge
What comprise the “standard searches”?
- LLC1
- Planning permission granted (not refused)
- planning enforcement notices
- Art 9 directives
- conservation areas
- listed building status - CON29
- planning permission granted or refused
- building regulation approval
- adopted roads
- contaminated lands - Water and drainage
- checking connected to water supply and to sewage - Chancel repair liability
- Desktop environmental search
If company - CH search
If unreg
- SIM
- Land charges search
Optional searches:
- CON29O
- common areas/village green - Flooding
- Phase I (site inspection) and Phase II (samples)
- Coal mining
- Waterways
- check whether any obligation to maintain banks - utility
- railway
- Highway search
What forms are used for pre-contract enquiries in property?
Commercial - CPSE1
Residential - TA6
- form TA10 for details of fittings and fixtures etc
When is planning permission needed?
- Development (not including purely internal works)
- Change of use
How do you know if building regs have been obtained?
CON29
How to know if planning permission has been obtained?
LLC1 or CON29
Main big use class - commercial stuff
Domestic dwelling?
E
C3
What should someone do if they are unsure whether their development falls within the GPDO?
Apply for a certificate of lawfulness which will confirm whether or not it falls within the GPDO
What permission is required for developments of listed buildings?
Listed building consent may be required even where planning permission is not e.g. for internal alterations
When do Building Regulations apply?
To “building works” - erection or extension of a building
- also includes installation or extension of services covered by BR
- includes material change of use of whole building
Who can LA enforce against for breach of planning permission?
The CURRENT landowner so it is important that a new buyer looks into this
What are LA options when faced with a breach of planning permission?
Time limits for enforcement?
- Enforcement notice
- LA can give owner 28 days to restore land to condition before developments
- if owner does not do this LA can enter property and complete works themself and recover costs from owner - Stop notice
- can only be served after enforcement notice and requires owner to stop unauthorised activity
- cannot stop use as dwelling house or a use that has been ongoing for 4 years - Breach of condition notice
- similar to enforcement notice but requires owner to comply with planning permission condition - Injunction
- LA must show ‘good reason’
Time limits for enforcement:
- 4 years for building works from when they were “substantially completed”
- 4 years for change of sue to dwelling house
- 10 years from other changes of use and breaches of PP conditions
If deliberately concealed breach then no time limit
Enforcement options - building regulations:
LA enforcement option:
1. Prosecution
- Need to bring within 6 months from discovery of breach
- AND within 2 years from when works were completed
- Unlimited fine may be impose d
2. Enforcement notice
- Similar to PP but must be served within a year of works completing
- Gives owner 28 days to restore building or LA can enter, carry out works and recover the cost
3. Injunction
- no time limit if works are unsafe
Options available to Buyer after discovering a breach of PP or BR?
- Withdraw from transaction
- Indemnity insurance (though note it only covers financial loss not death or PI)
- Request S to regularise matters e.g. alterations/removing work
- Request S to get retrospective planning permission or regularisation certificate for works that did not get BR approval for if compliant
[can make this a condition of the contract]
Can buyer sol raise additional enquiries besides the TA6 or CPSE?
Remedies if misrep?
Commercial - yes, but S may decline to respond
Residential - if following the LS Conveyancing Protocol then should not unless relates to the title, existing or planned use, nature or location OR matters arising out of docs provided
- should NOT relate to state of building
Remedies:
- rescission or damages
- generally limit liability in replies to restrict rescission
- damages limited to loss to value of property
Key obligations under the Law Society Conveyancing Protocol?
- Sols should only make essential enquiries that are in their client’s best interests
- Confirm and update enquiries if were made more than 2 months earlier
- Do not seek opinion, only fact
- Use standard enquiries
Requirements for a contract for land:
- in writing
- contain all the terms agreed on by the parties
- be signed by all parties
Key difference between SCS and SCPC? (Hint: latent incumbrances)
SCS - S must disclose ANY incumbrances listed on the LR (or LCR) and on CH
SCPC - B deemed to buy subject to any incumbrances that would be revealed by a prudent search (onus on B) - except latent incumbrances
Types of TITLE guarantee? What is it?
Its the guarantee the seller gives the buyer regarding its title
- Full title guarantee - free from incumbrances except as disclosed in contract and those S could not reasonably know about
- Limited title guarantee - given by S with little knowledge of property e.g. PR
- no such incumbrances during period of ownership - No title guarantee
- lender selling after repossessing
- administrator or liquidator
Some standard conditions in the contract for SCS/SCPC?
Completion
VAT
Risk and insurance
Deposit
Completion
- If no completion date is set then will be 20 business days after date of contract at 2pm
VAT
- Residential - usually 0% rated
- Commercial - VAT at 20% unless over 3 years old and opted not to tax
Risk
- Risk passes to buyer on exchange
- Recommended B take out insurance
Deposit
- Contract generally requires a 10% deposit but can be reduced to 5% in special conditions
- S sol can hold as stakeholder or as agent
Standard conditions in contract re VAT?
Purchase price is inclusive of VAT
How is the contract for exchange prepared?
- Prepared by Seller’s solicitor
- Using the heads of terms
- if LSCP adopted then will be in standard form inc. (i) official copies (ii) protocol form sent to B sol at same time
Buyer solicitor’s checklist before exchange:
- Received results of surveys and responses to enquiries
- Fully reported on title to B
- Advised on insurance
- Obtained cleared funds from B
- Read the contract through with B
- If commercial - confirmed certificate of title with L
- Sent B contract to sign
- Obtained instruction from B to exchange
- Obtain instruction for proposed completion date
Seller solicitor checklist before exchange:
- Obtain redemption figure from lender if there’s a mortgage
- Reply to outstanding enquiries
- Prepare engrossment version of the contract and send copy to S and to B sol for signing
- Obtain instructions from S to exchange
What are the undertakings imposed on solicitors on exchange by Formula B?
- Each solicitor holds the contract to the other solicitor’s order
- Each solicitor has to post the contract to the other by first class post, DX or by hand THAT DAY
- For B solicitor - send the deposit specified in the contract
Exchanging related properties:
B solicitor releases contract to related solicitor - if this contract is exchanged on time then first is treated as exchanged to or else it is cancelled
State of affairs directly after exchange?
-What happens?
- risk passes to B
- B and S make preparations for moving
- B gets mortgage money from L
- commercial - certificate of title sent to L
- Solicitors prepare MEMORANDUM OF EXCHANGE which details the key terms
- B now holds an equitable interest which can protect by notice on the LR or if unregistered c(iv) on LCR
Who needs to sign the transfer deed?
- Seller (all sellers or if TIC and one died, seller and trustee)
- Buyer IF indemnity covenant or other obligation otherwise no need to sign
What is Buyer’s solicitor checklist pre-completion?
- Sent COT to L and request mortgage funds
- Draft the transfer deed and send to S sol for approval and signature
- Arrange for B to sign transfer deed if giving an indemnity covenant or other obligations
- Raise requisitions on title
- Pre-completion priority searches
- Send B a statement of monies needed to complete
- Get B to approve SDLT form
Seller’s solicitor checklist pre-completion:
- approve the transfer deed
- arrange for S to execute transfer deed
- redemption figure from L
- reply to requisitions on title
- residential - meter readings
When is a transfer deed considered “delivered”?
When it is DATED
How can a company execute a transfer deed?
- Company seal + signature of 2Ds or 1D and CS
- No seal and signature of 2Ds or 1D and CS
- Signature of 1D and independent witness
- Signature of senior employee authorised under POA
Pre-completion searches:
Reg land
Unreg land
Acting for B and L
Registered land
- OS1 = transfer of whole - 30 working day priority period in which to register
- OS2 = transfer of part - 30 working day priority period in which to register
- search against title number
Unregistered land
- K15 = search of LCR - 15 working day priority period in which to COMPLETE and then have 2 months to register
Acting for B and L
- K16 = solvency search to protect L - 15 working day priority period
- If B a company - CH search (no priority period so do as soon before completion as possible
What protection does B have in relation to ensuring S’s mortgage is redeemed on completion?
Under the LSC Protocol, S solicitor gives undertaking to redeem mortgage against the property
- Undertaking is NOT to discharge the mortgage (not in solicitor’s power)
- On loan being redeemed L should discharge the mortgage at LR either electronically or via form DS1
- B sol can insist S obtain an executed but undated DS1 in advance of completion for large value transactions
How does completion happen?
Usually by post
- Generally on a Friday if residential
- S solicitor provides undertakings so B knows when sends money, either complete or if not money will be returned
- Immediately after completion, S holds transfer deed and other deeds to B solicitor’s order
- ASAP but NO LATER THAN end of working day following completion, S sol undertakes to send docs to B sol
ALSO
- B sol undertakes to use reasonable endeavours to get the funds from B/L in good time before completion
What happens if either party fails to complete?
If either party has not completed by the deadline:
- non-defaulting party can start claiming contractual interest (at contractual rate) for every day past deadline that do not complete
- COULD instead claim damages for loss which may give higher compensation - deduct interest from this
- can serve notice to complete
- if B defaults then must make deposit up to 10% if has not already under SCS
Notice to complete
- makes time of the essence (if not completed within deadline then parties can rescind contract)
- gives both parties 10 working days to complete - both bound
If fail to complete
1. Buyer’s remedies
- claim deposit back
- contractual damages
- may be able to apply for specific performance
- Seller’s remedies
- forfeit deposit
- contractual damages
- re-sell property with contents
What needs to be included in the application for registration?
AP1 with:
- TR1 (or TP1)
- SDLT5
- DS1 (if relevant)
- Copy of mortgage deed in respect of B
- fee
- certificate of charge registered at CH (if relevant)
Application for first registration - what to include:
FR1 + all the docs needed for AP1
AND epitome of title and land charges searches against previous owners in the chain
Deadlines for registration:
- registered land
- first registration
Reg land:
- register within priority period
- can register after but lose priority
Unregistered
- within 2 months of completion
- otherwise is VOID and legal title reverts to seller who holds on trust for the buyer
When is CGT payable?
Payable on or before 31 Jan following the tax year to which it relates
Conditions for principal private residence exemption to apply (to CGT):
- live in property as permanent home
- grounds not more than 5,000 square feet
- not let out or used for business purposes
Absences permitted:
- last 9 months
- first 12 months
- intermittent period up to aggregate of 3 years
- times when required to live abroad for work
- when required to live elsewhere in UK by employer for up to 4 years
What are upper rate gains and what do they apply to?
For CGT, some disposals attract upper rate gains (e.g. higher than the 10% and 20% rates)
- these are disposals of residential properties that are not seller’s home e.g. buy-to-let
- rates are basic: 18% and higher: 28%
Definition of a lease:
- grant of exclusive possession of land for a determinate term which is less than the grantor has himself in the land
Formalities for a valid lease:
- Under 3 years
- no formalities
- can be oral or in writing - Between 3 and 7 years
- in writing and be a deed but does not need to be registered - Over 7 years
- by deed and registered at LR
What does a LL want when agreeing a lease (particularly an institutional landlord):
- Property kept in repair
- Only used for permitted use
- Have a say over tenant alterations
- Be able to increase rent in line with market
- Be able to terminate if T in breach
- Be able to control who occupies the premises
- Property insured
Why might a landlord allow a break clause?
- More marketable
- a 10y lease with a 5 year break is more valuable than a 5 year lease
- Allows LL to end lease if unhappy with T (if L break or mutual)
What types of break clause can you have?
- Specific date
- Rolling (e.g. can break at any time after X date)
What if a lease is silent on when rent is payable?
It will be payable in arrears
e.g. if there is no written lease then assume payable in arrears
Does LL have a right to conduct rent review/raise rent?
No implied right that LL can do this HAS to be WRITTEN into a lease
How does open market rent review work?
L and T will agree on a new rent on/after the rent review date BUT if they cannot agree will instruct a valuer
Valuer looks at
- Comparable rent of similar properties
- Common assumptions include that T has complied with covenants in lease - T should push back on any assumptions that L has complied
- Common disregards include any improvements T has made to property
What happens after rent review?
- New rent recorded in rent review memorandum and kept with the lease
- If figure agreed after rent review date then T may have an additional sum to pay as this figure is backdated to the rent review date
Code for leasing business premises
- Who does it apply to?
- What is it concerned with?
It applies to:
1. RICS regulated firms/members of RICS
2. Most commercial lettings EXCLUDING those for 6 months or less
Concerned with:
(i) heads of terms (ii) negotiations
Split into:
(i) mandatory requirements (ii) good practice provisions
Mandatory provisions in the code for leasing business premises?
- Negotiations to be approached in a constructive and collaborative manner
- Unrepresented party should be told of the code and advised to get representation
- LL is responsible for ensuring HOT are compliant with the Code
- Provisions to be included in the HOT:
- Rent and rent review
- Term
- Break clauses
- Repairing obligation
- Alternations
- User clause
- Alienation
- Extent of premises
What is the effect of an insured risk in a lease?
- If there is an insured risk and that risk arises then the rent should be suspended if the premises are damaged by that risk
LL solicitor checklist pre-exchange/completion:
- Prepare draft lease (and draft agreement fore lease if relevant)
- Reply to pre-contract enquiries
- Answer questions on title
- Deduce title
- Prepare engrossment lease - L will sign original and T will sign counterpart
- Prepare and send pre-completion statement (apportion yearly rent, insurance rent, service charge on daily basis)
What enquiries will T solicitor raise in respect of a commercial lease?
CPSE1 and CPSE3 enquiries
What pre-completion searches will T solicitor need to do?
- OS1 if lease is of whole of L’s reversion
- OS2 if for part of L’s reversion
- OS3 if the lease is not registrable - does not confer a priority period but does check LL free to grant a lease
Who is responsible for repair of the premises and to what extent?
Lease of whole - T will be responsible for the repair of the whole demise/postcode - interior and exterior
Lease of part - detailed clause on what the premises includes
- generally T responsible for internal but not external repairs
- LL will be responsible for the common areas
Types of repair covenant:
- Full repair - “good and substantial repair”
- Qualified covenant - e.g. to keep it in the same repair as was at beginning of tenancy
- would include a schedule of repair
- would NOT be included in an FRI lease
If a lease has the covenant that T must replace a damaged item rather than repair, what will T want to qualify this with?
Only if the item is “beyond economic repair”
- T will not be responsible for this under a normal lease unless specified
What does it mean to T if the lease says to keep property in “good repair and condition”?
“and good condition” imposes further obligations on T and is more onerous e.g. dealing with condensation comes with condition but not repair
What should T ensure is not present in its repairing obligations in a newly constructed property?
Should ensure provision that is not liable for inherent and structural defects and should not have to provide service charge for fixing these
When must B/T sol register for SDLT/LTT?
Before expiry of OS1/2 search
Rates of SDLT and LTT:
SDLT
- up to £150,000 - no SDLT
- between £150,000 - £5m - 1%
- over £5m - 2%
Rounded to nearest pound
LTT
- up to £225,000 - no LTT
- between £225,000 - £2m - 1%
- over £2m - 2%
Not rounded to nearest pound
Procedure for registration of a lease
AP1, fee, letter of consent from L if charged
T will receive 2 sets of official copies
- T’s registered title
- L’s updated title
Position on alterations in a lease?
What are alterations?
Is there a restriction?
LTA upgrade?
If lease is silent then T can carry out alterations
Alterations:
- reconfiguring internal walls
- adding mezzanine floor
- new windows
Restriction - doctrine of waste:
- T can’t carry out alterations that reduce the value of the property
LTA upgrade
- if lease contains a qualified covenant this is upgraded to a fully qualified covenent and therefore requires LL to be reasonable in considering its consent
Landlord protection when granting permission for alterations?
License for alteration - this is a document which sets out LL consent but also sets out obligations for T including:
1. T to carry out works in compliance with L requirements (e.g. good quality materials)
2. Obtain all necessary consents - e.g. planning permission and building regulations
3. Pay LL’s costs in dealing with application for alteration
4. Reinstate the property at the end of the tenancy
Does T have any options if there is an absolute covenant against alterations?
T may have a statutory right to alterations under s.3 LTA:
- T can serve a notice on L of intention to commence improvements
- if L objects then T can apply to court - court will approve if improvements:
(i) are to letting of value
(ii) are reasonable and in keeping with character of property
(iii) do not diminish value of surrounding property owned by LL
- if LL does not respond within 3 months T can do alterations
- LL can offer to do alterations themselves and up the rent - T can object but cannot then do alterations themself
Does LTA help a tenant out with user clause?
Doesn’t upgrade a qualified to a fully qualified covenent
DOES mean that if LL consents cannot increase rent unless requires structural alterations
What does Code for leasing business premises say about what L should put in lease re alteration and user clauses?
- LL should only restrict user and alteration clauses so far as is necessary to protect the value of the reversion
- in lease of part should be at least fully qualified covenant against non-structural internal alterations and for lease of whole should be no consent needed
- if LL requires property to be reinstated then this should have been in HOT otherwise lease may only require this if reasonable
Who are leasehold covenants enforceable against where the lease in question is an old lease that has been assigned?
Old lease - before 1 Jan 1996
- Privity of contract will remain and there will be new privity of estate
- Can sue first tenant and current tenant
New lease
- abolishes privity of contract for this purpose
- if old tenant assigns in breach of alienation covenants then privity of contract will likely remain
- Can sue current tenant or former IF gave an AGA BUT this is limited to damages
- Former T may be able to recover damages paid if New T gave an indemnity
- If NT did not give indemnity may still be able to recoup through common law (where a party pays damages for the legal default of another)
What is the position on enforceability of lease covenants against a sub-tenant?
- LL has no privity of contract or privity of estate with a sub-tenant
- restrictive covenants will still be enforceable against sub-T in any event
- LL should covenant directly with ST so that positive covenants are enforceable
- sub-lease will also contain obligations on ST to comply with T’s covenants under lease
- T remains liable to LL for compliance
Can T assign lease where not provided for in the lease?
Yes - if lease is silent T can assign (generally L will require consent to be obtained first)
Does LTA help T in the case of an assignment?
If there is a qualified covenant then LTA upgrades to fully qualified
- L must be reasonable in considering whether to consent
- includes being given in a reasonable time
- Dong Bang Minerva - must respond within 28 days
When is it reasonable for a landlord to withhold consent to alienation?
What happens if LL does not act reasonably?
- where it goes against a reasonable policy of the LL
- where LL has worries about T’s ability to pay rent (e.g. don’t have good references)
- CANNOT be for a personal reason
- LL will include provisions in lease specifying where it will be reasonable to withhold consent
LL not act reasonably:
- T can claim damages (inc. agent and solicitor fees)
Can LL insist on former tenant giving an AGA for a new tenant in the case of assigning a new lease?
If this is provided for in the lease agreement then YES but if it is not, then LL can only insist on this if it is REASONABLE
What is LL solicitor checklist on T assigning lease to new T?
(i) confirm receipt of application for consent
(ii) draft the license to assign
What is the (former) T solicitor checklist when T is assigning lease to new T?
(i) submit application for consent to LL
(ii) draft the new lease agreement
(iii) forward the license to assign
(iv) deduce title
(v) respond to enquiries
(vi) engross contract and obtain signature of T
What is the new T solicitor’s checklist on T assigning lease to new T?
(i) review the license to assign
(ii) review the draft lease and agree it with client
(iii) assist FT sol with obtaining consent
(iv) pre-contract enquiries and searches
(v) investigate title
(vi) report on title
(vii) arrange for new T to sign license and lease
What will LL want to ensure is in place to protect it financially where T wants to assign lease?
Get LL solicitor to obtain undertakings from T solicitor that will pay LL the costs of the consent application that it incurs
How is title deduced on an assignment of a lease? What needs to be sent to the new T solicitor?
If the lease is for 7 years or more then T sol will deduce by obtaining official copies of T’s title
If lease is for less than 7 years then T will deduce by obtaining official copies of LL title
T needs to send official copies AND original lease to the New T’s solicitor
What pre-contract enquiries will a NEW TENANT solicitor make on a commercial assignment process?
What searches?
- CPSE1 (standard)
- CPSE4 (specific to assignment)
Same searches as though purchasing the freehold
What happens pre-completion in an assignment and who does what?
New T sol:
- OS1 search (if assigning whole)
- Prepare deed of assignment (might be the TR1 if registered lease)
T sol:
- Prepare completion statement to send to New T
L sol:
- prepare the license to assign in tripartite
What happens on completion of an assignment?
Formula B
- L, T and NT agree over the phone to complete and date the license to assign
- T and NT agree over phone to date the deed of assignment
- NT pays T any completion monies due
How can LL ensure it can enforce covenants against ST?
Insisting that ST signs a license to underlet
Process for underletting and who does what?
Pre-exchange/completion
Completion
Pre-exchange and pre-completion
T sol:
(i) apply for consent
(ii) give undertakings to L sol to cover cost of underletting
(iii) prepare draft underlease (obligations no less onerous than own)
(iv) deduce title (own if reg, LL if unreg) - AND provide with copy of the lease
(v) prepare completion statement - UT rent due under underlease NOT T rent
(vi) reply to enquiries
UT sol:
(i) assist with consent application
(ii) raise enquiries and searches
(iii) investigate title
(iv) review license and underlease
(v) OS1 or OS2 search (if T lease reg), if not then OS3 search (search against T title not LL title because it is out of the leasehold NOT the freehold)
LL sol:
(i) receive application for consent
(ii) insist on undertakings from T sol to cover cost of UT application
(iii) draft the license to underlet
When does the landlord need to be informed of completion of assignment/underletting?
Who by?
LL needs to be informed by formal notice within 1 month of completion
Assignment - new tenant
Underlease - original tenant
Process for opting out of security of tenure in a lease:
- Landlord serves a warning notice on tenant of intent to opt out BEFORE completion of lease (or agreement for lease if relevant)
- Tenant signs a declaration in the prescribed form:
(i) if WN is served at least 14 days before date of proposed completion then this can be a written declaration
(ii) if WN is served less than 14 days before proposed completion then this must be a statutory declaration (sworn in front of a solicitor)
(3. lease MUST contain reference to this opt out procedure or else security of tenure may still apply)
NB: if there is an agreement for lease then this process must take place before that
Landlord’s s.25 notice:
- Types
- Timing
- Grounds
- Compensation
Friendly - LL proposes a new lease and includes proposed terms
Hostile - LL notifies of intent to end the tenancy and requires LL to specify a statutory ground to base the notice on
BOTH require LL to specify a termination date and to send the notice not less than 6 months and not more than 12 months before the termination date
Grounds:
1. T delayed in paying rent - Disc + NC
2. T persistently in breach of repair covenant - Disc + NC
3. T persistently and seriously breaching other covenants - Disc + NC
4. LL offers alternative accommodation - M + NC
5. LL wants to move in (must have owned the reversion for 5 years) - M + C
6. LL wants to demolish - M + C
Compensation
- If T has occupied the property for less than 14 years then 1x rateable value
- if T has occupied for 14+ years then 2x the rateable value
Rateable value = a figure set by the council
Tenant notices:
- What are they
- Requirements
Section 26
- requesting new tenancy
- served between 6-12 months of the proposed commencement date of the new lease
- only if T had a contractual term of 1+ years already
- can’t serve if a 25 has been served
- LL can oppose within 2 months serving a counter-notice on a statutory ground
Section 27
- must give 3 months notice of proposed termination date
- proposed termination date can’t be earlier than the end of the contractual term
- alternatively, T can just vacate the premises
Procedure following notice (s.25/26/27)?
- Timing considerations
- Orders requested
- New lease
- Interim rent
- When will current lease end?
[- Competent landlord - slightly separate point]
Section 25:
- Either party can apply to court at any point after service of notice
- L would apply for a Order to terminate lease on a statutory ground
- The deadline to apply to court is the day before the proposed termination
- If friendly - the notice will contain proposed terms
Section 26:
- T can apply to court for order to renew EVEN where L has served counter notice
- T must wait until service of counter-notice or until 2 months have elapsed to serve the notice
- Deadline is day before proposed commencement of lease
Section 27:
- no procedure - T just leaves
Negotiating terms of new lease
- L and T will aim to agree the terms of the lease, but if they cannot will apply for the court to decide
- Court can grant max 15 year term
- Rent will be based on open market rent review and can go down as well as up
- Other clauses based on current lease and other circumstances
- if T is unhappy with the terms of lease can apply for court to revoke order within 14 days and court MUST but T loses any right to renew
Interim rent
- After service of notice, either party can apply to court to fix an interim rent
- Based on open market rent and can go down and up
Current lease end date:
- 3 months and 21 days after order
- if order is for new lease will start day after termination date
Competent landlord
- Will be the first in the chain of landlords who has a reversionary interest that will not end in 14 months’ time
How can we split up categories of breach in which LL can forfeit a lease?
Breaches relating to:
1. Rent (not required to serve s.146 notice)
2. Repairs
3. Other covenants
Effect of L exercising break clause in a fixed term lease with security of tenure?
The contractual lease will end but T is able to hold over
Can a tenant of a periodic tenancy hold over?
Can they serve s.26 notice?
They can hold over but they cannot serve a s.26 notice
In order to serve a s.26 notice the tenant must have held a fixed term lease of term at least one year
What is a reverse premium?
This is a premium paid by a tenant who wishes to give up a lease before the end of the contractual term (i.e. through an agreed surrender with LL)
4 ways a lease can end:
- Effluxion of time
- Surrender
- Notice to quit
- Merger
What are the landlord’s remedies for non-payment of rent on lease?
- Contractual damages
- Pursue former T under AGA
- Pursue guarantor
- Commercial Rent Arrears Recovery
- self-help remedy
- used where tenant owes principal rent (excluding service charge and insurance rent) for at least 7 days
- L can appoint enforcement officer with the appropriate certificate from court
- L gives T 7 clear days’ notice of intent to enter property - stating value of debt
- if T has not repaid the debt by end of 7 clear days then EO enter property and take possession of items up to value of the debt
- give T further 7 clear days’ notice of intent to sell items then can sell if debt still unpaid
- Specific performance (rare)
- Injunction - e.g. where T proposes to assign against terms of lease - Forfeiture
- Action in debt
- Limited to rent payable in last 6 years
- Court process
What is forfeiture in its most basic terms?
Right of landlord to enter premises and take it back from the tenant, bringing the least to an end before its contractual term
Process of relief from forfeiture:
AS SOON AS L either serves s.146 notice or begins process of forfeiture, T can apply to court for relief from forfeiture
- discretionary power of court whether to grant or not
- if forfeiture is bc T has not paid rent, can generally obtain relief if settle debt
Relief = restores the lease - puts parties in position as though lease had not been forfeited
Landlord’s options where T breaches repair covenant under a lease:
- Forfeiture
- must be provided for in lease
- must first serve a s.146 notice setting out nature and extend of breach and giving T reasonable time to remedy
- if T’s lease is for 7+ years and has at least 3 years left to run then T may serve a counter-notice
- CN means that L needs leave of court to continue forfeiture process - Damages
- Still needs to serve a.146 notice and T can serve CN
- Damages is calculated by reference to loss to reversion not cost of repairing - Jervis v Harris self-help clause
- must be provided for in the lease
- allows L to enter the premises, carry out the work and recover the cost
- treated as a debt not damages so can recover in full
