Property Flashcards
1
Q
What is an exception to caveat emptor in terms of misrepresentation?
A
The seller cannot mislead the buyer by concealing physical defects (such as painting over damp patches) or answering questions dishonestly
2
Q
What is the second exception to caveat emptor?
A
A latent incumbrance, which is something that is not apparent, or cannot be discovered, when inspecting the property and a defect in title
3
Q
What is the maximum number of legal owners?
A
4
4
Q
What is the maximum number of beneficial owners?
A
Unlimited
5
Q
Will a property be subject to CGT when sold?
A
Not if selling own home as it falls under Private Residence Relief
6
Q
Does VAT apply to residential properties?
A
No
7
Q
What is a capital repayment mortgage?
A
The borrower repays the capital sum by monthly payments, together with an interest amount added each month. At the end of the term (say 25 years), the loan has been paid off in full.
8
Q
What is an interest only mortgage?
A
The borrower only pays the interest on the loan. This means the borrower pays less per month, but the disadvantage is that the capital remains outstanding, no matter how long the loan is in place. The capital will generally only be repaid by the sale of the property. The borrower may, still, however, end up better off as they will have the “equity”, ie, the value of the property (hopefully higher) that is not required for the mortgage.
9
Q
What is an endowment mortgage?
A
In general, these are no longer available in the UK, but you may come across endowment mortgages that clients have taken out in the past. They are interest only mortgages, topped up with a payment that is invested in an endowment policy. The idea is that the policy repays the capital at the end of the term. Unfortunately, many have not performed as expected, leaving borrowers with a shortfall to make up out of their own cash
10
Q
How can you act for two clients without it being subject to a conflict of interest?
A
There is a substantially common interest” – a situation where there is a clear common purpose between the clients and a strong consensus on how it is to be achieved
Clients are competing for the same objective eg auction
11
Q
Where are rights benefiting the property set
A
Property register
12
Q
How can a right of way be made enforceable?
A
Burden has to be registered on the servient land
13
Q
Where is the class of title (title absolute) found on the title register?
A
Proprietorship register
14
Q
What is qualified title?
A
There’s a defect in the title eg missing deeds
15
Q
What is possessory title?
A
No title deeds for the property. Obtained through adverse possession.
16
Q
What is good leasehold title?
A
Applies to leaseholds only. Landlord’s title cannot be found but title can be upgraded if landlord’s title is subsequently registered
17
Q
What is found in the charges register?
A
Rights burdening the land
18
Q
List the 4 interests burdening the property in the charges register.
A
- Mortgage
- Leases
- Easements (rights of way burdening the land)
- Covenants ( restrictive + positive)
19
Q
What covenants are not binding on the property?
A
Positive covenants
20
Q
How can an owner be bound by a positive covenant?
A
By entering into an indemnity covenant. This means if there is a breach, the original owner can sue the next person in the chain.
21
Q
What does a local search include?
A
enquiries of the local authority (CON29) and search of the local land charges (LLC1)
22
Q
What searches are carried out for unregistered land?
A
land charges search and search of the index map
23
Q
What does the con29 reveal?
A
• planning consents, refusals and completion notices • building regulations • roads and public rights of way (such as footpaths) • Environmental notices (including contaminated land notices)
24
Q
What does the LLC1 reveal?
A
• planning permissions that have been granted • planning enforcement or stop notices • article 4 directions (restricting the General Permitted Development Order) • tree preservation orders • smoke control orders • financial charges such as road-making charges • conservation areas • listed building status Drainage and water search
25
What is an Environmental Phase 1 survey?
This is more detailed than the standard desktop environmental search and includes a site inspection.
26
What is an Environmental Phase 2 survey?
This will be taken where Phase 1 study indicates risk of contamination. Soil/water samples are tested to indicate whether there is contamination or not.
27
What is an enforcement notice for planning?
Local authority gives 28 days’ notice that: • land must be restored to condition it was in before unauthorised development; or • comply with any conditions or limitations imposed by planning permission After 28 days, land owner may be fined, and the local authority can enter the land to carry out the work, recovering its expenses from the land owner
28
What is a stop notice?
Local authority can serve a stop notice only after serving an enforcement notice – requires that specified activity (for example, an unauthorised use) stop immediately. Cannot prohibit use as a dwelling house or any activity that has been carried out for more than four years
29
What is the time limit for enforcement action for building works without planning permission and change of use to single dwelling house before 25th April 2024 and what is it now
4 years, now 10 years
30
What is the time limit for enforcement action for other changes of use and breach of planning condition?
10 years
31
What is the time limit for a local authority to prosecute for breach of building regulations
Local authority has six months after discovering breach to prosecute the person responsible (builder, installer or main contractor) for the breach in the Magistrates’ Court. Unlimited fines may be imposed. Prosecution may take place up to two years after completion of the building work.
32
What is the time limit for an enforcement notice for breach of building regulations?
Local authority has one year after completion of the building work to serve an enforcement notice. Similar to a planning enforcement notice, this gives the land owner 28 days to alter or remove the work. Again, if the land owner fails to comply, the local authority can undertake the work at the land owner’s expense.
After October 2023, enforcement changed to ten years
33
What is the time limit for bringing an injunction claim for breach of building regulations?
Local authority can apply to court for an injunction. If the work is unsafe, then there is no time limit.
34
What is a certificate of title?
a document in which a solicitor certifies that the title to the property is satisfactory for lending purposes.
35
What is a facility letter?
the commercial equivalent of a mortgage offer.
36
What is the certificate of title for commercial property called?
CLLS certificate of title
37
What is the default completion date if parties do not fix a completion date?
20 working days after the date of exchange
38
What happens if a party fails to complete by completion date?
the non-defaulting party can claim damages for the breach, but cannot yet walk away from the transaction. They can serve a notice to complete and make time of the essence.
39
What happens to the deposit once notice to complete is served?
If the full deposit has not been provided for, the buyer must immediately pay the balance of the 10% deposit
40
What does it mean for the seller's solicitors to hold the deposit as stakeholder?
that the seller’s solicitor must keep the deposit safe and not pay it to the seller until completion.
41
What does it mean for the seller's solicitors to hold the deposit as agent?
the seller may demand the deposit immediately after exchange.
42
How is the deposit usually held by the seller's
As stakeholder
43
What properties are exempt supplies (so no tax and cannot offset input tax)
Residential properties and commercial properties over 3 years old that has not opted to tax
44
What properties are standard rated supplies (20% VAT)
Commercial properties less than 3 years old and older commercial properties that have opted to tax
45
What properties are zero rated supplies (no tax but can offset input tax)
Newly constructed property
46
What is the result of undertaking an OS1 or OS2
Creates a priority period of 30 working days
47
How do you confer a priority period for unregistered land and how long is
Carry out a land charges search (form KI5) against seller onlywhich creates a priority period of 15 working days
48
Buyer has exchanged contracts with a 10% deposit, for completion on 1 June at a price of £200,000. Buyer does not complete until 5 June, so there are 4 days of delay. The Law Society interest rate at the time is 4.1%. Work out the interest
£200,000 - £20,000 (deposit) = £180,000/100 X 4.1 = 7,380 =365= £20.22 interest per day x4 = £80.88
49
can you rescind the contract for failure to complete?
No, need to serve notice to complete
50
How long does a party have to comply with notice to comply?
10 working days starting with day after notice served.
51
Once notice to complete has been served, can it be withdrawn?
Not unless both parties agree
52
What remedies are available to seller if buyer fails to complete after notice is served?
The seller may rescind the contract, and on doing so, may also: • forfeit the deposit and any interest accrued on it • resell the property and any contents included in it • claim contractual damages
53
What remedies are available to the buyer if seller fails to complete after notice is served?
The buyer may rescind the contract, and on doing so, may also: • demand return of the deposit with any interest accrued on it • claim contractual damages or even specific performance (an equitable remedy forcing the seller to complete the sale)
54
When must SDLT be submitted
14 days after completion & will receive SDLT5 certificate
55
When must LTT (Welsh SDLT) be submitted
30 days after completion & will receive WRA
56
What must be registered if company is a buyer?
A charge must be registered at companies house within 21 days of creation of charge. Failure to do so means charge is void
57
What form is used to register registered property and what else should be submitted
AP1
1. TR1
2. SDLT5 or WRA certificate to prove payment of SDLT or LTT
3. Form DS1 to discharge the seller’s mortgage if appropriate (this can be sent on later if not yet available)
4. Mortgage deed in favour of the buyer’s lender
5. If appropriate, certificate of registration of charge at Companies House
6. Other documents as appropriate (eg, death certificate for deceased joint proprietor if the seller is a sole surviving beneficial joint tenant)
58
What form is used to register unregistered property and what else should be submitted
FR1
1. Same as registered land plus
2. The epitome of title and the deeds and documents referred to in it
3. Land charges searches for the seller and previous owners in the chain of titl
59
How should overriding interests be disclosed when registering the property?
On form DI
60
When do you not use the online portal for registering property at HMLR
For unregistered land or for registered land when solicitor does not have access to portal (post or DX will be used instead). Certified copies should be sent as HMLR doesn't return paper companies
61
Is there a deadline for registering registered property beyond priority period
No, can technically be submitted at anytime
62
Is there a deadline for registering unregistered property beyond priority period
Yes, two months after completion. Transaction will be void after this
63
What is first time buyers relief
A discount is applicable for a person buying their first home provided the purchase price is no more than £625,000. If there is more than one person buying, all must be first-time buyers. There is no SDLT for the first £425,000 of the purchase price, and 5% on any part of the price over £425,000
64
What are the essentials for a lease?
1. Exclusive possession
2. Formalities
3. Fixed term or periodic tenancy
4. Reversion (property reverts to landlord at end of lease)
65
Describe exclusive possession in the context of a lease.
Exclusive possession is the tenant's right to exclude others, including strangers and the landlord (except when the landlord is exercising their right to enter for inspections), from the leased premises.
66
What are the terms a lease can have? (Lengthwise)
A lease can be for a fixed term (such as six months or five years) or a periodic term (such as weekly, monthly, or yearly).
67
Define the term 'reversion' in relation to a lease.
The reversion is the interest that the landlord holds in the property, which returns to them at the end of the lease term.
68
How must a legal lease be created if the term is over 3 years?
A legal lease for a term over 3 years must be created by deed.
69
What are the formalities for creating a tenancy of 3 years or under?
A tenancy of 3 years or under may be created in writing or even orally.
70
Explain the difference between a lease and a licence.
A lease provides exclusive possession to the tenant, allowing them to exclude others, while a licence does not grant such exclusive rights.
71
Identify an exception to the rule regarding the duration of a lease not being indeterminate.
An exception to the rule is that a lease may be for an indeterminate time if it is tied to the tenant's employment with the landlord.
72
Define a full repairing and insuring (FRI) lease.
An FRI lease is a type of lease where the tenant is responsible for all costs associated with the property, including repairs and insurance.
73
What are the key requirements landlords want in a lease regarding the premises?
Landlords typically want the premises to be insured, kept in repair, and used only for the permitted purpose.
74
Describe the key objectives a tenant seeks in a lease agreement.
A tenant typically wants a lease that allows for the intended use of the premises, has a satisfactory contractual term (like 10 years), and provides flexibility for changing circumstances.
75
Define the rent review process in a full repairing and insuring (FRI) lease.
In a full repairing and insuring (FRI) lease, the rent is reviewed every 5 years to the higher of the market rent or the current rent, ensuring the landlord does not lose income if the market dips.
76
Explain the implications of a break clause in a lease agreement.
A break clause allows the party benefiting from it to terminate the lease early, providing flexibility for tenants but potentially reducing the landlord's long-term income.
77
Define the term commencement date in leasing.
The term commencement date is the date on which the lease term starts, marking the beginning of the lease period.
78
Describe a situation where the term commencement date may be earlier than the lease is dated.
A landlord may want all leases to start at the same time for simplicity, resulting in the term commencement date being set before the lease is officially dated. tenants are generally not expected to pay rent for the period they haven't used.
79
Explain what a reversionary lease is.
A reversionary lease is a type of lease where the term starts after the lease is dated, often used to extend the letting in advance of the current lease's expiry.
80
Describe how the expiration date of a lease term is determined.
The expiration date of a lease term is determined by how the term is defined in the lease. If the term is defined as 'from and including' a certain date, it expires the day before that date in the relevant year. If defined as 'from' a certain date, it starts the day after that date and expires on that date in the relevant year.
81
How does a lease term defined as 'from and including' affect its expiration date?
A lease term defined as 'from and including' a certain date will expire on the day before that date in the relevant year.
82
What is the expiration date of a lease with a term of 10 years from and including 24 March 2019?
The lease will expire on 23 March 2029.
83
Calculate the expiration date for a lease with a term of 10 years from 24 March 2019.
The lease will start on 25 March 2019 and expire on 24 March 2029.
84
Define the types of break clauses available in lease agreements.
There are three types of break clauses: landlord break (only the landlord can exercise it), tenant break (only the tenant can exercise it, the most common type), and mutual break (either party can exercise it).
85
What does the term 'anniversary' mean in the context of leases?
In leases, 'anniversary' refers to the same day of the year, such as the fifth anniversary of a lease starting on 8 September 2030 being 8 September 2035.
86
Do both parties need to agree to terminate a lease without a break clause?
Yes, if there is no break clause, both the landlord and tenant must agree to terminate the lease before the end of the fixed term.
87
Describe the two main categories of leases.
Leases generally fall into two categories: short leases with a market rent and long leases with a ground rent.
88
How long do commercial leases typically last?
Commercial leases usually last up to 15 or 20 years.
89
Explain the payment structure for commercial leases.
In commercial leases, tenants typically pay a market rent but do not pay a premium to the landlord upon the grant of the lease.
90
Define a long lease in the context of residential properties.
A long lease in residential properties may last 99 or 999 years and typically includes a ground rent.
91
Define FRI lease in the context of rent payment.
FRI lease refers to a commercial lease where the tenant is responsible for all outgoings, including rent, maintenance, and repairs.
92
How does a lease specify the payment of rent?
The lease needs to state if the rent is payable in advance; if it is silent, the rent is payable in arrears.
93
Define what an FRI lease indicates about rent payment.
An FRI lease will specify that the rent is payable in advance.
94
How does VAT relate to rent payments in a lease?
The lease will specify whether VAT is payable on the rent.
95
Describe stepped rent in a lease agreement.
Stepped rent refers to a lease structure where the rent increases at predetermined intervals, such as a yearly rent of £25,000 for the first two years, followed by £30,000 for the next two years.
96
Explain turnover rent and its common application.
Turnover rent is a rental structure where the rent is calculated based on the tenant's sales or turnover at the property, commonly used in retail leases such as shops.
97
Define index-linked rent and its adjustment mechanism.
Index-linked rent is a rental agreement where the rent is adjusted according to an agreed measure of inflation, such as the retail prices index.
98
What is the typical nature of rent reviews in commercial leases?
Commercial leases almost always have an 'upwards only' rent review, meaning the rent can only increase.
99
How does an 'upwards only' rent review affect rent if market rents fall?
If market rents have fallen on the date of the rent review, the rent stays the same.
100
Define the basic assumptions necessary for valuation in lease agreements.
The basic assumptions for valuation include that the premises are vacant and available, and that there is a willing landlord and a willing tenant.
101
How do common disregards function in the context of lease agreements?
Common disregards operate to ignore voluntary actions taken by the tenant, ensuring they are not penalized with higher rent for improvements made for their own use.
102
What assumptions are made about the landlord and tenant in the valuation process?
It is assumed that there is a willing landlord and a willing tenant involved in the lease agreement.
103
Describe the fairness of the assumption regarding the tenant's compliance with lease covenants.
It is considered fair if the tenant has complied with all its covenants under the lease, as they should not be penalized with a lower rent for the landlord's inaction.
104
Is the assumption that the tenant has complied with all its covenants under the lease fair
Yes. If the tenant, say, lets the premises fall into disrepair, it should not be rewarded with a lower rent.
105
Is the assumption that the landlord has complied with all its covenants under the lease fair
No. Say that the lift in an office block never works. This would affect the rent that tenants would pay. From the tenant’s perspective, the assumption is unfair, as the landlord is not suffering the consequences of its inaction.
106
Is assumption on the terms of the actual lease other than the rent payable fair
Yes. If the actual lease, for example, has clauses that are very restrictive on the tenant’s use of the property, the tenant is stuck with those and should not have to pay a higher rent as if those clauses do not exist
107
Is the assumption that the term of the hypothetical lease is the term remaining of the actual lease fair
Maybe, depends on whether prospective tenants favour short or long lease terms. Say that 5 years are left at rent review, and prospective tenants want 5 year leases. This would work against the tenant who initially took a 10 year lease.
108
Is the assumption that if damaged or destroyed, the premises have been repaired or rebuilt fair
Yes. This is because the lease will usually have detailed provisions for what happens in this instance (including suspending the rent). It would be unfair on the landlord if the tenant continues to pay a decreased rent as if the premises have been destroyed once they have been rebuilt
109
Is disregarding the effect of the tenant’s occupation on the rent fair
Yes. The premises will be worth more to the tenant than a new prospective tenant, as the tenant has the convenience of not having to move.
110
Is disregarding the goodwill attached to the tenant’s business fair
Yes. Say the tenant is a restaurant business. If successful, the tenant will make that location more valuable to other restaurant businesses. It is unfair for the tenant to be penalised with a higher rent for this
111
Is disregarding the tenant’s improvements (other than as obliged under the lease) fair
Yes. If the tenant voluntarily improves the property, then it is unfair to the tenant if this is used to increase the rent, and unfair to the landlord if it limits the rent
112
How is the new rent documented after a rent review?
The new rent is documented in a rent review memorandum, which is usually a single page that includes the new rent details and is signed by both the landlord and tenant.
113
Define the implications of a rent review occurring before the 5th anniversary of the term commencement date.
If a rent review occurs before the 5th anniversary, the tenant may have to pay additional Stamp Duty Land Tax or Land Transaction Tax, as these taxes are calculated based on the first five years' rent.
114
What happens if the new rent is agreed after the rent review date?
If the new rent is agreed after the rent review date, it is backdated to the rent review date, requiring the tenant to pay an additional sum plus interest at a rate specified in the lease.
115
Explain the tax implications for a tenant if a rent review occurs on or after the 5th anniversary of the term commencement date.
If a rent review occurs on or after the 5th anniversary, the tenant will not have to pay further Stamp Duty Land Tax or Land Transaction Tax.
116
Describe the responsibilities of a commercial tenant regarding repairs in a lease of the whole property.
In a lease of the whole property, such as an office block, the commercial tenant is responsible for the interior, exterior, and structural repairs of the premises.
117
How does the definition of 'Premises' differ in a lease of the whole property versus a lease of part?
In a lease of the whole property, 'Premises' refers to the entire title and postal address, while in a lease of part, it specifies the particular area leased, such as a specific floor, and details the extent of the tenant's responsibilities.
118
What is the tenant's responsibility in a lease of part of a property?
In a lease of part, the tenant is typically only responsible for the interior repairs, as the lease will specify the demised area without including structural or exterior responsibilities.
119
Define a full repairing obligation in a lease.
A full repairing obligation requires the tenant to keep the premises in good repair, meaning that if the premises are not in good repair, the tenant must take action to restore them.
120
What does a qualified repairing obligation entail?
A qualified repairing obligation requires the tenant to keep the premises in good repair but limits them from improving the premises beyond the condition they were in at the start of the lease, as documented in the Schedule of Condition.
121
What is the purpose of the Schedule of Condition in a lease?
The Schedule of Condition serves to document the state of the premises at the start of the lease, often including photographs, to establish the baseline condition for any future repairs.
122
Identify the circumstances under which a qualified repairing obligation might be accepted by an institutional lender.
A qualified repairing obligation may be accepted by an institutional lender in exceptional circumstances, such as a short letting or a difficult market.
123
Describe the tenant's options regarding repairing or replacing
Unless the lease states otherwise, the tenant may generally choose whether to repair or replace an item of disrepair.
124
Explain the difference between renewal and repair in the context of a lease.
If the premises are damaged beyond repair, such as due to subsidence requiring rebuilding, this is considered renewal, not repair, and the tenant is not responsible for it under a simple repairing obligation.
125
How does the requirement to keep premises in good repair differ from simple repair obligations?
If the lease refers to keeping the premises in good repair and condition, this is more onerous for the tenant, as it includes aspects like condensation, which falls under condition but not repair.
126
Provide an example of a tenant's repairing obligation.
For example, if a tenant has a lease of the whole and the roof is dilapidated, the tenant may choose to replace the roof entirely, but if possible, they do not have to and may instead repair it.
127
Describe the potential issues a tenant may face with newly constructed properties.
Newly constructed properties may have inherent or structural defects that only become apparent over time, leading to repair obligations for the tenant that are unfair, as they are not responsible for these defects.
128
What is the role of service charges in relation to structural defects?
Service charges may include costs for repairs, so if structural defects are not excluded, the tenant could indirectly bear the financial burden through these charges.
129
Explain the relationship between insurance costs and tenants in commercial leases.
The costs of insuring the building are usually passed on to the tenants, either as a full refund in a lease of whole or as a proportionate share in a lease of part.
130
What happens to the insurance premium in a lease of whole?
In a lease of whole, the tenant is responsible for refunding the landlord the entire insurance premium.
131
What types of disturbances are considered insured risks?
Insured risks can include civil commotion, strikes, labor disturbances, and political disturbances.
132
What does good practice indicate in the Code?
Good practice is indicated by the word 'should'.
133
What protection should be provided to tenants in newly built premises?
Tenants in newly built premises should be given appropriate protection against inherent construction defects.
134
How should a tenant's repairing obligation be defined if it is limited to the initial state of the premises?
If a tenant gives a qualified repairing obligation limited to the initial state of the premises, a schedule of condition should be required.
135
Describe the key elements that should be included in the heads of terms regarding rent and rent review.
The heads of terms should clearly state the initial rent, frequency of payment (e.g., quarterly), whether VAT will be charged, and if there is a rent-free period. It should also specify how and how often the rent will be reviewed.
136
What conditions does the Code set for exercising break rights in lease agreements?
The Code sets out basic conditions for exercising break rights that are acceptable, but additional conditions may be included if specified in the heads of terms.
137
How should the heads of terms address the premises in a lease agreement?
The heads of terms should clearly define the demise, provide a lease plan, and refer to all the rights that the tenant will need for its use of the premises, such as the right of access, water, and electricity.
138
Describe the mandatory requirements for preparing written heads of terms.
Written heads of terms must state that they are subject to contract and cover specific areas such as extent of the premises, length of term and break rights, rent and rent review, repairing obligation, rights to assign or underlet, permitted use of the property, and rights to alter the property.
139
Define the role of the landlord's property agent in lease negotiations involving an unrepresented tenant.
The landlord's property agent must ensure the unrepresented tenant is informed about the Code and encouraged to seek professional legal advice.
140
Who is responsible for ensuring compliance with the Code before circulating the draft lease?
The landlord (or its letting agent) is responsible for ensuring that heads of terms compliant with the Code are agreed before the draft lease is circulated.
141
Under what circumstances can RICS members and regulated firms deviate from good practice?
They may deviate from good practice only under exceptional circumstances, which may need to be justified to the RICS.
142
Describe the purpose of the Code for Leasing Business Premises.
The Code aims to improve the quality and fairness of negotiations on lease terms and promote comprehensive heads of terms to make the legal drafting process more efficient.
143
How are mandatory requirements indicated in the Code?
Mandatory requirements are indicated by the word 'must'.
144
Describe the main focus of the Code.
The Code concerns itself with negotiations and heads of terms.
145
Explain the role of RICS regulated firms in commercial property lettings.
RICS regulated firms, such as letting agents, must adhere to the Code during negotiations for commercial property lettings.
146
Do landlords and their solicitors have obligations under the Code?
Landlords and their solicitors are not obliged to follow the Code unless they are members of the RICS or RICS regulated firms.
147
How does the Code impact letting agents?
Letting agents who are RICS regulated firms are professionally obliged to take account of the Code in negotiations.
148
Identify exceptions to the application of the Code.
The Code does not apply to tenancies of 6 months or less.
149
To whom does the Code for Leasing Business Premises apply?
The Code applies to members of the RICS and RICS regulated firms.
150
Describe the origin of the Code for Leasing Business Premises.
The Code is written by the Royal Institution of Chartered Surveyors (RICS).
151
Explain the negotiating position of landlords compared to tenants.
Landlords generally enjoy a stronger negotiating position than tenants, which is why the Code was established to balance this dynamic.
152
Describe the role of the landlord's solicitor in the lease process.
The landlord's solicitor takes instructions, prepares the draft lease and agreement for lease, reviews and amends the documents as required, deduces title, checks lender consent, answers pre-contract enquiries, engrosses the agreement for lease, obtains the landlord's signature, and sends the counterpart to the tenant's solicitor.
153
How does the tenant's solicitor contribute to the lease process?
The tenant's solicitor takes instructions, investigates title, raises queries on title, answers pre-contract enquiries, and arranges for the tenant to sign the counterpart lease.
154
Define the term 'counterpart' in relation to lease agreements.
The counterpart is the copy of the lease that is executed by the tenant, while the original is executed by the landlord.
155
What steps are involved in the pre-exchange phase of a lease agreement?
In the pre-exchange phase, the landlord's solicitor engrosses the agreement for lease, obtains the landlord's signature, and sends the counterpart to the tenant's solicitor, while the tenant's solicitor arranges for the tenant to sign the counterpart lease.
156
Describe the role of the landlord's solicitor in drafting a lease.
The landlord's solicitor drafts the lease based on the heads of terms, potentially using a generic precedent lease or a part-completed lease from past lettings on the landlord's estate.
157
Define the term 'heads of terms' in the context of lease agreements.
Heads of terms refer to the preliminary agreement outlining the main points of a lease before the formal lease is drafted.
158
Describe the purpose of an agreement for lease.
An agreement for lease is used when parties want to commit to completing a lease but are not yet ready or have conditions that need to be satisfied.
159
Provide an example of when an agreement for lease might be used.
A developer builds a shopping center and signs retailers to an agreement for lease to secure their interest before the center is completed.
160
Define CPSE1 and CPSE3 enquiries in the context of lease transactions.
CPSE1 enquiries are raised by the tenant's solicitor similar to a buyer's solicitor in a commercial freehold transaction, while CPSE3 enquiries are specific to the grant of a lease.
161
How should the tenant's solicitor approach searches in a leasehold transaction?
The tenant's solicitor should raise the same searches as they would if they were buying the freehold.
162
What considerations might a tenant's solicitor take into account for a short lease?
The tenant may agree with their solicitor that the cost of full investigations are not justified for a very short lease with limited repair and other obligations.
163
What is usually required in terms of payment during the exchange of an agreement for lease?
No deposit is usually payable during the exchange of an agreement for lease.
164
How does an agreement for lease typically outline the completion process?
The agreement for lease may set a fixed completion date or specify conditions that need to be satisfied and by when for completion to occur.
165
Describe the role of the landlord's solicitor in the completion process.
The landlord's solicitor prepares a completion statement, which involves apportioning yearly rent, insurance rent, and service charge on a daily basis.
166
How is the yearly rent typically paid in a lease agreement?
The yearly rent is usually paid quarterly.
167
What pre-completion searches are carried out in a lease transaction?
Pre-completion searches include an OS1 search for a lease of whole, an OS2 search for a lease of part, and an OS3 search if the lease is not registrable.
168
Does an OS3 confer priority
An OS3 search does not confer priority but checks if the landlord is free to grant the lease.
169
Do pre-completion searches confer priority in lease transactions?
No, pre-completion searches do not confer priority; they are used to check the landlord's ability to grant the lease.
170
What documents do the landlord's and tenant's solicitors exchange after completing the lease?
They send the completed original and counterpart of the lease to each other.
171
What is the final step for the landlord's solicitor after the lease completion?
The landlord's solicitor may need to register the lease if necessary.
172
Define the pre-completion stage in lease transactions.
The pre-completion stage in lease transactions includes all necessary steps that occur before the lease is officially granted, which may include negotiations and preparations.
173
Do landlords have the right to charge for consent to changes of use?
Landlords cannot charge for consent to changes of use unless the change requires structural alterations, in which case they may charge a lump sum or increase the rent.
174
How long does a landlord have to object to a tenant's proposed improvements?
The landlord has three months to object to the tenant's proposed improvements.
175
What happens if the landlord does not object within the specified time frame?
If the landlord does not object within three months, the tenant may proceed with carrying out the improvements.
176
What option does a landlord have if they wish to carry out the improvements themselves?
The landlord may offer to carry out the works themselves and increase the rent, but the tenant does not have to agree to this.
177
What is the consequence for a tenant if they agree to the landlord's offer to carry out improvements?
If the tenant agrees to the landlord's offer, they cannot then ask the court for permission to carry out the improvements themselves.
178
Define the tenant's statutory right regarding improvements under the LTA 1927.
The tenant has a statutory right to carry out improvements, which may allow them to circumvent an absolute covenant against alterations in the lease if the proposed alterations are deemed improvements.
179
What is the significance of the Town and Country Planning (Use Classes) Order 1987 in relation to user clauses?
The Town and Country Planning (Use Classes) Order 1987 provides a framework for defining appropriate uses for premises, which can be referenced in user clauses.
180
How does the Landlord and Tenant Act 1927 affect landlord consent for changes of use?
Section 19(3) of the Landlord and Tenant Act 1927 states that if a landlord consents to a change of use, they cannot charge a lump sum or increase the rent unless the change also requires structural alterations.
181
What should tenants understand about the statute's impact on qualified covenants for changes of use?
Tenants should understand that the statute is less generous for changes of use compared to alterations, and it does not convert a qualified user clause to a fully qualified user clause.
182
What conditions must be met for a court to grant permission for tenant improvements?
The court will grant permission if the improvements add to the letting value of the property, are reasonable and suitable to the character of the property, and will not diminish the value of any other property belonging to the landlord.
183
How does a lease typically address compliance with planning law for alterations?
A lease usually contains a clause requiring the tenant to comply with relevant laws, which is often reiterated in the licence for alterations or licence to change use.
184
Define the term 'sui generis' in the context of property use classes.
Sui generis refers to a use class that does not fall within any of the established use classes, requiring specific planning permission for changes.
185
Explain the importance of obtaining relevant consents in property alterations.
Obtaining relevant consents is crucial to comply with the lease and avoid potential enforcement actions from authorities.
186
What does the Code require regarding internal non-structural alterations in a lease of part?
The Code requires a landlord to provide the tenant with a fully qualified covenant for internal non-structural alterations.
187
What ability does the tenant have in a lease of the whole according to the Code?
The tenant has the ability to carry out internal non-structural alterations without needing consent.
188
How should landlords communicate requirements for reinstating alterations at the end of the lease?
Landlords should make it clear in the heads of terms if they require any alterations to be reinstated at the end of the lease.
189
Under what condition may a lease require reinstatement of alterations if not specified in the heads of terms?
The lease may only require reinstatement if it is deemed reasonable.
190
What happens if a lease is silent on alterations?
If the lease is silent on alterations, the tenant is free to carry out alterations.
191
Describe the process a tenant must follow to carry out improvements under s 3 of the LTA 1927.
The tenant must serve notice on the landlord of their intention to carry out improvements. If the landlord objects, the tenant can apply for the court's permission to proceed.
192
How does a licence for alterations protect the landlord's interests?
It ensures that any changes made by the tenant meet the landlord's standards and that the property can be restored to its original condition at the end of the lease.
193
What costs might a tenant incur when applying for a licence for alterations?
The tenant may need to pay the landlord's costs associated with the application, typically including surveyor's and solicitor's fees.
194
How should a tenant handle necessary consents for alterations?
The tenant is responsible for obtaining all necessary consents, which may include planning permissions and building regulations approval.
195
Discuss the inconsistency in the interplay between lease drafting and statute.
The inconsistency arises because different rules apply to different provisions, making it essential for landlords and tenants to understand the specific legal context of their lease agreements.
196
Explain the significance of improvements in the context of lease alterations.
Improvements are significant because they justify the conversion of a qualified covenant to a fully qualified covenant, allowing tenants to make beneficial changes to the property.
197
How does a tenant's perspective influence alterations under a qualified covenant?
A tenant is unlikely to propose alterations that do not constitute an improvement from their point of view, which means that any proposed changes are generally seen as beneficial by the tenant.
198
Describe the conversion process from a qualified to a fully qualified covenant in lease agreements.
The conversion occurs when a lease contains a qualified covenant against alterations, and under s19(2) LTA1927, it is converted to a fully qualified covenant if the tenant's proposed alterations are considered improvements from the tenant's perspective.
199
In what situations might a landlord refuse consent under a qualified covenant?
Under a qualified covenant, the landlord can refuse consent for alterations without needing to provide a reason.
200
Explain what a fully qualified covenant entails.
A fully qualified covenant is similar to a qualified covenant, but the landlord must act reasonably when deciding whether to grant or withhold consent for alterations.
201
Describe the difference between a qualified covenant and an absolute covenant.
A qualified covenant allows alterations only with the landlord's consent, while an absolute covenant does not permit alterations at all.
202
Define an absolute covenant in the context of lease agreements.
An absolute covenant against alterations means that alterations are not permitted under any circumstances.
203
What must happen to alterations at the end of a lease term?
Alterations may need to be reinstated, meaning the premises must be returned to their original state at the end of the lease term.
204
Define FRI lease in the context of alterations.
An FRI lease refers to a Full Repairing and Insuring lease, which typically includes specific provisions regarding the types of alterations permitted.
205
Define the doctrine of 'waste' in the context of tenant alterations.
The doctrine of 'waste' means that a tenant cannot carry out alterations that reduce the value of the premises.
206
Describe the registration requirements for leases up to 3 years.
Leases up to 3 years do not need to be registered and cannot be noted against the landlord’s title.
207
What happens to leases longer than 3 years but up to 7 years regarding registration?
Leases longer than 3 years but up to 7 years do not need to be registered but can be noted against the landlord’s title, appearing in the schedule of leases to the landlord’s freehold title.
208
Define the registration requirement for leases longer than 7 years.
Leases longer than 7 years must be registered at the Land Registry and will be given their own title number, noted against the landlord’s title.
209
How can a tenant claim damages if a landlord withholds consent unreasonably?
If a landlord does not act reasonably in withholding or delaying consent, the tenant may be able to claim damages, including costs for agents and solicitors.
210
Explain the conditions under which a landlord can insist on an AGA if the lease is silent on the matter.
If the lease is silent, a landlord can only insist on an AGA if it is reasonable to do so, such as when the tenant's ability to pay rent is in doubt.
211
What happens to the outgoing tenant's liability under an AGA if there is a subsequent assignment?
The outgoing tenant's liability under the AGA ends if there is a subsequent assignment.
212
Describe the purpose of an authorised guarantee agreement (AGA).
An authorised guarantee agreement (AGA) allows the original tenant to guarantee the obligations of the incoming tenant under a new lease.
213
Define what is meant by 'new leases' under the Landlord and Tenant (Covenants) Act 1995.
New leases refer to leases granted on or after 1 January 1996.
