Property and Land Flashcards
What are the formalities for creating a lease of up to 3 years?
Can be created with no formalities if:
- It takes effect in possession
- It is granted at market rent
- No fine/premium is payable
What are the formalities of creating a lease of 3 to 7 years?
It must be created by deed.
It does not need to be registered - it’ll take effect as an overriding interest.
What are the formalities of creating a lease of over 7 years?
It must be created by a deed.
It must be registered at the Land Registry.
What are the Re Ellenborough Park [1956] requirements for a valid easement?
- There must be a dominant and servient tenement.
- The right must accommodate the dominant tenement.
- There must be diversity of ownership.
- The right must be capable of being the subject matter of a grant.
What does it mean for a right to ‘accommodate the dominant tenement’ in the Re Ellenborough Park requirements for a valid easement?
The right must have a beneficial impact on the dominant tenement.
If there is a business on the land, the right must benefit the land itself, not just the business.
For an easement to be valid, must the dominant and servient tenement be physically adjoining?
No - although they usually are.
Pugh v Savage [1970] - A right of way over a field was still an easement, even though there was a third field in between as the dominant land was close enough to derive a benefit.
What are quasi-easements?
Benefits over one’s own land which are capable of becoming easements if the land is ever partitioned.
If a right is capable of being an easement, what else must occur for it to be a valid easement?
It must not be disqualified by any one of the 3 disqualifying factors
AND
It must be acquired as an easement
What are the 3 disqualifying factors which could prevent a right from being an easement?
- The exercise of the right must not amount to exclusive possession of the servient tenement.
- The exercise of the right must not involve additional, unavoidable expenditure by the servient owner.
- The exercise of the right must not depend on permission being given by the servient owner.
What are the 4 methods of implied acquisition by which an easement can be impliedly acquired?
- Necessity (Landlocked Land ONLY) - Grants Only
- Common Intention - Grants or Reservations
- Wheeldon v Burrows - Grants Only
- S.62 Law of Property Act 1925 (Upgrade Effect) - Grants Only
What is the common intention method of implied acquisition of easements?
Where land is sold/leased for a particular purpose known to both parties, and the easement is essential to achieve this common purpose, the easement is impliedly acquired.
What is the rule in Wheeldon v Burrows in implied acquisition of easements?
Where a quasi-easement is enjoyed before land is divided,
it was continuous and apparent,
was necessary for the reasonable enjoyment of land,
and was in use by the common owner at the date of the transfer…
the easement is impliedly acquired.
What is the s.62 Law of Property Act 1925 method of implied acquisiton of easements?
It operates to upgrade informal rights into full legal easements.
There must have been prior diversity of occupation.
An informal permission/licence must have been granted to the occupier to use the servient tenement in some way.
There must have been a conveyance of the dominant tenement (a transfer by deed/legal lease).
What is the rule in Tulk v Moxhay for allowing the burden of a restrictive covenant to pass to a successor?
The covenant must be restrictive.
It must accommodate the dominant tenement.
- The covenant must touch and concern the land.
- The dominant and servient land must be in proximity.
There must be an intention for the burden of the covenant to run.
There must be an intention for the burden of the covenant to run.
There must be notice of the covenant.
- Registered Land - Notice in the Charges Register
- Unregistered Land - Class D(iii) Land Charge
To establish that the benefit of a restrictive covenant has passed in equity, what must be shown?
The covenant must touch and concern the dominant land.
The benefit must pass via annexation, assignment, or a building scheme.
- Annexiation can be express or statutory (s.78(1) LPA)
- Assignment must be done in signed writing each time the land is transferred
- Covenants in a Building Scheme are seen as a set of by-laws enforceable by and against all owners
What is the only interest that can be overreached?
Beneficiaries’ interests in trusts of land.
A purchaser must pay capital money to at least 2 trustees to overreach their interests.
What are the 3 main categories of overriding interests under sch 3, Land Registration Act 2003, para 1 to 3?
Para 1 - Legal leases granted for 7 years or less
Para 2 - Equitable interests held by people in actual occupation
- Interests must be a qualifying proprietary trust in land
Para 3 - Implied legal easements
- Binding if the new owner knew of it, it was obvious on a reasonable inspection of the land, or it was exercised in the 12 months prior to disposition
What is a notice on the Charges Register used for?
To protect equitable interests, ensuring new purchases take the property subject to the interest
What is a restriction on the proprietorship register used for?
To create a condition that must be fulfilled before a transfer/purchase can take place.
E.g., a mortgage restriction
Following a S.26 Land and Tenant Act 1954 request, what order can the court make if they do not agree to the terms of the new tenancy?
The court can only order the grant of a new tenancy on such terms as it determines under the 1954 Act for a term not exceeding 15 years.
What class Land Charge should be entered on the Land Charges Register for puisne mortgages?
Class C(i).
What class Land Charge should be entered on the Land Charges Register for estate contracts?
Class C(iv).
What class Land Charge should be entered on the Land Charges Register for post-1926 restrictive covenants?
Class D(ii).
What class Land Charge should be entered on the Land Charges Register for post-1926 easements?
Class D(iii).
What class Land Charge should be entered on the Land Charges Register for spousal matrimonal rights of occupation?
Class F.
When should a licence to assign/underlet have a direct covenant by the assignee/undertenant to comply with the tenant’s covenants in the tenant’s lease?
If it is an old lease (created pre-1996).
A landlord may still choose to do this in a new lease.
Who must sign a licence to assign?
The landlord, the tenant, and the assignee.
What makes a good root of title for unregistered land?
It should be dated over 15 years ago.
Deals with both legal and beneficial title to the property.
Adequately describes the extent of the land being conveyed.
Does not cast doubt on the seller’s title.
What do you look for and in what register to confirm if there is a right of way over neighbouring land?
An easement in the property register.
If 3 people jointly purchase a property and expressly agree to hold the equitable title as tenants in common, how is legal title held?
Joint Tenants.
The legal title can ONLY be held as joint tenants.
For a lease to exist, what 3 things must be present?
- Certainty of Term
- Exclusive Possession
- The correct formalities to create the lease
If you are granted a right of way by deed over unregistered land, is it enforceable over future owners of the servient land?
Yes, as legal interests bind the world.
The doctrine of notice only applies to interests in a trust of land and pre-1926 equitable easements/restrictive covenants.
If a lease was never validly created, will a 3rd party purchaser of the freehold be bound by the “tenants’” interest?
Yes, because they have an actual occupation overriding interest.
If there is a missing deed of covenant on a root of title, what is the consequence?
You can only obtain qualified title at Land Registry.
- An indemnity policy may cover financial loss but a later enforcement of the covenants could conflict with the buyers’ use of the property.
What are the 6 triggering events for compulsory first registration?
- Transfer of the freehold (FH) by sale, gift, or court order.
- Grant of a leasehold (LH) for over 7 years.
- Assignment (transfer) of a LH of unregistered land with over 7 years to run.
- An assent, vesting assent or vesting deed which is a disposition of the FH/LH with over 7 years to run.
- The grant of a lease to take effect in possession more than 3 months after the date of the grant.
- A first legal mortgage of the FH/LH with over 7 years to run.
If a transaction on unregistered land occurs, what should the buyer’s solicitor ask the seller to do?
They should insist that the seller registers the title at the seller’s expense before proceeding as the compulsory first registration date has now passed.
To check whether something falls within the General Permitted Development Order (GPDO), what should you do?
Seek a certificate of lawfulness.
What is the CON29 search used for?
A ‘local search’ - standard enquiries of the Local Authority.
E.g., planning consents, refusals, completion notices, building regulations, roads and public rights of way, environmental notices.
What is the CON290 search used for?
Optional enquiries, including commons registration search.
What is the LLC1 search used for?
Local Land Charges Search.
E.g., granted planning permission, planning enforcement, Article 4 directions restricting the GPDO, listed building status.
What is a drainage water search used for?
Property specific drainage and water enquiries which are dealt with by the local water service company.
It verifies sewer connection and mains water supply are done.
When should a Desktop Environmental Search be used?
Always, due to the potential liability for land contamination clean-up.
What does a Desktop Environmental Search address?
Contamination, flood risk, industrial land uses, and natural subsidence within 250m.
What is a Chancel Repair Search used for?
To search for properties in parishes where there is shared responsibility for church roof repair.
When is a Highways Search used?
To reveal public highway boundaries.
When is the Environmental Phase 1 Survey used?
When a more detailed examination is needed after the desktop environmental search.
When is the Environmental Phase 2 Survey used?
It follows on from the Phase 1 Survey to confirm contaminations.
What is the Flood Search used for?
For flood prone properties.
What is an Index Map Search (SIM) used for?
For unregistered/multi-title properties, or where registered title refers to mineral rights.
When is a Central Land Charge Search (K15) used?
For unregistered property, carried out in the full names of the seller and all previous owners referred to in the epitome of title to ensure there are no charges over the land.
When is a bankruptcy search (K16) usually used?
It is carried out against the seller if the transaction is not at full market value.
What methods of enquiries can/should be used in commercial and residential enquiries?
Commercial Property = Commercial Property Standard Enquiries (CPSE’s)
Residential Property = Law Society Conveyancing Protocol
Under the Law Society’s Conveyancing Protocol for residential transactions, what do the solicitors agree to adopt?
Standard Conditions of Sales (incorporated into the contract)
Property Forms
Formulae for Exchange
Code for Completion by Post
If acting for both buyer and lender in a purchase of residential property, which pre-completion searches should be done?
An OS1 against the registered title.
A K16 bankruptcy search against the buyer (because you are acting for the lender).
What is the OS1 pre-completion search used for?
It is used for registered title of whole and leases of the whole.
What is the OS2 pre-completion search used for?
It is used for parts of registered land and leases of part.
What is the OS3 pre-completion search used for?
Only used for non-registrable leases.
It does not confer priority periods like OS1 and OS2.
In a long-lease, does the buyer pay SDLT on the ground rent, premium, or both?
SDLT is payable either on the premium payable on lease transfer or (for shorter leases) on the net present value of the rent if they’re paying a market rent.
SDLT is not payable on ground rent.
What is a “qualifying tenancy” for the purposes of the Landlord and Tenant Act 1954?
The tenant must be in occupation for the purposes of a business.
If you sub-lease the whole of your lease, you will no longer be “in occupation”.
What are the 4 different classes of title?
Title Absolute = (freehold/leasehold) Land Registry is convinced of true and proper ownership
Qualified Title = (freehold/leasehold) There is a defect in the title (e.g., a deed with covenants is missing on first registration)
Possessory Title = (freehold/leasehold) Have physical possession but lack title deeds (e.g., squatters rights)
Good Leasehold Title = (leasehold only) Leasehold title is fine but cannot show evidence of landlord’s freehold title
If the solicitor and estate agency have a fee-sharing arrangement, what must the solicitor say to their client about it?
They must inform the client of the arrangement AND account to the client for the commission.
(This is a professional conduct issue)
When can a Class C(iv) Land Charge be registered?
They are for estate contracts (contracts for the sale of an estate).
They are used if there is a long period between exchange and completion/to protect a tenant’s option to renew.
What statutory provision sets out the requirements for a contract for the sale of land?
S.2 Law of Property (Miscellaenous Provisions) Act 1989 - Sets out that contracts for the sale of land must be made in signed writing.
What does a caution against first registration discovered in an Index Map Search (SIM) do?
It is entered by a person having an appriopriate interest in unregistered land to ensure they’re notified of any application of first registration of unregistered land.
What is included with the TA6 Property Information Form used for pre-contract enquiries?
Among other things…
Information on Japanese Knotweed and Septic Tanks
Compliance with Building and Planning Applications
The Supply of Services
Common Parts shared with Neighbours
If there is a restriction providing permission must be given before a transfer of property can be registered, but the entity to give permission has since been taken over, what should the buyer’s solicitor do?
Apply to cancel the restriction on the basis that the company/entity no longer exists and the transfer to the buyer can then be registered.
If a seller of a property does not wish to disclose the existence of a noisy dog, do they have to tell the buyer?
Not necessarily due to Caveat Emptor.
BUT, the seller must accurately complete the Property Information Form (TA6).
If the seller is aware of disputes, anything that may lead to a dispute/complaints/discussions, they may need to disclose this in the form.
If they have made complaints, they must disclose these interactions otherwise it is misrepresentation.
What is Caveat Emptor?
“Buyer Beware”
The seller need not disclose defects which a buyer could and should see upon a reasonable inspection.
If someone wants to sell their property but the spouse has protected rights of occupation, how are those rights protected?
By entry of a home rights notice in the register.
What does an “all monies” mortgage mean?
If there is a breach of this mortgage, it entitles the lender to call in all monies owed to it by the borrower.
If securing a second charge over your property, how will its priority be determined?
Its priority will be determined by the order the charges on the property are shown in the register.
For Law Society Formula C method in chain transactions, how must the client give consent to their solicitor to exchange?
Their irrevocable consent is required as the solicitor will be giving an undertaking in the exchange process.
This can be oral but should be in writing.
Is the automatic vesting of unregistered title in personal representatives a “trigger” for compulsory first registration?
No, a conveyance would be a trigger.
If a lease has an unqualified covenant that landlord consent is required for a change of use, must the landlord act reasonably?
No.
When transferring registered land, what land registry forms should be used?
TR1 for transfer of the whole.
TP1 for transfers of part of the title.
TR5 for portfolios of registered (and unregistered) titles.
What forms are used to transfer unregistered land?
Unregistered land may be transferred in the form of a conveyance but it is usual to use the TR1 for unregistered land too.
What is the “daily rate” in a redemption statement?
It is the daily rate which must be added to the redemption figure for each day the redemption of the mortgage is delayed.
In Antoniades v Villiers, what did the court rule on sharing clauses and clauses ‘acknowledging’ a lack of exclusive possession in a licence?
The clauses were invalid (a sham).
They could not seriously be considered to have any practical operation/to serve any purpose apart from the purely technical one of seeking to avoid the ordinary legal consequences of a lease.
What 4 circumstances should be considered when deciding whether a sharing clause is genuine or a sham?
- The size and nature of the accommodation
- The relationship of the occupiers
- The wording of the clause
- Whether the clause has ever been exercised
If a commercial occupation agreement contains a right for the landord to relocate the tenant to an alternative premises, is it a lease?
No.
You cannot have a tenancy granting exclusive possession subject to the provision that the landlord can require the tenant to move elsewhere.
What are the 4 unities that must be established for a valid joint tenancy (4 unities of title)?
- Unity of Possession - Each co-owner is equally entitled to any part of the land.
- Unity of Interest - The interest in land of each co-owner is of the same nature and duration.
- Unity of Title - All acquire title from the same document.
- Unity of Time - Each co-owner’s interest vests at the same time.
What is the short lease exception (S.54 LPA 1925)?
A lease of 3 years or less need not be created by deed if:
- The lease takes effect in possession (tenant takes lease immediately)
- The lease is granted at best rent (market rent)
- Lease is not subject to a fine/premium (no upfront payment for granting lease)
If a legal lease is defective, in what circumstances will an equitable lease be found?
An equitable lease on the same terms as the defunct legal lease will be found if:
The document complies with S.2 LP(MP)A 1989
AND
The remedy of specific performance is available - must have come with clean hands
What does a document which complies with S.2 Law of Property (Miscellaneous Provisions) Act look like?
The document is in writing and signed by both parties containing all the terms.
If a tenant fails to register a valid deed for a 10 year lease, will there be an equitable lease?
No, unless there is a contract in writing, containing all the agreed terms of the lease, and is signed by the landlord.
Where there is a qualified covenant against alterations in your lease, can a landlord outright withhold consent?
S.19(2) Landlord and Tenant Act 1954 converts the qualified convenant against alterations to a fully qualified one if they are considered to be improvements.
So the landlord must act reasonably in withholding consent.
What does S.19(3) LTA 1927 have the effect of regarding qualified user covenants?
It prevents a landlord demanding money for consent unless the chnage of use also involves a change to the structure of the property.
It does not imply a reasonableness proviso.
If there is a qualified covenant against assignment and against underletting, can a landlord unreasonably withhold consent?
No, S.19(1)(A) LTA converts qualified covenants against alienation into fully qualified covenants.
A landlord cannot unreasonably withhold consent.
If a landlord wishes to refuse consent under a fully qualified covenant against alienation, what must they do according to S.1 LTA 1988?
They must give/refuse written consent within a reasonable time (28 days).
The burden is on the landlord to prove reasonable refusal with written reasons.
Under Land Charges Act 1995, when and how must a Tenant Default Notice under S.17 be used?
If a landlord wants to pursue a former tenant still liable for a fixed charge (e.g., under a AGA), they must serve notice of this potential claim within 6 months of the charge becoming due.
If they do not, the landlord won’t be able to make a claim.
Under S.18 LCA 1995, if a variation has been made to a lease, can a guarantor/former tenant be liable to pay additional amounts owing to this variation?
No, they are not liable for additional amounts owing to variations made post-assignment which they could not have anticipated at the time the lease was entered into.
Under S.19 LCA 1995, what is an overriding lease and when must it be granted?
If a former tenant is called up by the landlord to pay rent/fixed charges from an assignee, they can request an overriding lease to become the immediate landlord of the party in default.
The landlord must grant it within a reasonable time.
It is granted for the term outstanding +3 days.
Why are overriding leases used?
(S.19 Landlord and Tenant (Covenants) Act 1995)
The former tenant is in a better position to secure compliance, to terminate the assignee’s lease and re-let it, or to assign it to a more reliable tenant.
What are the requirements in S.2 LP(MP)A 1989 for a valid deed?
A deed must be intended as a deed
Signed by the seller in the presence of a witness who attests
and it must be delivered to the buyer.
Will a buyer ever execute a TR1?
Only if they are entering into any freehold covenants or making a declaration of trust.
Can the burden of a positive covenant pass to a successor at common law or in equity?
It cannot pass in equity.
It can pass in common law through the doctrine of mutual benefit and burden (Halsall v Brizell).
- The burden of a covenant can pass if they grant an easement with a connected burden.
- If the successor relinquishes the benefit, they are released from the burden.
- The benefit and burden must have been conferred in the same transaction and there must be a genuine choice as to whether to take the benefit.
What must be done to protect puisne mortgages over registered and unregistered land?
Registered Land = It should be substantively registered to take effect as a legal interest.
Unregistered Land = It must be protected by a Class C (i) Land Charge to bind a purchaser for valuable consideration.
In co-ownership of land, equity, normally presumes land is to be held as joint tenants. When will equity presume it is held as tenants in common?
If the land is a business asset (Lake v Craddock).
If the purchase price of a non-domestic property has been paid in unequal shares (Bull v Bull).
What are the formalities for the disposition of an equitable interest or trust?
It must be in signed writing of the person disposing of the interest (or their agent).
If a tenant is in breach of a rent covenant and the landlord applies to the Court of Possession, what will the Court do if the tenant can subsequently pay the arrears?
If the tenant pays into court all arrears and costs before trial, all further proceedings are stayed.
If a notice to sever a joint tenancy is posted to the last known place of abode or business of the joint tenant, when is it deemed served?
If made by registered post and not returned undelivered, it is deemed served when the registered item would, in the ordinary course of events, be delivered.
In Burgess v Rawnsley, what did the court say must be present to sever a joint tenancy by mutual agreement?
An express or inferred agreement to change the basis on which co-ownership will continue.
What are the 2 forms of severance of a joint tenancy under S.36(2) LPA?
- Notice in Writing
- Other acts or things
- Unilateral Act by one joint tenant
- Mutual Agreement
- Mutual Conduct
Following Williams v Hensmen, what 3 things is severance of a joint tenancy by a unilateral act of a joint tenant subdivided into?
- Acts of Total Alienation - Sale/Gift of Equitable Interest
- Acts of Partial Alienation - Mortgage/Lease of Equitable Interest
- Involuntary Alienation
Court declares them bankrupt
According to Street v Mountford, what 2 things must be present for a valid lease?
- Certainty of Term
- Exclusive Possession
The correct formalities must have also been complied with.
Is payment of rent required for there to be a valid lease?
No, according to LPA S.205(1)(xxvii) and Ashburn Anstalt v Arnold.
When can an implied periodic tenancy arise?
There is nothing in writing.
The certain term arises by looking objectively at all relevant circumstances, including payment and acceptance of rent on a periodic basis.
If a document purports to grant a lease for an uncertain time, but the tenant moves in and pays annual rent in quarterly installments, is there any type of lease?
They will be deemed to have an implied periodic tenancy of 1 year.
What categories of rights are subject to the doctrine of notice?
Equitable Interests created pre-1926.
Equitable interests under a trust that have not been overreached.
The majority of equitable interests created post-1926 should be protected in what way?
By entering a land charge.
How is the entry of a land charge protected?
The land charge must be entered against the correct name(s) of the estate owner(s) at the time of creation of the charge.
S.3(1) LCA 1972.
What is the one exception to the rule that only equitable interests are registered as land charges?
Puisne Mortgages (second legal mortgages) must be protected by entry of a land charge in unregistered land.
1st mortgagee holds title deeds as protection.
2nd mortgagee cannot also do this so must enter a land charge.
What are the only equitable interests that cannot be protected by way of a land charge?
Interests in a trust of land.
Equitable easements and restrictive covenants created pre-1926.
What will happen to a puisne mortgage created post-1926 if not registered before completion of the purchase?
It will be void against a purchaser of the land or against any interest in that land.
What happens if an estate contract, restrictive covenant, or equitable easement created post-1926 is not registered as a land charge before completion of purchase?
It will be void against a purchaser for money or money’s worth
If a land charge is not correctly registered and someone is gifted/inherits the land, what happens?
It is valid against gifted/inherited land, not against a purchaser
If someone knows a land charge created post-1926 has not been correctly registered and they sell the land, what will happen?
The court will deem the failure to enter a notice on the register is conclusive as to notice (Midland Bank v Green).
As long as they are a purchaser, the value of the purchase does not matter (i.e., can be at an undervalue).
The state of the purchaser’s knowledge is irrelevant.
What is the difference between actual, imputed, and constructive notice in the doctrine of notice?
Actual Notice = Purchaser actually knows of the equitable interest.
Imputed Notice = Buyer’s agent has actual/constructive notice of the beneficial interest and this is imputed to the buyer.
Constructive Notice = If the buyer fails to pursue a line of enquiry which ought reasonably to have been made.
Once a joint tenant successfully severs a joint tenancy, what will happen to them and the other tenants?
They will hold equitable title as a tenancy in common, an equal share based on how many former joint tenants there were.
The remaining tenants continue to hold equitable title as joint tenants (unless there is only one left).
How long must a tenancy be in order for the LTA 1954 security of tenure provisions to protect the business lease?
It must exceed 6 months.
Unless the tenancy allows renewal extending it beyond 6 months or the tenant has already occupied for over 12 months.
How do you opt out/contract out of the security of tenure provisions?
Landlord serves notice on tenant at least 14 days before the lease is due to be entered into.
Prospective tenant makes a statutory declaration agreeing to opt out (signing a declaration).
Tenant must take individual legal advice.
What declaration must a tenant make if they are to contract out of a security of tenure?
If lease completion is over 14 days away = signed declaration.
If lease completion is less than 14 days away = statutory declaration declared before an independent solicitor.
How can a landlord terminate a tenancy protected by security of tenure?
Serve a hostile S.25 notice.
On what 6 grounds can a landlord serve a hostile S.25 notice?
- Persistent and serious breach of tenant repair obligation
- Persistent delay by tenant in paying rent
- Persistent and serious breaches of other tenant covenants
- Landlord offers suitable alternative accommodation
- Landlord wants to demolish/do substantial construction requiring premises
- Landlord intends to occupy premises
How does a landlord indicate they are willing to renew a lease protected by LTA 1954?
Serve a friendly S.25 notice.
What is a holding-over period?
For a LTA protected tenancy, the tenant has the right to stay in occupation after the duration of the tenancy ends.
This period between the first tenancy ending and a new tenancy being entered into is known as holding over.
If a tenant of a protected tenancy is holding over, do they have to pay rent?
Yes, they have to continue to pay rent at the rate at which it was last reviewed under the lease.
Many protected leases contain a rent review on the last day before the end of the contractual term to ensure that the tenant pays a market rent during the period of holding over.
What should a tenant serve if they wish to request a new tenancy in an LTA 1954 protected tenancy?
S.26 Notice - The original lease must have been granted a contractual term of more than 1 year otherwise only a landlord can start the renewal process.
How can a landlord oppose renewing an LTA 1954 protected tenancy following a S.26 notice?
Serve a counter-notice opposing renewal based on the statutory grounds.
Must be done within 2 months from the S.26 notice.
How does a tenant under an LTA 1954 protected lease indicate to a landlord that it wishes to terminate the tenancy?
Serve a S.27 notice giving 3 months’ notice - termination date cannot be before contractual expiry date.
Or the tenant can just leave at the end of the tenancy - if the tenant is holding over, they must serve a S.27 notice to leave.
What is land?
Land is both the physical and intangible - the rights in land.
Physical does not only just include the surface of the land.
What are fixtures and fittings?
Fixtures - Fixed to the land therefore a part of the land
Fittings - Chattels and not part of the land
Two tests to see if an item is a fixture or a fitting:
- Degree of Annexation Test - How hard is it to remove the item? The harder it is, the more likely it is to be a fixture.
- The Purpose Test - Does the item permanently increase the value of the land? If so, more likely to be a fixture.
What is an estate in land?
A right someone has over the land.
Two kinds:
Freehold - Legal estate that lasts for an unlimited amount of time and is perpetual. Owner has full rights in the land. All land must have a freehold owner.
Leasehold - Legal estate that lasts for a certain period of time. Lease temporarily sits over the freehold.
What is an interest in land?
A right someone has over another’s land (or estate).
Two kinds:
- Legal Interest - Must be made by deed
- Equitable Interest - Must be made in a contract for land
What is the difference between proprietary and personal rights?
A proprietary right can bind third-party purchasers of the land who were not original parties to the right.
Personal rights cannot bind third parties.
Estates in Land (Land Interests) and Proprietary Rights (such as an easement) are capable of binding third parties.
Personal Rights - Merely contractual rights. Bind only the counterparty to the contract (under privity of contract rules). A 3rd party purchaser is not bound by any right under a licence (a contractual right) unless they are a party to that licence agreement.
What are the legal interests in land?
Specifically listed by the Law of Property Act 1925, any interest not below is an equitable interest:
- The estates in land (freehold and leasehold)
- Easements - Gives someone a right to use another’s land in a certain way or prevents someone from using the land for a certain purpose
- Charge by way of legal mortgage
What are the requirements for a deed?
- Must make it clear that it is intended to be a deed (put “Deed” at the top)
- Signed by the person executing it and witnessed (the witness signs)
- Delivered (must be dated)
What are the equitable interests in land?
- Interests of Beneficiaries under a trust
- Failed Legal Easements (e.g., no deed used)
- Freehold Covenants
- Not registered as required by Land Reg Act 2002
- Estate Contracts (contracts for sale of land, options)
What are the requirements for a contract for land?
- Be in writing;
- Contain all the terms agreed upon by the parties; and
- Be signed by all the parties.
Required to create an equitable interest.
What are registrable dispositions?
A legal transfer or charge that is required to be completed by registration under the registered land rules (Land Reg 2002) to be legal, valid, and enforceable.
If left unregistered, there is no legal transfer or creation of an interest. Left only with equitable rights and third party unregistered rights may be binding on you.
Applies to registered land.
What dispositions must be registered?
- Transfer of a freehold estate (whether by sale or gift)
- Transfer of a registered lease (of any duration)
Note - The land on which the lease sits could be unregistered
- Grant out of a registered estate of a lease exceeding 7 years
- Grant of legal mortgage over registered land
What is the effect of registering a disposition?
Registering a disposition of a registered estate given for valuable consideration binds any third-party purchaser and takes priority over any interest (whether for consideration or not) which has been registered or is not overriding, regardless of when that interest was created.
This means that any interest which has not been registered or is not overriding will not bind a third-party purchase of a registrable disposition that is validly registered.
What are the triggers for compulsory first registration?
- Sale of unregistered freehold land
- Sale (assignment) of an unregistered lease with more than 7 years to run at the time of sale
- Grant of a 7 year plus lease out of an unregistered freehold
- Creation of a legal mortgage against the unregistered land
What are overriding interests?
An unregistered interest that overrides a registered dispositon.
What are the overriding interests?
- Legal Lease of 7 years or less: must be in existence at the time of the disposition. No need to prove actual occupation.
- Implied Legal Easements: Overriding if:
- It is known to the purchaser; or
- It is obvious upon reasonable inspection; or
- It has been used at least one year prior to the disposition. - Interest in Land with Actual Occupation, with the interest held at the time of the disposition.
What is actual occupation?
For an interest in land to be overriding, it must be held at the time of the disposition and be with actual occupation.
Actual Occupation = there must be some permanence and continuity. Occasional visits to the land are not enough.
If:
- The interest is not reasonably disclosed by the interest holder on enquiry by the purchaser; or
- Actual occupaion is not obvious on reasonable inspection at the time of the disposition AND the purchase does not know about the interest at the time of the disposition,
It will NOT be an overriding interest.
What are minor interests?
Interests that must be registered in order to be protected.
Registered by serving a notice on the Land Registry setting out the details of the interest.
What are the minor interests?
- Estate Contracts (contracts to purchase an estate in land):
- Options to Purchase
- Rights of Pre-Emption
- Contracts to Grant a Lease
- Equitable Lease (a failed legal lease)
- Contracts to Sell
- Restrictive Covenants
- Equitable Easements
If minor interests are registered, then a purchaser for valuable consideration cannot be bound by them unless it amounts to an overriding interest. A volunteer still will be however.
What is overreaching?
Paying the purchase money to two trustees of a beneficial interest in land.
Once this is done, the equitable interests in the land transfer to the purchase money. The purchaser therefore takes the land free of the interests.
Who are legal interests enforceable against?
The world.
A legal interest is binding automatically on any third-party purchaser.
There is no need to register any legal interest in unregistered land.
How must (most) equitable interests in unregistered land be protected?
Register at the Land Charges Registry; otherwise are void against a third party purchaser for value.
These interests are:
- Estate Contracts
- Equitable Leases
- Equitable Mortgages
- Restrictive Covenants
- Equitable Easements
How are beneficial interests under a trust enforceable against a third-party purchaser of unregistered land?
Via the Doctrine of Notice.
No need to register beneficial interests under a trust.
If a 3rd party purchaser wants to avoid being bound by any beneficial interest, they must overreach that interest by paying the purchase money to two trustees.
If the interests are not overreached, they will be binding if the Doctrine of Notice applies.
What interests are capable of being enforced via doctrine of notice?
- Beneficial Interests under a trust that have not been overreached
- Restrictive covenants under an unregistered lease
- Interests arising out of estoppel
- Pre-1926 restrictive covenants and easements
What is the Doctrine of Notice?
Equitable Interests that rely on the Doctrine of Notice to be enforceable means that they are enforceable against everyone except Equity’s Darling.
Equity’s Darling is a bona fide (good faith) purchaser for value of a legal estate without notice (of the interest).
What are covenants?
Promises that are exchanged via a deed; they are equitable proprietary interests under the Law of Property Act 1925.
Two kinds of freehold covenants:
- Positive Covenants - An obligation on someone to do something on their land - requires the expenditure of money.
- Negative Covenants - Restricts the use of the land. Does not require any money to be spent. Also known as restrictive covenants.
Any covenant must benefit the land and not be personal.
Who is the covenantor and who is the covenantee?
Covenantor = The person who agrees to the covenant (is burdened by it)
Covenantee = Person who enjoys the benefit of the covenant
Dominant Land = The land owned by the covenantee who enjoys the benefit
Servivent Land = Land owned by the covenantor who is subject to the burden
How does the original covenantee enforce the covenant against the original covenantor?
The covenantee can sue the covenantor under the contract they entered into.
Covenant creates a contractual relationship and a proprietary interest that is potentially enforceable against third parties. Can be enforced by or on third parties by common law or equity.
Original parties can rely on their contractual relationship to enforce the covenant.
Does the benefit of a covenant pass at law?
Yes, the benefit is capable of passing at common law.
Will only not pass if the original covenantee or the claimant do not hold a legal estate, the covenant does not touch or concern the land or when the covenant was made it was intentionally not annexed to the land, will a covenant not pass at law.
Does the burden pass at law?
No. The original covenantor remains on the hook.
They will enter into an indemnity agreement with their successor-in-title.
This creates the chain of indemnity.
What do the legal rules mean in repsect of a positive covenant?
A burden can only be enforced at equity. To enforce a burden at equity, the covenant must be negative.
That means that a positive covenant can only be enforced against the original covenantor. The benefit can pass via equity or common law - equity is easier to establish.
However, specific performance can be used if the original covenantor still lives on the land and owns it and a PC has been enforced directly against them (either under law or equity).
Are there any exceptions to the common law burden rule?
One exception - used for modern developments.
Applies if all of the following conditions apply:
- Dominant Landowner grants the Servient Owner a right/benefit over their land - e.g., drainage or a right of way
- This right/benefit comes with a burden to maintain it - e.g., to pay maintenance costs to upkeep the road/drain
- The owner of the Servient land and any successors could choose not to use the benefit if they wanted to
Can the benefit pass in equity?
Yes, the benefit of a covenant can pass under the rules of equity.
Can the burden pass in equity?
Yes. The following conditions must apply:
- The covenant must be negative
- The covenant must “touch and concern” the land (not be personal)
- The covenant must accommodate the DT: the DT must still be owned/occupied by the covenantee; the DT must actually benefit from the RC and the ST and DT must be next to each other
- The burden of the convenanrt must have intended to run with the land - will happen unless expressed otherwise in the deed
- Notice: The covenant must be registered at the Land Register (registered land) or Land Charges Register (unregistered land) to be binding on a third-party purchaser
What do the equitable rules mean for a negative covenant?
If you have a successor-in-title to the dominant tenement and they want to enforce their negative covenant directly against the successor-in-title to the servient tenement, they can potentially do so under equity.
What are the conditions for the existence of an easement?
- There must be a dominant and servient tenement
- There must be separate ownership of the ST and DT
- The easement must benefit the DT
- The right must ‘lie in grant’ - be sufficiently certain and not too vague
- The easement must be recognised by the courts and cannot be a negative easement
- No expenditure by the ST owner
- No exclusive possession
- Use of the easement is no dependent on ST’s owners permission
How can a legal easement be expressly created?
- By grant - The owner of the ST deliberately grants an easement to the owner of the DT. To be legal, must be in a deed and registered (for registered land)
- By reservation - The owner of the DT, on sale of part, reserves a right so they can use it over the sold land. Must also be created in deed and be registered (for registered land)
No need to register legal easement if the land is unregistered as it is automatically binding as a legal interest.
How can an easement be created impliedly?
- Necessity - Existence must be essential to the use of the DT (right of way for landlocked land).
- Common Intention of the Parties - Land is sold/leased for a particular purpose and that purpose cannot be realised without an easement
- Wheeldon v Burrows - When A sells/leases part to B, B will acquire A’s quasi-easements over A’s land which are necessary for B’s land
- S.62 LPA 1925 - On a conveyance of land, informal rights become easements. Applies both to land separately owned (in two plots) and land split.
What are the conditions for Wheeldon v Burrows to operate?
Operates when an owner of land splits their land by selling or leasing one part but retaining the other.
The quasi-easement must be:
- Continuous and Apparent - the easement must have been used prior to sale on a continuous basis for a length of time and must be noticeable on inspection
- Necessary for the reasonable enjoyment of the DT
When can S.62 LPA 1925 operate to create an easement?
Two scenarios:
- Land is already divided - B is enjoying informal rights in A’s land. B sells her part. C, the new owner, takes B’s informal rights as an easement
- Land is divided for the first time (Wheeldon v Burrows).
Conveyance must be in a deed. Creates an implied legal easement.
What is prescription?
The acquisition of an easement by long use of that easement by the claimant.
There are requirements to getting an easement by prescription:
- Only freehold owners can get one exercised over another freehold owner’s land
- The use of the easement must have been without force, secrecy, or permission
- Use of easement cannot be for an illegal purpose
- Use must be continuous (cannot have a long period not using the right)
- The right claimed must be one which in nature can be an easement
Two methods of obtaining an easement by prescription:
- Lost Modern Grant - The easement has been in continuous use for 20 years or more by the user. The use can be interrupted provided it was in use for 20 years before the interruption.
- Prescription Act 1832:
- For rights other than rights of light, you need 20 years of continuous use or, if you have oral permission from the ST, 40 years of continuous use by the user
- For rights of light, 20 years continuous use (even with oral consent) by the user
- For both, oral consent will not defeat the right but written consent will.
The use must immediately precede the taking of legal action.
How can an easement arise via proprietary estoppel?
- A commitment or promise by one person (X) to another (Y) that they can use an easement
- Which X intends Y to rely on (objective test - would a reasonable person believe that X is making a promise she intends to keep and for Y to rely on?)
- In reliance on this promise, Y suffers a detriment which is reasonable (does not have to be financial)
- It would be unconscionable for X to go back on their promise
How is an expressly granted or reserved legal easement protected?
Registered Land - An expressly granted legal easement (by grant or reservation) is a registrable disposition. It must be registered to operate at law.
Unregistered Land - Legal easement is automatically binding (express or implied).
How is an implied legal easement protected over registered land?
An implied legal easement will be created by S.62 LPA 1925 or Wheeldon v Burrows if the conveyance was in a deed.
No registration required.
How is an equitable easement protected (registered and unregistered land)?
Registered Land - Enter a notice in the Land Registry
Unregistered Land - Register via a land charge at the Land Charges Registry
What does a secured loan (over a property) give a lender?
A proprietary right (a mortgage) over the property, which can be used to take possession and sell if the borrower defaults.
As the loan is secured, it takes priority over unsecured creditors on an insolvency or bankruptcy.
What is a mortgage?
A charge by way of legal mortgage is the proprietary right granted over the property. The borrower retains legal title, but the lender gets a bundle of rights.
Legal Interest which must be documented in a deed and registered.
What is the equitable right to redeem?
The right to pay off the mortgage so that the land is free of the security.
Arises after the contractual date of redemption has passed.
How is the equitable right to redeem protected?
There are a number of rules which protect the right for the borrower to repay the mortgage and take the property free of debt:
- The redemption right is permanent and cannot be restricted or removed
- Option to purchase is invalid - allowing the mortgagee to buy the land as it prevents the mortgagor from being free of the debt and taking the land themselves
- Collateral Advantages / Restraint of Trade - The only terms in a mortgage should be the repayment of the debt plus interest. Any other terms that advantage the lender are void (with exceptions)
- Unconscionable Terms
- FCA Supervision
- CRA 2015 - If terms in the loan are contrary to good faith - applies to B2C only
What is the effect of undue influence on a mortgage?
The mortgage is voidable and cannot be enforced.
What enforcement rights does the mortgagee have if the borrower defaults?
- Sue under the mortgage contract
- Right to take possession
- Power of sale (under the mortgage deed or LPA 1925 provided it has arisen and is exercisable)
- Foreclosure
- Right to possess title deeds
- Appointment of receiver (either expressly under the mortgage deed or under LPA 1925)
An equitable mortgage has fewer rights than a legal mortgage - cannot take possession and no power of sale.
Only powers for an equitable mortgage are to apply to the court for sale and the right of foreclosure.
What restrictions are there on the right to take possession?
- Lender must act with honest intention and good faith
- If they take possession, they must take reasonable care of the property
- Possession can be postponed by the court if the borrower can prove they can pay the arrears by the end of the mortgage term (residential only)
- The lender must comply with the Protocol for taking possession.
- Protection for Spouses/CPs under the Family Law Act 1996 - The bank has to inform spouse/CP of any possession proceedings and the spouse/CP can be a party to them
When does the power of sale arise and become exercisable under LPA 1925?
It arises as soon as the mortgage money becomes due, which is when the contractual date of redemption has passed (usually 3 months into the mortgage term), or a capital mortgage instalment fails to be paid.
It becomes exercisable when the borrower:
- Fails to repay capital for 3 months after notice (from the lender); or
- Interest has not been paid for 2 months; or
- The borrower has breached some other term of the mortgage deed.
What is the priority between legal mortgages over the same property for registered land?
Priority between legal mortgages is governed by the date of registration.
What is the order of priority between equitable mortgages?
Determined by date of creation.
What are the rules on priority for a legal mortgage over unregistered land?
As it would trigger first registration, the mortgage will be subject to any pre-existing equitable mortgage registered on the Land Charges Registry
What is the relationship between landlord and tenant?
The landlord owns the reversion (the freehold).
But the ownership is subject to the rights of the tenant, who occupies the property.
A lease creates both contractual and proprietary relationship.
What is the difference between a lease and a licence?
Lease - creates both a contractual and proprietary relationship
Licence - merely a personal right and only a contractual relationship
A lease is stronger than a licence. It has three main benefits:
- Capable of binding third parties
- Security of Tenure - Entitled to occupy the land for the full term of the lease and possibly after the lease ends
- Exclusion Possession and Overall Control of the land. Enforceable against anyone even the landlord, can sue for trespass and nusiance on the land (a licensee cannot).
What are the necessary characteristics of a lease?
- Certainty of Term - A fixed or periodic term
- Exclusive Possession - Right to exclude anyone, including the landlord, from the property. Is there ICLR to create a lease with exclusive possession?
- Rent - Not necessary for a lease except implied periodic tenancies. But, if no rent is paid, likely there is no ICLR to make a lease.
What are the formalities required to create a legal lease?
Lease exceeding 7 years - Deed + registered as a registrable disposition (and triggers compulsory first reg)
Lease of 3 to 7 years - Must be in a deed. No need to be registered; will bind 3rd party purchasers as an overriding interest for registered land. Auomatically binding in unreg land as a legal lease.
Lease of 0 to 3 years - No formalities required. Binding on 3rd parties as an overriding interest for reg land, and automatically as a legal interest in unreg land.
What are the formalities required for an equitable lease?
Must be documented in a contract for land. Must be registered to be binding against 3rd party purchasers, unless it is an overriding interest with actual occupation for registered land.
Most commonly arise when a lease of more than 3 years has failed (e.g., not in a deed).
But if a lease fails as an equitable lease and the tenant has moved in and starting pay rent, you have an implied periodic tenancy that is legal.
What is a leasehold covenant?
A promise between a landlord and a tenant to perform certain obligations under the lease.
Can either be:
Express - Agreed between the parties and documented in the lease
OR
Implied by statute or the courts
What are some common landlord and tenant express covenants?
Landlord Covenants:
- Quiet Enjoyment - not to interfere with the tenant’s quiet enjoyment of the lease.
- To insure
- To repair (for which T will pay a service charge)
- To enforce the covenants of other leases in the same building (flat in a block of flats)
Tenant Covenants:
- To pay rent (including any service charge and insurance premiums)
- To repair: T usually not liable for fair wear and tear
- Alterations: restrictions on what internal and external alterations T can make to the property
- Alienation: how T can assign or sublet the property
What are the rules on alienation of a commercial lease?
If there is a clause in the lease permitting the tenant to assign or sublet subject to the landlord’s consent, under law the landlord cannot withhold that consent unreasonably and must respond to any request to assign/sublet from the tenant within a reasonable time.
Landlord must state in writing why consent is refused (if it is) or what conditions will be imposed (must be reasonable).
Landlord cannot charge for their consent but can recover fees from the tenant incurred in order to give consent.
The landlord would enter into a licence with the outgoing tenant and the assignee/subtenant.
When do conditions for assignment not have to be reasonable?
Commercial leases entered on or after 1 January 1996.
However, if the conditions are subject to the landlord’s discretion, then under the LTA 1927, any clause containing discretionary conditions must also state a) that discretion must be exercised reasonably or b) the tenant has a right to get a third party to review the landlord’s exercise of discretion to determine if it is reasonable.
A common condition is that the tenant enters into an Authorised Guarantee Agreement.
Does NOT apply to subletting.
What are common landlord and tenant implied covenants?
Landlord:
- Quiet Enjoyment (implied if not express)
- Not to frustrate/interfere with the purpose of the lease (non-derogation from grant)
- Repair (for residential tenancies of 7 years or less)
- S.4 Defective Premises Act - Duty to keep tenants safe from defects L knows or ought to know about if L has breached their repair obligations
Tenant:
- To pay rent
- To pay rates/taxes (e.g., council tax)
- To use the property ina. tenant-like manner (e.g., take out the bins)
- Not to commit waste (means be negligent causing the land to change, such as knocking down a wall or allowing a wall to get into a state of disrepair)
- To allow the landlord to enter and view
How are leasehold covenants enforced for pre-1996 leases on assignment?
Covenants can be enforced directly by the parties to the original lease via privity of contract - L can sue T directly for breach of any covenant by T
If either L or T assigns the reversion or the lease, the covenant can only be enforced against the new party via privity of estate or S.141 and S.142 LPA 1925 (for both, only covenants that ‘touch and concern’ the land).
The original parties remain on the hook to each other due to privity of contract. To combat this, L will ask A to enter into a licence to assign so privity of contract is established between A and L.
How are leasehold covenants enforced for post 1996 leases on assignment?
Privity of Contract is abolished - The original tenant is no longer liable after assignment.
The new tenant takes on all the covenants and is liable for any breach.
L may require T to enter into an Authorised Guarantee Agreement so L can pursue T for any breach by A of the covenants.
Even though A becomes liable for all covenants, L will still want A and T to enter into a licence to assign so L has PoC with A (so L can sue A for damages on breach of covenant and get an injunction).
However, different for Landlords. The new Landlord will take on the burden and benefit of the covenants. However, the original landlord is not automatically released from liability on assignment of the reversion - they must apply to the tenant to be released from the covenants. If the tenant refuses, they can apply to the court to be released.
How are leasehold covenants enforced on a sub-letting of the lease?
If T sublets, there is no PoC or PoE between L and ST.
There is only PoC between L and T - L cannot enforce the covenants directly against ST under both old and new leases.
However, restrictive covenants can be directly enforced against the ST by L.
For non-restrictive covenants, L has two options:
- L can sue T, who is responsible for the ST. T can get an indemnity from ST to cover the cost of reimbursing L if ST breaches their covenant
OR
- L can directly covenant with ST as a condition of subletting. Creates a contractual relationship between L and ST - can be achieved via a licence to sublet.
What remedies are available to a tenant on a breach of a landlord covenant?
Injunction - To prevent a breach of covenant from happening in the first place
Specific Performance - To force L to comply with their repairing covenant.
Damages - Compensation for breach. For a breach of repair, T can also claim for any reduction in value of the lease and for any distress, inconvenience, and losses caused by having to live elsewhere.
Repudiation - T can claim repudiatory breach, terminate the contract and claim damages.
Set-off - If L breaches repair covenant, T can do the repair themselves and set it off against rent, but this can be expressly excluded in the lease and T must give L notice of their default.
How can the landlord forfeit the lease for non-payment of rent?
- There must be a right of forfeiture in the lease.
Forfeiture = Allows L to enter the property and terminated the lease. No notice is required.
- L must make a formal demand for payment UNLESS there is an exemption in the lease or T is more than 6 months in arrears.
- L can forfeit by physical re-entry or possession proceedings in the County Court.
- T can get relief by paying into court all outstanding arrears and costs.
How can the landlord forfeit the lease for breach of any covenant other than non-payment of rent?
Right of forfeiture must be in the lease.
L must serve a S.146 notice which:
- Specifies the breach
- If capable of remedy, requires it to be remedied; if not, L has to wait 14 days to forfeit
- Requires T to pay any compensation
*For repair covenants (if lease was granted for more than 7 years and has at least 3 years left), a special S.146 notice: it must include a statement of T’s rights to serve a counter-notice within 28 days. If T does, L must apply to the court to forfeit. If T doesn’t, no need to apply to court.
If T doesn’t remedy the breach, L must apply to court to forfeit. T can apply to the court for relief.
What are the other remedies (excluding forfeiture) availble to the landlord for a tenant’s breach of covenant?
Action for Debt - L can sue T to recover debt due within past 6 years
Commercial Rent Arrears Recovery (CRAR) - Commercial leases only. Used to recover rent, VAT and interest. Debts must exceed 7 days’ rent. L must give T 7 clear days’ notice and exercise right within 12 months of notice. A certified enforcement agent can seize T’s goods and sell them, provided 7 clear days’ notice has been given to T of sale.
Damages for Breach of Repair - L can sue for any reduction in value of L’s reversion
Self-help: Jervis v Harris - Lease must contain a clause with this right. If T has breached a repair covenant, L can enter the property and carry out the repairs himself, then sue to recover cost of repairs
Specific Performance - Court order to compel T to perform covenant (rarely granted)
Pursue Guarantors - If T’s rent has been guaranteed, unpaid rent can be paid for by guarantees.
Take the Rent Deposit - If a rent deposit has been entered into. No proceedings necessary
Bankruptcy and Winding Up - If the rent arrears are greater than £5k for an individual or £750 for a company
What are the ways a lease can come to an end?
- Expiration - The term of the lease expires
- Break Clause - Allows either party after a certain period of time to serve a notice to terminate
- Surrender - T voluntarily terminates the lease with L’s consent
- Merger - T acquires the freehold
- Frustration - e.g., destruction of the leasehold property
- Repudiation - T claims repudiatory breach for L’s breach of covenant
- Forfeiture - L can forfeit and terminate the lease if T has breached a covenant
- Insolvency/Bankruptcy - Liquidator or trustee in bankruptcy disclaims onerous lease
How is co-owned land held?
All land that is co-owned is held in a trust
How is the legal title held in a co-ownership setting?
The legal title is always held by two or more individuals (the trustees)
The legal title is ALWAYS held at law as a joint tenancy.
The right of survivorship applies to this legal title. When one legal joint tenant owner dies, their legal ownership dies with them. You cannot pass a legal joint tenancy in a will.
For a joint tenancy to exist at law, you must have the four unities:
- Unity of Possession - All co-owners are entitled to possession of the land
- Unity of Interest - The co-owners hold the same legal estate
- Unity of Title - The co-owners derive their title from the same document
- Unity of Time - The co-owners’ interests must vest at the same time (i.e., from the same transaction or document)
How can the equitable title be held in a co-ownership?
Either as a joint tenancy or a tenancy in common
What is a beneficial joint tenancy?
If the equitable title is held as a beneficial joint tenancy, then:
- The equitable interests are held equally between the beneficiaries as one; and
- Survivorship applies to the beneficial interest (if one of the beneficiareis dies, their interest dies with them, and it cannot be pass down in a will).
Most commonly, beneficial interests are held as joint tenancies where the trustees and the beneficiaries are the same.
For a beneficial joint tenancy, the four unities must be present. If not, you will have a tenancy in common.
What is a tenancy in common?
If the beneficial interest is held as a tenancy in common (tic), the beneficiaries each have a separate share, which they can do what they like with: sell or hand down in a will.
The doctrine of survivorship does not apply.
Unity of Possession still applies.
What can be used to determine if equitable interest in property is held as a joint tenancy or tenancy in common?
- Express Declaration of Trust - The parties state that the property is to be held in equal or unequal shares
- Words of Severance - Words are used which indicate how the property is to be held - e.g., indicating that the shares are to be split or divided (TIC)
- Have the parties contributed money in equal amounts?
- In a family situation, the presumption is a joint tenancy (even if there is unequal financial contributions)
How can an equitable joint tenancy be severed?
- By written notice served on all other equitable JTs, with the immediate desire to sever expressed in the notice
- JT operating on their own share (transferring it to a 3rd party, being bought out, mortgaging their interest or bankruptcy)
- Severance by Mutual Agreement - All JTs agree to sever
After a severance, the JT who severed their interest will hold it as a TIC. The remaining JTs will still hold their equitable interest as JTs in equal shares
After severance, because the equitable share is now held as a TIC, it can be passed down in a will.
How can a co-ownership trust come to an end?
Co-owned Land Owned by One JT - Under the doctrine of survivorship, if all the JTs die, they pass their share onto the other JTs. If one JT is left, the trust comes to an end
Overreaching - Purchaser pays the purchase money to 2 or more trustees. Trust comes to an end.
Partition of Co-owned Land - Land is physically divided between co-owners
Court Order of Sale under S.14 and S.15 TOLATA 1996 - A trustee or beneficiary can apply for an order of sale under S.14 where the owners cannot agree what to do with the property. The court under S.15 will look at a range of factors to see if the home should be sold (e.g., are there children living at the home?)
What is the Law Society Conveyancing Protocol?
A set of guidelines that standardises the residential conveyancing process and makes it more transparent and efficient.
Can a solicitor act for both a buyer and a lender?
Yes, in residential transactions, provided that there is no conflict of interest or a significant risk of such conflict that makes it unreasonable for the solicitor to act.
There will be a conflict of interest if:
- The terms of the mortgage are unfair to the borrower (e.g., very high interest rate)
- The buyer has told the solicitor they shall breach the terms of the mortgage from the outset
- The buyer cannot comply with the terms of the mortgage
- The mortgage or property transaction is complex (and/or is not residential) and requires negotiation between the parties.
What is mortgage fraud?
When a buyer gives false information to a lender (e.g., overstating their income) in order to obtain the mortgage proceeds.
If a solicitor becomes aware that the buyer is attempting mortgage fraud, they must stop acting for them straight away.
If this happens, the solicitor is discharged from their duty of confidentiality; they can pass this information to the lender and may make a report to the NCA.
What sources of mortgage finance can be used to purchase a property?
- Banks and Building Society Loans
- Private Mortgages (e.g., from a relative)
- From a Client’s Employer (e.g., banks may offer reduced rates to employees)
- Finance Houses (bespoke financing companies)
Buyer’s solicitor should ensure the buyer has sufficient funds to complete - before exchanging, they should double check this.
If the solicitor believes the terms of the mortgage are particularly unfair (e.g., higher rates of interest), they may have a duty to advise the clien that they could obtain better financing terms elsewhere.
NOTE - You must be authorised or exempt (or rely on an exclusion) in order to carry out any specified activity in relation to a regulated mortgage contract under FSMA 2000.
A specified activity includes arranging or advising on a specific task. Generally advising on mortgages does not count - however, advising on entering into a specific mortgage does count.
If a solicitor receives a fee for introducing a client to a lender, they must account for that fee to the client.
What are the two different types of mortgages?
- Repayment Mortgage - The borrower pays a monthly fee which pays both the interest and some of the capital lent. At the end of the mortgage term (usually 25 years), the mortgage is repaid.
- Interest-Only Mortgage - Every month, the borrower only pays the interest on the mortgage. The capital remains outstanding at the end of the term of the loan. The borrower will usually invest in an investment plan so that the capital can eventually be repaid.
What is the Investigation of Title?
Inspection of the property’s title documents to check the seller owns the land and therefore has a right to sell the property, and what burdens and benefits are attached to the land.
Registered Land - Title documents are all registered on the Land Registry and are known as Official Copies.
Unregistered Land - Must look through the old documents that make up the title deeds. The bundle of documents for unregistered land is the Epitome of Title.
NOTE - Caveat Emptor: It is up to the buyer to make sure the seller has good title and the seller has a limited duty of disclosure (although the duty in residential transactions is wider than commercial).
What do the Official Copies contain?
- Property Register: describes the property (a title plan) and the rights benefitting the property.
- Proprietorship Register: gives the seller’s class of title (absolute or qualified) and the seller’s name. Also shows a restriction if the property is held as a tenancy in common and if an idemnity covenant has been entered into.
- Charges Register: third-party rights over the property.
For every right benefiting the property, check:
- Adequacy - Is the right good enough?
- Maintenance - Does the buyer have to pay costs towards it?
- Adoption - Conduct search to see if the council will take possession of lanes/roads
Negative Covenants on the Charges Register pass with the land. The buyer will be bound so check if the seller is in breach. If so, get insurance or get a waiver from the person holding the RC or apply to the Lands Chamber to get the RC removed.
If the seller is in breach of a positive covenant, make it a condition of the contract that they shall fix this before completion.
What should the buyer’s solicitor do if the property is held as a tenancy in common?
Pay the purchase money to two trustees.
- This will ensure that any interest in the property is overreached.
- If there is only one legal owner, a second trustee may need to be appointed.
- This transfers any interest in the land to the purchase money, meaning the buyer will take the property fee of any interest of a third party.
NOTE - Remember with a Joint Tenancy, if one of the JTs has died, because of survivorship the interest passes to the surviving tenant. You would need to see a death certificate to ensure that the JT has died, but otherwise, the money can be paid to that sole surviving JT.
If the JT is still going, the purchase money will be paid to the JTs (at least 2) as they will be selling as the legal owners.
What should the buyer’s solicitor do if the property is not being sold by the registered seller?
If the property is being sold by the estate of the seller, check the grant of representation.
If the property is being sold by the seller’s appointed attorney, check the power of attorney.
NOTE - If the seller is a company, you will need to make sure the company validly signs the contract and purchase deed in accordance with CA 2006 (one director for the contract; two or one director plus witness for purchase deed) and search Companies House to check it is a properly registered company.
What is the Epitome of Title?
A collection of copies of the relevant title documents (e.g., old conveyances) and a schedule listing the original documents.
- The actual originals are not delivered to the buyer until completion - these comprise the Root of Title.
- The Epitome will be presented by the seller to the buyer. On completion, the seller sends across the originals, which will then need to be registered at the Land Registry.
- If there are any issues with the seller’s Title, then like for registered land, before exchange the buyer must raise requisitions on title with the seller (questions on the seller’s title to see if these issues/defects can be resolved).
What is the Root of Title and “Good Root”?
Root of Title - The conveyance deed to the seller
Good root - if the conveyance is valid:
- Dated before 1 December 1990 - Any conveyance dated on or after this date would have to have been registered.
- Contain a description by which the property can be identified (i.e., a reference to earlier conveyance which contains a map with boundaries)
- Deals with Legal and Beneficial Interests in the property - the conveyance must have been validly executed and stamped (stamp duty paid if necessary)
- Casts no Doubt on the Seller’s Title - must be clear that the seller is the owner (selling with full title guarantee)
How should the buyer’s solicitor check if the property is held as a Joint Tenancy or Tenancy in Common if unregistered?
Check if there is a joint tenancy or if the joint tenancy was severed to create a tenancy in common:
- Check the Conveyance first - Does it say the property is held as JT or TIC? Even if the property is stated to have been held as a joint tenancy, you then need to check if that JT has been severed.
- Conduct a Bankruptcy Search - Severes JTs and creates TICs.
- Check the Conveyance for a Memorandum of Severance which states that the JT is now a TIC.
- In the purchase deed before completion, check the seller is selling as the sole legal and beneficial owner.
If you have a TIC, you will need to effect an overreach - pay the purchase money to two trustees.
How should the buyer’s solicitor identify the beneifts of an unregistered property?
- Check the Conveyance and any Easement Deeds in the Epitome to see what express legal easements are included.
- Check if the seller is expressly granting any easements (on sale of part).
NOTE - Check if the seller is reserving any easements.
- Check what easements or rights the seller already enjoys which the buyer can pick up via S.63 LPA 1925 or Wheeldon v Burrows.
- Check for any Restrictive Covenant Deeds that the property enjoys (or other rights such as options).
After the sale, any expressly granted legal easements will need to be registered and any equitable easements should be registered via a notice to be binding on a third party.
NOTE - Same process as for registered land when it comes to rights: check adequacy, maintenance, and adoption.
How should the buyer’s solicitor identify the burdens affecting an unregistered property?
Conduct a search against the names of the current and previous sellers at the Charges Registry.
This search will show:
- Restrictive Covenants: these will be registered against the names of the person who gave the RCs - you need to check that person once held the land and their period of ownership to check they made the covenant when they held the land, otherwise RC is invalid. If the RC is valid, you need to ensure the seller has not breached it; if they have, obtain insurance or get a release from the person who holds the benefit of the covenant. Or apply to court to have the covenant removed.
- Estate Contracts (e.g., an Option).
- Equitable Easements (post-1 Jan 1926).
Look out for other burdens:
- Previous Mortgage deeds in the Epitome; make sure you have the discharge deeds of each one.
- Positive Covenants; check the seller’s conveyance to see if they made an indemnity. If so, the seller will want the buyer to enter into one. Ensure the seller remedies any breach before completion.
- Unregistered Interests; Legal interests bind the world so do not need to be registered (check for any legal easements or leases) and check for any pre-1926 equitale easements or RCs that bind because of the operation of Equity’s Darling.
What searches must the buyer’s solicitor always conduct?
- LLC: Local Land Charges Search. Searches for planning permissions and restrictions set down by the Local Authority (e.g., Tree Preservation Orders, or whether the building is listed).
- Local Authority Searches - CON29: Further planning matters - some overlap with LLC. Also shows future plans for the property - e.g., whether there are plans for any new roads, developments, or railways near the property.
- Drainage and Water Supply: Checks on who supplies drainage and water and their terms of supply.
- Desktop Environmental Search: To see if the property sits on contaminated land. The buyer could be liable for the clean-up of contaminated land, even if they do not cause it, so this needs checking.
- Structural Survey and Physical Inspection (usually done by client).
- Index Map Search: for unregistered land - shows whether the land is already registered, is subject to a pending application for registration or has a caution against first registration.
- Central Land Charges Search Certificate: unregistered land - this is the search at the Charges Registry; usually done by the seller’s solicitor.
What searches can the buyer’s solicitor conduct if applicable?
The main ones are:
- A search of the Index Map (for registered commercial properties - remember ALWAYS done for unregistered land). Used to check if there are any interests on the land and the land’s rights over neighbouring property.
- Highways Authority Search. Checks the property’s road access.
- Flood Risk Searches. If the property may be at risk of floods, e.g., by a river.
What is the CPSE1?
Pre-Contract Enquiries made to the Seller for Commercial Transactions.
- The buyer’s solicitor will need to ask the seller a number of questions on the property before exchange, covering issues like planning permission, Building Regulations, and overriding interests.
- These are standardised questions that can be used for commercial conveyances, known as a CPSE1, and these can be added to if necessary to be customisable for the purchase.
NOTE - For residential properties, use standard forms under the Conveyancing Protocol.
- The seller does not have to disclose much (caveat emptor) but if the answer questions incorrectly they will face potential liabilites like misrepresentation.
- In residential transactions, you can use the Law Society forms to make pre-contract enquiries of the seller.
What is the Report on Title and what is the Certificate of Title?
Report on Title = A report setting out in full all that has been found, any issues, the results of any searches and anything not covered. Given to the buyer before exchange.
Certificate of Title = The same but given to the lender (if a client of the solicitor in a residential transaction).
- Make sure to discuss with the client any issues that were raised in the Report or anything the client should be aware of; answer any questions promptly.
- The client must be as fully informed as possible before exchanging to discharge obligations to act in the best interests of the client under the Code of Conduct.
What are the final steps the buyer’s solicitor should make before exchange?
- Make sure the buyer has the required deposit.
- Make sure the Mortgage Finance is ready (send the Certificate of Title to the lender and get lender sign off).
- Explain thoroughly the contents of the contract and what it means for the client once exchange has taken place (that the client will be bound).
- Get the Client to sign the contract (or a power of attorney if the client is not available).
- Make sure you and your client are clear on when the date of completion is.
- Draft the Financial Statement - sets out how much the client needs to purchase the property (including SDLT/LTT and legal costs).
- Get the client’s authority to exchange.
What are the methods of exchange and how can they be done?
3 methods of exchange:
- In Person - Solicitor’s physically date and exchange contracts together. The buyer’s solicitor hands over the deposit.
- By Post - The buyer’s solicitor posts the contract + cheque to the seller’s solicitor. The seller’s solicitor sends their contract. Exchange occurs when the buyer’s solicitor receives their contract.
- By Phone - Using one of Formula A or B:
- Formula A: The seller’s solicitor holds both signed contracts and the deposit. On the phone, both solicitors agree on a date of completion and release each of their client’s signatures. The seller’s solicitor dates both contracts and undertakes to send the seller’s contract.
- Formula B: Each solicitor holds their signed contract. They agree on a completion date. They release each signature (exchange occurs) and the contracts are dated. They undertake to send each other their contracts.
What are the risks between exchange and completion for the buyer and how can they be mitigated against?
After exchange, the risk passes to the buyer.
- The seller is under no obligation to insure the property - if the property is damaged by accidental fire or flooding, the seller will not be liable, and the buyer will have to pay any restoration costs. The seller would only be liable if they deliberately damage or negligently permit damage.
- To avoid the buyer having to pay out for property damage after the exchange:
- Insert a condition in the contract that the seller must obtain insurance for the property; or
- The buyer should get insurance in place immediately upon exchange.
Also a risk that the seller pulls out if it is a long completion date or a dispute arises between the seller and the buyer between exchange and completion.
- To mitigate against a long completion date (over 2 months) or a dispute, register the land contract as an estate contract at the Land Registry or Land Charges Registry.
What are the pre-completion steps the buyer’s solicitor should do?
- Draft the Purchase Deed (Form TR1) which transfers the legal etstate to the buyer and effects completion.
- Requisitions on Title: Questions to the seller’s solicitor about completion practicalities.
- Pre-Completion Searches to “freeze” the register:
- OS1 (or OS2 if sale of part): for registered land. You have 30 working days from date of search to make an application to register the property.- Land Charges Search (K15): for unregistered land. 15 working days from date of search to complete.
- Receive the Completion Statement from the seller’s solicitor - sets out the amount to be paid for the property LESS the deposit.
- Send the Financial Statement to the buyer with a bill of legal costs. Contact the mortgage provider to confirm the money is ready to complete.
What are the pre-completion steps the seller’s solicitor should do?
- Approve the Purchase Deed - the seller’s solicitor has 4 working days to do this after receiving it from the buyer’s solicitor.
- Get the seller to sign the Purchase Deed - normally only the seller signs, but the buyer may need to sign if they are entering into an indemnity covenant with the seller.
- Reply to the buyer’s solicitor on Requisitions of Title - SCS and SCPC require the seller’s solicitor to reply within 4 working days of receiving the questions.
- Give the Completion Statement to the buyer’s solicitor.
- Make sure the mortgage can be paid off - the seller’s solicitor needs to ensure the sale proceeds will pay off the seller’s mortgage. Therefore, they get a Redemption Certificate from the lender confirming the mortgage amount.
- Send Financial Statement to the client (which includes legal fees).
How is completion done?
Complete - Solicitors can complete in person or by post.
For both, money is transferred to the seller’s solicitor who dates the deed and sends / gives it to the buyer’s solicitor with title deeds (if UR).
Discharge Mortgage - Seller’s solicitor gives an undertaking to use the purchase money to discharge the seller’s mortgage and send either the DS1 (registered land) or Deed of Discharge (unregistered land).
If registered land, the seller’s solicitor can also undertake to do the discharge themselves via the e-DS1 service.
Completion Done - The legal title passes to the buyer in unregistered land.
For registered land, the buyer will now need to register the property for legal title to operate at law.
What are the buyer’s solicitor’s post-completion steps?
- Date the buyer’s mortgage deed - Register it at Companies House within 21 days of its creation if you are acting for a company.
- Report to the client (buyer and lender) that the transaction has completed.
- Pay SDLT within 14 days of completion; LTT within 30 days of completion.
- Register the property at the Land Registry (if registered land, make the application within 30 working days of the OS1 search; for unregistered land, within 2 months of completion).
Send certified copies (with the fee) of:
- Form DS1 (discharge of seller’s mortgage) (unless this has been done through the e-DS1 service by the seller)
- Purchase Deed (usually Form TR1)
- Mortgage Documentation (of buyer’s mortgage) in order to register the charge (including any Certificate of Registration from Companies House if you are acting for a company).
- SDLT5 Certificate.
- For unregistered land, the original conveyance (the “good root”), the contract, and search results (from Charges Registry search as well as results from LLC etc).
- Form FR1 where the land is being registered for the first time.
- Form AP1 where the land is already registered (this form updates the registry details).
What is the drafting process of the contract?
The seller’s solicitor drafts the contract. The buyer’s solicitor then approves the contract.
The contract will follow one of the Law Society’s “standard forms” depending on what kind of transaction it is:
- Commercial - Standard Commercial Property Conditions (SCPC) - for commercial conveyances.
- Residential - Standard Conditions of Sale (SCS) - for individuals buying their homes.
Both contain:
- A set of standard terms which are incorporated into the contract unless varied or excluded by either party.
- Special Conditions. Some of the special conditions are “pre-printed”, meaning already in the SCS and SCPS. These can be amended or excluded. Parties can also insert their own tailored special conditions.
What are “specified incumbrances” and how are these dealt with in the contract?
Refers to all the burdens that affect the property on purchase as set out in the contract.
- In a SCS contract, the seller must set out in the contract all latent incumbrances (meaning third party rights on the land which are not discoverable by inspection) and all burdens that are on the Land Registry/the Land Charges Registry and/or Companies House which the property will be subject to on sale.
- In a SCPC contract, the duty of disclosure is more limited. The seller only needs to disclose all latent incumbrances. No need to disclose all other burdens - the buyer is obliged to carry out their own searches/enquiries to the level expected of a business buying a property.
What is “Title Guarantee” and how is it dealt with in the contract?
The seller’s quality of ownership of the property, as given by the buyer.
The seller will give either full title guarantee or limited title guarantee in the contract (they can also give no title guarantee but this is rare).
Both the SCS and SCPC presume that full title guarantee is given, so the contract will need amending if only limited title is being given.
Full Title Guarantee - The seller has the right to sell the property and is not aware of any burdens except those disclosed in the contract.
Limited Title Guarantee - The seller is not 100% sure what burdens attach to the land, but only the seller has not created any new burdens themselves and is not aware of anyone else doing so.
Non-owner sellers, such as PRs, usually give limited title.
What is the date and timing of completion under the standard forms?
Date of Completion - 20 working days after exchange.
Time of Completion - by 2pm on the completion day.
- Both can be amended.
- If the completion is after this time (e.g., 2:30pm), it is deemed to take place the next working day and is delayed. The parties can amend the timing via a special condition.
- If either party under the SCS or the buyer under the SCPC fails to complete, the other party/seller is entitled to compensation at the “contract rate” until completion. This is the rate of interest at which compensation for late completion is assessed.
The rate in the standard forms is the Law Society rate (4% above the base rate of Barclays) but this can be amended by the parties.
What are special conditions?
Used to override or vary the standard conditions.
- Vacant Possession: Property is usually sold VP but there may be tenancies and leases which should be listed.
- Disclosure of Incumbrances: extra ones can be inserted.
- Contents: listing fittings that are being sold.
- New Covenants or Easements (including any indemnity for a positive covenant).
- Any matters agreed upon - e.g., repairing a fence before completion to comply with a positive covenant.
- Title Guarantee - If the seller has limited title, they will remove implied convenants of sale under the standard conditions, give a “limited title guarantee” and a “Faruqi Clause” where the seller excludes liability for any missing conveyance.
- Date and Time of Completion (if amended).
- VAT: State if VAT is payable (commercial properties).
- Conditions to Completion.
When is completion delayed under the standard forms?
Any time after the time stipulated for completion on the completion date.
What contractual compensation is available under the standard forms?
Paid irrespective of the loss suffered at a contract rate payable on each day of delay.
Under the SCS, the seller AND the buyer can pay it.
Under the SCPC, the buyer ONLY pays it.
The amount paid is:
- Based on a penalty interest rate, known as the contract rate - the rate is stated in the contract, but if not, the default is 4% p.a. above the base rate of Barclays (the Law Society rate) for each day of delay (it is calculated and applied daily).
- The contract rate is paid on:
- The whole purchase price of the property if the seller is paying (under SCS)
- The balance of the purchase price (i.e., minus the deposit) if the buyer pays (SCS and SCPC)
- No interest is payable on the actual day of completion: count from the day of delay to (but not including) the date of completion
- No contractual compensation is awarded when rescission has occurred. In that case, the innocent party will claim damages.
How is the contract rate calculated?
- Calculate the number of days of delay.
- Identify the contract rate applicable (usually 5%).
- Check the amount it will be applied on.
- Apply the contract rate of 5% to this total (figure X).
- Figure X represents a per annum figure. So divide it by 365 (to get the daily figure), then multiply it by the number of days of delay.
How can a party rescind the contract?
Serve a notice to complete on the other party.
The non-defaulting party must be ready, willing, and able to complete in order to serve the notice.
To serve a valid notice:
- You must wait for the time of completion to pass.
- You must send the notice using the methods set out in SCS/SCPC: post, fax, or email.
- A notice received after 4pm on a working day is deemed to have been received the next working day.
- Deemed times of service are:
- Post: the second day after posting.
- Fax and Email: one hour after sending (be careful - if sent at 3:30pm would not be deemed until 4:30pm therefore next working day).
- Parties must complete within 10 working days of receiving the notice (excluding the day on which the notice is received).
- Under the SCPC, if the buyer did not pay a deposit or paid a deposit of less than 10% (e.g., 5%), they must pay a 10% deposit or make up their deposit to 10%.
- One served, a notice to complete cannot be withdrawn.
What remedies are available if a party does not complete within the period required after the receipt of a rescission notice?
If the buyer fails to complete, the seller can:
(A) Rescind
(B) Take the deposit (and any interest accrued on that deposit)
(C) Resell the property
(D) Claim damages
if the seller fails to complete, the buyer can:
(A) Rescind
(B) Get repaymet of the deposit + interest accrued on it
(C) Claim damages
What damages are available for a delay to completion?
Because there has been a breach of contract, common law damages are available as of right. This is to compensate for any loss suffered.
DAMAGES ARE ONLY PAYABLE IF A LOSS HAS BEEN SUFFERED - To calculate the damages, the starting point is the difference between the market price of the property and the contract price at the date of breach, then financial losses can be added as interest costs on the mortgage, legal costs, costs of removals etc (subject to standard principles of causation, remoteness, mitigation, and defence).
- Under the SCPC, a damages claim is the only claim available for a buyer against a seller if the seller delays (except recission after service of notice). Therefore, under the SCPC the buyer must rely on damages to recoup any financial losses.
- For the seller under the SCPC and both under the SCS, damages can be claimed in addition to contractual compensation if the actual loss is greater than what is recovered from contractual compensation. Credit will be given for any contractual compensation already paid.
What are the documents that make up a lease?
The Agreement for Lease - The contract exchanged between the parties. It contains the SCS/SCPC and any special conditions.
The Lease Deed.
On exchange, the lease is attached to the back of the agreement for the lease (but the lease deed is not signed or dated until completion). Both documents are sent to the Land Registry to be registered.
What is the grant of a lease and what are the key procedural transaction steps?
The landlord carves a new leasehold estate out of their freehold estate.
- Deduction and Investigation of Title of the Freehold, including the same searches as for a freehold transaction.
- If the landlord has a mortgage, consent of the lender is required.
- Report on Title.
- The landlord’s solicitor will draft the Agreement for Lease. One of the Law Society Formulae can be used for exchange by phone. When the lease contract is executed, the lease deed is annexed.
- Requisitions on Title (practical questions for completion) and other pre-completion steps (including a OS1/OS2/CLC search).
- Completion: the lease deed is signed and dated (in counterparts); T will likely pay a premium upfront.
- Post-completion steps:
a. The lease will need to be registered if it exceeds 7 years.
b. SDLT/LTT will need to be paid (on the premium and upfront rent).
What requirements will a lender have for providing a mortgage for a lease?
- The consent of the landlord’s lender, if applicable, be obtained.
- The length of the lease must be adeuqate (usually cannot be less than 60 years).
- The lease must contain adequate insurance provisions which fit with the lender’s insurance requirements.
- Landlord has good title to the freehold.
- The lease contains adequate repair covenants in respect of:
a. The actual premises T is renting; and
b. The common parts of the building. - For residential leases, forfeiture is not allowed if T becomes bankrupt.
- Notice of the mortgage must be given back to L after completion, which L will counter-sign and hand back to T.
What is an assignment of lease and what are the procedural steps?
The tenant sells their remaining term in the lease to another party who then becomes the immediate tenant of the landlord.
- Two Investigations of Title - the freehold and the leasehold. You need official copies of both (if unregistered, the epitomes). Searches will need to be carried out against the freehold, including pre-completion priority searches (against both).
- Usually, as a condition of assignment, L, T, and A enter into a Licence to Assign to give privity of contract between A and L. This also signifies L’s consent to the assignment.
- T will enter into AGA with L: this is a guarantee given by T that A will perform all covenants under the lease, and creates privity of contract between L and outgoing T.
- If the freehold of the property is subject to a mortgage, consent of the lender is required.
- If the lease being assigned is a sublease, consent of the freehold owner is required.
- A’s solicitor will need to inspect:
- The terms of the lease (Can T assign? Is L’s consent needed?)
- That T is rightfully occupying the property
- That there is adequate insurance in place
- That T is paying rent and service charges on time.
- A TR1 deed is executed on completion. LoA also executed on completion.
- SDLT/LTT is payable if a premium was paid on assignment.
- If the lease is an unregistered lease with more than 7 years to run, it will need to be registered - FR1.
- If the lease is already registered, the Land Registry will need updating - AP1.
What is a sublease and what is the procedure for granting one?
Where a tenant grants a lease out of their own lease (called the sublease).
- New lease document is drafted and entered into.
- Investigation of Title of the headlease and the reversion.
- A condition of subletting will be that L, T and ST enter into a licence to sublet. This creates privity of contract between L and ST.
What are the key terms of a licence to assign?
- Approval of the Landlord - It will typically require the landlord’s approval of the assignment. The landlord may not have the right to refuse the assignment if the proposed assignee does not meet certain criteria, such as having a poor credit rating or a history of defaulting on leases.
- Assignment Fee - May require the tenant to pay an assignment fee to the landlord for the administrative costs associated with processing the assignment.
- Release of Liability - It will often include a provision that releases the outgoing tenant from any future liability or obligations under the lease once the assignment has been completed.
- Representations and Warranties - May require the tenant to make certain representations and warranties to the landlord and the assignee, such as that the lease is in good standing and that the tenant has not breached any terms of the lease.
- Indemnification - May require the tenant to indemnify the landlord and the assignee against any losses or damages that may result from the assignment.
What is the Code for Leasing Premises?
A set of guidelines/recommendations when negotiating a commercial lease.
Voluntary, but landlords are expected to follow it.
Code contains 10 recommendations.
Recommendation One:
“Landlords must make offers in writing which clearly state: the rent; the length of the term and any break rights; whether or not tenants will have security of tenure; the rent review arrangements; rights to assign, sublet, and share the premises; repairing obligations; and the VAT status of the premises. Landlords must promote flexibility, stating whether alternative lease terms are available and must propose rents for different lease terms if requested by prospective tenants.”
What is the term and a break clause?
Term = Length of a lease
Break Clause = An option to terminate before the end of the term
Commercial leases are usually for a fixed term, normally seven years.
Under law, tenants have an automatic right to renew a lease following the end of its term unless the parties agree to exclude that right - known as SECURITY OF TENURE.
There may be an option to terminate the lease before the end of its term, known as the break clause. Under this clause, the tenant or the landlord can terminate the lease on a certain date (known as the Break Date) earlier than the end date by serving notice. Notice must usually be served 6 months before the Break Date.
The Code recommends:
- The length of term must be clear
- Any pre-conditons to a tenant exercising a break clause should be limited
What are the standard contents of a rent clause for a commercial lease?
Usually a monthly or quarterly rent (paid on Quarter Days); rent may be reduced if a premium is paid upfront.
- There may be a grace period for the payment of rent. This means if the tenant does not pay on the specified date, they may get a few extra days to pay. If they still do not pay, interest will be charged.
- Landlords can choose to charge VAT on rent. If they do, they must opt to tax the property.
- Tenant will try and negotiation a right of suspension of payment of rent if the premises, or the access to it, is destroyed or damaged by something covered by insurance (an insured risk).
What are the standard provisions of repair covenants in the lease?
The tenant will be required to repair and decorate the premises during the term and then hand it back to the landlord in repair at the end of the term.
For example:
- T must replace fixtures and fittings with new ones of the same kind if they are required to be replaced.
- T shall keep the property clean, tidy, and free from rubbish.
- Every X number of years, T shall redecorate the property so that it is of the same standard and look as it was at the beginning of the term.
- L has a right to inspect the property and give notice of breach of repair covenant which T will have to remedy; if not, L can do it themselves and sue for debt (Jervis v Harris Self-Help Clause).
- “Yield Up in Repair” Clause. Requires a tenant to return the property to the landlord in a state of adequate repair. If L finds problems, they can serve a schedule of dilapidations on the tenant. T can either do the repairs or pay a sum. T may not be able to exercise their break clause if the property is not in adequate repair at the time.
What negotiating position should the tenant take with respect to repair covenants?
- Any replacement fixtures and fittings should be of the same kind: AVOID improvement language (to reduce expense).
- T should get a surveyor at the start of the lease to inspect the property and report on its condition. This should be scheduled in the lease so that T only needs to maintain that condition throughout the lease, rather than improve it. The tenant should AVOID any obligation to renew or rebuild.
- Landlords often want tenants to improve the property throughout the term. Tenants should push so that they only have to keep it in the state they found it (recommended by the Code).
- T will want to exclude damage for fair wear and tear and any liability for damage caused by latent defects in the property.
- The tenant will not want to repair any damage as a result of an insured risk.
- For Yield Up and Repair - get this clause removed or have the assessment of the property subject to a surveyor’s reasonable opinion.
What are the common insurance provisions in a lease and what should the tenant push for?
The landlord will take out insurance, and charge the tenants the premium (on top of the rent). L will covenant to take out insurance; T will covenant to pay for that insurance.
T should make sure of the following:
- A comprehensive list of stuff that is insured is included. The landlord will want the option to insure anything else outside that list as they feel necessary (because they can just charge the tenant for it), which the tenant should resist.
- The insurance covers full reinstatement value.
- It is with a reputable insurance company.
- L covenants to use any insurance money provided to actually carry out repairs to the property caused by an insured risk.
- T does not pay rent if an insured risk occurs that prevents their access to the premises (a rent abatement clause).
- The insurance is taken out in both T and L’s names so T is kept informed of the policies.
- A right of termination should the property become unusuable and unable to be reinstated is included.
The Code recommendds:
- L takes out appropriate and reputable insurance policies
- Rent Abatement should be allowed where the premises are damage by an insured risk. Leases should be allowed to be terminated if reinstatement cannot be completed within a certain period
What is an alienation covenant and what are the rules on its operation?
Covers any dealing by T of their leasehold interest to another - including assigning or subletting.
There are two types: absolute (not permitted0 and qualified (permitted subject to L’s consent).
- Under law, qualfiied covenants become fully qualfiied covenants (consent of L not to be unreasonably withheld, given within a reasonable time and written notice to T stating any reasons for refusal)
- What constitutes a “reasonable time” to respond to an alienation request depends on the facts at the time, but usually, it should be within a few working days. It is up to the landlord to prove that their refusal was reasonable/was made within a reasonable time.
- L cannot charge T for a fee for giving their consent but can recover costs from T incurred in giving such consent, e.g., credit checks on A/ST.
- Consent is given in the form of a licence: a licence to assign or sublet.
- Under new commercial leases, L can set down circumstances and conditions that must be satisfied to give consent to assign (not sublet). These conditions do not have to be reasonable, but if one of the conditions is subject to L’s discretion, that discretion must be exercised reasonably. One of these conditions will likely be that T enters into an AGA.
- T and A/ST will covenant not to take possession of the premises until the licence is executed.
- In commercial leases, it will be a condition of the licence to assign being effective that the outgoing T signs and delivers to L the AGA.
The Code recommends that:
- Alienation should be permitted, and consent should not be unreasonably withheld
- L should not impose any circumstances or conditons unless the assignee is of a questionable financial position
- T should not have to enter into an AGA unless A is of questionable financial standing
What is a Use covenant and what are its standard terms?
A covenant that restricts the ways a tenant can use the premises. Tenants are usually restricted to using the property only for the “permitted use”.
- The clause can be absolute (permitted use only), qualified (unless without L’s consent), or fully qualified (consent cannot be unreasonably withheld). There is no requirement for the landlord to be reasonable when consenting to use, as for alienation (no automatic upgrade of a qualified covenant).
- The landlord is not permitted to charge for giving use consent but can recover any costs for granting consent and recoup the loss to the value of the property as a result of the change in use.
- The tenant should negotiate a use clause that allows the premises to be used in a similar way to the way the tenant wants to use it (e.g., offices), but then allow for other uses subject to the landlord’s consent, not to be unreasonably withheld.
What is an alteration covenant and what is the law on this covenant?
A covenant that restricts the changes the tenant can make to the property. The lease will usually prohibit T from making any alterations whatsoever, subject to exceptions.
These exceptions are:
- T must get L’s consent (a qualified covenant)
- The type of alterations allowed is limited
- T must provide a full written plan and description of what alterations they plan to do
- The property must be returned to its original state at the end of the lease
The law:
- If you have an absolute prohibition of any alternations to the property:
- This won’t apply if the tenant is making alterations to improve access to the property for disabled people; and
- The tenant can bypass the landlord and apply to court for any alteration
- If you have a qualified alteration covenant:
- L’s consent cannot be unreasonably withheld if T is going to carry out improvements to the property from T’s perspective. The burden is on T to prove L is being unreasonable
- There is no requirement for such consent to be given within a reasonable time
- L can put in the following conditons for giving such consent:
- Payment of compensation for any loss of value of the property
- Reinstatement of the property at the end of the lease term
- Payment of L’s expenses in giving consent
What does the Code recommend with respect to alteration covenants?
- Restrictions on alterations should not be more restrictive than so as to protect the value of the property
- L should not prevent T from making internal alterations to the property unless they affect the building in a major way
- L should not require T to make good any alterations at the end of the lease
NOTE - When consenting to alteration, L will likely require T to enter into a licence to alter.
What is a rent review clause?
Allows L to increase the rent to the market rate after a certain amount of time. This is to prevent L from being stuck on the rate agreed at the beginning of the lease when the market rate is rising.
Main types of Rent Review:
- Stepped Review - L and T agree at the outset of the lease to increase the rent at certain points of the term (e.g., after 5 years the rent shall increase by x%).
- Increases based on T’s Turnover - Consideration should be given as to whether VAT will be included and how L will assess turnover.
- Indexation - Increases based on inflation.
- L and T agree the rent themselves.
- Open Market Rent Review - The property is re-evaluated at a certain point during the lease (e.g., every 5 years) to see what the rent would be if the lease was put on the market at that point. These reviews are “upwards only” - this means that even if the market is depressed, and rents have reduced since the lease started, the tenant’s rent will not be reduced but will stay the same. The Code recommends that they should not be upawards only but this is often ignored by landlords.
What are “assumptions and disregards”?
When an open market rent review is done, it is done by a surveyor. L and T will agree a set of “assumptions and disregards” the surveyor must use when evaluating the market value of the rent.
- These are to ensure that the surveyor considers what a fresh tenant would pay on the market as accurately as possible for the lease as it would be on the market as standard, rather than taking into account the personal situation of the current landlord or tenant. They are looking at the hypothetical valuation of the tenancy as is on the market.
- These assumptions and disregards are up for negotiation - T will not want them to be too positive or lenient on the property as it could raise the rent.
- Once the rent has been agreed between L andT, they will enter into a “rent review memorandum” to document the agreement of the new rent.
What is security of tenure?
Applies to commercial leases. Means the tenant is able to stay in their property after the expiry of the lease.
Provided under the Landlord and Tenant Act 1954 (Part II).
- The tenant is secure in the leasehold property even if their lease has expired. If tenants stay, they are “holding over” their lease, and the lease is deemed to continue.
- If a landlord wants to end the lease and remove the tenant, they must prove one of the grounds in the 1954 Act exists. Even if L applies to court to terminate the tenancy, T still has a right to apply for a new one.
What does security of tenure under the LTA 1954 apply to?
“Business tenancies” only. A business tenancy is occupied by the tenant for the purpose of carrying on a business.
- Tenancy = Must have the essential characteristics of a lease: certainty of term and exclusive possession (therefore can be a fixed or periodic term tenancy and can be express or implied - licences are not included).
NOTE - Tenancies fixed for 6 months or less are not included.
- Occupation = The tenant must occupy the premises to have security of tenure. Subletting the whole will remove this right.
- Business = Any business counts, including a members’ tennis club and even a charity. People can stay in the property on a residential basis, but the business must still be a significant purpose of the lease.
How can a landlord contract out of LTA 1954?
- L must serve notice on T at least 14 days before exchange (or shorter if agreed by T) - known as a warning notice. This has a prescribed form.
- T must make a declaration:
a. A simple declaration if the notice has been given more than 14 days before the entry into the lease; or
b. If the notice has been given less than 14 days before, a signed statutory declaration stating they have received and accepted the consequences of the notice. - The declaration has a prescribed form that must be adhered to to be valid.
- The lease must contain a clause stating that security of tenure has been excluded AND must directly reference L’s warning and T’s declaration.
What is a “s.25 notice” under the LTA 1954?
A notice to T from L ending the current tenancy on a date specified in the notice (the specified end date). L must inform T whether they will oppose (hostile notice - with grounds) or not oppose (friendly notice) T’s application for a new lease. T then applies for a right to renew.
- The notice must be served on the tenant not more than 12 nor less than 6 months before the specified end date (SED).
- The SED cannot be earlier than the date on which the tenancy could have been brought to an end. This means L cannot set an SED which is earlier than the CED of the lease.
What is a hostile s.25 notice?
Where L wants to terminate the current lease and oppose any new lease. Must contain grounds of opposition.
The grounds of opposition are either discretionary or mandatory.
Once the notice has been served, an application to court must be made. This can be by either:
- Landlord: applying for termination on the grounds stated in the s.25 notice. The tenant will then need to make a counterapplication to challenge. The landlord cannot do this if the tenant has already made an application asking for the lease to be renewed.
- Tenant: who will then apply for a new tenancy, hoping the court won’t uphold L’s grounds of opposition. L must make a counterapplication to challenge.
L and T must make the court application any time after service of the s.25 notice and at the latest on the SED contained in the notice. This deadline can be extended by agreement between the two parties to allow them to try and negotiate a solution before applying to court.
If T does not make any application to court (a counter or an application), they will have no right of renewal. An application is therefore cruical.
What are the mandatory and discretionary grounds under a hostile s.25 notice?
Mandatory - If L proves them, no new tenancy can be granted:
- L has made an offer of suitable alternative accommodation with regard to T’s business
- L intends to demolish, reconstruct, and carry out substantial works of construction to the whole or a substantial part of the property and cannot do so with T there
- L intends to occupy the property itself. L cannot use this ground if they purchased the property (or reversion if a new landlord) within 5 years of the SED/SCD.
Discretionary - Even if L proves them, the court can still grant a new tenancy to T:
- Breach of Repairing Obligation by T which must be a serious breach at the date of the hearing
- Peristent and serious delay in paying rent (MUST be persistent)
- Other substantial breaches of the lease, must be serious and persistent
- If T has sub-letted a part of the property, L can claim to want to take possession of the whole property to lease or sell it as a whole.
What is a friendly s.25 notice?
L still wants to terminate the lease but wants T to stay on, i.e., L wants to take advantage of increased rents in the market
- This notice does not contain grounds of opposition, it must state that a new tenancy is not opposed and include proposals (i.e., terms) for a new lease
- An application must still. be be made to the court in the same way as for a hostile notice and within the same time frame. Application is made for a new lease rather than termination.
Remember - T must ALWAYS apply to court to secure the right of renewal, T must apply by the SED in the notice
What is a s.26 notice?
Notice served by T on L to terminate the current tenancy and request a new one to commend on a date specified in the notice (SCD).
The notice must be in the prescribed form. Must set out the proposed terms of the new lease.
The SCD shall be no longer than 12 months nor less than 6 months after the notice was given. Cannot be earlier than the CED.
T may choose to serve a s.26 notice because:
- Assignment: T may want to assign. A lease with not long left will not be attractive to potential assignees.
- Rental Negotiation: Local rents may be fallen, so T wants a lower rent via a new lease.
- Improvements to Property: T may want to make improvements to the property, but only has a short time left on the lease so wants a new lease giving it longer.
What is the process after a s.26 notice has been served?
L serves counternotice and/or T or L apply to court.
If L wishes to oppose renewal, it must serve a counter-notice on T within 2 months of receiving the s.26 notice. The notice must state the grounds of opposition (same as under s.25). If L fails to serve the counter, he cannot oppose the renewal or apply to court.
Any time after L has served the counter-notice OR if L fails to serve the counter-notice once 2 months have passed since serving the s.26 notice, L (if they have served) and/or T can apply to court. T applies to court to have the lease renewed; L applies to court to terminate (NOTE - L cannot do so if T already has). The deadline for application is the day before the SCD. This deadline can be extended by agreement between the two parties.
If T fails to apply to court, T has no right of renewal. So, if L does apply after serving the counter, T must still make an application.
If L does not oppose the new tenancy, L does not need to serve a counternotice. T and L can negotiate the terms of the new lease. T should still apply before the SCD to ensure they still have protection under the Act. The parties can agree to extend the time limit.
What is a s.27 notice?
T wants to end the tenancy without renewal. Served by T on L.
- This notice will only be used if T intends to stya on a bit longer after the CED.
- After serving the s.27, T cannot then serve a s.26.
When can a tenant be paid compensation by the court under LTA 1954?
Either after s.25 or s.26 notice, the court does not grant a renewal of tenancy and the tenant has to vacate, and either:
- L uses ground of opposition which T is not at fault for:
- If T has subletted, L wants to take possession of the whole.
- L intends to demolish, reconstruct, and carry out substantial works of construction on whole/substantial part.
- L intends to occupy the property themselves.
OR
- The landlord has used misrepresentation or concealment of facts when stating the grounds and either:
- The court refuses to renew the tenancy after an application is made; or
- The tenant does not make an application to the court at all or withdraws their application.
The amount of compensation will be the equivalent of the rateable value of holding unless the tenant (and predecessors in the same business) have been in occupation for at least 14 years, in which case it will be twice the rateable value.
When will the court impose terms of the new tenancy?
If the court grants a renewal lease and the parties cannot agree on the terms of the new lease, the court steps in.
If the clause is to do with the property, the court would impose a term of: the property is occupied by the tenant as in the current tenancy.
If the clause is to do with the duration, the court decides this but it cannot be for more than 15 years.
If the clause is to do with rent, the court would impose a term of: market value, subject to disregards. Court can insert a rent review clause.
If the clause is to do with the term commencement date, the court would impose a term of: 4 weeks after the court order (to allow time for appeal) and 3 months.
When is planning permission required?
Planning permission is required for any “development”.
Development is defined as:
- The carrying out of building, engineering, mining or other operations in, on, over or under land (which includes the demolition of buildings and structural alterations or extensions; and
- The making of any material change in the use of any buildings or other land.
If PP is required, an application must be made to the Local Authority - they can grant, refuse, or attach conditions to the PP.
What are the exceptions to “building works” that do not require planning permission?
- Works that only affect the interior of the building.
- Works which do not materially affect the outside appearance of the building.
- “Permitted Developments” - A list of works which are specifically allowed uner planning law.
“Permitted Developments” include:
- The enlargement, improvement or other alteration of someone’s private home (dwelling house), including roof improvements, extensions, chimneys, swimming pools etc (subject to a number of conditions, such as the maximum height and materials that can be used).
- “Minor Operations”: the erection of fences, walls, and gates; constructing access to public roads, painting, installation of electric parking charging hubs, installation of CCTV (again, subject to several conditions such as the height of the fences).
What is a “material change in use”?
Changing the use of the property to a different class under planning law.
Main Classes are:
- Class E: Commercial, business and service
- Class F1: Learning and non-residential institutions
- Class F2: Local Community Uses
- Class B2: General Industrial
- Class B8: Storage or Distribution
- Class C1: Hotels
- Class C3: Private Homes
To change from one class to another (e.g., F2 to E), you will need PP and to make a Change of Use Application.
What happens if planning permission has been breached or ignored?
The local authority can serve an enforcement notice or a breach of condition notice.
- These notices can only be served during the relevant period.
- The buyer can be liable even if they did not commit the planning breach. This means you must:
- Ensure the property is not breaching PP/Law at the date of purchase. Conduct searches (LLC and CON29) and make enquiries with the seller.
- If there are breaches, get the seller to remedy these before exchange.
What are the relevant periods for breaches of planning permission in England?
From 25 April 2024, all breaches of PP have a 10 year enforcement period.
Prior to 25 April 2024 - 4 year enforcement period.
- The exception to these rules is deliberate concealment of a breach: there is no time limit.
What are the relevant periods for breaches of planning permission in Wales?
For building works - within four years following substantial completion of the works.
Change of use - private home, 4 years from change of use. Not a private home, 10 years from change of use.
Breach of Condition of PP - 10 years from the date of the breach of condition
Deliberate Concealment by the developer - Any time after the time limits above for all three breaches
When must building regulations be complied with?
Whenever building works are carried out.
