Property Law 6 Flashcards
What is the definition of a lease?
“the grant of a right to the EXCLUSIVE POSSESSION of land for a DETERMINATE TERM LESS THAN that which THE GRANTOR HAS HIMSELF in the land.
What are the essential ingredients of a lease?
- Exclusive possession
- If over 3 years requires a deed
- If under 3 years can be in writing or oral
- Fixed term or periodic tenancy
- The reversion (the property reverts to the LL after the lease comes to an end).
What is the “term commencement date”?
The date on which the lease term starts
NOTE: the term commencement date can be earlier or later than the lease is dated.
What is a commencement date that starts after the lease is dated called?
a reversionary lease
If the term of a lease is “from and including” a certain day of the year, when does the term expire?
The day before that day of the year
E.g. a term of 10 years from and including 1 April 2010 would end on 31 March 2020.
If the term of a lease is “from “ a certain day of the year, when does the term expire?
The day of that day of the year
E.g. a term of 10 years from 1 April 2010 would start on 2 April 2010 and end on 1 April 2020.
If a lease is silent as to whether rent is payable in advance or arrears, which method is used?
Rent will be payable in arrears.
What are the four types of rent review?
- Stepped rent - increase by set amount
- Index-linked rent - increased by reference to an index
- Turnover rent - calculated by the tenant’s turnover
- Open market rent - MV
When thinking about MV, What assumptions are there on a hypothetical lease?
- the tenant has complied with covenants
- the landlord has complied with all its covenants
- on the conditions as the actual lease
- same term as lease
- if damaged/destroyed, the premises have been repaired or rebuilt
What disregards are there on a hypothetical lease?
- the effect of the tenants occupation
- goodwill attached to business
- tenants improvements
What happens after the rent review is complete?
The new rent is documented in a “rent review memorandum”
What are the risks of a rent review before the first 5 year anniversary?
SDLT may be due may be due as its calculated by the first 5 years of rent
What is the purpose of the Code for Leasing Business Premises?
“improve the quality and fairness of negotiations on lease terms”
AND
“promote the issue of comprehensive heads of terms that should make the legal drafting process more efficient”
Who does the Code for Leasing Business Premises apply to?
RICS regulated individuals
What are the mandatory requirements of the Code for Leasing Business Premises?
- Lease negotiations must be approached in a constructive and collaborative manner.
- An unrepresented party must be advised of the existence of the code.
- The landlord is responsible for ensuring that the heads of terms compliant with the code are agreed before the draft lease is circulated
What areas MUST be covered by the heads of terms under the Code for Leasing Business Premises?
- extent of the premises
- length of term and break rights
- rent and rent review
- repairing obligation
- rights to assign or underlet the lease
- permitted use of the property
- rights to alter the property and obligation to put the property back in its original state.
What areas are GOOD PRACTICE to cover in the heads of terms under the Code for Leasing Business Premises?
- all the rights the tenant will need for its use of the premises
- How rent will be reviewed and when rent is payable.
- Advise of limits to repairing obligation
- Suspend rent if buidling is damaged
When can a RICS member depart from the GOOD PRACTICE elements of the Code for Leasing Business Premises?
A strong reason to do so.
What are the stages of a grant of lease?
- Pre-exchange (not common)
- exchange (not common)
- Pre completion
- Completion
- Post completion
What are the steps required of the Landlord’s solicitor pre-exchange?
- Take instructions
- prepare draft lease and, if relevant, agreement for lease
- DEDUCE title and respond to any queries on title
- Answer pre-contract enquiries
- Once agreed, print the agreement for lease, obtain LL’s signature, and send counterpart to tenant’s solicitor.
What are the steps required of the Tenant’s solicitor pre-exchange?
- Take instructions
- Review draft lease and agreement for lease and amend as required
- INVESTIGATE title and raise queries
- Raise pre-contract enquiries and searches
- Arrange for tenant to sign counterpart lease.
Which enquiries will the tenant’s solicitor raise?
CPSE1 (as a buyer would in a commercial transaction)
CPSE3 (which are specific to a lease)
If a contract is used, what is the process for exchange and what does the contract normally cover?
- LL’s Sols and T’s Sols exchange as for a freehold property (usually using Law Societ B)
- No deposit is usually payable
- The agreement will likely set out conditions to be met for the lease to start (e.g. property being built)
- agreement will normally have a draft of the lease annexed.
What are the steps required of the Landlord’s solicitor pre-completion?
- Prepare original and counterpart lease, obtain LL’s signature and sent to counterpart for T’s signature.
- Prepare and send the completion statement detailing money due on completion
