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Ella SQE > Property Law 6* > Flashcards

Property Law 6* Flashcards

1
Q

What is the definition of a lease?

A

“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.

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2
Q

What is an FRI lease

A

full repairing and insuring lease

  • T picks up the costs (direct or indirect) associated with the property , and L receives clear rent
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3
Q

In a commercial lease, who is generally responsible for repair? What about for lease of part/whole?

A

Tenant

Of whole - for interior, exterior & structural repair

Of part - ONLY interior (other tenants responsible for other areas)
- however, LL will bear responsibility but will recover cost from tenants

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4
Q

How is repairing obligation set out in lease?

A

tenant’s covenant

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5
Q

Can the tenant generally choose whether to repair or replace an item of disrepair?

A

Yes unless lease states otherwise

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6
Q

What is the essential ingredients of a lease?

A

Exclusive possession

  • must be able to exclude strangers & landlord (Except when L exercising right to enter premises)
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7
Q

What formalities are required for leases?

A

Over 3 years requires a deed

3 years or under can be in writing or oral

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8
Q

What is the reversion?

A

Interest that L holds subject to lease

The reversion (the property reverts to the LL after the lease comes to an end).

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9
Q

Full repairing obligation vs qualified repairing obligation

A

Full - keep (i.e. put) in good repair

Qualified - e.g. keep in no better condition than at date of lease (schedule of condition)

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10
Q

What is the “term commencement date”?

A

The date on which the lease term starts

NOTE: the term commencement date can be earlier or later than the lease is dated.

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11
Q

What type of term does an FRI lease typically have?

A

Fixed term

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12
Q

What is a commencement date that starts after the lease is dated called?

A

a reversionary lease

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13
Q

If the term of a lease is “from and including” a certain day of the year, when does the term expire?

A

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.

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14
Q

If the term of a lease is “from “ a certain day of the year, when does the term expire?

A

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.

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15
Q

3 types of break clause

A

Landlord break

Tenant break

Mutual break

NB: may specify a date OR may be a rolling break

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16
Q

2 broad types of lease

A
  1. Short lease with market rent (most commercial leases, premium not normally charged)
  2. Long lease with ground rent (most residential leases, most restricted to peppercorn rent only)
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17
Q

Ground rent on long residential leases?

A

Since 30 Jun 2022 - long residential leases restricted to peppercorn rent only

Before 30 Jun 2022 - ground rents remain effective still

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18
Q

If a lease is silent as to whether rent is payable in advance or arrears, which method is used?

A

Rent will be payable in arrears.

NB: FRI lease will state if rent is payable in advance

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19
Q

What if parties complete the lease part-way through a quarter?

A

Quarter will be apportioned, so T only pays the appropriate portion of rent

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20
Q

Traditional quarter days

A
  • 25 December to 24 March
  • 25 March to 23 June
  • 24 June to 28 September
  • 29 September to 24 December
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21
Q

Modern quarter days

A

1 January

1 April

1 July

1 October

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22
Q

Will rent review be implied

A

NO

NB: FRI lease of 10+ yrs will usually contain rent review clause

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23
Q

What are the four types of rent review?

A
  1. Stepped rent - increase by set amount
  2. Index-linked rent - increased by reference to an index
  3. Turnover rent - calculated by the tenant’s turnover
  4. Open market rent - MV (type adopted by FRI leases)
24
Q

What will a valuer consider in open market RR

A
  1. Rent payable for comparable premises
  2. Terms of the hypothetical lease
25
Q

Basic assumptions for OMRR

A
  • the premises are vacant and available
  • there is a willing landlord and a willing tenant
26
Q

When thinking about MV, What assumptions are there on a hypothetical lease?

A
  • the tenant has complied with covenants
  • the landlord has complied with all its covenants
  • on the terms of the actual lease other than rent payable
  • same term as lease
  • if damaged/destroyed, the premises have been repaired or rebuilt
27
Q

What disregards are there on a hypothetical lease?

A
  • the effect of the tenants occupation
  • goodwill attached to business
  • tenants improvements
28
Q

What happens after the rent review is complete?

A

The new rent is documented in a “rent review memorandum”

  • signed by L&T, kept with lease
29
Q

What are the risks of a rent review before the first 5 year anniversary?

A

SDLT may be due may be due as its calculated by the first 5 years of rent

30
Q

What if the new rent was agreed some time after rent review?

A

New rent is backdated to rent review date

PLUS interest (non-punitive)

31
Q

What is the purpose of the Code for Leasing Business Premises?

A

“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”

32
Q

Who does the Code for Leasing Business Premises apply to?

A

RICS regulated individuals/firms & RICS members

33
Q

What are the mandatory requirements of the Code for Leasing Business Premises?

A
  • 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
34
Q

What areas MUST be covered by the heads of terms under the Code for Leasing Business Premises?

A
  • 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.
35
Q

What areas are GOOD PRACTICE to cover in the heads of terms under the Code for Leasing Business Premises?

A
  • 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 building is damaged
36
Q

When can a RICS member depart from the GOOD PRACTICE elements of the Code for Leasing Business Premises?

A

Exceptional circumstances

37
Q

What are the stages of a grant of lease?

A
  • Pre-exchange (not common)
  • Exchange (not common)
  • Pre completion
  • Completion
  • Post completion
38
Q

What are the steps required of the Landlord’s solicitor pre-exchange?

A
  • 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.
39
Q

What are the steps required of the Tenant’s solicitor pre-exchange?

A
  • 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.
40
Q

Which enquiries will the tenant’s solicitor raise?

A

CPSE1 (as a buyer would in a commercial transaction)

CPSE3 (specific to a lease)

41
Q

If a contract is used, what is the process for exchange and what does the contract normally cover?

A
  • 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.
42
Q

What are the steps required of the Landlord’s solicitor pre-completion?

A
  • 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
43
Q

What does the Code for Leasing Business Premises apply to?

A

commercial lettings except short tenancies of 6 months or less.

44
Q

What are the steps required of the Tenant’s solicitor pre-completion?

A
  • arrange for T to sign counterpart lease
  • Obtain funds from client needed to complete as per completion statement
  • raise pre-completion searches
45
Q

What searches are carried out at the pre-completion stage?

A
  • OS1 with a lease of whole,
  • OS2 with lease of part.

If the lease is not registrable then:
- OS3 (this does not give priority)

46
Q

What happens on completion?

A
  • T’s Sols send L’s Sols the completion monies
  • LL and T’s solicitor agree to complete and then date the executed leases
  • LL and T’s Sols send the completed original and counterpart to each other.
47
Q

What happens post completion?

A
  • LL’s Sols sends a summary of main provisions of lease to client
  • T’s Sols arrange and submit SDLT and pay
  • T’s Sols registers Lease if necissary
48
Q

Where are the repairing obligations set out? And what are the types?

A

as a tenants covenant in the lease.

  • They may be full - i.e. repair the whole building into a good state, or
  • They may be qualified - i.e. maintain the standard the building is already in

NOTE: should also check definition of premises to see the extent of the obligation

49
Q

Who is generally responsible for the insurance of a building?

A
  • the commercial LL
50
Q

Which repairing obligation is used in an FRI?

A

Always a full repairing obligation

51
Q

Who is responsible for insurance under an FRI

A

The landlord

  • cost of insuring will be recovered from T
52
Q

How is lease of whole vs lease of part insured?

A

Of whole - L insures the whole & sole T refunds L in whole of premium

Of part - L insures whole & each T refunds L in their proportionate part of premium

53
Q

Who is responsible for repairing the exterior?

A

If a part of a building- LL

If a whole of a building - Tenant

54
Q

Does the Landlord recover the insurance from the Tenant?

A

Yes - through ‘insurance rent’.

55
Q

Is tenant responsible for repairing insured risks?

A

Excluded except certain circumstances e.g. if T’s negligence means insurance is not paid out

56
Q

What is contained within the completion statement

A

Yearly rent, insurance rent & service charge (apportioned on daily basis) + VAT

May need to multiply by 365 to get daily rate (366 if leap year)

Ella SQE (13 decks)

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