Property Law 8 - Alienation

Question 1

What does ‘alienation’ mean?

Answer 1

a disposal of all or part of the tenant’s interest in the lease

Question 2

If a tenant’s covenant against assigning a lease is qualified, they will need permission of the Landlord, does the Landlord have to act reasonably when considering the request?

Answer 2

Yes - s19(1)(a) of the Landlord and Tenant Act 1927 converts a qualified covenant into a fully qualified covenant.

Question 3

If a tenant requests an assignment orally, when must the landlord give his decision?

Answer 3

Must act reasonably but no time limit or how they respond

Question 4

If a tenant requests an assignment in writing, when must the landlord give his decision?

Answer 4

Must respond in writing within a reasonable amount of time. Case law says 28 days.

Question 5

When considering a sublease, what covenants will the Landlord require?

Answer 5

Covenants that are no less strict than those in the Lease.

Question 6

How long can a underlease be for?

Answer 6

Must be shorter than the lease

Question 7

Who drafts the licence to underlet

Answer 7

The Landlord’s Solicitor (at the tenant’s cost)

Question 8

Who drafts the underlease

Answer 8

The Tenant’s solicitor

Question 9

What are the pre-exchange steps for an assignment/sublet of a lease by the Landlord’s solicitor?

Answer 9

· Takes instructions

· Confirms receipt of application, sets out any requirements

· If client wishes to proceed in principle, drafts licence to assign/sublet and sends to tenant’s solicitor (costs normally paid for by the tenant under an “undertaking for costs”)

Question 10

What are the pre-exchange steps for an assignment of a lease/sublet by the Tennant’s solicitor?

Answer 10

· Takes instructions

· Applies for consent to assign/sublet from Landlord

· Prepares draft contract (if applicable) and deduces title. Forwards licence to assign/sublet to assignee’s solicitor.

· Answers pre-contract enquiries.

· Once agreed, engrosses the contract, obtains tenant’s signature and sends engrossment to assignee’s solicitor.

Question 11

What are the pre-exchange steps for an assignment of a lease by the Assignee’s/Undertenant’s solicitor?

Answer 11

· Takes instructions

· Assists tenant’s solicitor if anything needed for consent.

· Reviews draft contract (if applicable) and investigates title. Reviews and reports on lease. Reviews the licence to assign/sublet.

· Raises pre-contract enquiries and searches.

· Arranges for assignee to sign contract.

Question 12

Pre-exchange steps for an assignment of a lease by the Assignee’s solicitor - what steps are involved in investigation of title?

Answer 12

If the lease is unregistered, investigate the landlord’s title,

If the lease is registered, then the assignee’s solicitor can rely on the leasehold official copies.

Raise CPSE1 enquiries (as does a buyer’s solicitor in a commercial freehold transaction)

Also raise CPSE4 enquiries which are specific to the assignment of a lease.

Question 13

What happens at exchange for an assignment of a lease of a leasehold (assuming there is a contract)?

Answer 13

• the tenant’s solicitor and assignee’s solicitor exchange in similar manner as for a freehold contract (usually adopting Law Society B)
• no deposit is usually payable for assignment of a rack rental lease (for an assignment of a long residential lease, a 10% deposit would be usual, just like for a freehold)
• the contract may set a fixed completion date, or may specify that completion is conditional (eg, on the landlord’s consent).

If an underlease, the contract will normally have a copy of the underlease attached and so can’t exchange until terms of underlease are agreed.

Question 14

What are the pre-completion steps for an assignment of a lease by the Landlord’s solicitor?

Answer 14

· Engrosses licence to assign in triplicate (three copies), arranges for landlord to execute one copy

Question 15

What are the pre-completion steps for an assignment of a lease by the Tenant’s solicitor?

Answer 15

· Arranges for tenant to execute one copy of the licence to assign

· Prepares and sends a completion statement detailing the money due on completion (eg, any apportioned annual rent, service charge and insurance rent)

· Responds to requisitions on title

· Approves deed of assignment and arranges for tenant to execute

Question 16

What are the pre-completion steps for an assignment of a lease by the Assignee’s solicitor?

Answer 16

· Arranges for assignee to execute one copy of the licence to assign

· Obtains funds from assignee needed to complete as per completion statement

· Raises requisitions on title

· Raises pre-completion searches

· Drafts deed of assignment

Question 17

What pre-completion searches are carried out if the lease is registered

Answer 17

The appropriate search is an OS1 search of the whole of the tenant’s leasehold title

Question 18

What pre-completion searches are carried out for a sublet?

Answer 18

If it is an underletting of the whole of the tenant’s interest, then an OS1 search is carried out against the tenant’s registered leasehold title.
If it is an underletting of part of the tenant’s interest, then an OS2 search is carried out against the appropriate part of the tenant’s registered leasehold title.

Where the underlease is not registrable, an OS3 search may be carried out against the tenant’s interest to check whether any adverse entries have been made since the date of the last copy of the tenant’s title register.

Question 19

What happens on completion for an assignment of a lease?

Answer 19

• the assignee’s solicitor sends the tenant’s solicitor the completion monies
• the landlord’s solicitor, tenant’s solicitor and assignee’s solicitor agree over the telephone to complete and date the licence to assign
• the tenant’s solicitor and assignee’s solicitor agree over the telephone to complete and date the deed of assignment

Question 20

What happens on completion for an underlease?

Answer 20

• the undertenant’s solicitor sends the tenant’s solicitor the completion monies
• the tenant’s solicitor and undertenant’s solicitor agree over the telephone to complete and date the executed underleases that they are holding
• the tenant’s solicitor and undertenant’s solicitor send the completed original and counterpart underleases to each other

Question 21

What steps are carried out by the Assignee’s solicitor Post-completion?

Answer 21

Assignee/ undertenant solicitor
· Arranges to submit SDLT or LTT return and pay appropriate SDLT or LTT if necessary

· Registers assignment/underlease if necessary

Tenant
· Sends formal notice of assignment/underlease to landlord’s solicitor

Question 22

How long can an underletting be for?

Answer 22

At longest, 1 day less than the lease itself. The underlease must be shorter than the tenant’s lease.

Question 23

If the lease on underletting is silent, is the tenant free to underlet?

Answer 23

Yes

Question 24

Is a qualified covenant against underletting automatically converted to a fully qualified covenant?

Answer 24

Yes - and the decision must be made within a reasonable time.

Question 25

Is there privity of contract between the Landlord and the undertenant?

Answer 25

No - there is between the landlord and the tenant and the tenant and the undertenant.

Question 26

Can the Landlord enforce covenants against the undertenant?

Answer 26

No - unless that Landlord required the undertenant to covenant directly with the Landlord as part of the licence to underlet with the tenant.

Question 27

Pre-exchange steps for an assignment of a lease by the Tennant’s solicitor - What documents are typically sent to the assignee for ‘deduce of title’?

Answer 27

Copy of the lease, AND

Official copies for the leasehold title, if registered interest
or
If it is not a registered interest (ie, a term of 7 years or less), then the landlord’s title.

Question 28

What form are licence of assignment of leases and underleases normally given by a Landlord?

Answer 28

By Deed

Question 29

What is a qualified covenant

Answer 29

LL can withhold consent

Question 30

What is a fully qualified covenant

Answer 30

LL can withhold consent if not acting unreasonably