Property - Leasehold

Question 1

What are the express covenants within a lease?

Answer 1

1. Term.
2. Payment of rent.
3. Quiet enjoyment.
4. Repair.
5. Use of the premises.
6. Alterations (qualified or absolute bar).
7. Insurance.
8. Service charge.
9. Alienation.

Question 2

What is the implied covenant in a lease?

Answer 2

To keep in repair the structure and exterior of the dwelling house and keep installations in working order. They must effect this in a reasonable time.

Question 3

What does the Code for Leasing Business Premises set out?

Answer 3

Licence to assign: Consent is usually required, as the incoming tenant must be of good standing and able to afford the rent. May require 3 years of business accounts.

Extra security: Landlord may require rent deposits, guarantors, and AGAs.

Question 4

How is a lease drafted and title investigated?

Answer 4

If a new lease is for a term of >7 years, the landlord must deduce title to enable the tenant to register the lease with title absolute.

The contract package should include:
- Replies to standard pre-contract enquiries.
- The draft contract with the draft lease.
- The seller’s freehold title.
- The PIF.
- If a newly built block, planning permission and building regulations consent.
- If a building <10yrs old, a new build warranty.
- If a new build development, a service charge budget.
- Management company details.

Question 5

What happens at exchange?

Answer 5

The contract will provide that the buyer agrees to take a lease in the form of the agreed draft. Contracts are exchanged and can only be changed by executing a new lease agreement or deed of variation.

Question 6

What must the landlord’s solicitor do at the pre-completion stage?

Answer 6

Pre-completion searches, requisitions on title, application for funds, and sending out completion statements.

Question 7

What must the buyer’s solicitor do at the pre-completion stage?

Answer 7

Prepare the transfer deed to legally transfer the lease to the buyer and complete the pre-completion searches. Service charge apportionment may be relevant here.

Question 8

What are the completion and post-completion steps?

Answer 8

If for a term of >7 years, the buyer’s solicitor must apply to register the lease at HMLR. They may also need to apply for a share in a management company if applicable.

Question 9

What additional guarantees are given by the seller of the lease to the buyer?

Answer 9

1. The lease is valid and subsisting; and
2. There is no breach of covenant rendering the lease liable to forfeiture.

Question 10

Who prepares a draft for assignment?

Answer 10

The landlord’s solicitor will draft a licence to assign setting out their conditions. This is signed by the landlord, tenant, and incoming tenant.

Question 11

How is shortfall of service charge payments dealt with re. assignment?

Answer 11

These are payable by the buyer, so solicitors should negotiate a retention where the buyer’s solicitor keeps some of the purchase money pending production of the final service charge account.

Question 12

How is title deduced and investigated on assignment?

Answer 12

The seller’s solicitor will check the terms of the existing lease to check if consent is needed to assign. Rescission is permitted if the landlord’s consent is not obtained 3 days before completion.

Question 13

What does a contract package look like for an assignment?

Answer 13

• A copy of the outgoing tenant’s leasehold register of title.
• A copy of the existing lease.
• A PIF and Leasehold Information Form.
• Copies of the last 3 years’ service charge accounts.
• A copy of the landlord’s freehold register of title.
• If the property is <10 years old, a copy of the new build warranty, planning permissions, and building regulations consent.

Question 14

What steps must be taken at pre-completion for an assignment?

Answer 14

The buyer’s solicitor will prepare the purchase deed to legally transfer the lease to the buyer, and conduct pre-completion searches.

The seller’s solicitor will provide evidence of the landlord’s consent if required.

Question 15

What are the completion and post-completion steps for the buyer’s solicitor on assignment?

Answer 15

• Will arrange for payment of SDLT.
• Will serve notice to the landlord of assignment, and notice of any new mortgage.
• Will arrange for registration at HMLR of the transfer and any new mortgages.

Question 16

What are the completion and post-completion steps for the seller’s solicitor on assignment?

Answer 16

• Will send the buyer’s solicitor the original lease and share certificate, and the original licence to assign.
• Will prepare the final service charge adjustment if retention has been agreed.
• Will provide a signed STF to transfer their share in the management company.

Question 17

What is the liability on covenants in leases pre-1 January 1996?

Answer 17

The original landlord and tenant remain liable to each other for the entire lease period, even after assignment (unless expressly released).

Question 18

What is the liability on covenants in leases post-1 January 1996?

Answer 18

Tenants are automatically released from their covenants upon assignment (not landlords).

Question 19

What is an AGA?

Answer 19

Outgoing tenant will act as guarantor for their immediate successor in title. Only commercial leases can include a provision requiring an AGA on assignment.

Question 20

What is Commercial Rent Arrears Recovery?

Answer 20

A statutory procedure allowing landlords of commercial premises to take control of the tenant’s goods and sell them through an enforcement agent.
- Need not be in the lease.
- Must provide 7 days’ notice of enforcement.
- Premises must be wholly commercial.
- Cannot be used to recover service charge arrears.

Question 21

What are two remedies for failing to carry out repairing obligations?

Answer 21

• Damages: Puts the party in the position as if the contract had been performed - available as of right.
• Specific performance: Equitable remedy compelling the party to perform its contractual obligations.

Question 22

What is a self-help/Jervis v Harris clause?

Answer 22

The innocent party can carry out the repairs themselves and then claim the cost from the defaulting party. The landlord can then recover the costs as a debt.

Question 23

What is a forfeiture clause?

Answer 23

The landlord could claim possession of the property and end the lease early if there is an expressive provision in the lease. They must first serve a notice warning the tenant and allowing time for rectification.

Question 24

How can a landlord otherwise recover?

Answer 24

Pursuing guarantors or using the rent deposit.

Question 25

What are 2 methods of ending a lease unilaterally?

Answer 25

• Surrender: Parties agree the tenant will give up possession to the landlord.
• Merger: The landlord transfers a reversion to the tenant.

Question 26

When does security of tenure (1954 Act) not apply?

Answer 26

To fixed term tenancies of 6 months or less.

Question 27

How does a landlord and tenant contract out of security of tenure provisions?

Answer 27

1. The landlord must give a health warning at least 14 days before the lease;
2. The tenant makes a declaration; and
3. There is reference to these in the lease.

Question 28

What are the 7 statutory grounds under a Section 25 notice?

Answer 28

1. The tenant’s failure to carry out repairing obligations.
2. The tenant’s persistent delay in paying rent.
3. The tenant’s substantial breaches of other obligations.
4. The availability of suitable alternative accommodation.
5. The landlord requires the whole property for subsequent letting.
6. The landlord intends to demolish or reconstruct the premises.
7. The landlord intends to occupy the whole building.

Question 29

When will a tenant give a Section 26 notice?

Answer 29

Given by a tenant as a request for a new lease 6-12 months before they wish it to start. The landlord has 2 months to inform them of their decision, specifying a statutory ground if the answer is no.

Question 30

When will a tenant receive compensation under the security of tenure provisions?

Answer 30

If a landlord establishes a ‘no-fault ground’ or suitable alternative accommodation is found.

Question 31

How much compensation is the tenant entitled to?

Answer 31

• If they have occupied the premises for at least 14 years (including combined occupancy if they took over a business), twice the rateable value of the holding.
• If they have occupied the premises for <14 years, the rateable value of the holding.

Question 32

When will a court decide a new lease under the security of tenure provisions?

Answer 32

If they cannot agree. It is rare and it cannot be set for a term of more than 15 years. The new lease will commence 3 months after the court proceedings.