Property Management - Leases Flashcards
What is a lease?
- A lease is a contractual arrangement where a tenant agrees to pay rent to a landlord for exclusive occupation of a property for a fixed term.
- The tenant benefits from vacant possession
- Lease creates a legal interest in the property – if there is a sale then it is subject to the lease
- The legal interest can be assigned to another tenant
- Maximum length of a lease is 175 years
What is a licence?
- A licence is where the landlord grants a tenant permission to use the property or land for a specific purpose
- A licence may be for a fixed term or ongoing.
- Do not benefit from vacant possession
- Merely a right to occupy
- More flexibility
- Cannot be assigned to another party
- Can terminate at short notice
What is the difference between an FRI and an IRI lease?
- FRI – Fully repairing and insuring, tenant wholly responsible for both internal and external repairs
- IRI – Internal repairing and insuring – tenant only responsible for the internal area. LL able to negotiate a higher lease as they may have financial obligations to the unit.
What are title documents?
A copy of the original register of title that the land registry can provide (a title plan and title register) detailing:
* Owner
* Address of owner
* Tenure
* Price paid (if sold since April 2000)
* The boundaries
* Any rights of way or restrictions & covenants on the land noted on the register
What are the title plan lines?
- Brown – right to title
- Red – boundary of the site
- Green – retained part by owner
- Blue – right of way inside title
What are the pertinent parts of a lease?
- Lease terms
- Break clause
- Rent Clause
o Rent commencement – is there a rent free?
o Is there a stepped rent? - Service charge clause
o Any service charge exclusions?
o Is there a service charge caps?
o Details how to calculate cap - Tenant obligations
- Landlord obligations
- Rent review
o Open Market
o RPI index
o Fixed increase
What is the difference between a deed and a registered title?
- Title - A commercial real estate title is a document that grants the owner the right to use it.
- Deed - A property deed is the legal document that transfers the property’s title from one party to another.
What is a break?
- An agreed date noted within the lease that allows either the landlord or the tenant to leave prior to the lease expiry
- Governed by the lease
- Tenant no longer liable for the property
- Can either be on a specific date or a rolling basis – see Adams v green
What must a break notice contain?
- Break date
- Beneficiary – party who may exercise the break option (stated in the lease)
- Requirements for service of notice
Are there any break conditions?
- Notice is served correctly
- all arrears must be up to date
- vacant possession on the break date
- depending on the agreement, there may be a break penalty the tenant needs to pay if they serve notice – this is usually if they receive a rent concession at the beginning of the lease.
Who can exercise the break?
- this will be noted within the lease
- if silent, only the tenant exercise the break
Break Case Law?
Danby v Spurrier
What are user clauses in leases and how do they work?
- User clauses in leases define what a tenant can use the property for. This can range from specific commercial activities to more general use categories.
- They help protect the property’s value by preventing inappropriate or detrimental use.
What is a keep open clause?
- Tenants must agree to opening times prior to the lease beginning
- Usually applies to tenants in a shopping centre to ensure they match the centres open and close times
What is an irritancy clause?
- The Landlord can terminate the lease due to non payment of rent
