Property Management - Leases

Question 1

What is a lease?

Answer 1

• 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

Question 2

What is a licence?

Answer 2

• 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

Question 3

What is the difference between an FRI and an IRI lease?

Answer 3

• 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.

Question 4

What are title documents?

Answer 4

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

Question 5

What are the title plan lines?

Answer 5

• Brown – right to title
• Red – boundary of the site
• Green – retained part by owner
• Blue – right of way inside title

Question 6

What are the pertinent parts of a lease?

Answer 6

• 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

Question 7

What is a break?

Answer 7

• 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

Question 8

What must a break notice contain?

Answer 8

• Break date
• Beneficiary – party who may exercise the break option (stated in the lease)
• Requirements for service of notice

Question 9

Are there any break conditions?

Answer 9

• 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.

Question 10

Who can exercise the break?

Answer 10

• this will be noted within the lease
• if silent, only the tenant exercise the break
• see Danby v Spurrier

Question 11

What are user clauses in leases and how do they work?

Answer 11

• 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.

Question 12

What is a keep open clause?

Answer 12

• 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