SGS 8: Contents of a lease 1

Question 1

What should you breakdown your advice to clients into?

Answer 1

The four Ls:

• Lease
• Law
• Landlord’s title
• Local authority consents

Question 2

When is it common for a commercial lease to start?

Answer 2

On the quarter day preceding the date of lease

Question 3

How do you calculate the contractual expiry date?

Answer 3

• from and including [x]/commencing on [x] = the lease will expire on the day before that date in the relevant year/month
• from [25th march] -> will commence on 26th and expire on 25th

Question 4

How do you ascertain the full picture re the service charge?

Answer 4

cross check the exact definition of the premises, the tenant’s repairing obligation and the landlord’s repairing obligation in the lease

Question 5

Insurance rent = ?

Answer 5

the premium paid by the landlord for ensuring the premises against damage caused by insured risks and also for insuring against 3 years loss of rent. The tenant pays the IR to the landlord on the usual quarter days

Question 6

rent suspension clause = ?

Answer 6

if the tenant’s premises are damaged by an Insured Risk so that they cannot be used or occupied, then the tenant does not have to pay the annual rent, insurance rent or service charge until the earlier of:

• the date the premises are again fit for occupation; or
• three years from the date of the damage

Question 7

What if the premises are destroyed by an insured risk and cannot be occupied or used within three years?

Answer 7

Either party can serve a notice on the other to terminate the lease

Question 8

What should an action for damages for breach of a repair covenant not exceed?

Answer 8

The amount of any reduction in the value of the landlord’s freehold interest. Damages are not recoverable where the premises are going to be pulled down or structurally altered after the end of the lease (s.18(1) LTA 1927)

Question 9

What is the landlord’s remedy for breach of a tenant’s covenant?

Answer 9

Forfeiture:

• bring the lease to an end before its expiry date
• remove the tenant from the premises

Question 10

Is the right of a landlord to forfeit a lease automatic?

Answer 10

No - it is only available as a remedy if the lease expressly reserves such a right in an express clause, giving the landlord right of re-entry following a defined triggering event

Question 11

What must a landlord do before exercising the right to forfeiture for breach of covenant or bankruptcy?

Answer 11

Serve a s.146 notice on the tenant which must:

• Set out the breach
• Require it to be remedied within a reasonable time (if capable of remedy)
• Claim any compensation (damages) required

Question 12

What can the tenant apply for when a s146 notice is served on them?

Answer 12

s.146(2): tenant can apply to the court for relief against forfeiture

Question 13

What does the Leasehold Property (Repairs) Act 1938 apply to>

Answer 13

• breach of repair covenants
• leases that were originally granted for a term of 7 years or more, with at least 3 yers left to run at the date of notice

Question 14

What must happen if the Leasehold Property (Repairs) Act 1938 applies?

Answer 14

Special s.146 notice must be served on these leases even if the landlord chooses just to claim damages for breach of a repair covenant rather than to forfeit the lease:

Question 15

What must the s.146 special notice contain?

Answer 15

• statement that T has the right to serve a counter-notice (s.1(4))

Question 16

What can the tenant do after having a s.146 special notice served on them?

Answer 16

The tenant has 28 days to serve a counter notice. If the tenant serves a counter-notice on the landlord, then the landlord has to get leave of the court before he can forfeit the lease, re-enter or sue for damages (s.1(3))

Question 17

What did the Landlord and Tenant Act 1954 s.51(1) do?

Answer 17

Extended the LP(R)A to apply to all leases of at least 7 years with at least three years left to run at the date of the notice

Question 18

Self help for breach of repair covenant - case 1

Answer 18

Jervis v Harris:

• If landlord reserves the right to enter the premises, makes good the damages and recovers the cost from a tenant and describes the sum due from the tenant as debt, this money would be recoverable by the landlord as debt
• Adv: any sum claimed is not subject to the same limitations r requirements as a claim for damages under s.18 LTA or under the LP(R)A
• Note: the landlord can only do this if the lease expressly reserves the right to do so using a J v H clause = allows the landlord to enter the premises to repair if the teantn has defaulted + sue the tenant as a debt to recover the cost of repairs

Question 19

Self help for breach of repair covenant: case 2

Answer 19

Rainbow Estates ltd v Tokenhold ltd:
- An order for specific performance to force the tenant to comply with its repairing obligation is available in principle. However, this is a discretionary remedy and is more likely to be obtained in exceptional circumstances

Question 20

Why will commercial landlords seek to reserve as many payments under the lease as possible as ‘rent’?

Answer 20

Broadened definition means a default on any such payment of rent without serving a s.146 notice
- s.146(1) no requirement for the landlord to serve notice if it is a breach of covenant to pay rent

Question 21

What is the general rule on alterations?

Answer 21

The tenant is free to carry out any alterations to the premises, subject to the legal doctrine of waste = prevents alterations which would devalue the premises

Question 22

What are some potential controls the landlord can have on alterations?

Answer 22

• limiting the type of alterations permitted
• requiring the landlord’s approval or consent in order to do the alteration works
• requiring reinstatement/removal of alterations at the end of the lease term

Question 23

What is consent of the landlord to the tenant’s works documented by?

Answer 23

Licence for alterations

Question 24

Who prepares the licence for alterations?

Answer 24

• landlord’s solicitor

Question 25

What does the Code for Leasing Business premises recommend re alterations?

Answer 25

That the landlord’s control over alterations and changes of use should not be more restrictive than is necessary to protect the value, at the time of the application, of the premises and any adjoining or neighbouring premises of the landlord

Question 26

What are the types of covenant?

Answer 26

Absolute, qualified and fully qualified

Question 27

What is the wording of a fully qualified covenant?

Answer 27

The tenant shall not do x without the landlord’s consent, such consent not to be unreasonably withheld or delayed

Question 28

What is the relevance of s19(2) LTA 1927?

Answer 28

Where the lease contains a qualified covenant against alteration, if a proposed alteration could be considered an improvement, then s.19(2) implied that the landlord’s consent is not to be unreasonably withheld

Question 29

What is the landlord allowed to require as a condition of giving consent?

Answer 29

• the payment of a reasonable sum in compensation for loss in value to the reversion caused by the alterations (damage to or diminuition in the value of the premises)
• payment of any of the landlord’s legal or other expenses in giving consent, e.g. costs for surveyor
• reasonable reinstatement of the premises at the end of the lease term
  [dont HAVE to be set out in licence]

Question 30

Lambert v Woolworth

Answer 30

‘Improvements’ are to be construed widely as works which improve the premises from the tenant’s perspective –> all alterations assumed to be improvements

Question 31

Iqbal v Thakrar

Answer 31

The landlord was entitled to withhold consent to the tenant’s proposed alterations because he had serious and justified concerns as to the potential consequences which the works would have to the structure of the building

Question 32

Why would a tenant ideally want the lease to provide expressly that the consent to alterations is not to be unreasonably withheld or delayed?

Answer 32

there is no statutory duty on a landlord to give its decision to a tenant’s requisition to make alterations within a reasonable time

Question 33

What is an implied surrender and re-grant

Answer 33

A deed of variation which alters the extent of the premises demised or changes to the length of the term will usually operate as a surrender of the existing lease and a grant of a new lease

Question 34

What are the undesirable consequences of an implied surrender and re-grant?

Answer 34

• a further payment of SDLT may be due on the new lease
• if the original lease was registered at the land reg, a formal application would need to be made to close the title and open a new one for the new lease
• if the original lease was contracted out of the security of tenure provisions, the contracting out procedure will not apply to the re-granted lease, resulting in the tenant benefiting from security of tenure unless the statutory procedure was also followed for the re-grant

Question 35

What is the best thing to do if the extent of the premises is to be increases?

Answer 35

Deal with the extra premises by way of a separate lease

Question 36

What is the best thing to do if a term needs to be extended?

Answer 36

Grant a reversionary lease - a lease which only takes effect at the end of the term of the current lease, provided the term of the reversionary lease commences no later than 21 years from the date it was granted

Question 37

s.19(3) LTA

Answer 37

does not apply a reasonableness proviso into qualified user covenants

Question 38

What if the change of use does not involve any structure alteration of the premises?

Answer 38

The landlord cannot impose a fine or sum of money in the nature of a fine

Question 39

If the change of use does involve a change to the structure?

Answer 39

The landlord can increase the rent or charge the tenant a lump sum in return for consent

Question 40

What is the landlord entitled to do under s19(3)

Answer 40

• require payment of a reasonable sum in respect of any damage or diminuition in the value of the premises
• to require payment of any legal or other expenses incurred in connection with the licence/consent e.g. surrveyors fees and legal fees

Question 41

What should the landlord do if they was to forfiet the lease becuase the tenant is in breach of the user covenant?

Answer 41

Get an injunction if the tenant has changed the use of the premises in breach of the covenant as to use