SGS 8 - FRI lease and landlord's remedies

Question 1

Before completing on the lease, what type of search does the tenant’s solicitor need to do and why?

Answer 1

An OS1 search if you are taking lease of the whole building, or an OS2 search if a lease of part. This will give you a priority period of 30 working days in which to register the new lease. Only leases of terms greater than 7 years need to be registered

Question 2

What post-completion steps does the tenant’s solicitor need to carry out?

Answer 2

Pay SDLT and send SDLT1 to HMRC.
Send to the LR:
- The lease
- SDLT5
- Form AP01
- the fee 

LR will send ‘title information document’ back

Question 3

If the landlord wants to forfeit the lease for non-payment of rent, does the landlord need to follow any procedural step?

Answer 3

No - doesn’t need to send a s146(1) notice in these circumstances as per s146(11).

Only need to follow any steps as indicated in the forfeiture clause of the lease.

Question 4

Where the tenant has defaulted in paying rent, what other remedies might be available to the landlord?

Answer 4

• CRAR (commercial rent arrears recovery) - can seize goods for the value of the unpaid rent.
• Damages (but subject to the usual limitation periods of 6 years)
• can take the arrears from any rent deposit or guarantor

Question 5

When drafting the repair clause, what do you need to carve out?

Answer 5

• Any damage caused by the Insured Risks - the tenant must not be liable to repair this damage

Question 6

List three things you might want to consider when drafting a repair clause from the perspective of the tenant

Answer 6

1) latent/ inherent defects - especially crucial if you are buying a new build. Do not want to be responsible for repairing any defects which could not have been known when taking the lease
2) fixtures and fittings - if a fixture/fitting falls into a state of disrepair e.g a wardrobe, you don’t want to be committed to finding an exact replica to replace it - might be a better to draft as a ‘reasonable replacement fixture’’
3) Decoration - the tenant does not want to be committed to onerous decoration covenants e.g having to repair twice in the same year or immediately before they hand back the lease

Question 7

If the landlord wants to forfeit the lease for breach of a repair covenant, what procedural step do they need to follow?

Answer 7

Need to serve a s146(1) notice on the tenant
AND if a lease granted for 7 years or more with 3 years left to run, the Leasehold Property (Repairs) Act will apply which requires the landlord to serve a special notice, which gives the tenant the right to serve a counter-notice. The lease then may not be forfeited unless the court gives permission.

Question 8

Where s18 LTA applies, what is the effect?

Answer 8

If the landlord wants to claim damages for breach of a repair covenant, damages will be capped at the reduction in value of the landlord’s reversionary interest. So if the repair damages cost the landlord say £200k, but the freehold reversion has only devalued by £100k, damages are capped at £100k

Question 9

If the landlord wants damages for breach of repair, what procedural step do they need to follow?

Answer 9

s146 notice and a special notice if the LP(R)A ‘38 applies

Question 10

what leases does the leasehold property (repairs) act apply to?

Answer 10

leases granted for at least 7 years with at least 3 years left to run

Question 11

What is a Jervis v Harris clause and what is the advantage of such a clause?

Answer 11

Jervis v Harris clause allows the landlord to enter the property himself and carry out the repairs. He may then claim for the cost of carrying out the work from the landlord as a debt.

The advantage of this is that it is not subject to s18 LTA so the damages are not capped at the reduction in value in the reversionary interest