W8

Question 1

What is the importance of the enforceability of leasehold covenants?

Answer 1

The enforceability of leasehold covenants is important to ensure that the terms of the lease are upheld and that both the landlord and tenant fulfill their obligations.

Question 2

What is privity of contract?

Answer 2

Privity of contract is the ability of the original parties to a contract to enforce the obligations against each other, even after the contract has been assigned.

Question 3

What is the consequence of Assignee 1 assigning the lease to Assignee 2 without the landlord’s consent?

Answer 3

If Assignee 2 were to breach any of the tenant’s covenants, the landlord may pursue the tenant, Assignee 1, or Assignee 2 for a remedy for the breaches of covenant.

Question 4

What is privity of estate?

Answer 4

Privity of estate exists between any current landlord and current tenant of the property and lasts only for the period while the lease is vested in the tenant.

Question 5

How does the enforcement of leasehold covenants work?

Answer 5

The enforcement of leasehold covenants is governed by normal contractual principles. When the tenant assigns its interest and/or the landlord sells its interest, there is no contractual relationship between the new landlord/tenant. In old leases, the liability of the original landlord and the original tenant continues for the full duration of the lease term due to privity of contract. However, the LTCA 1995 changed this principle for new leases, where the original landlord and the original tenant are no longer liable for the leasehold covenants for the full duration of the lease term.

Question 6

Under the LTCA 1995, what happens to the benefit and burden of landlord and tenant covenants when a lease is assigned?

Answer 6

Under the LTCA 1995, the benefit and burden of all landlord covenants are automatically transmitted to the new owner of the reversion, and the benefit and burden of all tenant covenants are transmitted to the assignee. However, covenants that are expressed to be personal do not pass to a third party.

Only operated for leases after 1st Jan 1996

Question 7

How does the liability of the assignor and assignee differ under privity of contract and privity of estate?

Answer 7

Under privity of contract, the original tenant remains liable to the landlord to pay the rent and perform other obligations even after assignment. In contrast, under privity of estate, only limited obligations automatically pass to the new tenant, and the new tenant must covenant directly with the landlord to observe all the tenant’s covenants in the lease.

Question 8

What happens to leasehold covenants upon assignment of a new lease?

Answer 8

Upon assignment of a new lease, the LTCA 1995 provides for the automatic transmission of the benefit and burden of the covenants to the new owner of the reversion/the lease. However, the benefit and burden of covenants that are expressed to be personal will not pass to a third party. The outgoing landlord/tenant remains liable for breaches of covenant before the assignment/sale

Question 9

What is the liability of a party for breaches of covenant occurring before an automatic release under the LTCA 1995?

Answer 9

Even if there is an automatic release under the LTCA 1995, a party remains liable for breaches of covenant occurring before the release.

Question 10

What is an authorised guarantee agreement (AGA)?

Answer 10

An authorised guarantee agreement (AGA) is a document that allows the original tenant of a lease to agree to guarantee the obligations of the incoming tenant. It is often a condition of assignment in commercial leases.

Question 11

What happens if a lease is assigned in breach of an alienation covenant?

Answer 11

If a lease is assigned in breach of an alienation covenant, it is considered an excluded assignment, and the defaulting tenant will not be released from its obligations under the terms of the lease. The landlord may choose to sue the former tenant who remains liable for the covenants under an authorized guarantee agreement, and the former tenant may rely on an express or common law indemnity to recoup its losses from the defaulting tenant.

Question 12

In relation to a lease granted on or after 1 January 1996, who can sue or be sued for a breach of covenant?

Answer 12

In relation to a lease granted on or after 1 January 1996, the LTCA 1995 governs whether an assignee of the reversion or the lease can sue or be sued for a breach of covenant.

Question 13

What is the effect of the LTCA 1995, s 5 on the liability of the tenant for breaches of covenant?

Answer 13

The tenant is liable for the assignee’s breaches of covenant but only until the assignee assigns the lease.

Question 14

How does the enforcement of leasehold covenants work?

Answer 14

The enforcement of leasehold covenants is governed by normal contractual principles. When the tenant assigns its interest and/or the landlord sells its interest, there is no contractual relationship between the new landlord/tenant. In old leases, the liability of the original landlord and the original tenant continues for the full duration of the lease term due to privity of contract. However, the LTCA 1995 changed this principle for new leases, where the original landlord and the original tenant are no longer liable for the leasehold covenants for the full duration of the lease term.

Question 15

In what case was it held that a tenant was not entitled to withhold rent from a new landlord and set off one claim against the other?

Answer 15

In the case of In Edlington Properties Ltd v JH Fenner & Co Ltd (2006) 1 WLR 1583, it was held that a tenant was not entitled to withhold rent from a new landlord and set off one claim against the other. The tenant had a claim against the former landlord for damages, but the new landlord was not responsible for the breach of the former landlord.

Question 16

What happens if a lease is assigned in breach of an alienation covenant?

Answer 16

If a lease is assigned in breach of an alienation covenant, it is considered an excluded assignment, and the defaulting tenant will not be released from its obligations under the terms of the lease. The landlord may choose to sue the former tenant who remains liable for the covenants under an authorized guarantee agreement, and the former tenant may rely on an express or common law indemnity to recoup its losses from the defaulting tenant.

Question 17

What is an assignment in the context of a lease?

Answer 17

Assignment means the existing tenant passing the lease to a new tenant.

Question 18

Under what circumstances can a landlord insist on an authorised guarantee agreement (AGA)?

Answer 18

If the lease is silent, the landlord can only insist on an AGA if it is reasonable to do so, such as when the tenant’s ability to pay the rent is in doubt.

Question 19

How does privity of estate and privity of contract relate to leasehold covenants?

Answer 19

Privity of estate exists between any current landlord and current tenant of the property and lasts only for the period while the lease is vested in the tenant. Privity of contract denotes the legal relationship between two or more parties to a contract. When a landlord grants a lease to a tenant, privity of contract exists between them, and all the terms of the lease can be enforced by the original landlord against the original tenant and vice versa. However, upon assignment of either the lease or the reversionary interest, privity of contract remains between the original landlord and the tenant, but there will no longer exist privity of estate between them.

Question 20

What happens to an AGA when a tenant assigns the lease to a new assignee?

Answer 20

When a tenant assigns the lease to a new assignee, the AGA from the tenant falls away unless it is an excluded assignment. The new assignee may then provide a new AGA to the landlord.

Question 21

How does an authorised guarantee agreement (AGA) work in practice?

Answer 21

In practice, an AGA allows the landlord to pursue both the incoming tenant and the outgoing tenant if the incoming tenant falls behind with the rent. However, the outgoing tenant’s liability under the AGA ends if there is a subsequent assignment.

Question 22

What are the advantages of an assignment compared to an underlease?

Answer 22

In principle, an assignment is better than an underlease because there is a clean break. If there are conditions or circumstances for assignment in the lease, they are automatically considered reasonable. For an old lease, the outgoing tenant remains liable, but the incoming tenant only becomes liable if it gives a direct covenant to the landlord.

Question 23

What happens to the liability of the outgoing tenant and the incoming tenant in an assignment?

Answer 23

For a new lease, the outgoing tenant is released from liability unless it enters into an authorised guarantee agreement. The incoming tenant automatically becomes liable.

Question 24

What choice does the presence of an AGA provide to the landlord?

Answer 24

The presence of an AGA provides the landlord with a choice. The landlord can sue the current tenant or, if the current tenant is not worth suing, the landlord can sue the outgoing tenant who is acting as a guarantor for the assignee.

Question 25

What is the remedy available to the landlord if it sues the former tenant under an AGA?

Answer 25

If the landlord sues the former tenant under an AGA, its remedy is limited to damages because the former tenant is not in control of the premises anymore. The damages may be extensive.

Question 26

What is the role of the tenant’s solicitor in the assignment procedure?

Answer 26

The tenant’s solicitor takes instructions, applies for consent, prepares draft contracts, reviews and reports on the lease, raises pre-contract enquiries and searches, and arranges for the assignee to sign the contract.

Question 27

What is the difference between an absolute covenant and a qualified covenant against assignment?

Answer 27

An absolute covenant means that assignment is not allowed. A qualified covenant against assignment means that assignment is only allowed with the landlord’s consent. However, s19(1)(a) of the Landlord and Tenant Act 1927 converts a qualified covenant into a fully qualified covenant, meaning that the landlord must act reasonably if deciding to withhold consent.

Question 28

What is the purpose of an indemnity covenant in relation to an assignment of a lease?

Answer 28

An indemnity covenant is a contractual agreement where the assignee agrees to pay the rent and perform all the covenants for the remainder of the lease. It ensures that the outgoing tenant can recoup damages paid to the landlord from the assignee in case of breach of covenant.

Question 29

What is the role of the assignee’s solicitor in the assignment procedure?

Answer 29

The assignee’s solicitor assists the tenant’s solicitor, reviews the draft contract, investigates title, reviews the licence to assign, raises pre-contract enquiries and searches, and arranges for the assignee to sign the contract.

Question 30

What is an undertaking for costs in the assignment procedure?

Answer 30

An undertaking for costs is a promise by a solicitor to pay costs. Breach of the undertaking may lead to disciplinary action by the Solicitors Regulation Authority, and the undertaking is enforceable in the courts.

Question 31

Under what circumstances can a former tenant claim an indemnity at common law under the rule in Moule v Garrett (1872) LR 7 Exch 101?

Answer 31

In the absence of an express indemnity covenant, a former tenant can claim an indemnity at common law under the rule in Moule v Garrett (1872) LR 7 Exch 101. This rule allows a former tenant to sue a subsequent assignee directly in respect of breaches committed by that assignee.

Question 32

What is the reasonable time frame for the landlord to give its decision on consent to assignment?

Answer 32

Case law suggests that a ‘reasonable time’ is dependent upon circumstances but should be measured in days or weeks instead of months. Under the Landlord and Tenant Act 1988, the landlord must give its decision on consent within a reasonable time.

Question 33

What is the significance of the landlord’s consent in the assignment procedure?

Answer 33

The whole transaction hinges on the landlord’s consent, and the tenant’s solicitor usually applies for consent early on. The landlord’s solicitor may ask for an undertaking for costs, and the tenant’s solicitor ensures they have sufficient funds to cover the undertaking.

Question 34

What is the impact of the LTCA 1995 on the enforceability of leasehold covenants?

Answer 34

The LTCA 1995 reformed the law on the running of covenants in leases. It abolished privity of contract for all new leases, meaning that the original landlord and the original tenant are no longer liable for the covenants for the full duration of the lease term. A tenant with a new lease will generally obtain an automatic release from the tenant’s covenants upon assignment, while the landlord must apply for a release from the tenant. However, there are exceptions for excluded assignments, where the tenant remains liable, and the landlord can sue a subtenant for breach of a restrictive covenant in the headlease.

Question 35

What is the relationship between a landlord and a subtenant in terms of enforcing covenants?

Answer 35

In the case of a sublease, there is no direct relationship between the landlord and the subtenant. The landlord cannot enforce positive covenants directly against the subtenant. However, restrictive covenants in new leases can be enforced against any owner or occupier of the premises.

Question 36

What is the purpose of a deed of variation in the context of a lease assignment?

Answer 36

In rare instances, the landlord may agree to vary the lease to accommodate the assignee over the tenant. This would require a deed of variation.

Question 37

What happens during the pre-exchange stage of the assignment procedure?

Answer 37

During the pre-exchange stage, the tenant’s solicitor takes instructions, applies for consent, drafts the licence to assign, and ensures the undertaking for costs is provided. The assignee’s solicitor reviews the draft contract, investigates the tenant’s title, and raises pre-contract enquiries and searches.

Question 38

What incentive does a sublease provide for a subtenant to observe the covenants in the head lease?

Answer 38

In a sublease, the threat of forfeiture of the head lease is a strong incentive for a subtenant to observe the covenants in the head lease. If the head lease is forfeited, the sublease is automatically terminated, subject to a claim for relief.

Question 39

What happens during the completion stage of the assignment procedure?

Answer 39

During the completion stage, the completion monies are paid, and the licence to assign and deed of assignment are dated. Post-completion involves payment of Stamp Duty Land Tax (SDLT) and registration of the lease if necessary. Notice of assignment is sent to the landlord’s solicitor.

Question 40

What is the effect of a tenant including a provision in a sublease for the subtenant to observe and perform the covenants in the head lease?

Answer 40

When a tenant includes a provision in a sublease for the subtenant to observe and perform the covenants in the head lease, it makes it easier for the tenant to control the actions of the subtenant and indirectly protects the landlord. The subtenant is more likely to comply with the covenants in the head lease due to the threat of forfeiture.

Question 41

What happens to the assignor’s entitlement to use the premises and liability for tenant covenants after assignment?

Answer 41

The assignor is no longer entitled to use the premises and generally need not pay the rent or perform the other tenant covenants. However, the assignor may still have liability for them.

Question 42

What is the liability of a tenant for breaches committed by an assignee under the LTCA 1995?

Answer 42

Under the LTCA 1995, an assignee of the lease becomes liable from the date of assignment for all covenants in the lease, other than those expressed to be personal. The tenant remains liable for the assignee’s breaches until the assignee assigns the lease.

Question 43

What are the differences between the assignment procedure for a commercial lease and a freehold transaction?

Answer 43

The assignment procedure for a commercial lease is similar to a freehold transaction but with some important differences. For example, the stage of exchange of contracts is often skipped in the assignment procedure, and the assignee generally takes the lease as it is without negotiation.

Question 44

Why would a tenant want to assign the premises?

Answer 44

A tenant may want to assign the premises if they no longer need them for the purposes of their business or cannot afford to keep paying the rent (perhaps following a rent review). Conversely, if the premises are right for the assignee, they may be only too happy to take the lease.

Question 45

What remedies are available to a landlord if the current tenant is not worth suing?

Answer 45

If the current tenant is not worth suing, the landlord may look to other parties for compensation in respect of breaches of covenant committed by a subsequent assignee. The outgoing tenant who provided an authorised guarantee agreement (AGA) may be sued by the landlord for guaranteeing the obligations of their immediate successor.

Question 46

What are the steps involved in the assignment of a lease?

Answer 46

The steps involved in the assignment of a lease include investigating the tenant’s leasehold title, raising CPSE1 and CPSE4 enquiries, conducting searches, preparing and exchanging contracts, obtaining a licence to assign, preparing a completion statement, responding to requisitions on title, approving the deed of assignment, completing the assignment, and carrying out post-completion tasks such as submitting SDLT or LTT returns and sending notice of assignment to the landlord’s solicitor.

Question 47

What is the purpose of a completion statement in the assignment of a lease?

Answer 47

A completion statement details the money due on completion, including any apportioned annual rent, service charge, and insurance rent. It is prepared by the tenant’s solicitor and sent to the assignee for payment.

Question 48

What are the considerations for underletting in a commercial lease?

Answer 48

A commercial lease may contain qualified covenants against underletting, which means that underletting is only allowed with the landlord’s consent. The landlord will want to ensure that the undertenant can pay the rent and perform the obligations of the lease. The landlord can also restrict the underletting and may require direct covenants between the undertenant and the landlord.

Question 49

What is the role of the assignee’s solicitor in the assignment of a lease?

Answer 49

The assignee’s solicitor is responsible for raising CPSE1 and CPSE4 enquiries, conducting searches, drafting the deed of assignment, obtaining funds from the assignee for completion, raising requisitions on title, raising pre-completion searches, and arranging for the assignee to execute the necessary documents.

Question 50

What is the difference between privity of contract and privity of estate in the context of underletting?

Answer 50

Privity of contract refers to the ability of the original parties to a contract to enforce the obligations against each other, even after the contract has been assigned. Privity of estate, on the other hand, is the ability of the landlord and tenant to enforce the provisions of a lease against each other. While privity of contract exists between the landlord and the tenant, and between the tenant and the undertenant, it does not exist between the landlord and the undertenant. Privity of estate exists between the landlord and the tenant, and between the tenant and the undertenant, but not between the landlord and the undertenant.

Question 51

What are the requirements for an underlease to be considered no less onerous than the tenant’s lease?

Answer 51

In an underlease, the tenant’s lease usually requires the underlease to contain obligations that are no less onerous than those in the tenant’s lease. For example, if there is a full repairing covenant in the lease, there must also be a full repairing covenant in the underlease. The underlease may be a full form lease or a lease by reference, which incorporates sections of the tenant’s lease by reference.

Question 52

What searches are typically carried out in the assignment of a lease?

Answer 52

The assignee’s solicitor should ideally carry out the same searches as they would in a freehold transaction. If the lease is registered, an OS1 search of the tenant’s leasehold title is conducted. If the lease is unregistered, the landlord’s title is investigated. Additionally, pre-completion searches are carried out if the lease is registered.

Question 53

What are some requirements of the 2020 Code for Leasing Business Premises regarding alienation?

Answer 53

The 2020 Code for Leasing Business Premises has various requirements on alienation. Some important ones include allowing tenants to assign or underlet the whole of the premises with the landlord’s consent (not to be unreasonably withheld or delayed) and allowing tenants to share with group companies without consent.

Question 54

What are some restrictions that a commercial lease may impose on underletting?

Answer 54

A commercial lease may prevent the tenant from underletting the premises together with property that does not belong to the landlord, on payment of a lump sum, with a rent-free period beyond what is normal in the market, or with a rent lower than that in the tenant’s lease. The lease may also require that the underlease contains covenants no less onerous than in the tenant’s lease.

Question 55

What is the difference between a full form underlease and a lease by reference?

Answer 55

A full form underlease looks similar to the tenant’s own lease, while a lease by reference incorporates sections of the tenant’s lease by reference. Both types of underleases ensure that the obligations in the underlease are no less onerous than those in the tenant’s lease.

Question 56

What does the lease allow tenants to do with the landlord’s consent?

Answer 56

The lease allows tenants to assign or underlet the whole of the premises with the landlord’s consent (not to be unreasonably withheld or delayed) and to share with group companies without consent.

Question 57

What is the purpose of a licence to assign in the assignment of a lease?

Answer 57

The landlord’s solicitor prepares a licence to assign in triplicate, with each party (landlord, tenant, and assignee) receiving a signed copy. The licence to assign sets out the terms and conditions of the assignment.

Question 58

What is the maximum term granted by an underlease?

Answer 58

The term granted by an underlease must be less than the remaining term of the tenant’s lease, even if it is only one day less.

Question 59

What is the procedure for underletting in a commercial lease?

Answer 59

The procedure for underletting is similar to the grant of a lease. It involves negotiation of the licence to underlet, completion of the licence and the underlease, payment of SDLT (Stamp Duty Land Tax), registration of the underlease if necessary, and serving notice of underletting on the landlord.

Question 60

What covenant does the license contain for the tenant?

Answer 60

The license contains a covenant for the tenant’s solicitor to undertake the landlord’s cost.

Question 61

What is the difference between underletting and assignment in the context of a lease?

Answer 61

Underletting involves the tenant creating an underlease to the undertenant, where the tenant takes on a landlord role and their landlord becomes the superior landlord. The undertenant pays market rent. Underletting can be useful when the tenant does not need all of the premises or does not need them temporarily. After underletting, the tenant remains liable to the landlord for its covenants, while the undertenant is liable to the tenant for its covenants.

Question 62

What is the significance of direct covenants between the undertenant and the landlord?

Answer 62

Direct covenants between the undertenant and the landlord are important because there is neither privity of contract nor privity of estate between them. The landlord is not able to enforce covenants against the undertenant, so having direct covenants ensures that the undertenant is directly liable to the landlord.

Question 63

What is the purpose of a qualified covenant in the context of underletting?

Answer 63

A qualified covenant is converted by statute to a fully qualified covenant, which requires the landlord to make its decision regarding underletting in a reasonable time.

Question 64

What is the difference between underletting and subletting?

Answer 64

Underletting and subletting are terms used interchangeably, although underletting is more commonly used in commercial leases. Both refer to the act of letting a property to a subtenant. The sub- prefix can be used interchangeably with under-, but it is important to stay consistent in the terminology used.

Question 65

How does the 2020 Code for Leasing Business Premises address the issue of sharing with group companies?

Answer 65

The 2020 Code for Leasing Business Premises allows tenants to share with group companies without consent, providing flexibility for tenants in utilizing their leased premises.

Question 66

What are the post-completion tasks in the assignment of a lease?

Answer 66

Post-completion tasks include submitting SDLT or LTT returns and paying the appropriate tax if necessary, registering the assignment if necessary, and sending a formal notice of assignment to the landlord’s solicitor.

Question 67

What is the relationship between the head landlord, landlord, and tenant in the context of underletting?

Answer 67

The head landlord, landlord, and tenant are different terms used to describe the same individuals involved in underletting. The head landlord refers to the owner of the property, the landlord refers to the immediate lessor, and the tenant refers to the lessee who wishes to underlet the premises.

Question 68

What is the purpose of allowing tenants to charge the lease to a bank or reputable lending institution?

Answer 68

Allowing tenants to charge the lease to a bank or reputable lending institution provides them with the option to secure financing using the lease as collateral.

Question 69

What costs might a landlord incur when considering an application for consent to assign?

Answer 69

A landlord may incur legal costs in considering an application for consent to assign. The landlord’s solicitor may require an undertaking for costs from the tenant’s solicitor or raise an invoice at the end of the process, relying on the lease’s obligation for the tenant to pay the landlord’s costs.

Question 70

What is the purpose of an authorised guarantee agreement in underletting?

Answer 70

There is no equivalent of an authorised guarantee agreement for underletting, as the tenant remains liable to the landlord regardless of the underletting arrangement.

Question 71

What are the pre-completion steps for an underlease?

Answer 71

Pre-completion steps for an underlease include the landlord’s solicitor engrossing the agreed form of licence to underlet, obtaining the landlord’s execution to the licence to underlet, the tenant’s solicitor preparing the original and counterpart underlease, obtaining the tenant’s signature to the original, and sending the counterpart to the undertenant for signature. Additionally, a completion statement is prepared, detailing the money due on completion, and pre-completion searches are raised.

Question 72

What precompletetion searches are carried out during underletting?

Answer 72

• If it is an underletting of the whole of the tenant’s interest, then an OS1 search is carried out against the tenant’s registered leasehold title. If it is an underletting of part of the tenant’s interest, then an OS2 search is carried out against the appropriate part of the tenant’s registered leasehold title. · Updates your official copies and gives you a priority period
• Where the underlease is not registrable, an OS3 search may be carried out against the tenant’s interest to check whether any adverse entries have been made since the date of the last copy of the tenant’s title register. · Updates your official copies but does not give you a priority period

Question 73

What is the purpose of the exception to obtaining consent for charging the lease to a bank or reputable lending institution?

Answer 73

The exception to obtaining consent for charging the lease to a bank or reputable lending institution allows tenants to secure financing using the lease as collateral without unnecessary delays or restrictions.

Question 74

What happens on completion of an underlease?

Answer 74

On completion of an underlease, the solicitors for the tenant and undertenant agree to date and complete the licence to underlet. The undertenant’s solicitor sends the completion monies to the tenant’s solicitor. The completed original and counterpart underleases are sent between the solicitors, and notice of the underlease is sent to the landlord’s solicitor.

Question 75

What is the purpose of a licence to assign or underlet in the context of alienation?

Answer 75

A licence to assign or underlet is a formal deed that documents the landlord’s consent to an assignment or underletting. It specifies the transaction allowed and is limited in time. The assignee or undertenant may be required to covenant directly with the landlord in the new lease, and in the case of an assignment of a new lease, an authorised guarantee agreement may also be included.

Question 76

Why is it important for the consent to an assignment or underletting to be documented in a deed?

Answer 76

Consent to an assignment or underletting is usually given by the landlord in a formal deed, such as a licence to assign or licence to underlet. Documenting the consent in a deed ensures formality and lessens the risk of inadvertent consent. It also ensures that the tenant’s covenants and any variations to the lease are given the requisite formality.

Question 77

You act for an individual landlord who has received an application to underlet one of their units to a sole proprietor. The sole proprietor has a successful business, plenty of capital and excellent tenant references and credit score. However, the landlord knows the sole proprietor from a club that they both belong to, and they have had a falling out. For that reason alone, the landlord does not want to grant the consent.

How do you advise the landlord?

A. The landlord can unreasonably withhold consent as it is only a qualified covenant.

B. The landlord is required to act reasonably if withholding consent, and personal feelings are not a reasonable ground for withholding consent. The landlord will likely have to give consent within a reasonable time.

C. The landlord cannot unreasonably withhold consent, but it is reasonable to withhold consent to a sole proprietor as their covenant strength is less than a company’s.

d. The landlord cannot unreasonably withhold consent, but given that the underlessee might end up being the direct tenant of the landlord, it is reasonable to take their personal relationship into account as it might make their business relationship unworkable.

E, The landlord is required to act reasonably if withholding consent, and personal feelings are not a reasonable ground for withholding consent. The landlord may, however, stall for time and hope that the proposed underletting falls through.

Answer 77

A

Correct.
This is a qualified covenant against underletting (the landlord’s consent is required), which is automatically upgraded to a fully qualified covenant (s19(1)(a) Landlord and Tenant Act 1927). Furthermore, the landlord must make a decision within a reasonable time (s1, Landlord and Tenant Act 1988).
As the prospective underlessee has good covenant strength, and the landlord’s only objection is their personal relationship, it is likely that the landlord will have to give consent within a reasonable time.

Question 78

A 20 year lease is dated 1 July 2010. The tenant when the lease was granted was a clothes shop. The clothes shop lawfully assigned the lease to a bookstore and entered into an authorised guarantee agreement (AGA). The bookstore, two years later, lawfully assigned the lease to a dry cleaners and entered into an AGA. The dry cleaners still occupy the premises under the lease. The dry cleaners are struggling to pay their rent and the landlord wants to know who it can pursue for the rent arrears.

Which one of the following is the most accurate list of those the landlord can pursue for the rent arrears?

A.The dry cleaners only.

B. The clothes shop and the dry cleaners.

C. The clothes shop only.

D. The bookstore and the dry cleaners.

E. The clothes shop, the bookstore and the dry cleaners.

Answer 78

D

The dry cleaners are the current tenant and are liable to pay the rent. The bookstore gave an AGA to the landlord in respect of the dry cleaners when they assigned to the dry cleaners. The landlord can therefore claim from the bookstore under the AGA.
The original tenant (the clothes shop) will not have any original tenant liability as this is a new lease. The clothes shop’s AGA only covered the bookstore whilst they were the tenant.

Question 79

You act for an assignee taking the remaining 3 years of a 10 year term. The assignment is about to complete. The immediate landlord of the current tenant is the freeholder.

Which pre-completion searches should you undertake?

A. An OS3 search as the assignment is for 3 years and therefore not registrable.

B. An OS1 search of the tenant’s leasehold title.

C. An OS1 search of the landlord’s freehold title (or if the landlord’s title is unregistered a central land charges search against the landlord’s name for the landlord’s period of ownership), but as there is only 3 years left on the lease, no search against the leasehold.

D. An OS2 search of the relevant premises against the landlord’s freehold title.

E. An OS1 search of the landlord’s freehold title (or if the landlord’s title is unregistered a central land charges search against the landlord’s name for the landlord’s period of ownership) and an OS1 search against the tenant’s leasehold title.

Answer 79

B]

As the original lease was over 7 years, it would have been registered. It is the tenant’s title that the assignee is interested in.

Question 80

A tenant, A Ltd, has applied for consent to assign a five year lease to the assignee, B Ltd. The lease is dated after 1 January 1996.

You act for the landlord, who has asked you to advise who would be liable for the obligations of the lease after the assignment. How would you advise?

A. The outgoing tenant unless they enter into an authorised guarantee agreement, and the incoming tenant automatically on taking the assignment.

B. Both the outgoing tenant and the incoming tenant as it is a new lease.

C. The outgoing tenant if they entered into an authorised guarantee agreement, and the incoming tenant automatically on taking the assignment.

D. The incoming tenant provided that they give a direct covenant to the landlord to observe the obligations of the lease.

E. The incoming tenant if the landlord requires an authorised guarantee agreement; otherwise the outgoing tenant retains liability.

Answer 80

C

This is a new lease, and therefore liability shifts automatically from the assignor to the assignee on assignment. The outgoing tenant will only be liable if they have given an authorised guarantee agreement, but the incoming tenant will become automatically liable on assignment.

Question 81

A tenant has a registered lease dated before 1 January 1996. The tenant is assigning the lease to an assignee. The landlord has consented to the assignment and has asked you to draft the relevant documentation.

Which one of the following is the correct list of the documents that will be need to be prepared for execution?

A. Licence to assign and TR1

B. Licence to assign and deed of assignment.

C. Licence to assign and the lease.

D. Licence to assign, authorised guarantee agreement and TR1

E. Licence to assign, authorised guarantee agreement and the lease.

Answer 81

A

A licence to assign is needed to document the landlord’s consent.
As the lease is registered, the assignment will need to be documented by way of Land Registry’s standard transfer deed TR1.
An assignment is the sale of an existing lease, not the creation of a new lease. There will be no new lease granted to the assignee.