1
Q
In commercial leases who is responsible for the insurance
A
Usually it’s the T of a whole
If a part T responsible for inside and will pay a service charge to the LL is is responsible for the common areas exterior
2
Q
Why should a LL be wary of onerous T covenants
A
They may have a negative impact on rent review
3
Q
Is the code for leasing business premises voluntary or mandatory
A
Mandatory but it contains some obligatory elements and some good practice elements
4
Q
What does rent include
A
The annual rent (LLs income)
Other sums are reserved as rent eg insurance/service charge
5
Q
What is a rent review clause
A
That rent will be subject to review throughout the term
6
Q
How are costs recovered for a LL maintaining services, insuring structures and common parts of a building
A
via service charrge
7
Q
Break clauses are commonly found in what types of lease
A
commercial leases rather than long residential leases
8
Q
If a lease is registerable what is needed on the front page of the lease
A
Prescribed clauses mainly for the benefit of HMLR
9
Q
Why is the term rent usually defined to include payment of other costs such as insurance/service charges
A
As it gives the LL a wider ranger of remedies for no payment of rent
10
Q
If a LL wants to review rent what does it need in the lease
A
Rent Review Clause
11
Q
What does the LTA 1927 imply into a lease
A
s19(1) if a lease contains a QC will be upgraded to a FQC (LL cannot unreasonably withhold consent)
s19 a QC relating to change of use (excluding structural work) provides that the LL cannot charge a premium for giving consent but can recover reasonable costs (e.g legal fees)
12
Q
IF there is an absolute covenant to alterations to the premises what can a T do
A
apply to the court for authorisation to improve the property
13
Q
What is the difference between a residential and commercial lease regarding assignment
A
Residential - Usually permitted
Commercial - Not usually permitted
14
Q
What is important about a forfeiture clause
A
must be includes in the lease or cannot forfeit the lease
exception
where the T breaches a provision of the lease (i.e. a condition)
15
Q
For breach of non payment of rent what does a LL need to do
A
Make a formal demand for the rent unless excluded in the lease or the rent arrears are more than 6 months
then seek a court order for possession if the rent remains unpaid
16
Q
For other breaches of a lease what does the LL need to do
A
serve a s146 notice specifying the breach and the remedy
17
Q
If the T fails to comply with responding to the s146 notice what can the LL do
A
seek an order for possessionw
18
Q
What way could a LL waive their right to forfeiture
A
IF they know about the breach and continues to allow it to continue and the T is aware
19
Q
Repair covenants in lease why is the wording important
A
If the repairing covenant requires the tenant “to keep” in repair, the tenant is taking on the obligation to “put in repair” and then keep in that repair, which could be an onerous provision if the demised premises is in poor structural or decorative condition at the date of the lease.
The tenant will attempt to negotiate a limitation on the repairing covenant to exclude liability for “fair wear and tear”. This means that the tenant will not be required to pay for the general wear and tear to the demised premises caused by basic regular use.
20
Q
What statutory protection for residential tenants is in place for service charges if major expenditure is needed
A
The requirement for service charges to be fair in proportion to the amount of the building which a tenant occupies or over which the lease grants them rights (for example, common areas, such as stairwells, landings, garden areas and parking areas).
21
Q
When a T has taken a lease of an entire building who usually insures the building
A
The Tenant
22
Q
If part of a building is being lease who usually insures the building
A
the tenant will be responsible for insuring the demised premises as defined and the lease must be drafted to ensure that the landlord is responsible for insuring the building within which the demised premises are situated
23
Q
Who is usually responsible for insuring against insured risks on the lease of a part of a building
A
The Landlord and the T will covenant to contribute towards the premium (called insurance rent)
24
Q
s19 LTA 1927 is relevant to what only
A
is relevant to the assignment (but not other forms of alienation) provisions in commercial leases. It permits a landlord to specify conditions that must be met before the landlord will give the tenant consent to assign the lease. There is no requirement for the landlord to be reasonable but, as these conditions are inserted into the lease when it is first drafted, the tenant can decide if they want to take the lease at all if they do not like the proposed conditions.
25
If a T wants to change the use of a demised premises what is usually required
Consent of the LL
&
Planning Permission
26
If a lease contains a qualified covenant for an application to change the use what could the LL do
Consent or they could withhold consent (which could be withheld unreasonably)
27
What would a LL be entitled to if the T's alteration to a property diminishes the value
compensation and could request the T to reinstate the property
28
Does s19 (3) LTA apply to structural alerations
No
29
Absolute prohibition to make alterations what can the T do
LTA 1927 s 3 permits the tenant to serve notice of the proposed works on the landlord (accompanied by plans and specifications). If the landlord does not object within 3 months, the tenant can carry out the works. If the landlord objects, the tenant can apply to court for an order authorising the improvements.
30
what does open market rent review and rent based turnover mean
An “open market” review calculates what the rent would be if the premises were let on the open market at the date of the review.
Rent based on turnover calculates the rent payable according to the financial turnover of the tenant’s business. A stepped rent specifies what the rent increases will be and at what intervals.
USUALLY ONLY IN COMMERCIAL LEASES
31
A LL can only forfeit the lease if: -
* there is a provision in the lease allowing the LL the right of re-entry,
or
* the tenant’s obligation is termed a condition in the lease; the right of forfeiture then arises automatically if the condition is breached. If a tenant’s breach continues (for example, the tenant fails to repair the demised premises in accordance with the lease), the landlord’s right to forfeit the lease also continues.
The landlord’s right to forfeit a long residential lease that might have many years to run is a serious consequence for the tenant. The right to forfeit a long residential lease on the tenant’s bankruptcy is not acceptable to any mortgage lenders. Accordingly, this provision must be resisted by the tenant’s solicitor when the lease is granted.
32
What are the steps for forfeiture of non payment of rent
* The landlord must make a formal demand for the rent due (that is, demand the sum, at the property, on the day rent is due, between sunrise and sunset), unless this requirement is excluded in the lease or the rent is at least 6 months in arrears.
* If rent is still not paid, the landlord may seek a court order for possession.
* If dealing with commercial property, the landlord may also effect forfeiture by peaceable re-entry. Section 6 of the Criminal Law Act 1977 makes it an offence to use or threaten violence to secure re-entry
33
what are the steps for forfeiture of other breaches
* After a right of re-entry has arisen as a result of a breach of covenant, the landlord can serve a notice, under s 146 of the Law of Property Act 1925, specifying the breach, requiring a remedy if possible (within a reasonable time period) and requiring compensation if desired.
* If the tenant fails to remedy the breach, the landlord may seek a court order for possession or attempt peaceable re-entry (only for commercial properties) as outlined above.
34
Waiver of the right to forfeit a lease occurs when the LL does three things
* knows of the tenant’s breach
* does something or takes steps that recognise that the lease continues to exist, and
* communicates that act to the tenant
35
What relief is available for a tenant when a LL is looking to forfeit the lease (non payment of rent and breaches of other covenants)
* for non-payment of rent, if all arrears and landlord’s costs are paid, the tenant is usually entitled to keep the lease, and
* for breaches of other covenants, the tenant may apply for a court order for relief under s 146(2) of the Law of Property Act 1925 any time before the landlord re-enters the property. Relief is not available unless the breach has been remedied.
36
Section 146(4) of the Law of Property Act 1925 contains an important protection for subtenants what is it?
If the head lease is forfeited, the subtenant can apply for relief under this section of the Act. If successful, the subtenant will become the immediate tenant of the head landlord for the residue of the term of the sublease. Relief against forfeiture is an important right for a tenant, whether of a commercial or residential lease. It means that, if the tenant puts right the problem (for example, pays rent arrears or carries out required repairs), the landlord is not entitled to forfeit the lease and the tenant can retain their leasehold interest in the property
37
A lease may come to an end in what other ways
Effluxtion of Time - fixed term comes to an end
Surrender - both parties agree
Disclaim - usually if a company has gone into liquidation
Frustration - neither parties fault
Merger - FH and LH merge
Notice to Quit - Periodic Tenancies only (outside SQE)
38
39
What is the key act for breaches of covenants of a lease
Landlord and Tenant (Covenants) Act 1995
40
What dates make a lease and old lease or new lease
Before 01 01 1996 old lease
After 01 01 1996 new lease
41
What are the liabilities of the LL and T to an old lease
Both original LL and T remain liable for the covenants
42
Under the LT (covenants) act 1995 what are the liabilities for LL and Ts regarding breaches of covenants
Ts are automatically released upon assignment - can ask outgoing T to enter an AGA
LL not released can apply for release in certain circumstances
43
Can a residential lease have a provision for an AGA
No
44
Will the assignor of a lease remain liable for a breach of covenant which occurred while the assignor was still the T
yes
45
What are the Landlords remedies for non payment of rent
Debt Action - can only recover last 6 years
Taking possession of goods (peaceable re-entry)
Forfeiture (no s146 notice is required)
Deduction from Rent Deposit
Pursue Guarantors
CRAR
46
What is CRAR
Commercial Rent Arrears Recovery is a statutory procedure that permits a LL of COMMERCIAL PREMISES to recover rent arrears by taking control of selling Ts goods.
47
Does a provision for CRAR need to be in the lease to exercise this right
NO just the LL must give 7 days notice of enforcement
48
When will CRAR not be available
Where the commercial premises part let as a dwelling so only wholly commercial premises is this allowed
49
What are the Landlords remedies for other breaches
Injunction
Specific performance
Damages (cannot exceed the cost of breach)
Forfeiture
Deduction from Rent Deposit
Pursue Guarantors
Self Help
50
Damages as a remedy for other breaches in the lease what is the rule
Damages should not exceed the cost of the breach. This earns that the damages the LL could receive would be significantly less if the value of the land is not significantly affected. No repairing damages may be recovered if the building is about to be demolished or altered.
51
What is the forfeiture procedure for other breaches of leasehold covenants
Service s146 notice
Specify the breach
Require a remedy within a reasonable time
Require T to compensate the LL for breach
52
What is a self help clause in a lease and what is it usually called
The right for the LL to enter the premises and carry out the repaired if the T is in breach
(Must be a clause in the lease to exercise)
Jervis V Harris Clause
53
What is the procedure for the self help clause to be effective
Service notice on the T
Specify breach
Request a remedy
If T fails to do work the LL can enter and carry out the work and recover the cost from the T as a debt
54
What are the Ts remedies when the LL breaches their covenants
Injunction
Specific Performance
Damages (restore T to position enjoyed before the breach)
Repudiation
Set off - The T can give the LL notice of their failure to carry out their repairing covenant and if ignore the T has the right to carry out the repairs and deduct the cost from rent due
55
Is a personal guarantee the same as an AGA
No - A personal guarantee is a third party who enters a separate deed of guarantee with the LL and agrees to be pursued by the LL if the T doesnt pay the rent
56
What searches need to be undertaken by a purchaser and when becoming a Tenant
local search, drainage search and environmental search
57
What is an agreement for lease
A contract - An agreement that the lease will be in the format appended to the contract
58
Does Agreement for lease still need to adhere to the exchange contracts rules
yes
59
What is known as engrossmements
where two fresh copies of the agreed documents is provided
60
When does the terms of the lease come into affect
when the lease is dated
61
What are the two extra securities Landlords may require in the grant of a new lease
Rent Deposit
Guarantor
62
Once the agreement for lease is exchanged what cannot be changed
the agreed form of lease
63
What is the only way a lease can be amended
by a Deed of Variation only when it is completed not between agreement for lease and completion
64
How is LTT/SDLT assessed on the grant of a new lease
The SDLT on a new leasehold property is calculated in two parts, and the totals are added together:
* On the Premium: This is calculated in the same way as for a freehold property, using the standard SDLT rates and bands for the purchase price.
* On the Rent: This is calculated on the Net Present Value (NPV) of the total rent payable over the entire term of the lease.
* For a residential lease, if the NPV is above the threshold (currently £250,000 for residential), you pay a flat 1% SDLT on the amount of the NPV that is above the threshold.
* For a non-residential lease, the rates are different and have their own thresholds.
The total SDLT due is the sum of the tax on the premium and the tax on the NPV of the rent.
LTT Calculation (Wales)
The LTT calculation for a leasehold property in Wales is slightly different and depends on whether the property is residential or non-residential.
* Residential Leases: LTT is only paid on the lease premium. The rent is not taken into account for the calculation. This is a key difference from SDLT.
* Non-residential Leases: LTT is calculated on both the premium and the Net Present Value (NPV) of the rent, similar to the SDLT model for non-residential properties. The tax on the premium and the tax on the NPV of the rent are calculated separately using their respective rates and then added together.
The thresholds and rates for LTT are also different from SDLT, so it's essential to use the correct guidance for properties in Wales.
Key Points to Remember
* Net Present Value (NPV): The NPV is a complex calculation that estimates the current value of the future rent payments over the life of the lease. Both HMRC (for SDLT) and the Welsh Revenue Authority (for LTT) provide online calculators to help determine this figure.
* Existing Leases: When a lease is being assigned (i.e., you are buying an existing lease from a current tenant), tax is generally only paid on the premium, as the rent has typically been taxed at the time the lease was first granted.
* First-time Buyers: First-time buyer relief can apply to the premium part of the calculation, but not to the rent.
65
Is LTT/SDLT payable if the total rent over the life of the lease exceeds the threshold
yes
66
what is the total rent over the life of the lease called for SDLT/LTT purposes
Net Present Value
67
Assignment of an existing Lease can negotiations take place regarding the Terms
NO - only option is to enter into a Deed of Variation
68
What is a Licence to Assign
A formal document that the Landlord drafts providing agreement for a commercial lease to be assigned. There will be a term in the Lease confirming that the LLs consent is required
69
Can a LL insist on a Licence to Assign if this clause is not in the Lease
No
70
Who applies for a Licence to Assign
The existing T (seller)
71
Will the existing T pay the LLs fees for a Licence to Assign
Yes
72
Who will be a party to the Licence to Assign
Landlord
Existing Tenant
Incoming Tenant
73
Why is a Licence to Assign important
It creates privity of contract between all three parties
74
What other forms of protection could a LL request on assignment of a commercial lease
Rent Deposit Deed
Deed of Guarantee - Guarantor
AGA (only after 1996)
75
What the conditions that needs to be satisfied for the LL to request an AGA
After 1996 & and lease contains a provision
76
What does it mean when a seller gives the buyer title guarantee
A promise imposed by statute on the seller which the buyer can rely on after completion
Seller promises they have the right to sell and will at their own cost do all they can to transfer the title
77
Title Guarantee can be full/limited/No guarantee.
What does Full/Limited guarantee?
Full - Warrants that the seller is selling free from all charges or encumbrances
Limited - Warrants that they have not created any charges or granted any rights not disclosed
78
There is an additional guarantee given where the title being transferred is Leasehold what is it?
Lease is subsisting at the time of sale and no breach of condition that would warrant a forfeiture
79
Standard Condition 6.3.5 provides apportionments on what
Ground rent best estimates so accordingly solicitors should negotiate a retention if there could be a shortfall
80
If a seller holds a share in the management company what must they provide
A signed Stock Transfer Form on completion to transfer the Share in the company to the buyer
81
Sale of an existing lease is SDLT/LTT payable
Yes on purchase price only BUT not on the rent element
82
Grant of a new lease is SDLT/LTT payable
Yes AND it is payable on the rent element
83
Who should service notice of the assignment on the Landlord
The Buyer
84
If a Tenant wishes to underlet and there is a provision in the lease to obtain consent what document is needed
License to Underlet
85
Who are parties to a Licence to Underlet
Landlord, Tenant and Undertenant to create privity of contract
86
Security of tenure describes the right of what?
the right of a business tenant to remain in the premises at the end of the tenancy and will automatically continue at the end of the term
87
Security of Tenure is usually relevant for what lease?
Commercial Leases
88
If a Tenant is protected by the LTA 1954 what does that mean for the Landlord
the landlord can only bring the lease to an end by using one of the statutory methods of termination.
89
4 ways a 1954 Act protected tenancy can be brought to an end are:
* forfeiture by the landlord
* surrender
* the landlord serves a valid section 25 notice on the tenant to terminate the lease or suggest a new lease, or
* the tenant serves a section 26 notice on the landlord to request a new lease.
90
(5) There are certain tenancies to which the 1954 Act does not apply what are these:-
Agricultural tenancies
Tenancies at Will
service tenancies, for example caretakers
fixed term tenancies for less than 6 months.
The most important category of tenancies to which the 1954 Act protection does not apply is those which have been specifically ‘contracted out’ of the protection afforded by the Act.
91
What are the three main points for contracting out?
Warning notice must be served on the T 14 days before entering into a lease
T makes a declaration confirming contracting out
Lease contains an express provision to contracting out
92
What is a s25 notice and timeframe
Landlords way of service confirming renew or not renew a lease
The landlord must serve the notice between 6 and 12 months before they wish the existing tenancy to end.
93
To gain possession of a property serving a s 25 notice what are the grounds
mandatory (court must refuse T new Lease)
landlord can offer suitable alternative accommodation for the tenant or that the landlord intends to demolish or reconstruct premises
discretionary grounds Tenant has failed to carry out repairing obligations or pay rent.
94
What is a competent Landlord for service of a s26 notice
95
T's obligation when serving a s26 notice
Sent to a competent LL
6-12 months before they wish a new tenancy
LL has 2 months to agree or oppose with the grounds
96
If a Landlord establishes a mandatory ground for resisting a new tenancy how is the T protected
the right to compensation
97
If the court orders a new tenancy who will negotiate and what happens if the court steps in
LL & T will usually negotiate. Generally, the new lease will be the same as the existing. Parties are free to negotiate whatever lease term they desire but if they cannot agree, the maximum term that the court can impose is 15 years.
98
What is it called when the T remains in the premises after the term of the lease ends
Holding Over
99
What does Holding Over mean
when a T remains in the premises after the term of the lease has ended
100
A failure to comply with contracting out correctly means what
It will render the contracting out VOID and Tenancy will be protected
101
3 requirements to correctly contract out
Notice
Declaration
Clause in the lease
102
There are five ways an LTA 1954 protected lease can be brought to an end:
* forfeiture by landlord
* surrender
* landlord’s notice of termination (LTA 1954 s 25 notice)
* tenant’s notice of request for new tenancy (LTA 1954 s 26 notice), and
* tenant’s notice of termination (LTA 1954 s 27 notice).
103
Forfeiture by Landlord of terminating a tenancy with security of tenure
If the lease contains the right for the landlord to forfeit the lease, the landlord can do so in the event of tenant default. The LTA 1954 does not remove the landlord’s right to forfeit a protected lease: see 12.12.
104
What is a s27 Notice
A T does not want to renew and must give not less than 3 months notice to the LL
105
If a T serves a s27 notice can they change their mind (a-g)
No they cannot change their mind and serve a s26 notice
106
What are the grounds of opposition to a new tenancy
(a) tenant’s failure to carry out repairing obligations
(b) tenant’s persistent delay in paying rent
(c) tenant’s substantial breaches of other obligations
(d) suitable alternative accommodation is available for the tenant
(e) on subletting of part, landlord requires the whole property for subsequent letting
(f) landlord intends to demolish or reconstruct the premises, and
(g) landlord intends to occupy the holding
107
What are the discretionary grounds for opposition to a new tenancy
(a) tenant’s failure to carry out repairing obligations
(b) tenant’s persistent delay in paying rent
(c) tenant’s substantial breaches of other obligations
(e) on subletting of part, landlord requires the whole property for subsequent letting
108
what are the mandatory grounds for opposition to a new tenancy
(d) suitable alternative accommodation is available for the tenant
(f) landlord intends to demolish or reconstruct the premises, and
(g) landlord intends to occupy the holding.
109
If a Landlord establishes a no fault ground what does that mean for a Tenant
They will be entitled to compensation
110
Under the LTA 1954, a business tenant may remain in the premises beyond the contractual expiry date of the tenancy if:
o there is a tenancy rather than a licence
o the tenancy is not excluded under s 43 (tenancies at will, agricultural holdings, mining leases, service tenancies, a fixed term tenancy for fewer than 6 months or a contracted-out tenancy (see below))
o the tenant is in occupation, and
o the tenant carries on a business at the premises
111
There are seven grounds for opposition that the landlord can put forward to oppose the tenant’s application for a new tenancy:
o tenant’s failure to carry out repairing obligations
o tenant’s persistent delay in paying rent
o tenant’s substantial breaches of other obligations
o suitable alternative accommodation is available for the tenant
o on subletting of part, landlord requires the whole property for subsequent letting
o landlord intends to demolish or reconstruct the premises, and
o landlord intends to occupy the holding.
112
The discretionary grounds are:
o tenant’s failure to carry out repair obligations
o tenant’s persistent delay in paying rent
o tenant’s substantial breaches of other obligations, and
o on subletting of part, landlord requires the whole property for subsequent letting.
113
The mandatory grounds are
o suitable alternative accommodation is available for the tenant
o landlord intends to demolish or reconstruct
114
Who does Security of Tenure apply too?
Commercial Tenants (Business Tenancies Only)
115
What is SOT
The right to stay in the premises at the end of the lease
116
When a SOT lease expires what are the Tenants position?
They are known as holding over
117
Who does SOT not apply too?
under 6 months
118
If a T sublets the whole of a premises what does that mean for SOT
It means that the head T does not have SOT
119
Can periodic tenancies be contracted out
No
120
If a T's Lease is terminated through no fault of their own what are they entitled to
Compensation
121
Can a LL exclude compensation with a clause in the lease
Yes - but it will be VOID if the T has been in occupation for longer than 5 years
122
