Property formative

Question 1

You act for a company on the purchase of a commercial property. Contracts were exchanged last Friday with completion to take place next Friday. The contract incorporates the Standard Commercial Property Conditions (Third Edition) (‘SCPC’)

The company’s financial director calls you to say that the storage area to the rear of the property was destroyed by fire last night, and to ask who is responsible for the cost of repairing the damage.

Which one of the following options is the best advice to give to the financial director?
Select one alternative:
* The company will have to pay for the damage because the buyer bears the risk between exchange of contracts and completion.
* The seller will have to pay for the damage because it bears the risk between exchange of contracts and completion.
* The seller will have to claim on its insurance which it has to maintain until completion.
* The company and the seller will have to share the cost of repairing the damage as the law is silent as to who bears the risk.
* The company will have to claim on its insurance once it buys an insurance policy which starts on completion

Answer 1

The company will have to pay for the damage because the buyer bears the risk between exchange of contracts and completion.

Correct. Pursuant to the SCPCs the risk of the property passes to the buyer from the date of the contact, which is exchange. The buyer should have put in place insurance from exchange of contacts. The seller is no longer responsible for the property from exchange. The cost of repair is not shared between the parties, it will be at the buyer’s cost. The seller does not have to maintain its insurance of the property until completion. The buyer’s insurance policy should have been in place from exchange (not completion).

Question 2

You are acting for Company A in the purchase of an unregistered freehold property from Mr B and Ms C. Company A is funding the purchase with a loan from X Bank plc. You are not acting for X Bank plc. Contracts were exchanged 21 days ago and completion will take place in 7 days.

Which one of the following searches would it be best for you to carry out before completion?

Select one alternative:
* An OS1 search in favour of Company A.
* An OS1 search in favour of X Bank plc.
* A Central Land Charges Search on Form K15 against Mr B and Ms C.
* A Central Land Charges Search on Form K15 against Company A.
* A bankruptcy search on Form K16 against Mr B and Ms C .

Answer 2

• A Central Land Charges Search on Form K15 against Mr B and Ms C.

Correct. While the other options might sound plausible they are each incorrect. On a purchase of unregistered land, the transfer to the buyer must complete within the 15 working day ‘protection period’ in the Central Land Charges Search made against the name of the current seller. The 15 working day protection period in any pre-exchange Central Land Charges Search on K15 made against the current seller would have expired and therefore the search needs to be renewed before completion.

Question 3

The seller has replied to question 4.1 of the Law Society Property Information Form to say that a front extension was built to the house five years ago. From the estate agent’s photo, it is clear that the extension is visible from the road.

The seller has replied to question 4.2 of the same form to say that no planning permission or building regulations approvals were required.

How should you advise your client?
Select one alternative:
* The seller should be asked to obtain and provide a Regularisation Certificate in respect of the extension works before completion.
* The buyer should not be concerned as the relevant enforcement periods for lack of local authority approvals have expired.
* The buyer may rely on the seller’s reply 4.2 in which the seller confirms that no approvals were required.
* The seller should obtain indemnity insurance in respect of the lack of planning permission and building regulations approval before completion.
* The seller should be asked to provide indemnity insurance in respect of the lack of building regulations approval before completion.

Answer 3

• The seller should be asked to obtain and provide a Regularisation Certificate in respect of the extension works before completion.

Correct. This is the best option. There is no need to take any action regarding planning permission, as the extension works were completed more than four years ago, and were not concealed. They are immune from enforcement action. However, there is no time limit on the local authority applying for an injunction against a breach of building regulations. Moreover, if the extension is not compliant with building regulations, it may be unsafe. An indemnity insurance policy will cover the financial loss caused by enforcement action, but will not cover liability for injury or death caused by unsafe building work. If the local authority inspects the work and provides the regularisation certificate, this will eliminate the risk of enforcement action and confirm that the work is safe.

Question 4

You act for the buyer of a registered commercial property. The buyer intends to undertake a significant extension to the property following completion.

The seller told the buyer during a viewing of the property that an application for planning permission to build a similar extension was refused by the local authority two years ago.

Which search / enquiry would you undertake to confirm the position?
Select one alternative:
* The local land charges search (LLC1)
* Land Charges Department search
* The CON29O
* Seller’s replies to CPSEs
* A local authority search (CON29)

Answer 4

A local authority search (CON29)

This is correct. The CON29 search shows all applications for planning permissions granted, issued, refused or pending. The LLC1 search will only show planning permissions that have been granted.

Question 5

You are acting for the buyers of a property. The seller is Mark Arthur. The seller’s solicitor tells you that Philip Arthur recently died. You review the official copies, which contain the following entry:

Proprietor(s): PHILIP ARTHUR and MARK ARTHUR of 35 Yewdale Road, Leeds, LS3 8QP
RESTRICTION: no disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.

Which one of the following statements best explains what you need to do in respect of this entry in the Proprietorship Register?
Select one alternative:
* You need to ensure another trustee is appointed to pay the purchase money to, so the restriction will not apply.
* You do not need to do anything, the right of survivorship will apply so Mark Arthur can sell as a sole proprietor.
* You need to see a certified copy of the death certificate and then Mark Arthur can sell as a sole proprietor.
* You do not need to do anything as Philip Arthur has died so the restriction is no longer relevant.
* You do not need to do anything, this is for the seller’s solicitors to deal with.

Answer 5

You need to ensure another trustee is appointed to pay the purchase money to, so the restriction will not apply.

This is correct. This restriction tells us Mark and Philip are beneficial tenants in common and prevents a sale by a sole owner. This means a sale by Mark alone is not permitted and would not be registered by the Land Registry. A second trustee needs to be appointed in order to comply with the restriction. This will overreach Philip’s beneficial interest, which will have passed under his estate because the right of survivorship will not have applied on his death.

Question 6

You act for a buyer on the sale of an unregistered freehold property. You have undertaken a review of the title deeds to the property and note that the property benefits from a right of way granted by deed over neighbouring land.

Which one of the following statements best explains the next step you should take?

Select one alternative:
* You will need to undertake a search of the central land charges register to check whether the right of way has been registered as a land charge.
* You will need to undertake a SIM search to check whether or not the neighbouring land is registered.
* You will need to undertake a highways search to ensure the right of way has been adopted.
* You will need to apply to the Land Registry for a caution against first registration against the neighbouring land.
* You will need to agree a deed of variation with the owner of the neighbouring land to ensure the right of way is appropriate for your client’s needs.

Answer 6

• You will need to undertake a SIM search to check whether or not the neighbouring land is registered.

Correct. A SIM search will inform you whether or not the neighbouring land is registered. This is important as this will determine whether or not the easement will bind it. If the neighbouring land is unregistered then the easement will continue to bind the neighbouring land whilst it remains unregistered. If the neighbouring land is registered, however, the easement needs to have been registered on the charges register of the neighbouring land’s title in order for it to bind its current owners.

Question 7

The bank makes only exempt supplies for VAT purposes in the course of its business.

Which one of the following most accurately sets out the position with regards to any VAT chargeable in respect of the sale?
Select one alternative:
* The sale will be subject to VAT at 20% which the bank can recover by offsetting it against the 0% VAT chargeable on the goods and services it supplies, leading to a payment by HMRC to the bank.
* The sale will be subject to VAT at 20% which will be recoverable by the bank.
* The sale will not be subject to VAT.
* The sale will be subject to VAT at 0%.
* The sale will be subject to VAT at 20% which will be irrecoverable by the bank.

Answer 7

The sale will be subject to VAT at 20% which will be irrecoverable by the bank.

Correct. The option to tax a commercial building made by a VAT registered business seller means VAT is chargeable on the sale at 20%. The bank only makes exempt supplies (VAT is not chargeable on the goods and services it supplies) so the bank cannot recover the VAT it paid (input VAT) by offsetting it against output VAT it charges on goods and services it supplies since the bank cannot charge output VAT.

Question 8

The registered title to a property contains a restrictive covenant ‘not to use the property for any purpose other than as a single private dwelling house.’ The property is currently used as a private residence.

The buyer, who is a doctor, wishes to use the property as a surgery after completion.
Which one of the following options is the best advice to give to the buyer?
Select one alternative:
* Use of the property as a doctor’s surgery would be a future breach of the restrictive covenant. An application to the Upper Tribunal (Lands Chamber) is not possible, as they will not assist a person who intends to commit a future breach of a restrictive covenant.
* Provided that the buyer obtains planning permission for the surgery, this will put the Person with Benefit on notice, and they cannot then object to the breach if they do not object within the planning permission consultation stage.
* Use of the property as a doctor’s surgery would be a future breach of the restrictive covenant and the seller should pay for any restrictive covenant insurance policy.
* Use of the property as a doctor’s surgery is not a breach of the covenant as long as the doctor lives in the house and the surgery is an ancillary use.
* Use of the property as a doctor’s surgery would be a future breach of the restrictive covenant and, as a first option, the buyer should try to obtain (at the buyer’s cost) a restrictive covenant insurance policy.

Answer 8

Use of the property as a doctor’s surgery would be a future breach of the restrictive covenant and, as a first option, the buyer should try to obtain (at the buyer’s cost) a restrictive covenant insurance policy.

Correct. Where there will be a future breach of the restrictive covenant on the part of the buyer, the first remedy that the buyer should consider is a restrictive covenant indemnity policy which the buyer should pay the cost of. Please refer back to your materials relating to the different types of covenants and the remedies that are available if they are breached depending on whether the breach was a past breach by the seller or will be a future breach by the buyer.

Question 9

You are acting for a company on the purchase of a registered property for £550,000. A bank is providing the company with a mortgage of £300,000 and is taking a first ranking fixed charge over the property.

Which one of the following best describes the post-completion steps you would take to register the bank’s charge?

Select one alternative:
* Register the charge at Companies House within 21 working days of the creation of the charge and at the Land Registry within two months of the creation of the charge.
* Register the charge at the Land Registry within 21 working days of the creation of charge, and tick the MR01 box on the AP1 for the Land Registry to attend to registration at Companies House.
* Register the charge at Companies House within 21 working days beginning the day after the creation of the charge and at the Land Registry within 30 days of the OS1 search.
* Register the charge at Companies House within 21 days of the creation of the charge, and at the Land Registry within two months of the creation of the charge.
* Register the charge at Companies House within 21 days beginning the day after the creation of the charge, and at the Land Registry within 30 working days of the OS1 search.

Answer 9

Register the charge at Companies House within 21 days beginning the day after the creation of the charge, and at the Land Registry within 30 working days of the OS1 search.

Correct. This shows the correct timescale for both Companies House and the Land Registry.

Question 10

A solicitor acts for the buyer of a commercial property. The buyer instructs the solicitor that the seller and the buyer have agreed between them that the seller will carry out some repairs to the roof before the completion date.

Which one of the following best represents the steps that the buyer’s solicitor should now take in connection with the contract?
Select one alternative:
* A special condition would not be required, as the seller is obliged to transfer the property in good repair.
* There is no need for a special condition as the verbal agreement of the seller is sufficient.
* The buyer’s solicitor should draft a special condition in the contract specifying that the seller must carry out the repairs to the roof of the property before the completion date to the reasonable satisfaction of the buyer.
* The special condition is not required as the SCPC confirms that the property is sold in the state it is in at the date of the agreement between the parties.
* The buyer’s solicitor should draft a special condition in the contract specifying that the seller must carry out the repairs to the roof.

Answer 10

• The buyer’s solicitor should draft a special condition in the contract specifying that the seller must carry out the repairs to the roof of the property before the completion date to the reasonable satisfaction of the buyer.

This is correct. Special conditions are required to deal with specific matters agreed between the parties. Caveat emptor would mean that in the absence of a special condition, the responsibility for the repairs would fall to the buyer. s2 Law of Property (Miscellaneous Provisions) Act 1989 states that all the terms agreed between the parties must be incorporated in the contract, so the seller’s promise to repair the roof would not be binding without being in the contract.

Question 11

A restaurant operator is expanding its business and acquires the freehold of a registered property which is currently used as a shop. The restaurant operator will be changing the use of the property from a shop to a restaurant (both uses are within class E) and will also be carrying out significant internal building works.

Which one of the following best sets out the necessary consents needed for the restaurant operator’s plans?
Select one alternative:
* Neither planning permissions nor building regulations approvals are required for the planned change of use and works.
* Planning permission is not required for the change of use but it is required for the internal building works. Building regulations approvals are also required for the internal building works.
* No planning permissions will be needed although building regulations approvals for the works will be required.
* Planning permission is required for both the change of use (unless it falls within ‘permitted development’ under the GPDO) and the internal building works. Building regulations approvals are not required.
* Planning permission is required for the change of use although not for the internal building works. Building regulations approval is not required either.

Answer 11

• No planning permissions will be needed although building regulations approvals for the works will be required.

Correct. Under s55(2) TCPA 1990 the internal building works do not constitute development and so planning permission is not required for them. The change of use of the property, from a shop to a restaurant, where both uses are within the same use class is not a material change of use and so does not constitute development, so planning permission is not required for the change of use. Building regulations approvals are required for works carried out and cover safety matters such as structural integrity. They are a separate consent from the planning permissions.

Question 12

You act for a company who is selling its freehold offices (‘Seller’). Contracts have been exchanged for completion today at 2 pm. The contract incorporates the Standard Commercial Property Conditions (Third Edition – 2018 Revision) without any amendments and completion.

You have just been informed that the buyer can no longer complete today as planned but can complete before 2 pm a week from today.

Which one of the following best describes the advice you would give to the Seller regarding obtaining compensation for the delay?
Select one alternative:
* The Seller can claim compensation from the buyer for each day of delay including both today and the day completion finally takes place or is deemed to take place.
* The Seller can claim compensation from the buyer for each day of delay and can serve a notice to complete by e-mail in advance of 2pm today.
* The Seller can claim compensation and can serve a notice to complete by email on the buyer today in advance of 2pm. The buyer will then have 10 working days, including today, to complete.
* In addition to receiving compensation, the Seller may rescind the contract but is obliged to repay the deposit with accrued interest to the buyer.
* The Seller can claim compensation and can serve a notice to complete by email on the buyer today after 2pm. The buyer will then have 10 working days, excluding today, to complete.

Answer 12

The Seller can claim compensation and can serve a notice to complete by email on the buyer today after 2pm. The buyer will then have 10 working days, excluding today, to complete

Correct. This answer reflects the contractual terms prescribed by the SCPC. The ten working day period, given to the defaulting party to complete, starts to run the day after the notice to complete has been deemed served. The notice to complete can be served at any time on the day of completion once the time for completion has passed. The time for completion is 2pm under the SCPC. The compensation is payable for every day of delay so that would include today (the day the buyer was supposed to complete) but would not include the day completion takes place, on these facts, as the buyer will be completing before 2pm. Unless 2pm has passed on the day the buyer completes, the buyer will not have been ‘late’ on that day. Finally, the Seller cannot both claim compensation under the SCPCs and also rescind the contract, they can only do one or the other.

Question 13

You act for a client who intends to buy a registered freehold in the countryside. The client has asked you to check whether a public footpath crosses the property.

Where would you normally expect to find the answer?
Select one alternative:
* The commons registration search result
* The property register of the official copies
* The replies to standard enquiries of the local authority
* The central land charges search result
* Search of the index map result

Answer 13

The replies to standard enquiries of the local authority

Correct. There is a question to the local authority at enquiry 2.2 asking if there are any public right of ways (which would include footpaths) that abut or cross the property. While the other answer options might sound plausible, they are each incorrect.

Question 14

You are acting for a buyer on its purchase of a registered freehold commercial property. You exchanged contracts last week and are now preparing for completion which is due to take place in 14 days’ time. The property is subject to a standard commercial mortgage in favour of a clearing bank (the Bank).

Which of the following statements best explains an appropriate next step for you to take in preparation for completion?

Select one alternative:
* Obtain a redemption figure from the Bank.
* Undertake a Central Land Charge search using form K15 to obtain a protection period.
* Undertake a Land Registry priority search using Form OS1.
* Ensure that the seller has provided replies to the CPSE enquiries and that all issues discovered in the replies have been dealt with.
* Provide an undertaking to the seller’s solicitor to transfer the deposit monies.

Answer 14

• Undertake a Land Registry priority search using Form OS1.

This is correct. The buyer’s solicitor would need to do this to ensure the buyer benefits from a priority period. The OS1 freezes the register given the buyer a priority period to register the transfer. It also reveals if any changes have been made to the register since the title was investigated pre-exchange.

Question 15

A solicitor acts for the buyer of a commercial property which is situated by a river. The property includes 5 acres of the surrounding open agricultural land.

The solicitor has already received or requested: replies to CPSE, local authority search, drainage and water search, and index map search.

Which other searches should the solicitor carry out?
Select one alternative:
* Desktop environmental search, EA Phase 1 Audit, chancel repair search, highways search, brine subsidence search, waterways search and commons registration.
* Chancel repair search, highways search, waterways search and commons registration search.
* Desktop environmental search, chancel repair search, highways search, waterways search and commons registration search.
* Desktop environmental search, index map search, chancel repair search, highways search, waterways search.
* Desktop environmental search, chancel repair search, highways search and commons registration search.

Answer 15

• Desktop environmental search, chancel repair search, highways search, waterways search and commons registration search.

Question 16

You are acting on the sale of a property mortgaged to X Bank plc. The property is in negative equity, meaning that the sale proceeds are insufficient to repay X Bank plc’s loan.

How should you manage this issue?
Select one alternative:
* You should not provide an undertaking to redeem the existing mortgage in the Law Society’s recommended form until you are holding the shortfall in your firm’s client account in cleared funds.
* You cannot act for the seller in connection with the sale of the property until you are holding the shortfall in your client account in cleared funds.
* You cannot exchange contracts for the sale of the property until you are holding the shortfall in your client account in cleared funds.
* You should not provide an undertaking to the buyer’s solicitor to redeem the existing mortgage in the Law Society’s recommended form until the seller gives written confirmation to transfer the shortfall to your client account in cleared funds on or before completion.
* You should not exchange contracts for the sale of the property until the seller gives written confirmation to transfer the shortfall to your client account in cleared funds on or before completion.

Answer 16

• You should not provide an undertaking to redeem the existing mortgage in the Law Society’s recommended form until you are holding the shortfall in your firm’s client account in cleared funds.

Correct. A solicitor can act on the sale of a property in negative equity, but care must be taken not to provide an undertaking (nor to agree to provide an undertaking) unless the shortfall is held in cleared funds in client account. Care must also be taken to have the client’s agreement that it is to be used for this purpose, and not demanded back.

Question 17

Whilst investigating the registered title of a freehold commercial property (the ‘Property’), the buyer’s solicitor has come across the following entry on the Proprietorship Register:
“The Transfer to the proprietor contains a covenant to observe and perform the covenants referred to in the Charges Register and of indemnity in respect thereof.”
Which one of the following options is the best advice the buyer’s solicitor should now give to the buyer?
Select one alternative:
* The buyer will need to do a Central Land Charges search to check whether any restrictive covenants have been registered against the seller as a d(ii) land charge.
* The buyer will need to give the seller an indemnity covenant in the contract.
* The buyer will need to take out a restrictive covenant indemnity policy to cover possible past or future breaches of the covenants on the title to the Property.
* The buyer will need to ask the seller to give the buyer an indemnity covenant in the transfer (TR1).
* The buyer will need to give the seller an indemnity covenant at completion if SCPC 7.6.5 is incorporated into the contract.

Answer 17

The buyer will need to give the seller an indemnity covenant at completion if SCPC 7.6.5 is incorporated into the contract.

Correct. This entry on the Proprietorship Register indicates that there is a positive covenant in the Charges Register and states that the seller gave an indemnity covenant in respect of complying with it when they bought the Property. SCPC (Standard Commercial Property Conditions - incorporated into contracts for the sale of commercial property) 6.6.4 means that if the seller gave such an indemnity covenant (as here), the buyer will have to give an indemnity covenant to the seller when they purchase the Property (to continue the indemnity covenant chain). The buyer’s indemnity covenant will be given in the Transfer at completion.

Question 18

A solicitor acts for a lender (the ‘Bank’). The Bank lends 80% of the purchase price to a buyer of a registered commercial property.

The loan is to be secured by a first legal charge. The buyer agrees not to deal with the property without the Bank’s consent.

Which entries will the Bank’s solicitor want to see on the Land Registry official copies on completion?
Select one alternative:
* A restriction against dealings and the Bank’s charge in the charges register.
* A restriction against dealings in the proprietorship register the Bank’s charge in the charges register.
* The Bank’s charge in the charges register.
* A restriction against dealings in the property register and the Bank’s charge in the charges register.
* An a restriction against dealings in the charges register and the Bank’s charge in the proprietorship register.

Answer 18

• A restriction against dealings in the proprietorship register the Bank’s charge in the charges register.

This is correct. Charges such as mortgages are recorded in the charges and any entries restricting the current proprietor’s ability to deal with the property are recorded in the proprietorship register.

Question 19

A client is purchasing a residential property (the ‘Property’). The Property is currently subject to the seller’s mortgage. The seller will be buying a new home at the same time as the sale.

Which one of the following best describes the position at exchange of contracts?

Select one alternative:
* You would expect Formula A to be used at exchange because there is a chain of transactions and exchange and completion for all of the transactions needs to be synchronised.
* You would expect Formula A to be used at exchange because in a chain transaction, it is easier for all the contracts to be controlled by the same solicitor.
* You would need to use Formula C given that it is a chain transaction, but as there is a mortgage, you would also need to incorporate the Code for Completion by Post into the exchange.
* You can only use Formula C, because it is designed for chain transactions, and exchange and completion for all of the transactions needs to be synchronised.
* You would expect either Formula B with a ‘release of contracts’ or Formula C to be used at exchange because there is a residential chain of transactions, and exchange and completion for all of the transactions needs to be synchronised.

Answer 19

• You would expect either Formula B with a ‘release of contracts’ or Formula C to be used at exchange because there is a residential chain of transactions, and exchange and completion for all of the transactions needs to be synchronised.

Correct. In residential conveyancing you often have a chain of transactions as is the case here. As such the solicitors involved have to ensure that exchange of all the contracts takes place simultaneously (and that all the transactions complete on the same day). Although Formula C was designed for chain transactions, it is rarely used in practice as it is too complicated. The most common method of tying chain transactions together is for each transaction to be exchanged under Law Society Formula B, but for the contract to be ‘released’ to the solicitor who has a related transaction to exchange until that related transaction has exchanged.

Question 20

The epitome of title contains a conveyance made by deed, dated 28 January 1976, which contains the following clause:

“The Purchaser with the intent and so as this covenant shall be binding… hereby for themselves and their successors in title covenants with the Vendors and their successors in title that the Purchaser will use the Property only as a residential dwelling.”

Will the client be bound by this covenant?
Select one alternative:
* The client will be bound if the positive covenant was registered as a C(iv) land charge against the name of the original covenantor.
* The client will be bound if the restrictive covenant was registered as a D(ii) land charge against the name of the original covenantor.
* The client will be bound if the positive covenant is registered as a D(ii) land charge against the client’s name.
* The client will be bound if the restrictive covenant was registered at the Land Registry.
* The client will only be bound if the restrictive covenant was protected by a chain of indemnity covenants

Answer 20

• The client will be bound if the restrictive covenant was registered as a D(ii) land charge against the name of the original covenantor.

Correct. If a restrictive covenant in unregistered land is registered at the Central Land Charges department as a D(ii) land charge against the name of the original covenantor, it will bind the purchaser of the land.

Question 21

1
A tenant has, with their landlord’s consent, underlet their warehouse premises to another company (the ‘undertenant’). There was an agreement for underlease under which the undertenant was allowed to occupy the warehouse prior to completion for fit out purposes. The underlease has now completed and the undertenant’s solicitor is attending to post completion matters, including the payment of Stamp Duty Land Tax (‘SDLT’).

What is the deadline for payment of the SDLT on the underlease?

Select one alternative:

30 days from the date of completion.

14 days from the date the undertenant went into occupation of the warehouse.

14 days from the date of completion.

21 days starting the day after the date of completion.

30 working days from the date of completion.

Answer 21

14 days from the date the undertenant went into occupation of the warehouse.

SDLT must be paid within 124 days of “the effective date”. This is usually completion, but will be earlier if the tenant goes into occupation as it has done here.

Question 22

A freeholder (the ‘landlord’) of a commercial property granted a lease of the property to a tenant. A year ago, the tenant, with the landlord’s consent, sublet the property to another company (the ‘subtenant’). The tenant is surrendering its lease to the landlord.

Which one of the following options best describes the effect the surrender of the tenant’s lease will have on the subtenant?

Select one alternative:

The subtenant’s sublease will merge with the tenant’s lease and be extinguished.

The landlord will become the subtenant’s landlord on the terms of the sublease.

The subtenant’s sublease will end on the surrender of the tenant’s lease.

The landlord is obliged to enter into a new lease with the subtenant on the same terms as the subtenant’s sublease.

The landlord will become the subtenant’s landlord on the terms of the lease.

Answer 22

The landlord will become the subtenant’s landlord on the terms of the sublease.

If the tenant surrenders its lease, this will not affect the subtenant’s interest as the underletting was with consent. The landlord will become the immediate landlord of the subtenant under the terms of the sublease.

Question 23

A freeholder (the ‘landlord’) is granting a lease of a commercial property to a tenant. The freehold property is registered and has a registered charge over it. The landlord and tenant have agreed that the landlord will complete air conditioning works at the property before the lease is entered into. Heads of terms for the letting have been agreed and the landlord is preparing to deduce title and send the relevant draft documents to the tenant.

Which one of the following options best describes the documents that the landlord’s solicitor will send to the tenant’s solicitor in the circumstances?

Select one alternative:

Replies to CPSE.1 enquiries, a draft lease and a DS1.

Official copy entries of the registered freehold title, replies to CPSE.1 and CPSE.3 enquiries, a draft agreement for lease, a draft lease, written consent from the landlord’s lender to the letting, a DS1 and a draft transfer deed.

A draft agreement for lease, a draft lease, a DS1 and a draft transfer deed.

Official copy entries of the registered freehold title, replies to CPSE.1 and CPSE.3 enquiries, a draft agreement for lease, a draft lease and written consent from their lender to the letting.

Official copy entries of the registered freehold title, replies to CPSE.1 and CPSE.3 enquiries, a draft lease and a draft transfer deed.

Answer 23

Official copy entries of the registered freehold title, replies to CPSE.1 and CPSE.3 enquiries, a draft agreement for lease, a draft lease and written consent from their lender to the letting.

This correctly describes the documents that the landlord’s solicitor should provide. The tenant’s solicitor will need to investigate the landlord’s registered title in the same way a buyer’s solicitor would in a freehold transaction. CPSE 1 enquiries should be provided, as with a freehold purchase. CPSE 3 are additional enquiries in respect of a new letting. As the parties have agreed that the landlord will complete works before completion of the lease, an agreement for lease is appropriate to document this agreement. The draft lease is required as this is a new letting. Written consent from the lender is required giving the landlord permission to grant the lease. We are told the property has a registered charge over it. Without this consent, the tenant would not be able to register their lease at the Land Registry and the landlord would be in breach of the terms and conditions of its mortgage.

Question 24

You act for a landlord who owns shop premises let to a tenant. The tenant runs a jewellery shop. Last month, the monthly principal rent and insurance premium payments fell due but were not paid by the tenant. The landlord has told you that they have given the tenant 7 clear days’ notice and that they arranged for an enforcement agent to visit the shop tomorrow to seize enough jewellery to pay off the rent and insurance payments owed. You advise the landlord that they are not able to do this.

Which one of the following best answers why the landlord cannot do as they have planned?

Select one alternative:

Goods can only be seized to satisfy the principal rent debt, not the insurance premium payment debt.

The landlord must get a court order before the enforcement agent can seize goods.

The landlord has not given the tenant at least 14 clear days’ prior written notice of the intended seizure.

A minimum of three months’ rent must be owed before goods can be seized.

The landlord has not given the tenant at least 21 clear days’ prior written notice of the intended seizure.

Answer 24

Goods can only be seized to satisfy the principal rent debt, not the insurance premium payment debt.

CRAR can only be used to recover principal rent plus VAT and interest owed on principal rent which is outstanding under the lease. The insurance premium is not not classes as principal rent.

Question 25

5
Ten years ago, A granted B a twenty year legal lease of residential premises. The lease contains a landlord’s right of re-entry in the event of tenant breach of covenant. B is currently in breach of the tenant’s repair covenant. Last month, the landlord served a s 146 notice on the tenant requiring remedy within a month and informing the tenant of its right to serve a counter notice within twenty-eight days.
A has failed to remedy the breach, but has served a counter notice.

Which of the following statements best explains whether A will be able to immediately forfeit this lease?
Select one alternative:

A has a right to forfeit immediately because the lease waives the requirement to serve a formal demand

A has a right to foreit immediately because a reasonable time has passed and the breach has not been remedied

A does not have a right to forfeit without first obtaining the leave of the court

A does not have a right to forfeit because it has waived the right to forfeit

A has a right to forfeit immediately by peaceable re-entry or court order

Answer 25

A does not have a right to forfeit without first obtaining the leave of the court

This is correct. The Leasehold Property (Repairs) Act 1938 applies to covenants to repair in any lease when the lease is granted for over 7 years and there are at least 3 years still to run. This provides additional protection to tenants in the event the landlord seeks to forfeit a lease for breach of a repair covenant, which the landlord (A) is seeking to do on the facts here. On the facts, the lease contains an express right to forfeit in the event of tenant breach and this right has not been waived on the facts. The landlord must serve s 146 notice and give the tenant the chance to remedy the breach within a reasonable time, which it has done. The notice must also inform the tenant of their right under the 1938 Act to serve a counter notice within 28 days. We are told that the tenant has served a counter-notice, therefore the landlord cannot proceed to claim forfeiture without first obtaining the lease of the court. It does not matter that the tenant has failed to remedy the breach in the circumstances.

Question 26

Your client is the landlord of a freehold commercial property and is about to enter into a 5 year lease of the property with the proposed tenant. It has been agreed that the lease will be contracted out of the security of tenure provisions contained in the Landlord and Tenant Act 1954 and the parties have set a completion date for seven days’ time.

Which of the following statements sets out the correct notices which need to be served and by whom to ensure the lease is validly contracted out of Part II of the Landlord and Tenant Act 1954?

Select one alternative:

Your client has to serve a notice on the tenant in which the tenant agrees to accept a lease without security of tenure; if completion is to take place in the suggested timetable, the tenant will have to come to your client’s place of business to sign the notice in front of your client and an independent witness.

Your client has to serve a notice on the tenant in which the tenant agrees to accept a lease without security of tenure; if completion is to take place in the suggested timetable, the tenant will have to sign a statutory declaration.

Your client has to serve a notice on the tenant in which the tenant agrees to accept a lease without security of tenure; if completion is to take place in the suggested timetable, the tenant will have to sign a simple declaration.

The tenant has to serve a notice on the landlord agreeing to accept a lease without security of tenure; your client has to signing a simple declaration and return it to the tenant within seven days of receiving it.

The tenant has to serve a notice on the landlord agreeing to accept a lease without security of tenure; your client can sign a statutory declaration and return it to the tenant and the parties can complete the lease as soon as the tenant receives it.

Answer 26

Your client has to serve a notice on the tenant in which the tenant agrees to accept a lease without security of tenure; if completion is to take place in the suggested timetable, the tenant will have to sign a statutory declaration.

Given the deadline that completion is due to take place, this answer is the most appropriate. It also correctly describes the parties who would serve the notice / sign the declaration.

Question 27

7
You act for a landlord of a commercial unit it lets out to a tenant. Your client has come to you for advice as the tenant is in breach of its repair covenant in the lease. Your client does not want to lose the tenant, but wants to know what remedy to pursue in the circumstances. You check the lease and confirm it contains a self-help clause and an express right to forfeit in the event of tenant breach of covenant.

Which of the following options represents the best advice to the landlord about which remedy it should pursue?

Select one alternative:

The landlord should seek an order for a prohibitory injunction to stop the tenant from breaching the covenant.

The landlord should serve on the tenant a s 146 notice plus an additional statement setting out its rights under the Leasehold Property (Repairs) Act 1938.

The landlord should exercise its right to enter the premises and remedy the breach before then recovering the costs from the tenant as a debt.

The landlord should seek damages to put the landlord back into the position it would have been had the tenant complied with the covenant.

The landlord should seek an order of specific performance to force the tenant to comply with the covenant.

Answer 27

The landlord should exercise its right to enter the premises and remedy the breach before then recovering the costs from the tenant as a debt.

The lease contains a self help clause (also called a Jervis v Harris clause) which means this is the best remedy in the circumstances. Describing the sums which the landlord can recover from the tenant as a debt rather than damages means that the statutory restrictions in relation to claiming damages for breach of a repair covenant do not apply to this self-help remedy.

Question 28

A freeholder (the ‘Landlord’) granted a commercial lease of a property to a tenant. The tenant wishes to undertake some non-structural refurbishment works to the inside of the property. The Landlord does not want to grant consent to the alterations as the Landlord believes the tenant is planning on moving out of the property at the end of the term in 18 months’ time.

The lease provides the following wording in relation to alterations:
“The Tenant shall not make any internal non-structural alterations to the Property without the Landlord’s consent”.

Which one of the following best describes whether the Landlord can withhold consent to the works?

Select one alternative:

The Landlord can withhold consent because the Tenant is planning on vacating the property at the end of the term.

The landlord cannot unreasonably withhold consent if the tenant considers the works amount to an improvement to the property.

The Landlord can withhold consent if it does not consider the works will improve the premises.

The Landlord can withhold consent because the covenant against alterations is qualified so the landlord has complete discretion in the circumstances.

The Landlord can withhold consent because the covenant against alterations is absolute so the landlord has complete discretion in the circumstances.

Answer 28

The landlord cannot unreasonably withhold consent if the tenant considers the works amount to an improvement to the property.

The covenant against internal non-structural alterations is qualified. s 19(2) LTA 1927 therefore applies to this covenant and implies into it in relation to improvements a proviso that the landlord’s consent is not to be unreasonably withheld. It therefore converts a qualified covenant against alterations that amount to improvements into a fully qualified one. Lambert v FW Woolworth & Co Limited [1938] held that ‘improvements’ are to be construed widely as works which improve the premises from the tenant’s perspective, not the landlord’s.

Question 29

A freeholder granted a lease in 2010 to a pet shop. The lease made provision for an outgoing tenant to give an authorised guarantee agreement as a condition of assignment. With the freeholder’s consent, the pet shop assigned the lease to a café. The café then lawfully assigned the lease to a health shop which last year lawfully assigned the remainder of the term to a travel company.

If the travel company breaches the repair covenant in the lease, which one of the following best sets out all those who the freeholder can sue?

Select one alternative:

The travel company and the health shop.

The pet shop only.

The pet shop, the café, the health shop and the travel company.

The pet shop and the travel company.

The travel company only.

Answer 29

The travel company and the health shop.

The travel company is the current tenant in occupation of the premises and currently in breach of the repair covenant. It has the burden of all the tenant covenants and is liable. The health shop is liable under the AGA it gave as a condition of assignment. It will be liable under this AGA unless and until the travel company lawfully assign the lease.

Question 30

A landlord grants consent to the underletting of its tenant’s premises for a term of 7 years. You are acting for the undertenant in the transaction.

Which one of the following best describes a post-completion step you will need to undertake in this transaction?

Select one alternative:

Register the underlease at the Land Registry.

Send requisitions on title to the tenant.

Investigate the headlease.

Arrange for your client to execute the Licence to Underlet.

Notify the landlord that the underlease has completed.

Answer 30

Notify the landlord that the underlease has completed.

Correct. The landlord is not a party to the underlease and the lease and licence to underlet will usually provide that the landlord is notified when the underlease completes.

Question 31

A company occupies the whole of an office block under a 10 year lease that is due to end within the next 12 months. The lease is not contracted out of the Landlord & Tenant Act 1954. The company would like to remain in the property at the end of its contractual term and negotiate a lease renewal with its landlord, who owns the freehold of the office block.

Which one of the following statements is the best advice to give to the company?
(You may assume any statutory references are correct)

Select one alternative:

To write to the landlord to see if the landlord is amenable to granting the tenant a new lease.

To wait to see if the landlord serves a notice on the tenant pursuant to s.25 Landlord and Tenant Act 1954 as that notice will indicate if the landlord wants to grant the tenant a new lease.

To serve a request on the landlord pursuant to s.26 Landlord and Tenant Act 1954 asking for new lease to start as soon as possible.

To apply to court to protect its right to a new lease before the landlord serves a notice pursuant to s.25 Landlord and Tenant Act 1954.

To serve a notice to quit pursuant to s.27 Landlord and Tenant Act 1954 as that will put the landlord on notice the company wants to bring its lease to an end and wants a new lease.

Answer 31

To serve a request on the landlord pursuant to s.26 Landlord and Tenant Act 1954 asking for new lease to start as soon as possible.

A tenant’s request for a new tenancy must be made by a s 25 notice setting out the tenant’s proposals for a new tenancy. This is the best option in the circumstances.

Question 32

The owner of the registered freehold title to an industrial park (the ‘landlord’) is granting a lease of one of the units in the park to a tenant. The lease is now agreed.

Which is the correct pre-completion search for the tenant’s solicitor to carry out in the circumstances and which is the correct priority period which it gives?

Select one alternative:

A Local Land Charges Search (LLC1), which gives a 30 day priority period.

An Official Search on form OS2, which gives a 30 working day priority period.

A K16 Central Land Charges bankruptcy search, which gives a 15 day priority period.

An Official Search on form OS1, which gives a 30 working day priority period.

A K15 Central Land Charges Search, which gives a 15 working day priority period.

Answer 32

An Official Search on form OS2, which gives a 30 working day priority period.

As this is the grant of a lease of part of the landlord’s freehold title, an OS2 - rather than OS1 - is appropriate. This gives a 30 working day priority period.

Question 33

A freeholder (the ‘landlord’) granted a commercial lease to a tenant which is protected by and has security of tenure under the Landlord and Tenant Act 1954 (Part II) (the ‘54 Act’). The contractual expiry date of the lease has passed and the tenant is holding over and remains in occupation of the premises, under the terms of the lease. The tenant does not want a new lease to be granted and wishes to leave the premises and terminate their lease.

Which one of the following notices under the ‘54 Act would you advise the tenant to serve on the landlord?

Select one alternative:

‘Friendly’ section 25 notice.

‘Hostile’ section 25 notice.

Section 40 notice.

Section 27 notice.

Section 26 notice.

Answer 33

Section 27 notice.

As the contractual expiry date (CED) has passed and the tenant is ‘holding over’ the only way the tenant can terminate the tenancy is to serve at least 3 months notice under s 27 of the ‘54 Act.

Question 34

Your client is the landlord of a unit on an industrial estate. The tenant uses the property for the storage of its products. The tenant is seeking the landlord’s consent to change the use of the property.

The relevant wording of the user covenant in the lease is as follows:
“The Tenant shall not use the Property for any purpose except as storage or such other use as the Landlord may consent to”.

Which one of the following options best describes how the landlord should respond to this request?

Select one alternative:

The landlord cannot refuse consent if the proposed change of use is within the same use class as the current use (storage).

There is a fully qualified covenant against change of use so that landlord has to act reasonably in considering whether to withhold consent.

The landlord has to act reasonably in considering whether to withhold consent.

The landlord can refuse consent and does not have to act reasonably in withholding consent.

There is an absolute prohibition against change of use so the landlord can refuse to consider the request to change use.

Answer 34

The landlord can refuse consent and does not have to act reasonably in withholding consent.

This is a qualified user covenant on the facts - ‘The Tenant shall not do [ ] without the Landlord’s consent’. Section 19(3) of the LTA 1927 applies to qualified use covenants. Section 19(3) does NOT upgrade a qualified use covenant to a fully qualified use covenant. Therefore there is no obligation on the landlord to act reasonably. What s 19(3) does do is to stop the landlord demanding that the tenant pay a fine or sum of money in the nature of a fine, by way of increased rent or otherwise, to the landlord for their consent to a change of use unless the change of use involves structural alterations to the premises.

Question 35

A landlord and tenant are the parties to a 15 year lease, which was granted 5 years ago. The landlord has recently agreed that the tenant can assign its lease to a third party (‘the assignee’). The lease contains a clause that the landlord is acting reasonably if it requests an authorised guarantee agreement (‘AGA’) on any assignment.

Which one of the following options best describes the documents that the assignee will be a party to?
Select one alternative:

Licence to assign only.

TR1 and an AGA.

TR1 only.

Licence to assign, TR1 and an AGA.

TR1 and Licence to assign.

Answer 35

TR1 and Licence to assign.

The TR1 will be entered into by the tenant and assignee and it will transfer the lease to the assignee. The Licence to assign is entered into by all the parties and grants permission to assign. The assignee will enter into a direct covenant with the landlord to comply with the tenant covenants in the lease.

Question 36

It is early in January this year and a solicitor is meeting their client, a tenant occupying commercial premises with security of tenure, whose lease expires on the last day in February this year (the ‘Contractual Expiry Date’). Earlier in January this year the tenant’s landlord served a friendly section 25 notice under the Landlord and Tenant Act 1954 (the ‘1954 Act’) specifying a termination date in December of this year. The tenant does not wish to remain in occupation of the premises and wants their tenancy to end as soon as possible.

What 1954 Act compliant advice should the solicitor give to their client to ensure the protected tenancy ends on the earliest possible date?

Select one alternative:

To serve a minimum of 6 months’ notice on the landlord as soon as possible.

To vacate the premises at any time after the Contractual Expiry Date and before the expiry of the s.25 notice.

To serve at least 3 months’ notice on the landlord as soon as possible.

To vacate the premises on or before the Contractual Expiry Date.

To serve at least 3 months on the landlord at any time on or after the Contractual Expiry Date.

Answer 36

To vacate the premises on or before the Contractual Expiry Date.

If a tenant does not want a new tenancy of the same premises and the contractual expiry date of the lease (CED) has not yet passed the best advice is that the tenant should vacate the premises on or before the CED to terminate on the CED.

Question 37

You act for a freeholder (the ‘landlord’) who granted a commercial lease to a tenant which is protected by and has security of tenure under the Landlord and Tenant Act 1954 (Part II) (the ‘54 Act’). The lease was for a ten year term from and including 20 May. Assume that today’s date is 1 January in the year that the lease expires. The landlord wants to end the lease as soon as possible using the relevant procedure under the ‘54 Act.

Which one of the following options best describes the advice you would you give to the landlord regarding the service of and the termination date specified in the relevant ‘54 Act notice?

Select one alternative:

The ‘54 Act notice to terminate the lease should be served today with a date of termination of 20 May this year.

The ‘54 Act notice to terminate the lease should be served today with a date of termination of 19 May this year.

The ‘54 Act notice to terminate the lease should be served on 19 May with a date of termination of 19 November this year.

The ‘54 Act notice to terminate the lease should be served on 20 May with a date of termination of 20 November this year.

The ‘54 Act notice to terminate the lease should be served today with a date of termination of 1 July this year.

Answer 37

The ‘54 Act notice to terminate the lease should be served today with a date of termination of 1 July this year.

The s 25 notice can be served by the landlord 12 months before the CED, at the earliest, or at any time after the CED, whilst the tenant is holding over and the terms of its current lease are continuing, (provided another notice has not already been served under the 1954 Act). The date of termination must be at least 6 months but not more than 12 months after the date the s 25 notice is served (s 25(2)). On the facts, as we are assuming today’s date is 1 January, there is less than 6 months to the CED - 19 May - so the lease cannot be terminated on the CED. At least 6 months notice must be given. As the landlord wants to end the lease as soon as possible, it should just give this minimum amount of notice.

Question 38

A company occupies a commercial property under a lease. The company has written to its landlord for consent to assign. The relevant wording of the alienation covenant in the lease is as follows:

“The Tenant shall not assign underlet or charge the Property without the consent of the Landlord.”

Which one of the following options best describes the advice to the landlord about how it should respond to the assignment request?

Select one alternative:

The landlord has absolute discretion whether to grant consent and is under no obligation in respect of how it communicates its decision.

The landlord must act reasonably in considering the request and should respond to the request within 28 days by written notice.

The landlord has absolute discretion whether to grant consent but should respond within 28 days by written notice.

The landlord must act reasonably when considering the request but is under no obligation in respect of how it communicates its decision.

The landlord has absolute discretion whether to grant consent but should respond within 14 days.

Answer 38

The landlord must act reasonably in considering the request and should respond to the request within 28 days by written notice.

This is a qualified covenant against alienation. s 19(1)(a) upgraded this covenant so that is the ‘fully qualified’ and the landlord must act reasonably. s 1 of the LTA 1988 also applies so that the landlord is under a statutory duty to respond to the written request in writing within 28 days (a reasonable time according to Dong Bang Minerva v Davina)

Question 39

The owner of the freehold of a commercial office building (the ‘landlord’) granted a lease of the property to a tenant two years ago. The landlord has recently come to an agreement with the tenant, that the lease may be underlet to a company (the ‘undertenant’).

Which one of the following documents will create privity of contract between the landlord and the undertenant?

Select one alternative:

Authorised Guarantee Agreement (AGA).

Transfer deed.

Underlease.

Licence to underlet.

Lease.

Answer 39

Licence to underlet.

The landlord and undertenant, along with the tenant, will enter into this document. It grants formal permission to the underletting and will contain a covenant from the undertenant to comply with the tenant covenants in the lease.