Property Practice - The Different Types of Transaction

Question 1

Leasehold Transactions

Answer 1

Residential leasehold transactions: for the purposes of the SQE this refers to long-term leases (e.g. 99-999 years), premium (up front purchase price) plus nominated rent

Commercial leasehold: medium term (e.g. 7 or 21 years), usually higher monthly rent

Grant of a new lease or assignment of an old lease?

• New lease: freehold owner is creating a head lease out of freehold estate and granting this to a tenant
• Existing lease: tenant transferring the remainder of their lease to a new tenant

Leases of more than 7 years are registerable in their own right

If a new tenant wishes to vary the terms of a lease they need to ask the old tenant to request negotiate this with the landlord. Varied lease then achieved by a deed of variation

Question 2

Leasehold Transaction Parties

Answer 2

Grant of a new lease:

Freehold owner = landlord AND seller
New tenant = buyer

**Assignment of existing lease: **

Existing tenant = seller
New incoming tenant = buyer
Freehold owner = landlord

Question 3

Management Company

Answer 3

Responsible for maintenant of common areas

Tenant (leasehold owner) pays defined share of service charge for maintenance costs

Question 4

Key Provisions of a Lease

Answer 4

If a lease term is for more than 7 years and, therefore, subject to compulsory registration at HMLR the lease must have prescribed clauses at the front

• Term
• Rights and easements
• Service charge and management company
• Tenant covenants (e.g. rent, repairs, use of premises)
• Alienation (ability of tenant to transfer their interest)
• Landlord covenants (e.g. quiet enjoyment, enforcement of other tenant’s covenants, forfeiture)

Use of premises:

Long residential lease will typically restrict use of premises to residents only

Commercial lease may express the permitted business use of the premises

Unacceptable lease terms:

• If a new lease buyer’s solicitor will try to deal with this as part of negotiation of lease terms
• If an assignment of existing lease the buyer’s solicitor should discover this when investigating title and checking lease terms as part of stage 2 - seller’s solicitor will need to liaise with landlord to enter into a deed of variation to amend lease. If seller/landlord refuses to do this the advice should be not to proceed with purchase