6. Assigning a lease and rent review

Question 1

What are the 4 types of rent review?

Answer 1

1. Fixed increase
2. Index-linked
3. Tenant’s receipts / trading receipts - e.g. tenant’s turnover
4. Open market rent review

Question 2

What are the 2 basis for valuation in open market rent review?

Answer 2

1. Physical property
2. Terms of the lease itself

Question 3

What are the assumptions for open market rent review?

Answer 3

“By a willing landlord to a willing tenant”
“With vacant possession”
“On the terms of this lease other than as to the amount of the annual rent by including the provisions for review of the annual rent”
“For a term of X years”
“On the assumption that the tenant has fully complied with their obligations in this lease”
“On the assumption that if the property has been destroyed or damaged, it has been fully restored”

Question 4

What are the common disregards for open market rent review?

Answer 4

Effect of tenant’s occupation
Goodwill
Tenant’s own improvements

Question 5

If there is no restriction on assignment in a lease, what rights does the tenant have in regard to this?

Answer 5

Tenant can dispose of their lease however they wish

Question 6

If the contract incorporates SCs then how can it deal with the requirement for the landlord’s consent for assignment?

Answer 6

Either part may rescind the contract by notice if the consent has not been given 3 working days before the completion date

Question 7

If the contract incorporates SCPCs then how can it deal with the requirement for the landlord’s consent for assignment?

Answer 7

If landlord’s consent not given by completion date, completion is postponed until 5 working days after assignor notifies buyer that consent has been given

Note that contract cannot be rescinded until 6 months have passed since original completion date

Question 8

Who drafts the licence to assign?

Answer 8

Landlord’s solicitor

Question 9

Should the landlord when drafting the licence to assign restrict the time period in which the assignment must take place?

Answer 9

Yes - as otherwise they have no control over when it will take place

Question 10

If the lease being assigned was granted after 1 Jan 1996, what would the landlord include to ensure they are protected for any breached of covenants by the assignee?

Answer 10

An AGA

Question 11

How does the landlord enforce any breaches of covenants in assigned leases granted before 1 Jan 1996?

Answer 11

Doctrine of privity

Question 12

If the requirement for entering into an AGA is set out as a pre-requisite for landlord’s consent to assignment, can they insist compliance?

Answer 12

Yes, whether it is reasonable or not

Question 13

What checks should the assignor’s solicitor do before the assignment?

Answer 13

Investigate title in the same way as for the purchase of freehold property

Question 14

If the superior freehold title is registered with absolute title, what steps should the assignee take to investigate title to the freehold?

Answer 14

No checks needed as it is guaranteed by the Land Registry

Question 15

If the superior freehold title is registered with good leasehold title, what steps should the assignee take to investigate title to the freehold?

Answer 15

As there is no guarantee of soundness of freehold title, assignee should try insist on deduction of the freehold title (although this is not an entitlement under law)

Question 16

If the lease is unregistered, what is the assignee entitled to with regards to evidence of freehold title?

Answer 16

Nothing - no entitlement to call for evidence of freehold title

Question 17

If the lease is unregistered, what is the assignee entitled to review?

Answer 17

General law permits assignee to call for the lease and all assignments under which that lease has been held during last 15 years

Question 18

What is the SCPCs position on the assignee’s entitlement to call for evidence of freehold title in unregistered leases?

Answer 18

No entitlement - therefore would need to amend SCPCs to include a special condition requiring the deduction

Question 19

What is a deed of assignment?

Answer 19

The deed required to transfer the legal title of the estate in land

Question 20

What is the name of the deed and who usually prepares it?

Answer 20

TR1 usually prepared by the assignee’s solicitor

Question 21

What is the issue regarding the conflict between implied covenant for title and the caveat emptor principle?

Answer 21

Covenant for title includes promise that assignor has complied with tenant’s covenants in lease, including repair

Caveat emptor principle makes it assignee’s responsibility to check the physical state of the property and the assignor should not be expected to make any promises about it

Question 22

How is the conflict between the implied covenant for title and the caveat emptor principle resolved?

Answer 22

Contract can contain a clause modifying the title in respect of repair:

“The covenants set out in section 4 of the Law of Property (Miscellaneous Provisions) Act 1994 will not extend to any breach of the tenant’s covenants in the lease relating to the physical state of the property”

Question 23

What pre-completion searches should be carried out before the assignment for a registered lease?

Answer 23

Official search of register of leasehold title should be carried out to check for any new entries and to gain a priority period within which to register the transfer

Question 24

What pre-completion searches should be carried out before the assignment for an unregistered lease?

Answer 24

Land charges search against name of assignor

Question 25

What documents would the assignor possibly provide to the assignee following completion of the transaction?

Answer 25

o Lease
o Transfer deed
o Licence to assign executed by Landlord
o Evidence of freehold title in accordance with contract
o Evidence of discharge of assignee’s mortgage
o Copies of duplicate notices served by the assignor and its predecessors on the landlord in accordance with a covenant in the lease requiring the landlord to be notified of any dispositions
o Insurance policy
o Receipt for rent

Question 26

In assignment, what is SDLT / LTT payable on?

Answer 26

Any purchase price charged by the assignor
Any premium

NOT payable on rent (as this will have been paid when the lease was granted)

Question 27

If the lease is registered, when should the application for register of the transfer to the assignor be made?

Answer 27

Within the remainder of the 30 working days priority period

Question 28

If the lease is unregistered but still have over 7 years of the term unexpired, what registration steps need to be taken?

Answer 28

It will need to be registered at the Land Registry within two months of the assignment or will be void in respect of the legal estate