Terms Of A Lease Flashcards
How do you draft a tenant friendly right to repair clause?
The tenant shall maintain the Premises in good and substantial repair and condition but the Tenant shall not repair the Premises where the disrepair is caused by an insured risk and provided that the tenant shall not be required to put the premises in any better state of condition or repair than as evidenced by the Schedule of Condition attached to this lease.
What are the three types of key covenants in tenancy leases?
Absolute covenant - completely prohibits the tenant from the carrying out the action set out in the covenant.
Qualified covenant - restricts a tenant from carrying out the specific action without the landlords consent
Fully qualified covenant - prohibits the tenant from carrying out the specified action without the landlords consent, however, the landlord cannot unreasonably withold or delay such consent. - “such consent not to be unreasonably withheld or delayed”
Standard of repair
- landlords often want to place an obligation on the tenant to to repair the damage that is caused by fair and wear and tear whereas the tenant would want to avoid such obligation
- landlords also sometimes include an obligation to replacr, renew or rebuild. Which goes beyond merely repairing something. The tenant would want to avoid this.
Fixtures and chattels - what word to use when you should replace something?
- “beyond economic repair”
- nstead of identical use “substantially similar”- “articles of a kind and quality that are substantially similar to those being replaced”
Tenant friendly drafting things to be aware of
- fixtures and chattels (only replace where they are beyond economic repair, when replacing ensure the burden is “substantially similar”
- no liability or obligation for any damage caused as a result of latent defects and ensure that the landlord is to assume responsibility
- standard of repair - tenant not required to repair or place any damage caused by fair wear and tear
- yielding up - qualify with acting reasonably
Leases - Tenancies - insurance
- ensure the insurance policy covers as wide a range of risks as possible
- tenant would ideally like the insurance policy to be in both names, so that any proceeds go to both the landlord and the tenant. It also ensures that the tenant avoids subrogation (means tenant would avoid paying for losses he contributed to).
- if it’s not in both names the tenant could insure the insurance company has waived it’s subrogation rights against the tnant
- tenant should make sure that the insurance clause places an obligation on the landlord to
- insure the insured risk
- make a claim if any insured risk materialises and causes damage
- reinstate the property ( for tenants they would want to delete any clause that allows the landlord to use the proceeds as they deem necessary
- make up any shortfall out of their own money
Rent Suspension
- useful for the landlord to define as many service charges in the lease because there are then better remedies available for non-payment of rent.
- default common law position that a tenant must continue to pay rent even if the property has suffered socnuch damage it’s deemed unfit for use.
- therefore crucial to include clause entitling them to suspend rent payment on the event that in the event that an insured risk materialises and renders property unfit for use.
- for landlord, useful to have an obligation in the lease to take out insurance that covers landlord for loss of rent if such event materialises
Service charges drafting (landlord friendly)
- sweep up statement for service charges “such other facilities as the Landlord sees fit”
Service charges drafting (tenant friendly)
- ensure it covers a narrow range of services included so as to add greater certainty. The list of services should therefore be clearly defined and ambiguous phrases like “such other facilities as the landlord sees fit” should be avoided
- consider whether the clause for service charge seems fair and whether the tenant will actually use the service in the service charge (i.e. tenant on ground floor would not want to pay towards lift maintenance)
- obligation - express covenant by the landlord to provide the service, otherwise the landlord can decide which services are necessary
- conditional service - tenant want to avoid the provision of services being conditional on the service charge being paid
- suspension - ensure that payment of service chargesnare suspended if an insured risk causes damage or destruction that makes the building inaccessible
Alteration clauses (qualified covenant)
- in the absence of an alteration clause, a tenant can carry out any alterations to the property as long as they don’t devalue the property.
- the LTA 27 will affect any qualified covenant in the lease agreement that relates to alterations
- s.19(2) implies into qualified covenants against improvements that the landlord is not to unreasonably withhold consent . It upgrades the qualified covenant into a fully qualified covenant.
Note that s.19(2) only applies to improvements and not alterations ,however, the case of Lambert v FW Woolworth defined improvements widely and said that whether an improvement is an alteration should be decided using the tenants perspective.
What is considered unreasonable?
Iqbal v Thakrar the landlord was considered to be reasonable when he withheld consent on the basis that there were serious concerns that the suggested alterations would have a negative effect on the building
What is a use clause and how would you draft it
It restricts how and for which purpose a tenant may use the premises.
” The tenant will covenant not to use the Premises other than for the Permitted Use” (defined)
In the definitions section, “permitted use” will be defined by (1)using descriptive wording (i.e. as a restaurant) or (2) by reference to the TCPA(use classes) Order 1987 e.g. use classes falling within ass A1 or A2 in the TCPA (use classes) order 1987
Alteration clauses (absolute and fully qualified covenant)
For absolute covenants, a test of unreasonableness is not set out for a landlord giving consent.
S.19(2) has no effect on absolute and fully qualified clauses.
Where an action is restricted by an absolute or fully qualified covenant, the landlord can still provide consent. The consent to alter is given in the form of a license to alter.
The tenant will covenant to
- carry out the alterations in accordance with the landlords requirement
- obtain the relevant planning permission
- reinstate the property to its original state at the end of the lease
- pay the landlords expenses and costs relating to giving the consent
If a landlord is happy to consent to an alteration that is currently prohibited, what can be done?
Parties can
