Content of a Lease

Question 1

What are the three types of leasehold covenant?

Answer 1

Absolute Covenant: Tenant cannot carry out the stated action;

Qualified Covenant: Tenant cannot carry out the stated action without consent from the landlord;

Fully qualified covenant: Landlord can only withhold consent regarding the stated action with reasonable purpose (E.g. decreasing value of property)

Question 2

What is an FRI lease?

Answer 2

Tenant pays for repairs and insurance.

If in a large complex, the landlord will include an insurance premium on the basic rent.

Question 3

When is a tenant held to have breached their repair covenant?

Answer 3

When there is a state of disrepair.

Question 4

What happens if a property is uninhabitable, would the tenant still have to pay rent?

Answer 4

Yes, unless there is a specific rent suspension clause in the lease.

Question 5

If a tenant wishes to carry out improvements and serves a notice on their landlord detailing the proposals, how long does the landlord have to object?

Answer 5

3 months.

Question 6

If a landlord has refused the proposals for an alteration, when will the court intervene?

Answer 6

If, after the tenant’s application, the court considers the proposals to be ‘improvements’ and do not change the character of the building, the court will intervene.

Question 7

What is the effect of a qualified covenant regarding alterations and alienation?

Answer 7

It is upgraded in law to a fully qualified covenant. Meaning that a landlord must only refuse consent where it is reasonable to do so.

Question 8

What is the effect of a qualified covenant regarding user and planning?

Answer 8

It remains as is, the landlord has the right to not consent and there is no requirement for a refusal to be ‘reasonable’.

Question 9

Can a landlord charge for a change in user?

Answer 9

No, unless the change in user requires structural alteration.

Question 10

What is the nature of leasehold liability for pre-1996 leases?

Answer 10

Original tenant: Liable via privity of contract;

New tenant: Liable via privity of estate

Question 11

What is the nature of leasehold liability for post-1996 leases?

Answer 11

Original Tenant: No liability.

New tenant: Liable, and their direct predecessor is liable via an AGA (may be the original tenant)

Question 12

What is assignment?

Answer 12

Original tenant gives their rights to the new tenant in its entirety.

Question 13

What is an underlease?

Answer 13

Current tenant grants a lease to a new tenant for a shorter period than the main lease (so effectively a temporary letting).

The landord to the undertenant is the main tenant.

Question 14

What is the most common form of rent review?

Answer 14

Open market rent review - rent is adjusted by reference to the open market.

Question 15

What are common assumptions when it comes to open market rent review?

Answer 15

It is assumed that:

• the tenant would make an offer for an empty property;
• the provisions in the hypothetical lease are the same as the real lease;
• assumes that the tenant has fully complied with their lease obligations (so disregards if the tenant hasn’t repaired the property);
• assumes the property is fully restored

Question 16

What are common disregards when it comes to rent review?

Answer 16

• Any improvements to the property from the tenant (not to increase price due to the tenant treating the property well);
• Any goodwill attached to the property due to the tenants business;
• Any impact on the tenant for being ‘kicked out’ of the property

Question 17

How often is rent review set for?

Answer 17

Typically set for every three or five years.

Question 18

What are the three mandatory requirements in the code for leasing business premises?

Answer 18

(1) Lease negotiations must be approached in a constructive and collaborative manner;

(2) Any party must be advised on the existence of the code;

(3) Transaction terms must be recorded in writing and must summarise specified details as a minimum (rent, identity of the premises, assignment and repair, rent review etc.)