Lease Structure And Content

Question 1

What are the main stages in a grant of lease transaction?

Answer 1

The main stages are: Pre-exchange, Pre-completion, and Post-completion.

If there is no exchange, the stages are Pre-completion and Post-completion.

Question 2

What tasks does the landlord’s solicitor perform during the pre-exchange stage?

Answer 2

The landlord’s solicitor takes instructions, prepares draft lease and agreement for lease, deduces title, answers pre-contract enquiries, and engrosses the agreement for lease.

Question 3

What tasks does the tenant’s solicitor perform during the pre-exchange stage?

Answer 3

The tenant’s solicitor takes instructions, reviews and amends the draft lease, investigates title, raises pre-contract enquiries, and arranges for the tenant to sign the counterpart lease.

Question 4

What does ‘engross’ mean in the context of lease agreements?

Answer 4

‘Engross’ means to print a copy for signature, typically on good quality paper and bound.

Question 5

How does the landlord’s solicitor draft the lease?

Answer 5

The landlord’s solicitor drafts the lease based on the heads of terms, using a generic precedent lease or tailoring a part-completed lease from past lettings.

Question 6

What is an agreement for lease?

Answer 6

An agreement for lease is a commitment to complete the lease when conditions are satisfied, often used when parties are not yet ready to complete.

Question 7

What investigations does the tenant’s solicitor conduct during the pre-exchange?

Answer 7

The tenant’s solicitor investigates the landlord’s title, raises CPSE1 and CPSE3 enquiries, and conducts searches similar to those in a freehold purchase.

Question 8

What happens during the exchange of an agreement for lease?

Answer 8

The solicitors exchange agreements without a deposit, setting conditions for completion and attaching a draft of the agreed lease.

Question 9

What tasks does the landlord’s solicitor perform during the pre-completion stage?

Answer 9

The landlord’s solicitor prepares the original and counterpart lease, obtains the landlord’s signature, and sends the counterpart to the tenant.

Question 10

What is included in the completion statement prepared by the landlord’s solicitor?

Answer 10

The completion statement details the money due on completion, including apportioned annual rent, service charge, and insurance rent.

Question 11

What occurs during the completion of the lease?

Answer 11

The tenant’s solicitor sends completion monies, and both solicitors agree to complete and date the executed leases.

Question 12

What tasks does the landlord’s solicitor perform post-completion?

Answer 12

The landlord’s solicitor sends a summary of the main provisions of the lease to the client.

Question 13

What are the SDLT and LTT considerations for a grant of lease?

Answer 13

Calculating SDLT and LTT on a long residential lease is similar to a freehold, while for a commercial lease, it is more complex.

Leases of 3 years and under are not registrable.

Question 14

What are alterations in the context of a lease?

Answer 14

Alterations are changes to the premises, such as reconfiguring internal walls or adding new features.

Question 15

What is the doctrine of waste in relation to alterations?

Answer 15

The doctrine of waste prohibits tenants from making alterations that reduce the value of the premises.

Question 16

What is an absolute covenant regarding alterations?

Answer 16

An absolute covenant means alterations are not permitted without exception.

Question 17

What is a qualified covenant regarding alterations?

Answer 17

A qualified covenant allows alterations only with the landlord’s consent, which may not be unreasonably withheld.

Question 18

What is the significance of s19(2) LTA1927 in relation to improvements?

Answer 18

s19(2) LTA1927 converts a qualified covenant against alterations to a fully qualified covenant for tenant’s proposed improvements.

Question 19

What is a licence for alterations?

Answer 19

A licence for alterations documents the landlord’s consent for alterations and includes tenant’s covenants regarding the works.

Question 20

What is the tenant’s statutory right to carry out improvements?

Answer 20

Under s3, LTA1927, a tenant can serve notice for improvements, and if the landlord objects, the tenant can seek court permission.

Question 21

What does ‘user’ refer to in a lease?

Answer 21

User refers to what the lease allows the tenant to use the premises for, which can be specific or general.

Question 22

What are the implications of a change of use in a lease?

Answer 22

A lease may prohibit changes of user, allow them with consent, or allow them with consent not to be unreasonably withheld.

Question 23

What are the types of covenants regarding changes of user in a lease?

Answer 23

The lease may prohibit changes of user (absolute covenant), allow changes with consent (qualified covenant), or allow changes with consent not to be unreasonably withheld (fully qualified covenant).

Question 24

How does statute affect qualified user clauses?

Answer 24

Unlike a qualified alterations covenant, statute does not convert a qualified user clause to a fully qualified user clause.

Question 25

What does section 19(3) of the Landlord and Tenant Act 1927 state about landlord consent?

Answer 25

If the landlord gives consent to a change of use, they may not charge a lump sum or increase rent unless the change requires structural alterations.

Question 26

What should tenants ensure regarding planning law for alterations and changes of use?

Answer 26

Tenants must ensure they have the relevant consents to comply with the lease and avoid enforcement action.

Question 27

What is an example of a change of use that requires planning permission?

Answer 27

A landlord gives consent for a clothes shop (use class E(a)) to be converted to a betting shop (sui generis use), which requires planning permission and a betting premises licence. ## Footnote Understand the principle of requiring planning permission for changes of use.

Question 28

What does the Code for Leasing Business Premises state about alterations and change of use?

Answer 28

The lease should restrict alterations and change of use only as necessary to protect the value of the premises and adjoining properties.

Question 29

What does the Code require regarding internal non-structural alterations?

Answer 29

The Code requires landlords to give tenants a fully qualified covenant for internal non-structural alterations in a lease of part, and allows tenants to carry out such alterations without consent in a lease of whole.

Question 30

What should be clarified in the heads of terms regarding alterations?

Answer 30

If the landlord requires any alterations to be reinstated at the end of the lease, this should be made clear in the heads of terms.

Question 31

What types of covenants exist regarding alterations in FRI leases?

Answer 31

Covenants may be absolute (not allowed), qualified (allowed with landlord’s consent), or fully qualified (allowed with landlord’s consent not to be unreasonably withheld).

Question 32

What happens to a qualified covenant regarding tenant’s improvements?

Answer 32

A qualified covenant will be converted to a fully qualified covenant regarding tenant’s improvements, with a statutory procedure for allowing improvements even under an absolute covenant.

Question 33

What do FRI leases control regarding the use of premises?

Answer 33

FRI leases control the use of the premises, with changes subject to absolute, qualified, or fully qualified covenants.

Question 34

What does the lease usually require from tenants regarding laws?

Answer 34

The lease will usually require tenants to comply with relevant laws, such as planning.

Question 35

Is a qualified covenant converted to a fully qualified covenant for use changes

Answer 35

No - section 19(3) of the Landlord and Tenant Act 1927 does mean that if the landlord decides to give consent to a change of use, the landlord may not charge a lump sum or increase the rent for giving consent unless the change of use also requires structural alterations (in which case the landlord may charge a lump sum or increase the rent for giving consent).