Leases

Question 1

What are the disadvantages of owning a leasehold property?

Answer 1

1. Depreciating asset
2. Property belongs to landlord
3. Landlord can specify what the tenant can and cannot do
4. Repairing obligations which involve expenditure for the tenant.

Question 2

Advantages of owning a leasehold

Answer 2

1. Good for commercial tenants
2. Flexible
3. Tenants can negotiate a break clause to terminate the lease earlier.

Question 3

Prescribed clauses

Answer 3

Leases that are dated on or after 19 June 2006 which are granted out of registered land, must contain a standard set of clauses - summary of the important details of the lease.

Question 4

Rent suspension

Answer 4

Rent will continue to be payable even if the property is unusable.

Tenant should ensure that the lease provides for the payment of rent to be suspended during any period that the property cannot be occupied.

Question 5

Rent review clause

Answer 5

Annual rent payable under a lease is periodically reassessed

Question 6

Types of rent review

Answer 6

(A) fixed increase - rent will increase to a set amount throughout the term.
(B) index-linked - rent will be altered in line with inflation.
(C) tenants receipts - tenants ability to pay the rent.
(D) open market rent review (most common) - rent is adjusted at regular intervals, usually every 3-5 years.

Question 7

Licence to underlet

Answer 7

Head-landlord gives consent to head-tenant to underlet the property to the under tenant.

Landlords consent must be given by or on completion of the underletting