Procedural steps for the grant of a lease / underlease

Question 1

Who drafts a lease?

Answer 1

The landlord’s solicitor

Question 2

Why is the scope for negotiation in an underlease much more restricted?

Answer 2

Because likely that the headlease requires that the terms of the underlease mirror the terms of the headlease

Question 3

Under the SC & SCPC, when must the landlord supply the tenant with the final agreed lease (‘engrossed lease’)?

Answer 3

At least 5 working days before completion date

Question 4

What is an agreement for lease & when is it used?

Answer 4

Contract to enter into lease

Used where delay between agreeing & granting (eg. need to get consent, site being developed) but want parties to be bound

Question 5

Who drafts the agreement for lease & what are the formalities requirements?

Answer 5

Drafted by landlord’s solicitor

Must be valid contract, ie.
1. In writing
2. Contain all expressly agreed terms
3. Signed by both parties

Question 6

What must the landlord’s solicitor do if the property is subject to a mortgage?

Answer 6

Check if the consent of the lender is required before a lease can be granted

Question 7

Who deduces & investigates title in a lease/underlease?

Answer 7

Landlord’s solicitor (as with freehold)

Question 8

Why is deduction of freehold title important in the grant of a lease?

Answer 8

Tenant will want to know if there is anything on the freehold title which will bind the leasehold title

If landlord does not have freehold title, tenant cannot get absolute leasehold title on subsequent registration

Question 9

Is the tenant entitled to call for deduction of freehold title in the grant of a lease?

Answer 9

Only if transaction is grant of lease of 7+ years

–> If 7+ years & there is going to be an agreement for lease, landlord must deduce such title as would enable tenant to get absolute leasehold title at Land Reg

Question 10

Which title must be investigated in the grant of an underlease?

Answer 10

Immediate landlord’s title (headlease) & ultimate landlord’s title (freehold)

nb. if headlease registered with absolute leasehold title, no need to see freehold title, just headlease

Question 11

If the headlease is registered with absolute leasehold title, does the the landlord need to deduce title to the freehold?

Answer 11

No - just need to review headlease itself & official copies of headlease

Question 12

If the headlease is unregistered, what is the undertenant entitled to call for?

Answer 12

1. Headlease & all subsequent assignments for the last 15 years
2. Deduction of freehold title only where term is 7+ years

Question 13

Who undertakes the pre-contract searches & enquiries in the grant of a lease/underlease?

Answer 13

Under/tenant’s solicitor

Does the same ones as for freehold (but will usually have extra qs re lease eg. details of landlord’s insurance policy)

Question 14

What 5 documents must the landlord’s solicitor provide the under/tenant’s solicitor to enable them to carry out the pre-contract searches & enquiries?

Answer 14

1. Draft agreement to lease (if applicable)
2. Draft under/lease
3. Evidence of freehold / headlease title
4. Copies of any relevant planning consents
5. Evidence of lender’s consent to grant (if applicable)

Question 15

What are the formalities requirements for a lease?

Answer 15

Lease is transfer of legal estate in land, ie. must be valid deed

I. Clear it is a deed**

II. Signed & witnessed by grantor

III. Delivered

Execution

By individuals: signed in presence of attesting witness

By company
a. Affixing company seal in presence of 2 attesting directors

b. Signed by 2 directors

c. Signed by 1 director in presence of attesting witness

Question 16

What is a licence to underlet?

Answer 16

A contract between the head-landlord, headtenant & undertenant in which head-landlord grants formal consent to underletting

Will also have

• Covenant by undertenant with landlord to perform covenants (privity!)
• Covenant by tenant to pay head-landlord’s costs

Question 17

What are the covenants usually made by an undertenant and tenant with the landlord in a licence to underlet?

Answer 17

Undertenant: Direct covenant w/ landlord to perform covenants in sub-lease & headlease
(creates privity of contract between headlandlord & undertenant)

Tenant: to pay landlord’s costs incurred in giving consent (& maybe not to grant underlease until undertenant contracts out of LTA54 protections)

Question 18

What is SDLT payable on for the grant of a lease/underlease?

Answer 18

The VAT-inclusive amount of any premium paid & on the rent (non-residential)

(SDLT calculated on Net Present Value of the rent: £0 - £150k: 0%; £150k - £5m: 1%; >£5m: 2%)

Question 19

When must the SDLT1 be submitted?

Answer 19

Within 14 days of completion

(For LTT: within 30 days)

Question 20

When must an under/lease be registered?

Answer 20

If it is for a term of more than 7 years

Question 21

What documents need to be submitted for registration if the landlord’s title is registered? (6)

Answer 21

a. Lease

b. Fee

c. Consent of landlord’s lender / DS1 showing discharge of landlord’s mortgage (if applicable)

d. Mortgage deed (for new mortgage)

e. SDLT5 / WRA certificate

f. Death certificate of T.I.C. & Deed of Appt of 2nd trustee (if relevant)

Application must be made before expiry of 30 working day priority period conferred by OS1

Question 22

What documents need to be submitted for registration if the landlord’s title is unregistered? (7)

Answer 22

a. Lease

b. Fee

c. Consent of landlord’s lender / DS1 showing discharge of landlord’s mortgage (if applicable)

d. Mortgage deed (for new mortgage)

e. SDLT5 / WRA certificate

f. Death certificate of T.I.C. & Deed of Appt of 2nd trustee (if relevant)

g. Epitome of title etc. If evidence of title to freehold not submitted, can only get good title

Application must be made within 2 months of completion?

Question 23

When must the application to register the lease be made by?

Answer 23

Landlord’s title is registered: before expiry of 30 working day priority period conferred by OS1

Landlord’s title is unregistered: within 2 months of completion