Property Law & Practice Flashcards
(44 cards)
What is the report on title?
The report in which a solicitor reports to its clients on its investigation of title, search results and replies to enquiries. This is sent to the buyer before the exchange of contracts
The report on title includes:
- information about the property (address, title, land plan, registered/unregistered, owner, any charges)
- matters benefitting the property
- matters burdening the property
What are the heads of terms?
The document which sets out the terms of the transaction agreed in principle between the parties. The terms are subject to the contract and are confidential.
The Code (Code for Leasing Business Premises) is concerned with heads of terms - ensures they are clear and transparent
Areas covered:
- extent of premises
- length of term and break rights
- rent and rent review
- repairing obligation
- rights to assign
- permitted use of property
- rights to alter property and obligations to put property back in original state
What is an epitome of title?
It is a set of copies of relevant title documents for unregistered land. The seller’s solicitor identifies which deeds/documents are relevant to deduce title and lists them in the epitome of title
What is caveat emptor?
‘Buyer beware’
It means that it is incumbent on the buyer (buyer’s solicitor) to inform themselves of any issues with the property. Searches and enquiries, which the buyer’s solicitor carries out, are an essential part of this
What is security of tenure?
If a lease benefits from security of tenure, this means the tenant has an automatic right to remain in the property after the term ends and it can only come to an end under one of the prescribed forms set out in law.
The tenant or the landlord can apply to court for an order for a grant of a new tenancy.
Security of tenure applies automatically to a qualifying business tenancy, unless the parties agree to exclude it by “contracting out”
What is contracting out?
This allows parties to agree to exclude a fixed term lease from security of tenure provisions. If the parties do not contract out, and security of tenure is applicable to the tenancy, then secured tenure will automatically apply
Tenancies commonly contracted out:
- Short term lease (5 years or less)
- Underleases
Procedure:
1. Landlord serves a warning notice on the tenant in prescribed form
- details consequences of contracting out
- served before parties complete
- Tenant must provide a declaration
- at least 14 days before completion: simple signed declaration
- completion is less than 14 days away: statutory declaration (declared before an independent solicitor)
The lease must contain reference to both the notice and declaration of contracting out
What is forfeiture?
Forfeiture is the right of the landlord to re-enter the premises and take them back from the tenant
- Forfeiture is not an automatic right and is only permitted insofar as the lease provides for it
- Commercial leases typically allow the landlord to forfeit in the event the tenant fails to pay rent, breaches its obligations under the lease, or there is insolvency
- Non-payment of rent: Landlord is entitled to forfeit as soon as the lease allows
- Any other breach of tenant obligations: Landlord must serve a s146 notice
What is a s146 notice?
The notice is given by the landlord to the tenant and requires the tenant to remedy a breach of covenant of the lease. The landlord must serve a section 146 notice on the tenant before it forfeits the lease for a breach of a covenant, unless the breach is non-payment of rent.
The notice details the alleged breach and gives the tenant a reasonable opportunity to remedy it
What is the waiver of the right to forfeiture?
If the landlord acts in a way that acknowledges the continued existence of the lease, the landlord risks losing the right of forfeiture
Breach is one and for all breach
- Once the landlord waives the right to forfeiture, this is permanent and landlord can never regain the right to forfeiture for that breach
- This includes breaches such as non-payment of rent, unlawful assignment, insolvency event
Continuing breaches
- Each day the breach continues, the landlord regains the right of forfeiture
- This includes breaches such as failure to keep premises in repair, breach of user covenant, failure to comply with insurance
What is a landlord’s right to forfeit for breaches which are not capable of being remedied?
Subletting and illegal/immoral use are breaches which are not capable of being remedied
The landlord can:
- serve a s146 notice
- only needs to wait 14 days and then can forfeit
What is relief from forfeiture?
The tenant can apply to the court for relief, that is, to set the forfeiture set aside. The tenant is entitled to apply as soon as the landlord serves s146 notice, or starts the process of forfeiture either by peaceable re-entry or issuing proceedings.
The court has discretion whether to grant this remedy.
The court is more inclined to grant relief where the tenant:
- acts quickly
- pays any arrears
- remedies any breach
- pays landlord’s costs
What is a self-help clause? (Breach of repair covenant)
If tenant is in breach of repairing obligation
- Landlord must serve s146 notice and give tenant 28 days to serve a counter-notice
- Landlord cannot issue proceedings for damages unless it has done this
Damages for breach of repair:
- Measure of damages is limited to the loss of value to the landlord’s reversion, and not the cost of putting the premises into full repair
- Damages are limited for the landlord (cannot recover that much)
Therefore, neither forfeiture nor damages are particularly useful solutions for the landlord.
Instead, commercial leases almost always contain a self-help clause which avoid the difficulties of the other remedies.
- A self-help clause allows the landlord to enter the property, carry out repairs and recover the cost of doing so from the tenant
- The lease must contain a self-help clause for the landlord to be able to do this
Importance of self-help clause for a landlord
- There is no need for the landlord to serve a s146 notice, meaning the tenant cannot serve a counter notice
- Costs of carrying out the repairs are treated as a contractual debt to the landlord, rather than damages and therefore can be recovered in full
- Avoids procedural difficulties, costs and time of damages claim
- Quick and efficient and no need to involve the court
This is therefore a much more effective mechanism for the landlord to manage the tenant’s failure to comply with its repairing obligations
Note:
- The self-help clause MUST be provided for in the lease
When can a threat of forfeiture be a useful strategy for a landlord / what are potential drawbacks?
Threat of forfeiture may be enough:
- may spur the tenant into compliance with obligations
- for non-payment of rent, threat of forfeiture may be sufficient
It is an effective remedy as:
- It can cause embarrassment to a tenant’s business
- Can be achieved by peaceable re-entry or court proceedings
Potential drawbacks:
- In a tough rental market, a tenant in breach of some (perhaps minor) obligations, is likely better than no tenant at all
Threat of forfeiture may not be that useful for remedies of breach of repair covenant
- The tenant can serve a counter-notice
What is a periodic tenancy?
It is a lease for a period which extends itself automatically until ether the landlord or tenant give notice to quit (continues on a rolling basis, until either party serves a notice to quit)
- Periodic tenancy is brought to an end by notice to quit
What is surrender (method of termination)?
This is a mutual agreement (both must agree) to bring the tenancy to an early end before its expiry
- The tenant gives up its interest to the landlord, with the landlord’s agreement
- Tenant may wish to surrender if no longer needs the premises
- Landlord may wish to surrender if it needs premises back
A premium is payable to compensate for the loss of premises
- Who pays the premium depends on who wants to end early
- Landlord pays premium / tenant pays reverse premium
Surrender releases both landlord and tenant from on-going obligations, but need to be careful not to release the parties of previous obligations unless they have been met in full
- E.g., the tenant has paid any rent or other sums owed up to date of surrender
What is merger (lease termination)?
Either the tenant acquires the landlord’s interest, or a third party acquires both interests. This means the interest are merged and the lease is extinguished
Options for forfeiture
- Peaceable re-entry
- This causes embarrassment for a commercial tenant
- But there is a risk that the tenant disputes legal validity - Forfeiture by court order
- This means the tenant cannot dispute the legal validity
- But requires landlord to incur time and costs applying to court
What is ‘commercial rent arrears recovery’
It allows a landlord of a commercial premises to recover rent owed to them by taking control of tenant’s goods and selling them
What is an easement?
An easement is a private right to use land which belongs to another for a specific purpose.
The right allows one property owner to do something on the other’s land: common examples such as right of way, right to park, right to storage
To be recognised as an easement:
1. To be legal it must be for a certain term or forever.
- If not it can only be an equitable easement
2. Capable - tests in Re Ellenborough Park
3. No disqualifying factors (no payment; no exclusive possession; no permission)
4. Acquired (express / implied / prescription)
If the right is not an easement, it may just be a licence:
- an easement is a proprietary right attached to the land, which means it benefits a piece of land and binds subsequent owners.
- Whereas, if it is only a licence, this is only a personal right
- This impacts remedies available and enforcement against a third party
Issues when advising a client on whether the right is an easement
- Remedies available
- Enforceability against a third party deprived of their right and if the burdened land is transferred
Determine if the right being claimed is an easement, or just a licence
- Is the right capable of being an easement?
- Is it defeated by 3Ps?
- Is it acquired as an easement?
- Is it enforceable against a third party?
What is a covenant?
It is a means of private control of the land. It is a promise between landowners to do or not to do something.
Enforceability of covenants by successor owners may be a legal issues and the benefit or burden of the covenant can only pass to successors in title if certain criteria are met.
To validly create a restrictive covenant it must be in writing and signed by the grantor.
- A restrictive covenant is capable of being an equitable interest
- It should be protected by notice on the charges register (or Land Charge for unregistered land) of burdened land to be enforceable against third party
- n.b. a positive covenant is not an interest in the land and does not have equitable status
Issue of enforceability with covenants
As between the original parties, a covenant is enforceable as a matter of contract law
The issue arises where the land is sold to third parties, who were not party to the original covenant.
What are the characteristics of a Tenant in Common?
- Tenants in common each own separate share in the property (distinct, but undivided share)
- On the death of one of the tenants, their share will pass to beneficiaries as stated in their will or by intestacy (if there is no will)
- The property does not automatically transfer to the remaining owner upon the death of the other owner as there is no right of survivorship
Advantages:
- Each client chooses who to leave their share of the property to
- It protects the amount that each client put into the property
- The amount of each client’s share can reflect the amount contributed to the deposit
Disadvantages:
- It can be complicated working out the shares, although this is made clearer if there is a clear contribution split towards deposit
- If one client dies intestate, the matter goes through probate. It does not automatically pass to the other co-owner
- The surviving owner will have to share a property with whoever inherits the share
- Either client could decide to sell their share without knowledge or permission of the other owner
- More complex - higher legal costs
