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2023 > Property Practice - Leasehold > Flashcards

Property Practice - Leasehold Flashcards

1
Q

Repair Clauses

For a tenant to be in breach of a covenant to repair, there must first be…

The property need only be put into such a state of repair as renders it fit for…

A repair covenant can oblige the tenant to remedy an inherent defect in design/construction if it is…

What is the effect of a covenant requiring the tenant to “keep the property in repair”?

A

…disrepair.
…occupation of a reasonably minded tenant.
…the only way to effect repair.

This means to put the building in repair, even where this involves the tenant putting the building into a better state than when they entered the lease.

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2
Q

Termination and frustration

Unless the lease states otherwise, the lease will give the landlord the right to terminate the lease should…

Please note: there were some insurance pages I’ve skipped, if you want to check those, but they don’t look like exam material.

A

…reinstatement prove impossible.

The tenant should try to ensure they have an equivalent right: where reinstatement is impossible, they should be able to terminate.

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3
Q

Alterations

  1. If a landlord imposes an absolute covenant against all alterations, what can the tenant of business premises do under s.3 of the Landlord and Tenant Act 1927?
  2. How long does the landlord have to object? What can the tenant do if they do object?
  3. What three grounds are considered (and by whom?)
  4. Instead of objecting to the improvements, what can the landlord offer?
  5. Will the tenant be obliged to accept the landlord’s offer?
A
  1. Serve a notice on the landlord to carry out improvements.
  2. 3 months. If they do so, the tenant can apply to court for authorisation.
  3. The court will consider:
    - Whether the improvements add to the letting value of the property;
    - Whether reasonable and suitable to the character of the property;
    - Whether they diminish the value of any of the landlord’s other property.
  4. To carry out the works himself in return for a reasonable increase of rent.
  5. No. But rejecting it will mean that the court cannot give the tenant authority to do the works themselves.
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4
Q

Alterations/Alienation

Section 19 of the Landlord and Tenant Act 1927 has the effect of turning any qualified covenants against alienation (i.e. a covenant requiring the landlord’s consent) into a fully qualified covenant (i.e. a covenant requiring the landlord’s consent, not to be unreasonably withheld)

Which five forms of alienation and one form of alteration does this apply to?

A

Alienation:
- Assignment
- Underletting
- Charging
- Parting with possession
- Sharing occupation

Alteration:
Improvement.

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5
Q

Alteration: Improvement

If the tenant proposes works that increase the value/usefulness of the property, but reduces the value of the landlord’s reversionary interest does this constitute an improvement?

If the tenant obtains prior authorisation to make improvements using the s.3 statutory procedure (serving a notice on the landlord, etc.), what are they entitled to? Under what conditions?

A

Yes.
Compensation at the end of the term, provided that the improvement adds to the letting value of the property and is within certain statutory time limits.

The significance of this is that the landlord can only withhold consent if reasonable to do so.

The use of the s.3 procedure is rare in practice.

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6
Q

User covenants

A landlord is unlikely to restrict the use of property too much, as this will put off many potential tenants. However, they can impose greater control with a qualified covenant, e.g Not to use the Premises other than as a restaurant or such other use falling within Use Class E as the landlord may approve in writing.

Can the landlord’s consent be unreasonably withheld?
Can the landlord charge a fine or increase rent as a condition of giving consent?

What to both parties need to keep in mind?

A

Yes.
No, unless a structural alteration is involved.

Planning permission.

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7
Q

Alienation: Assignment

Conditions for the landlord to withhold consent can be agreed upon by the parties in advance. Are these subject to any requirement of reasonableness?

Where there is a qualified covenant against assignment, the tenant can make a written application for consent. The landlord must then, within reasonable time do two things:
For the latter of those, what must be specified?

The same considerations are given for underletting, so I have omitted them from the slides.

A

No.
1. Give consent, except where reasonable not to;
2. Serve a written notice of its decision, specifying in addition:
- conditions, if any.
- If withholding consent, the reasons for withholding.

Some guidelines are given in the book.

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8
Q

Which of the following are examples of consent being unreasonably held?

  1. Minor breaches of a repairing covenant.
  2. Proposed assignee’s references are unsatisfactory;
  3. Long-standing and extensive breach of repairing covenant by assignor;
  4. The premises have been on the market for 18 months with significant rent, but the tenant’s assignment will cause slight harm to the landlord.
  5. Assignee would be in a position to compete with the landlord’s business.
  6. Assignment would reduce the value of the landlord’s reversion.
  7. The proposed assignee intends to carry on a detrimental use of the premises
A

(1) and (4)

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9
Q

Rent Review

What are the four types of rent review?

A
  1. Fixed increase.
  2. Index-linked.
  3. Tenant’s receipts.
  4. Open market rent view.

  1. Fixed increase.
  2. Index-linked - an external index is used so that rent remains in line with inflation.
  3. Tenant’s receipts - linked to e.g. tenant’s turnover.
  4. Open market rent view - adjusted at regular intervals by reference to the open market rental value of the premises.
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10
Q

Open Market Rent Review

  1. The aim of this is to determine the rent which a tenant would be prepared to pay if, hypothetically…
  2. What two elements will be considered in this hypothetical scenario?

To deal with valuation problems, a well-drafted rent review clause will make certain assumptions and certain disregards.

A
  1. …the property were to be let in the open market.
  2. Two elements of Open Market Review:
    - The physical property
    - The terms of the lease.

E.g. if lease terms are too onerous due to a narrow user provision, this will be reflected in the rent review.

On 5, one approach is to make the hypothetical lease equal to the unexpired residue.

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11
Q

Open Market Rent Review

To deal with valuation problems, a well-drafted rent review clause will make certain assumptions and certain disregards.

  1. Other than the assumption that there is a willing landlord and tenant, five common assumptions are:
  2. What are three common disregards?
A
  1. That the property is sold:
    a. with vacant possession (empty)
    b. on the terms of the lease
    c. after the tenant has fully complied with their obligations, if in breach.
    d. after the property has been fully restored, if destroyed or damaged.
    e. for a term of x amount of years.
  2. Common disregards:
    a. Any effect of the tenant’s occupation.
    b. Any goodwill of the tenant’s business.
    c. Any effect of phsyical improvements carried out by the tenant.
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12
Q

Open Market Rent Review

The level of rent is…
Is time of the essence for either party to instigate review and negotiate the process?
If the parties fail to agree, the lease should make provision for the matter to be…

A

…upwards only.
No.
…referred to an independent third party.

There is some stuff on RICS Code, which I will leave out. It relates to members of the Royal Institute of Chartered Surveyors.

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13
Q

Procedural Steps for the Grant of a Lease or Underlease

REFER TO BOOK. These chapters are also covered in Land Law.

A
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14
Q

Procedural Steps for Assignment of a Lease

REFER TO BOOK. These chapters are also covered in Land Law.

A
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15
Q

Remedies for Breach of Leasehold Covenants

What is an old lease?

Under an old lease, if the original tenant (T1) assigns to T2 and T2 breaches a covenant,does T1 remain liable?

Under a new lease, would T1 remain liable?

In which of these cases is it useful for the landlord to impose an AGA in advance in the lease? Briefly, what is an AGA? What is the limitation of the AGA?

A

Lease granted before 1 January 1996.

Yes, under privity of contract.

No. They are released from liability.

For new leases, an AGA can be stipulated in the lease. This is a promise by T1 that the ywill be liable for T2’s breaches. It is limited to the duration of T2’s ownership of the lease.

Landlord can also sue T2 under privity of estate, or they can require T2 to give a direct covenant.

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16
Q

Remedies for Breach of Leasehold Covenants: Rent

If there is a breach of rent payment, what four remedies are available to the landlord?

A
  1. Action in debt.
  2. Commercial Rent Arrears Recovery (CRAR):
  3. Pursue guarantors and/or rent deposit
  4. Forfeiture
17
Q

Remedies for Breach of Leasehold Covenants: Rent

  1. Action in debt: this is via the High Court or Country Court. What is the limitation?
  2. CRAR:
    a. What does this allow the landlord to do?
    b. In order to use it, what must the landlord do?
    c. The landlord is not allowed to remove certain goods, including items or equipment up to the value of ____ which are necessary for…
    d. The landlord may sell the goods provided that this is done at… and the tenant…
    e. Is CRAR available for insurance rent?
    f. How much rent needs to be outstanding for this remedy to be available?
A
  1. Six year limitation period.
  2. CRAR
    a. Enter the property, seize and sell the tenant’s goods.
    b. The landlord must give seven days’ notice of its intention.
    c. £1350, the tenant’s business.
    d. …at a public auction; is given 7 clear days’ notice of the sale.
    e. No. Only rent for possession and use of premises.
    f. 7 days.
18
Q

Remedies for Breach of Leasehold Covenants: Rent

Where the landlord intends to pursue either the former tenant or guarantor of a former tenant, he must comply with s.17 of the Landlord and Tenant (Covenants) Act 1995. It applies to both new and old leases. What are the two requirements?

A
  1. The landlord must serve a default notice on any former tenant or guarantor if he intends to recover a fixed charge from them.
  2. The default notice must be served within six months of the current tenant’s breach.

A fixed charge = monetary payment such as rent, service charge or other liquidated sum.

On (2) the landord doesn’t need to start proceedings. He just needs to serve the default notice.

Where the landlord does proceed against a former tenant or their guarantor, that person may be able to call for an overriding lease, making the former tenant/guarantor the immediate landlord of the defaulting tenant.

19
Q

Remedies for Breach of Leasehold Covenants: Rent

What is the effect of forfeiture?
To be able to use it, the lease must…
What are the two ways in which the landlord can forfeit the lease?
The landlord must be careful not to waive its right to forfeiture by carrying out an act demonstrating…

A

Bring the lease to an end.
Contain a forfeiture clause.
Peaceable re-entry or if not possible, court order.
…an intention to continue the relationship. (e.g. accepting rent after breach)

20
Q

Remedies for Breach of Leasehold Covenants: Repair

What are the four remedies available?

A
  1. Specific Performance
  2. Damages
  3. Self-help (Jervis v Harris) clause.
  4. Forfeiture
21
Q

Remedies for Breach of Leasehold Covenants: Repair

1.When will specific performance be granted by the court?

  1. Damages are always available for breach of convenants, but what are the two important statutory provisions in relation to repair?
  2. If there is a self-help (Jervis v Harris) clause in the contract, this allows the landlord to…
A
  1. Where other remedies are not available.
  2. Two statutory provisions:
    i. Section 18, Landlord and Tenant Act 1927: limits the amount of damages to the amount by which the landlord’s reversion diminished in value.
    ii. The Leasehold Property (Repairs) Act 1938 applies to leases granted for more than seven years with more than three years to run: notice must be served on the tenant. If the tenant serves a counter-notice within 28 days, the landlord requires the court’s leave.
  3. …recover the cost of repairs as a debt rather than a damages claim.
22
Q

Remedies for Breach of Leasehold Covenants: Forfeiture for repair

Forfeiture for repair (and other non-rent covenants) is more complicated than that of non-payment of rent. The statutory procedure of s.146 of the Law of Property Act 1925 must be followed.

  1. Firstly, the landlord must serve an s.146 notice on the tenant, which will: (3 bullets).

When can the landlord forfeit the lease?

Where the lease was originally for seven years or more with at least three years left to run, what does the Leasehold Property (Repairs) Act 1938 require?

A
  1. s.146 notice:
    - specify the breach;
    - require the breach to be remedied within reasonable time (if capable of being remedied);
    - Require compensation for breach
  2. When the tenant fails to comply with the notice.
  3. That the s.146 notice notifies the tenant of their right to serve a counter notice within 28 days.

As with forfeiture of non-payment of rent, the tenant may apply to the court for relief from forfeiture.

On (3), if the tenant does so, the landlord would require leave of the court.

23
Q

Termination under Common Law

What are the four ways in which a lease can be terminated at common law?

Common Law termination

A
  1. Effluxion of time
  2. Notice to quit
  3. Surrender
  4. Merger
24
Q

Termination under Common Law

  1. Effluxion of time simply refers to the…
  2. Notice to quit is used for periodic tenancies. Suppose there is a monthly periodic tenancy starting on 1 August. If the landlord serves notice to quit on 14 August, when is the earliest date for termination?
  3. Suppose it is a yearly periodic tenancy that started on January 1 2023. If the landlord serves a notice to quit on April 1 2023, when is the earliest date for termination? What about if the landlord serves a notice to quit on October 1 2023?
  4. Surrender can only be achieved if… To be legal it must be…
  5. The opposite of surrender is ____ whereby the tenant acquires… or where a third party…
A
  1. …contractual end date in a fixed-term lease.
  2. 30 September.
  3. In the first scenario, the lease ends on January 1 2024, as this is the end of the completed year of tenancy. In the second scenario, the lease ends on 1 April 2024, as half a year’s notice is required for yearly periodic leases.
  4. …both the landlord and tenant agree for the lease to merge into the landlord’s reversion. To be legal, it must be by deed.
  5. The reversion, or where a third party acquires both the reversion and lease.
25
Q

Termination and Security of Tenure for Business Leases: The 1954 Act

If this Act applies, the common law methods of termination may not apply.

  1. Which tenancies fall under its ambit?
  2. Which four business tenancies are not protected by the Act?
A
  1. Tenancies where the property is or includes premises occupied by the tenant for the purposes of a business.
  2. Four businesses not protected by the Act:
    - Tenancies at will;
    - Fixed-term tenancies not exceeding six months.
    - Agricultural holdings, farm tenancies and mining leases.
    - Fixed-term tenancies that have contracted out of the 1954 Act.

The tenant may run the business personally, as agent or as manager.
On (2) for fixed term tenancies not exceeding six months, the landlord cannot circumvent the Act by granting successive 6 month tenancies: if the tenant has occupied for more than 12 months, they gain protection of the Act.

26
Q

Security of Tenure for Business Leases: The 1954 Act

What is the statutory notice procedure before the lease for contracting out of the 1954 Act?

If the statutory notice was given to the tenant less than ____ before the grant of lease, the tenant’s declaration must be made in the form of a…

A reference to …. and …. must be contained or endorsed inthe lease itself.

A

Landlord gives notice warning the tenant that they are agreeing to a lease without security of tenure.
The tenant must make a declaration that they received the notice and agree to contract out.
14 days; statutory declaration before an independent solicitor.

The service of notice and tenant’s declaration.

27
Q

Security of Tenure for Business Leases: The 1954 Act

The effect of the 1954 Act is to give the tenant security of tenure, which means they have the right to…

The Act provides for seven methods of termination. Even if so terminated, the tenant can …. which can only be opposed under the grounds in ____ (for which, there are also seven grounds).

What are the seven grounds for termination?

A

…remain in the property after the expiry of the contractual term and to apply for a new tenancy.

The seven grounds of termination:

  1. Landlord’s s.25 notice.
  2. Tenant’s s.26 request for a new tenancy.
  3. Forfeiture by tenant’s default (see above)
  4. Surrender (see above)
  5. Periodic tenancy: Notice to quit
  6. Fixed-term lease: Tenant’s notice, served three months in advance.
  7. Fixed-term: Tenant ceasing to be in occupatoin for business purposes at the end of the lease.

On (6) the notice cannot expire before the end of the contractual expiry date.
Important note: the landlord does not have the same right under (5) and (6) to end the lease.

This means the only way the landlord can terminate is under s.25, or by forfeiture/surrender where available.

28
Q

Security of Tenure for Business Leases: The 1954 Act

When the landlord serves this, they will make clear whether or not they oppose a new tenancy.

If they are not opposed to a new tenancy, they must indicate…
If they are opposed to a new tenancy, they must state…

The notice must state the date upon which the landlord wants the tenancy to end.
It must be served within ____ before the termination date specified in the notice.

The termination date cannot be sooner than…

Landlord’ s.25 notice

A

…the proposed terms of the new lease;
…the s.30 grounds upon which they rely.
6-12 months.

…the lease could otherwise have come to an end under common law.

29
Q

Security of Tenure for Business Leases: The 1954 Act

  1. A tenant occupies an office property under a 10-year fixed term lease. The term ends on 29 September 2023 and the lease is not contracted out of the 1954 Act.

What must the landlord do if they want to terminate the tenancy on the contractual end date of 29 September 2023?

  1. Assume the same, but the date is now 25 June 2023. Can the landlord terminate the tenancy?

Landlord’s s.25 notice

A
  1. They should serve a notice specifying 29 September 2023 as the termination date, and should be served between 29 September 2022 and 29 March 2023.
  2. Yes. However, the earliest date he can specify as the termination date is 25 December 2023 (giving the tenant six month’s notice), and the latest possible termination date is 25th June 2024.
30
Q

Security of Tenure for Business Leases: The 1954 Act

If the landlord opposes a new tenancy in the notice, what must the tenant do in order to keep their rights under the Act?

If the tenant has not done so, the landlord can pre-emptively…

Landlord’s s.25 notice

A

The tenant must apply to the court before the termination date given in the s.25 notice.

…apply for an order to terminate the lease on the s.30 grounds stated in its notice.

31
Q

Security of Tenure for Business Leases: The 1954 Act

If a tenant wants to terminate the lease on the contractual expiry date, they may do either by:

If a tenant wants to terminate the lease after the contractual expirty date, they may only do so by:

If a tenant wishes to remain in the property after the contractual expirty date, they could do nothing, and wait until the landlord serves an s.25 notice. Alternatively, they can…

Tenant’s Options

A

Ceasing to occupy as a business premises by the end of the lease, or serving an s.27 notice giving the landlord three months’ written notice.

Serving an s.27 notice or agreeing a voluntary surrender.

Serve an s.26 request for a new tenancy.

32
Q

Security of Tenure for Business Leases: The 1954 Act - s.26 procedure

The tenant’s s.26 request must state the date on which the tenant wants the new tenancy to begin and the request must contain the tenant’s proposal’s for the new tenancy.

  1. When serving this, the tenant must give the landlord between:
  2. The new tenancy start date cannot be…
  3. If the landlord wishes to oppose the new tenancy, it must…
  4. In order to keep their rights under the Act, the tenant must then…
  5. If the tenant has not applied to court, the landlord may pre-emptively…
A
  1. 6-12 months’ notice of the proposed new tenancy start date.
  2. …earlier than the date the tenancy could’ve been terminated under common law.
  3. …serve a counter-notice on the tenant within 2 months of the tenant’s s.26 request, stating the s.30 opposition.
  4. …apply to court for a new lease before the proposed new tenancy start date (unless the landlord agrees to extend the time limit).
  5. …apply to court for an order to terminate the lease under the s.30 grounds specified in the counter-notice.
33
Q

Security of Tenure for Business Leases: The 1954 Act

The landlord’s s.25 notice or s.26 counter-notice must state on which seven specified grounds under s.30 of the Act it does so. These are:

Landlord’s s.30 grounds for opposition

A

a. Tenant’s failure to repair;
b. Tenant’s persistent delay in paying rent;
c. Tenant’s susbstantial breach of other obligations;
d. Landlord has offered alternative accommodation;

e. Tenancy is an underletting of part.
f. Landlord intends to demolish or reconstruct and could not reasonably do so without obtaining possession.
g. Landlord intends to occupy the holding for its own business or as a residence.

34
Q

Security of Tenure for Business Leases: The 1954 Act

The s.30 grounds of opposition to a new lease are:

a. Tenant’s failure to repair;
b. Tenant’s persistent delay in paying rent;
c. Tenant’s susbstantial breach of other obligations;
d. Landlord has offered alternative accommodation;
e. Tenancy is an underletting of part.
f. Landlord intends to demolish or reconstruct and could not reasonably do so without obtaining possession.
g. Landlord intends to occupy the holding for its own business or as a residence.

Which of these are mandatory grounds and what does this mean?

s.30 grounds for opposition

A

d, f and g are mandatory, meaning the court has no discretion to decide whether to allow the new lease.

35
Q

Security of Tenure for Business Leases: The 1954 Act

Ground (f): Landlord intends to demolish or reconstruct and could not reasonably do so without obtaining possession.

This is the most common ground. The landlord must show that on termination, he: (3 conditions)

Ground (g): Landlord intends to occupy the holding for its own business or as a residence. The landlord cannot rely on this ground unless he has…

Under ground (g), what three things must the landlord demonstrate to the court?

s.30 grounds for opposition

A

Ground (f) requirements:
i. has a firm and settled intention to carry out the work;
ii. intends to demolish, reconstruct or carry out substantial work; and
iii. cannot reasonably carry out the work without obgaining possession.

Ground (g)
…owned the property for at least five years before the end of the current tenancy.

  • Firm and settled intention to occupy;
  • that practical steps have been considered/taken;
  • that there is a reasonable prospect of achieving the intention.
36
Q

Security of Tenure for Business Leases: The 1954 Act

The tenant is only entitled to the “holding”, meaning the property comprised in the current tenancy, but excluding…

On the other hand, the landlord has the right to insist that any new tenancy will be a tenancy of…

The term of the new lease will be such as is… but cannot exceed…

The term will not commence until…

Terms of new lease

A

…any part not occupied by the tenant (i.e. which the tenant has underlet).
…the whole property, including those parts underlet.

…reasonable in the circumstances; 15 years.
…3 months and 4 weeks after the order.

37
Q

Security of Tenure for Business Leases: The 1954 Act

The rent is the open market rent. The court must disregard the following four things:

If either party finds the new lease ordered by the court to be unacceptable, can they apply for its recovation?

Terms of new lease

A

a. The tenant’s and their predecessors’ occupation;
b. any goodwill attached;
c. improvements carried out by the tenant;
d. in the case of licensed premises, any addition in value due to tenant’s licence.

Only the tenant, not the landlord.

The landlord’s only remedy is to appeal.

38
Q

Security of Tenure for Business Leases: The 1954 Act

What are the no-fault grounds?

If the landlord successfully opposes any of these, the tenant will not be granted the new lease but will be entitled to…

The amount will be equivalent to the rateable… unless the tenant or their predecessors in the same business have been… in which case, it will be…

A clause contracting out of the obligation to pay compensation will only be enforceable if…

A

e. Tenancy is an underletting of part.
f. Landlord intends to demolish or reconstruct.
g. Landlord intends to occupy.

…compensation.
…value of the holding; in occupation for 14 years; twice the rateable value.

…the tenant/their predecessors has been in occupation for fewer than five years (otherwise it is void).

2023 (23 decks)

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