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FLK 2: Property Practice > Topic 7 - Grant of a Lease and Lease Structure > Flashcards

Topic 7 - Grant of a Lease and Lease Structure Flashcards

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1
Q

What is the purpose of the video element in the introduction to leasehold transactions?

A

To provide an introduction to leasehold transactions and put them in their commercial context.

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2
Q

What are common long-term leases for houses and flats?

A

99 or 999 years.

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3
Q

What is typically the annual rent for newer residential leases?

A

Around £150 a year.

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4
Q

What type of tenancy is common for letting out houses and flats on a short-term basis?

A

Assured shorthold tenancies.

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5
Q

What is the typical duration for commercial leases?

A

Up to 15 years.

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6
Q

From a tenant’s perspective, what is one advantage of taking a lease?

A

No need to spend capital which may be in short supply.

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7
Q

Who are commercial landlords?

A

Private investors and institutional investors.

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8
Q

What is an example of a private investor in commercial real estate?

A

Derwent, which owns a portfolio of 5.5 million square feet of commercial real estate.

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9
Q

What is a full repairing and insuring (FRI) lease?

A

A lease where tenants cover property costs, and the landlord receives the rent clear of deductions.

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10
Q

What is covenant strength in the context of leasing?

A

The tenant’s ability to comply with lease obligations and have recoverable assets.

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11
Q

What does asset management in commercial property usually involve?

A

Ongoing legal work for institutional landlords.

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12
Q

Define a lease according to Woodfall’s Law of Landlord and Tenant.

A

The grant of a right to the exclusive possession of land for a determinate term less than that which the grantor has himself in the land.

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13
Q

What is an essential ingredient of a lease that distinguishes it from a licence?

A

Exclusive possession.

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14
Q

What are the two types of lease terms?

A

Fixed term and periodic tenancy.

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15
Q

What formalities are required for a legal lease over 3 years?

A

It must be created by deed.

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16
Q

What is the reversion in the context of a lease?

A

The interest that the landlord holds subject to the lease.

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17
Q

What is typically included in a lease document?

A

Contractual term and rent payable.

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18
Q

What is a landlord’s primary objective in negotiating a lease?

A

To ensure the premises are insured and kept in repair.

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19
Q

What does a tenant seek in a lease agreement?

A

Flexibility and the ability to use the premises for its intended purpose.

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20
Q

True or False: A break clause allows either party to terminate the lease before the end of the fixed term.

A

True.

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21
Q

What is the term commencement date?

A

The date on which the lease term starts.

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22
Q

What is a reversionary lease?

A

A lease that may start after the lease is dated.

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23
Q

How is the expiry of a lease term calculated if it states ‘from and including’ a certain date?

A

It expires on the day before that date in the relevant year.

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24
Q

What is the difference between a landlord break clause and a tenant break clause?

A

A landlord break clause allows only the landlord to terminate; a tenant break clause allows only the tenant.

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25
What are the two categories most leases fall into?
Short lease with market rent or long lease with ground rent.
26
What does a typical commercial lease rent look like?
Expressed as a yearly figure, payable quarterly.
27
Fill in the blank: Most new long residential leases have been restricted to imposing a _______.
peppercorn rent.
28
What is a peppercorn rent?
A nominal rent payment, often not paid in reality ## Footnote Typically imposed for leases after a certain date.
29
How is rent expressed in a commercial FRI lease?
As a yearly figure, e.g., £80,000 per annum, payable quarterly.
30
What are the traditional quarter days for rent payment?
* 25 December to 24 March * 25 March to 23 June * 24 June to 28 September * 29 September to 24 December
31
When is rent usually due in a commercial FRI lease?
In advance on the quarter day.
32
Fill in the blank: If the lease is silent, the rent is payable in _______.
arrears.
33
What happens if a lease starts partway through a quarter?
The quarter will be apportioned for rent payment.
34
What are common types of rent review in commercial leases?
* Stepped rent * Turnover rent * Index-linked rent * Open market rent review
35
True or False: There is an implied right for the landlord to increase the rent.
False.
36
What is a 'stepped rent'?
A rent structure that increases at specified intervals.
37
What is a 'turnover rent'?
Rent calculated based on the tenant's turnover at the property.
38
What does 'open market rent review' involve?
Ascertaining rent based on comparable premises.
39
What is the typical nature of rent review clauses in commercial leases?
They often have an 'upwards only' review.
40
What is the role of a specialist valuer in rent review?
To determine the new rent if the landlord and tenant cannot agree.
41
What assumptions are made during a rent review?
* The premises are vacant and available * There is a willing landlord and tenant
42
What is a common disregard in rent review valuations?
The tenant's voluntary improvements to the property.
43
What must happen once the new rent is agreed or determined?
It is documented in a rent review memorandum.
44
Fill in the blank: A commercial tenant is usually responsible for the _______ of their demise.
repair.
45
What is a full repairing obligation in a lease?
To keep the premises in good repair.
46
What is a qualified repairing obligation?
To keep the premises in good repair but not better than the state at lease commencement.
47
What is the landlord's responsibility regarding insurance in a lease?
To insure the building and recover costs from the tenant.
48
What are typical insured risks in a lease?
* Fire * Explosion * Flood * Malicious damage
49
What does the doctrine of 'waste' restrict?
The tenant from making alterations that reduce the value of the premises.
50
What is an absolute covenant regarding alterations?
Alterations are not permitted without landlord consent.
51
What is a qualified covenant against alterations?
Alterations may be permitted with landlord consent.
52
What is an absolute covenant against alterations?
An absolute covenant against alterations means that alterations are not permitted.
53
What is a qualified covenant against alterations?
A qualified covenant against alterations means alterations are only permitted with the landlord’s consent, which the landlord does not have to give.
54
What does a fully qualified covenant entail?
A fully qualified covenant requires the landlord to act reasonably in deciding to withhold consent for alterations.
55
How can a lease contain different types of covenants?
A lease may have a mixture of absolute, qualified, and fully qualified covenants for different matters.
56
What does s19(2) LTA1927 do regarding alterations?
It converts a qualified covenant against alterations to a fully qualified covenant if the proposed alterations are improvements from the tenant’s perspective.
57
What must a tenant do to carry out improvements under s3, LTA1927?
The tenant must serve notice on the landlord of its intention to carry out improvements.
58
What are the landlord's conditions for consenting to improvements?
The improvements must add to the letting value, be reasonable and suitable to the property, and not diminish the value of the landlord's other properties.
59
What is a licence for alterations?
A licence for alterations documents the landlord's consent to alterations and includes details about compliance, costs, necessary consents, and reinstatement.
60
What is the user's definition in a lease?
User refers to what the lease allows the tenant to use the premises for.
61
What happens if the lease is silent on user?
If the lease is silent on user, the tenant may use the premises for anything they like.
62
What is an absolute covenant regarding change of use?
An absolute covenant prohibits changes of user.
63
What is a qualified covenant regarding change of use?
A qualified covenant allows changes of user with the landlord's consent.
64
What does section 19(3) of the LTA1927 state regarding change of use?
The landlord cannot charge a lump sum or increase rent for consent unless the change requires structural alterations.
65
What must a tenant ensure when making alterations or changes of use?
The tenant must comply with relevant laws and obtain necessary consents.
66
What is the purpose of the Code for Leasing Business Premises?
To improve the quality and fairness of negotiations on lease terms.
67
Who does the Code apply to?
The Code applies to members of the RICS and RICS regulated firms.
68
What are the mandatory requirements outlined in the Code?
Mandatory requirements include constructive negotiations, advising unrepresented parties, and preparing written heads of terms.
69
What should the heads of terms include?
* Extent of the premises * Length of term and break rights * Rent and rent review * Repairing obligation * Rights to assign or underlet * Permitted use of the property * Rights to alter the property
70
What does the tenant's repairing obligation depend on?
It should be appropriate to the length of the term and the condition of the premises.
71
What is the typical process for granting a lease?
* Pre-exchange * Pre-completion * Post-completion
72
What are the landlord’s solicitor's tasks during pre-exchange?
* Take instructions * Prepare draft lease * Deduce title * Answer pre-contract enquiries * Obtain landlord’s signature
73
What is the purpose of an agreement for lease?
To commit to completing the lease when the parties are not yet ready or need to satisfy conditions.
74
What is an agreement for lease?
A document signed by a developer and retailers to secure lease agreements before the completion of a property ## Footnote This is used to prevent the loss of interested parties before the property's completion.
75
What is the role of the tenant's solicitor during the pre-exchange phase?
Investigate title, ensure the landlord has the title to grant the lease, and raise CPSE1 and CPSE3 enquiries ## Footnote CPSE1 and CPSE3 are standard forms used to gather information about the property and the lease.
76
What are CPSE1 and CPSE3 enquiries?
CPSE1 enquiries are standard queries for all commercial transactions, while CPSE3 enquiries are specific to lease agreements.
77
What should the tenant's solicitor consider regarding freehold covenants?
Freehold covenants will bind the tenant even if the lease states otherwise.
78
What happens during the exchange of the agreement for lease?
Landlord’s and tenant’s solicitors exchange agreements similar to a freehold contract, usually without a deposit.
79
What is typically included in the agreement for lease?
A draft of the agreed form of lease and conditions that need to be satisfied for completion.
80
What is a completion statement?
A document prepared by the landlord’s solicitor detailing the money due on completion, such as apportioned rent and service charge.
81
What are the pre-completion tasks for the landlord's solicitor?
Prepare original and counterpart lease, obtain landlord’s signature, and prepare completion statement.
82
What is the method for calculating rent apportionment?
Multiply the number of days of occupation by the daily rate, found by dividing yearly rent by 365 (or 366 in a leap year).
83
What searches are required before completion?
An OS1 search for a lease of whole, OS2 search for a lease of part, or OS3 search if the lease is not registrable.
84
What occurs during the completion of the lease?
The tenant’s solicitor sends completion monies, and both solicitors agree to complete and send executed leases.
85
What are the tasks of the landlord's solicitor post-completion?
Send a summary of the main provisions of the lease to the client.
86
What must the tenant's solicitor do post-completion?
Submit SDLT or LTT return, pay SDLT or LTT if necessary, and register the lease if required.
87
What is the requirement for registering leases based on their term?
Leases up to 3 years do not need to be registered; leases over 3 years can be noted against the landlord's title; leases over 7 years must be registered.
88
What is the procedure for registering a lease?
Conduct an OS1 or OS2 search, apply using form AP1 or FR1, and submit a certified copy of the lease.
89
What happens if the landlord's freehold title is charged?
A letter of consent from the lender will be needed for the registration of the lease.
90
True or False: All leases must be registered.
False.
91
Fill in the blank: If the lease is not registrable, an _______ search could be used.
OS3

FLK 2: Property Practice (10 decks)

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