LEASES
If lease of part: Rights, Reservations & Exceptions that the LL & T should consider:
Exception: Something that exists and is (or would be) part of the thing granted, but which is
excluded from the grant (e.g. mineral rights)
Reservation: Something that is not in existence at the date of the grant but which arises out of the
demise (e.g. reservation of rent, right of entry, easement in favour of neighbouring land retained by
the LL (s65 LPA 1925))
- Significance of distinction arises only when ambiguity as to the scope/meaning of the words
Landlord will need: Tenant will need:
• Right of entry to the Premises for repairs • Rights for the T and its employees, invitees and
of other parts of the land and service any other persons authorised by it to use the
media (T may want work to be Common Parts for the purposes for which it is
completed in a reasonable time/act with intended
due care) • Right to access onto Common Parts for purposes
• Right to work and develop on of repairing [or altering] Premises and service
neighbouring property (T will want a media
qualification so the LL can’t carry out the • Right to run services through service media on
works so that T’s ability to use the Common Parts
Property for the permitted use is • Right to internal non-structural alterations
materially adversely affected as a result) • Right to assign/sublet with LL’s consent
• Anything else in the Heads of Terms (e.g. use of
car park)
Leases of part are more complex than Need to assess the potential liability of any 3rd party rights
leases of whole (e.g. undisclosed overriding interests/restrictive covenants
LL is usually responsible for the structural
parts - T will still bear the cost through the
service charge Provisions of UCTA on exclusion clauses won’t apply
CONTRACTS
Engross: produce ‘final’ copy - do this before executing
Landlord executes the lease, tenant executes counterpart
Once contracts are exchanged, a legal relationship exists between the parties - LL becomes obliged
to grant the lease and the T becomes obliged to take that grant. The terms of the lease will also
become fixed on exchange. The SCPC’s achieve this by providing that the form of the lease that the
parties will enter into will be the same as that which has been annexed to the contract (SCPC 11.2.3).
On the grant of a lease, SDLT is potentially payable both on any capital sum (known in the case of
the grant of a lease as a "premium") charged by the LL, and the rent.
Premium: SDLT is calculated in the same way that SDLT is calculated on the price (if any) in respect
of the disposal of freehold land or the assignment of a lease. Rent: calculated using the Net Present
Value of the rent. However, SLDT is not charged if the NPV does not exceed £150,000.
- On any subsequent assignment of that lease (ie when a tenant disposes of the lease), SDLT
can only be charged on any sale price charged by the assignor.
, Look out for:
Interpretation clause that states the LL’s consent much not be unreasonably withheld (2.7)
- This will make s19(1A) LTA 1995 irrelevant (LL can’t unreasonably withhold consent) as it’s
already a fully qualified covenant
Reimbursement clause where T pays LL’s costs e.g. with an application for consent (4.5)
T’s insurance obligations (4.7)
T’s repairing obligations (4.8): Usually FRI: Full repairing and insuring leases
- Also any LL’s self-help clauses (4.9.2/3)
User clause (4.13.1): Permitted Use will usually be a defined term
Alienation clause (4.14): Will usually prohibit everything unless it’s allowed
Planning clauses (4.19): Usually need consent to apply for PP
Clauses not to breach any obligations affecting the freehold interest (e.g. covenants) (4.21)
Forfeiture clause (6.1.1/2)
- Allows LL to re-enter the premises and end the lease
- Check whether it excludes the need for a rent demand
Check Schedules carefully
- Will usually have more insurance & damage/underletting provisions
- Insurance
o Usually the tenant will have to pay if the insurance providers don’t pay out because of
something the T did/didn’t do
o Usually LL will reinstate unless insurance providers don’t pay because of something
the T did/didn’t do
o Will usually provide for rent suspension and termination
Consider Security of Tenure
REPAIR/INSURANCE
All of the answers are in the lease
Go through each of the boxes:
Tenant’s Obligations Landlord’s Obligations Other Provisions
Repair Insurance Rent Suspension
Insurance Reinstatement Termination
Rent
If lease of part: Rights, Reservations & Exceptions that the LL & T should consider:
Exception: Something that exists and is (or would be) part of the thing granted, but which is
excluded from the grant (e.g. mineral rights)
Reservation: Something that is not in existence at the date of the grant but which arises out of the
demise (e.g. reservation of rent, right of entry, easement in favour of neighbouring land retained by
the LL (s65 LPA 1925))
- Significance of distinction arises only when ambiguity as to the scope/meaning of the words
Landlord will need: Tenant will need:
• Right of entry to the Premises for repairs • Rights for the T and its employees, invitees and
of other parts of the land and service any other persons authorised by it to use the
media (T may want work to be Common Parts for the purposes for which it is
completed in a reasonable time/act with intended
due care) • Right to access onto Common Parts for purposes
• Right to work and develop on of repairing [or altering] Premises and service
neighbouring property (T will want a media
qualification so the LL can’t carry out the • Right to run services through service media on
works so that T’s ability to use the Common Parts
Property for the permitted use is • Right to internal non-structural alterations
materially adversely affected as a result) • Right to assign/sublet with LL’s consent
• Anything else in the Heads of Terms (e.g. use of
car park)
Leases of part are more complex than Need to assess the potential liability of any 3rd party rights
leases of whole (e.g. undisclosed overriding interests/restrictive covenants
LL is usually responsible for the structural
parts - T will still bear the cost through the
service charge Provisions of UCTA on exclusion clauses won’t apply
CONTRACTS
Engross: produce ‘final’ copy - do this before executing
Landlord executes the lease, tenant executes counterpart
Once contracts are exchanged, a legal relationship exists between the parties - LL becomes obliged
to grant the lease and the T becomes obliged to take that grant. The terms of the lease will also
become fixed on exchange. The SCPC’s achieve this by providing that the form of the lease that the
parties will enter into will be the same as that which has been annexed to the contract (SCPC 11.2.3).
On the grant of a lease, SDLT is potentially payable both on any capital sum (known in the case of
the grant of a lease as a "premium") charged by the LL, and the rent.
Premium: SDLT is calculated in the same way that SDLT is calculated on the price (if any) in respect
of the disposal of freehold land or the assignment of a lease. Rent: calculated using the Net Present
Value of the rent. However, SLDT is not charged if the NPV does not exceed £150,000.
- On any subsequent assignment of that lease (ie when a tenant disposes of the lease), SDLT
can only be charged on any sale price charged by the assignor.
, Look out for:
Interpretation clause that states the LL’s consent much not be unreasonably withheld (2.7)
- This will make s19(1A) LTA 1995 irrelevant (LL can’t unreasonably withhold consent) as it’s
already a fully qualified covenant
Reimbursement clause where T pays LL’s costs e.g. with an application for consent (4.5)
T’s insurance obligations (4.7)
T’s repairing obligations (4.8): Usually FRI: Full repairing and insuring leases
- Also any LL’s self-help clauses (4.9.2/3)
User clause (4.13.1): Permitted Use will usually be a defined term
Alienation clause (4.14): Will usually prohibit everything unless it’s allowed
Planning clauses (4.19): Usually need consent to apply for PP
Clauses not to breach any obligations affecting the freehold interest (e.g. covenants) (4.21)
Forfeiture clause (6.1.1/2)
- Allows LL to re-enter the premises and end the lease
- Check whether it excludes the need for a rent demand
Check Schedules carefully
- Will usually have more insurance & damage/underletting provisions
- Insurance
o Usually the tenant will have to pay if the insurance providers don’t pay out because of
something the T did/didn’t do
o Usually LL will reinstate unless insurance providers don’t pay because of something
the T did/didn’t do
o Will usually provide for rent suspension and termination
Consider Security of Tenure
REPAIR/INSURANCE
All of the answers are in the lease
Go through each of the boxes:
Tenant’s Obligations Landlord’s Obligations Other Provisions
Repair Insurance Rent Suspension
Insurance Reinstatement Termination
Rent
