Notesale: Turn your study into money

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1
...
: Deed, within ambit of
power, not revoked, POA
Presumption of validity of
granted < 12 months

•

•
•

Two Main Enquires:
1
...

Title Documents
b
...
Searches and Enquires with TP’s and Seller
Title is Deduced by collating the title documents and investigation the
property (in line with the caveat Emptor principle)
Title Documents Include:
o
Official Copies
o
Title Plan
o
Copies of documents referred to in official copies but whole
details are not registered

Attorney

Exists – s
...
103 LPA 1925
Buyer: only 1 & 2;
Seller: all 3

Mortgagee

BREAKDOWN OF KEY ELEMENTS
Official Copies

- Death Certificate
- Deed of Trustee
appointment
Grant of
representation of
deceased
Original or solicitor
specified copy of POA
If < 12 months,
statutory declaration
of non-revocation
Mortgage Deed

4
...
HEADER
•
•

•
•
•

Verify title number corresponds to heads of terms/contract
Note the search from date (important at completion)

2
...
PROPRIETORSHIP REGISTER
•
•

Burden does not run, buyer must provide indemnity covenant
o
In proprietorship register; a promise to comply
Remedies for breach
o
Current breach: ‘Condition’ in contract to remedy precompletion, Reduce price proportionately, Insurance, Consent
from PWB
o
Future breach: Advice on possibility of enforcement, Insurance,
Consent from PWB

c) Mortgages
•

•
•

May be fully set out in register or separately filed
Burden and benefit run with land (Tulk v Moxhay)
Remedying sellers breach:
o
Covenant Insurance
o
Consent of person wit benefit (PWB)
o
Upper Tribunal (Lands Chamber)

Get advice on nature and extent of easements effecting property
May be unregistered rights which override: make enquiries with seller
o
Legal Easements via para
...
27(2)(d) LRA 2002)
o
Equitable Easements will not override unless transitional period
applied per para
...
1, Schedule 3, LRA 2002

e) General Consideration
•

Dates in brackets are dare of entry into the Land Register and not date of
the document itself

2
...
57 TCPA)

LLC1 – Local Land Charges Search
•

Granted planning permission and planning maters (enforcement & stop
notices), tree preservation orders, smoke control orders, financial charges
(road-making charges), conservation area notice

•

(s
...
1 GPDO)

Ensures if the boundary of the property abuts a public road or not – exactly
where highway ends and property starts

CON29DW – Drainage and Water Search

a) Works (or Alteration)

•

•
•
•
•
•

Sent to relevant company to area (e
...
Thames Water in London) for info on
water drainage to public sewers and water supply connection

DESKTOP ENVIRONMENTAL SEARCH – Online
•

Results show if land is contaminated (due to incidental costs of clean up) If
contamination is possible then;
o
Phase I survey – desktop survey and site visit
o
Phase II survey – site visit and samples taken

CPSE’s – Pre-Contract Enquiries of Sellers Solicitor
•

Wide range of matters; unregistered 3rd party rights, energy performance
certificate; elicit as much info as possible (CPSE
...
title number) and ascertain
ownership of neighbouring land

Permitted
Development
(Minor Ops
...
2 GPDO)

•
•
•
•

Consider any past uses by seller and future uses of buyer
Check if it falls within the same class as current use
Check GDPO table to see if it is a permitted swap of class
If not, then planning permission must be obtained

In addition to planning permission, any building works must comply with the
relevant building regulations

CONSERVATION AREA
Permitted development in these areas may be unduly restricted

•

Tree’s (Felling): 6-week notice must be provided; Planning Authority can
approve (or just ignore to approve) or reject and create a TPO (tree
preservation order)
Demolition (of any structure): Planning permission always required

LISTED BUILDINGS

CON29O – Optional Local Authority Enquiries

•
•

Company Search – Companies House
•

•

If the seller is a company, this checks the company’s registered number, the
current name and the solvency

CON29M – Coal Mining and Brine Search
•

Postcode entered online (Coal Authority’s online property search service)
determines whether the search needs to be carried out

Waterways Search
•

Obligatory if a waterway passes through the property; Establishes liability
for maintenance, rights of way, drainage, water abstraction licensing

Other Searches
•

Telecoms, utility searches, tin mining, china clay extraction, radon gas, gas
and electricity

ANALYZING SEARCH RESULTS
LLC1:

Building Reg
...


Tree Preservation

Pending Building Reg
...
171B TCPA):
Category

Enforcement Period

Planning Permission (Works)

4 years

Planning Permission (Change of Use)

4 years (to dwelling house)
10 years (other change of use)

Building Regulations

Unlimited

Listed Building Consent

Unlimited

Conservation Area

Unlimited

•

Planning Permission CON29R: Planning Permission (use with LLC1)
Conservation Area

(Sch 2, P
...
g
...
55 definition
Is it permitted development (Sch
...
3(1), TCP(UC)O

b) Change of Use

•

SIM – Search of the Index Map
•

(s
...
DRAFTING THE CONTRACT

SPECIAL CONDITIONS

•

“1) A) This contract incorporates the Standard Commercial Property Conditions
(Third Edition)

May either be standard form (SCPC) or tailor made (that normally
incorporate SCPC’s by reference)

FRONT PAGE OF SCPC

B) The terms used in this contract have the same meaning when used the
Standard Commercial Property Conditions
...
g
...
6
...
” (s
...
3(1) LP(MP)A 1994)

b) Limited Title Guarantee:

Have little relevant knowledge of the property
(check condition 3)

c) No Title Guarantee:

Done by removing SCPC 7
...
2 (no box is
checked)

d) Vacant Possession:

Handing over the property empty of chattels
and people rights (box 4)

CONTENTS/FIXTURES: SPECIAL CONDITION 5
Contents:
Seller entitled to take all its contents with them as they are not part of property
SDLT payable on purchase price – goods apportioned to price to reduce tax
SDLT:

£0 – £150,000
Next £100,000
Above £250,000

nil%
2%
5%

(Calculated in layers)
2% of £100,000 = £2000
5% of remaining amount above 250k

If seller is selling contents & apportioning price check condition 5 and a list of
contents should be attached
Fixtures:
•
•
•
•

•

•

•

•
•
•

•
•
•

Date – leave blank (filled in at exchange)
Seller – who has the legal title over the property (title documents)
Buyer – all buyers must be listed
o
Company – provide: Name, Number, Reg
...

Property (Freehold/Leasehold) – delete as appropriate
o
If whole sale: Provide description as in Prop
...

o
If part sale:
Provide reference to the title plan
o
If unregistered: Provide reference to conveyance
Title Number/Root of Title - delete as appropriate
o
Registered land – title number (title documents)
o
Unregistered land – “A conveyance of the property dated [date]
and made between [parties]”
Specified Incumbrances – restrictive covenants and easements SCPC 4
...
2
o
“The covenant referred to in entry [x] in the Charges Register of
title number [y]” (do not list mortgage here)
Title Guarantee (full/limited) - delete as appropriate
o
Limited only if the seller has little knowledge/interest in the
property (e
...
auctioneer/trustee)
Completion Date – adding a date overrides the SCPC
o
If left blank SCPC 9
...
1 applies (20 working days from exchange)
Contract Rate – “4% above the base rate of Barclays Bank plc from time to
time in force”
Purchase (Total Sum Payable including SDLT)
o
Must apportion the purchase price between the land and any
chattels (overvaluation is HMRC fraud)
Deposit – 10% of purchase price SCPC 3
...
2
Contents Price – (as applicable, do not pay SDLT on chattels)]
Balance (difference of purchase price and deposit)

If seller is going to remove fixtures, the second box at condition 5 should be
checked and a list of fixtures attached
Another special condition should be drafted to “make good” any damage caused
before completion

SPECIAL CONDITION 6, 7, AND CONDITION A1
•
•
•
•
•

•

Condition 6 - checked if payment is being made from an account other than
the one belonging to the buyer’s conveyancer – account details in contract
Condition 7 - checked if the time of completion is to be different than SCPC
9
...
2 standard of 2:00pm – often made later in day as precaution
Condition 8 - part sale condition not covered on PLP
Condition A1 - checked if sale is an old commercial property and seller has
not opted to tax, VAT will not be payable – supply not a taxable one
Additional special conditions - can be written to
o
Reflect party’s agreement
o
Override SCPC conditions
o
Agree an indemnity covenant wording for completion
o
Dealing with non-owning occupiers
Non-owning occupiers - often a separate document, signed by occupier,
confirming they will waive possible interest in property and vacate on
completion (important because actual occupation is an overriding interest)
o
“I [occupier] declare that I have no legal or equitable interest in
[address] and I will vacate the property on or before [time] on
the [completion date]” + Print Name + Signature

DRAFTING TIPS
WHO | WHAT | WHEN | WHERE | WHAT IF | TO WHOM

4
...
Draft the Transfer TR1
2
...
Obtain Finance
4
...
Reply to Completion and Undertakings Form

1) Draft the Transfer
•
•
•

o
o
o

•
•

a) Risk/insurance
SCPC 8
...

Death of buyer – Grant of representation

Seller’s solicitor will send buyers solicitor a completion statement showing
the total amount due and calculation
Buyer’s solicitor will then send client a financial statement (total cost of
transaction including legal fees, balance to be paid, SDLT, reg
...
)
Buyer (company or individual) must be notified to get funds in order
Lender must also be given notice of when to release monies

4) Pre-Completion Searches

Memorandum of exchange (top right box) filled in during exchange to record
exchange has taken place

PROBLEMS ARISING AT EXCHANGE

Undertaking confirming any outstanding mortgage will be paid
by the seller
Sellers completion statement setting out balance of funds
required from buyer to complete
Bank details of seller’s solicitors
Information on where keys to property can be collected and how
title deeds will be sent to buyer’s solicitor

3) Obtain Finance

•

5
...
e
...
52 LPA 1925)
TR1 Form: for freehold/leasehold transfer and registered/unregistered

2) Submit Completion and Undertakings Form

•

1
...

3
...


2
...
Agree the TR1 and arrange for it to be
executed by the seller

BUYERS SOLICITOR

3 methods: Person, post, (both rarely used), or by telephone (Formula B)

(Deposit often sent by telegraphic transfer before exchange on understanding it
is to be held to buyer’s solicitor’s order until exchange)

TA13

Land Registry Priority Search OS1 Form:
o
Check for further entries made on official copies since supplied
o
Provide the searcher with a priority period of 30 working days
o
Buyers solicitor must make its application to register the
purchase within this period to be subject to only the entries that
existed when OS1 was conducted – adverse interests will not
take priority
o
Commonplace to do the OS1 online (via Land Registry or NLIS)
Buyer Bankruptcy/Solvency
o
Company Search (solvency of company)
o
K16 Form (bankruptcy search)
Seller Bankruptcy/Solvency
o
Company Search (for pending solvency/floating charges which
would not be revealed on Land Registry Title)
o
Seller bankruptcy search unnecessary
Unregistered Land – Central Land Charges (CLC) Searches K15 Form:
o
Provides a protection period against bankruptcy of the seller of
15 days where purchase must be completed (no need to apply
to register in this period)
o
Companies Search if a company

SELLERS SOLICITOR
1) Reply to the Completion and Undertakings Form TA13
•

SCPC 7
...
1 – solicitor must reply to ‘written requisitions’ within four
working days after receiving them

Finance issues – mortgage of buyer may be revoked upon death, may cause issue
as PR will still be bound to provide full purchase price

2) Prepare a Completion Statement & Request a Redemption Statement

d) Bankruptcy / Insolvency (B/I) of seller or buyer

•

Seller: Buyer only effected if received notice of insolvency from company search
(company) or OS1 (registered) or Land Charges Search (unregistered)
Buyer: Benefit passes to liquidator/trustee who may complete transaction, may
become difficult if lender revokes funding, and/or liquidator/trustee deems
contract as onerous therefore disclaims it

•

Seller’s solicitor will send buyers solicitor a completion statement showing
the total amount due and calculation and obtain redemption statement
from lender for figure to redeem the sellers mortgage
Seller’s solicitor sends his client a bill of costs and statement of amount due
to seller on completion

3) Agree the TR1 and execute by the seller
•

Buyer only executes if entering new cov
...


5
...


PANEL 2
•
•

Registered Land: Registered Address (Official Copies Property Register)
Unregistered Land: Describe Property (Cross refer plan/conveyance)

PANEL 3
•

Do not date

PANEL 4
State the name of the Transferor (the seller):
•
•
•
•

Individual’s name
Company name, Company registration number
Joint Tenants – doctrine of survivorship (so just one tenant if one dead)
Tenants in Common - Surviving tenant in common & appointed trustee

PANEL 8
•

Write out in words and numbers total property price

PANEL 9
•
•

Full title guarantee – if registered owner and occupier (legal and equitable)
Limited title guarantee – For personal representatives or trustee’s

PANEL 10
•

If more than one purchaser, choose relevant co-ownership as instructed

PANEL 11
Memorize wording:
•

•

Indemnity Covenant: “The Transferee covenants with the transferor to
observe and perform the covenants contained or referred to in entry
number [x] in the Charges Register of title number [y] and to indemnify the
Transferor against any liability for any future breach or non-observance of
the covenants”
o
Needed so that positive covenants will bind
3rd Party Rights Exclusion: “A person who is not a party to this transfer will
not have any rights under or in connection with it by virtue of the Contracts
(Rights of Third Parties) Act 1999” (always include)

PANEL 12
•

TR1 always executed by the seller
SIGNED as a DEED and DELIVERED by
[Name of individual]

[Signature]

In presence of: Signature of witness: [signature]
Name: [Name]
Address: [Address]
Occupation: [Occupation]
•

•

Buyer only executes if;
o
Entering a new restrictive positive covenant
o
Giving the seller an indemnity covenant (pursuant to a SCPC
7
...
5 chain)
o
Declaring a trust (e
...
joint purchasers declaring whether they
will hold the property as tenants in common or joint tenants
Execution by Companies
o
Two authorized signatories (s
...
COMPLETION AND POST-COMPLETION
Buyer’s Solicitor

Seller’s Solicitor

Completion Information –
satisfactory answers to Completion
Information and Undertakings Form
(TA13) have been given
Transfer – that the TR1 has been
signed by the seller (held by seller’s
solicitor
Pay Completion Monies – all
necessary funds have been received
by the buyer

Assemble Documentation:
1) Executed TR1
2) Title deeds
3) Planning Permission and
Building Regulation originals
4) Receipts for payment of
apportionments for chattels
Give Undertaking – to discharge
mortgage upon receiving proceeds of
sale, and forward evidence of
discharge (DS1)

SOLICITORS UNDERTAKING
There are two important elements to this undertaking:
1
...


An undertaking to remit the funds required to redeem the charge
An undertaking to forward the DS1 discharge confirmation within a short
specified timeframe to the buyer’s solicitor

(The DS1 is sent to the Land Registry by the buyer’s solicitor to register the new
title to property so they can remove the old lenders charge from the register)

POST COMPLETION

REMEDIES FOR DELAYED COMPLETION
Remedies

Delayed
Completion

Failed
Completion

Misrepresentation

Equitable
Remedies

DELAYED COMPLETION
Highly usual for contract to specify completion date via an express clause, but
SCPC 9
...
1 states the matter will be completed 20 days after exchange
Latest time for completion is also usually expressly written in, but again SCPC
9
...
2 states if completion does not take place by 2pm it is deemed to take place
the following day for the calculation of compensation under SCPC 10
...
1
...
70 per day]

•

Compensation under the SCPS’s is not available if the contract is rescinded

b) Rescission

SELLERS SOLICITOR

•

On Day of Completion:
1
...

3
...


Report to client – on success of transaction
Date the Transfer – TR1 must be correctly completion date (not back dated)
and sent with title documents to buyer’s solicitor
Arrange for lenders charge to be discharged – send redemption funds to
lender as soon as possible following completion (same day)
Send client balance of sale proceeds – subject to mortgage and legal costs,
usually by bank transfer (same day)

Post Completion Steps:
1
...


Prepare notices to any relevant 3rd parties
Forward DS1 (or ED/e-DS1) to buyer's solicitor) – seller’s lender will send
seller’s solicitor DS1 form as soon redemption funds are received, this
should then be forwarded onto the buyer’s solicitor

On the Day of Completion
Report to client – both buyer and lender should be informed upon success
Date the legal charge (mortgage) – date of completion is inserted
immediately upon completion

Post Completion Steps (tight time-limit):
1
...


Check the title documents – ensure have obtained all relevant documents
Filings to be made to CH, HMRC, and LR

Companies House
MR01: register

new mortgage +
fee (£23)
Within 21 days of
charge
Send certified
copy of mortgage
Receive a
‘Certificate of
Registration of
Charge’

HMRC

•

•
•

AP1: Register transfer and

Within 30 days of
completion

1
...

3
...

5
...


•

•

mortgage discharge & new
charge within OS1 30-workingday priority period:
Land Registry Fee
TR1
DS1

Legal Charge (Mortgage)
Cert
...
8
...
3 – deemed service of notices)
SCPC 9
...
3 – If deposit paid was short of 10% notice also requires payment
to match shortfall
Contractual compensation continues to be payable but is not payable if the
contract is eventually rescinded
Failure to comply with a notice to complete SCPC 10
...
6

MISREPRESENTATION

Land Registry

Submit Land
Transaction
Return (SDLT1)
and pay SDLT

Receive a ‘SDLT5
Certificate of
Payment’

FAILED COMPLETION

•

BUYERS SOLICITOR
1
...


•

Unlikely remedy and non-defaulting party may only rescind when time is ‘of
the essence’ occurring if;
o
There is a specific contractual provision (unusual);
o
By implication from surrounding circumstances
o
After correct service of a ‘notice to complete’
SCPC 9
...
1 confirms time is not ‘of the essence’ until notice has been served

If there is a material difference between the property as represented by the
seller and the actual property, then the buyer is entitled to damages (SCPC
10
...
1(b)) (it is implicit that
such a breach entitles damages for breaching both thresholds)

EQUITABLE R EMEDIES
•

•
•
•
•
•

Damages - The actual loss suffered may exceed the amount payable under
the compensation of SCPC 10
...
UNREGISTERED LAND

PROPERTY AND ITS BEN EFITS

DEDUCING TITLE

Buyers Solicitor Must:

•

•

Seller’s solicitor will collate all title documents to be included in epitome of
title to ensure seller owns property, including as follows:
o
Root of title: Conveyance to current seller (date pre 1/12/1990)
o
Cross-referred to documents (for description, etc
...
etc
...
etc
...

2
...

4
...
52 LPA 1925)
Casts no doubts on seller’s title
o
Doubts cast are from; missing power of attorney execution, no
evidence of death, no evidence of change of name

EXECUTION OF DOCUMEN TS
Land Registry confirmed only root of title is important, if deed is not correctly
executed then legal title will not pass:
Individual:
•
•

Pre/on 31st July 1990: Deed, Signed, Sealed, Delivered, and Witnessed
Post 31st July 1990: Deed, Signed, and Witnessed

Company:
•
•

Pre/on 31 July 1990: Deed, Company Seal, 2 Directors Present
Post 31st July 1990: Deed, Either Company Deal, or 2 Directors/1 Dir
...
OF VALUE / STAMP DUTY
Must have;
•
•

Either ad valorum or certificate of title (or both); and
Particulars-Delivered (PD) Stamp (always needed)

1) Check that the description in both the contract and transfer (TR1) accords
with the property being bought as described in the ‘root of title’ and identifies
any rights to be granted expressly at time of sale
•

“the seller hereby conveys… etc
...

b
...

d
...


Those granted by deed (e
...
in any conveyance included in epitome)
Pursuant to s
...
g
...
3(1) LCA 1972)
3) CLC search carried out against names of all estate owners referred to in
epitome of title (pre/post root of title conveyance) using form K15
4) Search period (in years) to be specified (acquisition to disposal of property) –
•

To always be safe, search back to the date of previous conveyance – never
assume previous CLC search results dictate acquisition or disposal dates

5) Check each conveyance completed within the ‘protection period’ •

Given at the top right of CLC search result

6) Must obtain ‘official copy’ of any ‘Land Charges’ affecting the land revealed
by the CLC searches to confirm:
•

The subject, document, extent, and the name/address of original
covenanter (common Land Charges (s
...

b
...

d
...
of Title/PD stamp

Root of Title
Execution of Documents
Discharged Mortgages

POST COMPLETION AND 1 S T REGISTRATION
Seller’s Solicitor: Send discharge of mortgage (deed or validly executed receipt
on face or mortgage) to buyer’s solicitor
Buyers Solicitor:
•
•

•
•

Stamp duty stamps indicate stamp duty has been paid and PD stamp
indicates that the conveyance has been submitted to HMRC
Problems with unstamped conveyances:
1
...
Inadmissible as court evidence
3
...
It breaks the chain link in title (legal title hasn’t passed)
Special Condition: Good practice to get the seller to get all conveyances
included in epitome of title stamped and pay the penalty before completion
Must be no unexplained gaps in transmission of title – must investigate if
not provided with change of names (individual or company), deaths etc
...
within 2 months

but completion in CLC search
period (15 working days)
1
...

3
...

5
...

7
...
)
Cert
...
g
...
)
4) Landlords Covenants
LL’s obligations (quiet enjoyment, services etc
...

8) Rights Excepted and Reserved
Access, Repairs, Run Cables/Pipes through etc
...


8
...
23)
Section 23 LTA 1954: There must be:

4
...

2
...


5
...
(wide definition: trade, profession or employment)

Security of tenure will the apply unless the tenancy excluded (s
...
38A)

PROCEDURE FOR CONTRA CTING OUT (S
...


Section 38A LTA 1954: Parties may agree that the act is excluded in relation to
tenancy;
Regulatory Reform (Business Tenancies) Order 2003, Sch 1:
•

FURTHER SECTION SPECIFIC REQ UIREMENTS:

Standard notice
o
At least 14-day notice by LL  T
o
Sign a simple declaration that receive/understand consequences
of the notice and effect
o
Lease must:
▪
Refer to notice and simple declaration
▪
Contain a clause stating exclusion of security of
tenure
Short notice
o
Fewer than 14-day notice requires:
o
Statutory declaration by visiting independent solicitor that
warning is received and tenant accepts consequences
o
Lease must:
▪
Refer to notice and statutory declaration
▪
Contain clause stating exclusion of security of tenure

•

Timing:
•
•

If there is an agreement for lease – steps must be in place before exchange
If no agreement for lease – steps must take place before completion
A contracted-out lease can potentially command a lower rent than the
protected one (attraction for T in certain circumstances)
LL may want a protected tenancy where T generates a lot of goodwill and
footfall, meaning customers keep coming back

•

SECURITY OF TENURE PROTECTIONS (S
...

2
...
26 (T notice)
• Tenant asks for
New Tenancy

s
...
25 notice, otherwise a s
...


•

• Tenant asks for
Termination

NOTICE PROCEDURE (S
...
26)

1
...


S
...
25) or the
day before the SCD (under s
...
29B LTA 1954 before the
STD/SCD

Where LL wants to oppose T’s right to renew its lease (via s
...
26 counternotice) it must make out on of the 7 grounds of opposition in s
...
25 (LL notice)

Friendly: specifies the landlord is not opposed to same tenant and new
tenancy (application to court is for a new lease)
(Even when friendly notice is served, T should still apply to court to protect
its rights to the lease as negotiations may fall through)

GROUNDS OF OPPOSITION (S
...
Never count back from the CED; instead, count forward from the
date on the email/memo:
i
...

In other words, you can’t serve notice to terminate the contract
before the current contractually agreed expiry date
Notice must be in the prescribed form
a
...
Mannai Investment v Eagle Star: court will consider of notice is
sufficiently clear to leave any reasonable doubt on reasonable
recipient as to terms of notice
Additionally, the notice must be served by or on the competent landlord (as
defined in s
...
25(2) and (3) LTA 1954 &
s
...

(F): LL intends to demolish/reconstruct and needs to obtain possession to
do so reasonably
o
Must have firm and settled intention redevelop with evidential
proof (plans, planning permission, board resolutions etc
...
30(2))

Discretionary Grounds: (A), (B), (C), (E): if made out, court has discretion to
allow;
•
•
•
•

(A): Breach of repairing obligation
(B): Persistent delay in paying rent
(C): Substantial braches of obligations
(E): Possession required for letting/disposing wholly of property (in case of
sub-tenancy (very rare)

COMPENSATION
If either grounds (E), (F), and (G) are made out, the tenant may be entitled to
compensation:
•
•

Note that it must be solely one of these grounds (cannot be made out if
both a non-fault and fault ground are made out)
The compensation available is a multiplier of the rateable value of the
premises (as set by the Valuation Office Agency)
o
If occupying for;
▪
>14 years, twice the rateable value
▪
<14 years, once the rateable value

INTERIM RENT (S
...
24D)
Until the new lease is granted, T will continue to pay the old rent
Section 24A LTA 1924: either party, however, can apply to court for interim rent
•

Payable from earliest STD/SCD which could have been specified

Amount of interim rent to be paid;
•
•

LL willing to grant lease – interim rent set at market level (s
...
24D)

CONTENTS OF NEW LEASE
Typically, the parties will try to agree the terms of the new lease
If they cannot agree, the court will determine the terms
•
•

S
...
34: court will account comparable and certain disregards

O’May v City of London: the terms of the renewed lease should be based on the
current tenancy – any proposed deviation must be reasonable
Wallis Fashion Group: if an old lease is renewed, new alienation provisions can
only require an AGA where reasonable

SECTION 27 LTA 1954 NOTICE
Under s
...
27
notice
However, if after the CED, notice must be served 3 months before the date
on which T wishes to leave

9
...
BUT see the definitions section
to see what risks are and are omitted in the lease

Acting for Landlord’s

Acting for Tenant

3 obligations on T with regards to repair;

Insured Risks:

1)
2)
3)

Include; ‘such other risks that the
landlord may from time to time
reasonably consider necessary’

To repair premises during term
To replace items in premises (damaged beyond repair) during term
To decorate premises during term at agreed intervals during term

Extent of T’s obligations should always be considered in conjunction with:

Rent Abatement / Rent Suspension:

•
•
•
•

What does ‘repair’ mean and include?

Include obligation of LL to insure for
(and recover from the tenant) ‘loss
of rent for [usually 3 years] where
the premises have been rendered
unfit for use or occupation by
damage of an insured risk’

•

Reinstatement by LL:

Definition of ‘premises’ under the lease
LL’s repair obligations and service charge provisions
Insurance provisions
Alteration provisions
Repair: of subsidiary defective parts, not the whole

Acting for Landlord’s

Acting for Tenant

Use; ‘put and keep / keep in repair’
Wide entry and inspection ability

Use; ‘maintain’ premises in
i) ‘state evidenced by the Schedule
of Condition’; or
ii) ‘reasonable repair and condition’

Standard of Repairs:
Include obligation to ‘renew or
replace’ and ‘rebuild’ - extends T’s
obligation beyond merely repairing

Exclude liability for ‘fair wear and
tear’
Exclude liability for ‘inherent defects’
due to design or construction of
property

Fixtures and Fittings:
Use; T to ‘repair or replace’ fixtures
and fittings in the demise which are
‘beyond economic repair’
Include; Cost of ‘removal of fixtures
and fittings’ funded by T, and ‘make
good any damage caused’ during
removal

No common-law obligation for LL to
use insurance monies to repair the
damage caused by insured risks

Use; ‘tenant not liable to repair
damage caused by insured risks’
(except for T’s causal act/omission)
Ensure LL expressly covenants to use
insurance monies to repair damage
cause by the insure risks

LL would want any period of
reinstatement after damage from an
insured risk to be as lengthy as
possible to deny termination

Add; ‘… LL acting reasonably’
Use; ‘the T will not be required to redecorate in the last year of the
term, has re-decoration taken place
in the previous 12 months’
Ensure LL does not have a veto over
colours used
Ensure obligation is periodic (e
...

every 5 years)

Yield-Up Clause:
Use; ‘at the end of term, T is to give
back the premises in full accordance
with the repairing obligation of the
lease to the satisfaction of the LL’

Use; ‘… LL acting reasonably’

Insist on; ‘L to use insurance monies
to reinstate premises’ and ‘make up
any shortfall in insurance monies
out of its own monies’
Use; ‘T may terminate the lease if
reinstatement is impossible or after
the expiry of a specified period post
the insured risk damage’
Ideally this would be no longer than
the rent suspension (to save cost)

LANDLORDS REMEDIES
Forfeiture

Damages

Self-Help

Injunctions

Rent Deposit

Specific
Perfromance

FORFEITURE
Terminating lease pre-CED, and removing T from premises (LL remedy for a
breach of tenant covenants)
•

Decoration:
Use; ‘to the satisfaction of the LL’

Include; ‘if damage is caused by an
insured risk has caused the premises
or access to them, to be unfit for
use, then payment for all sums
reserved for rent is suspended’

Right to Termination:

Use; ‘fixtures and fittings
substantially similar’
Reduce cost/impossibility of an
onerous obligation

Damage by Insured Risk:

Ensure that a comprehensive list of
the insured risks can be found in the
definitions section

Only available if the lease has an express forfeiture clause: LL can re-renter
the premises and end the lease of the specific event occurs:
o
Arrears of rent (14/21 days after payable)
o
Breach of any covenant, agreement, and condition
o
Bankruptcy/liquidation of T

Ordinary s
...
146(1) LPA 1925:
o
Set out breach
o
Requiring it to be remedied within a specified amount of time (if
it is capable of being remedied)
o
Claim any compensation required
S
...
146(11): No section 146 notice needed for breach of covenant to pay rent

Special s
...
146 notice
Check the lease first (s
...
4 LP(R)A: T is to be advised of the right to serve counter-notice
o
S
...
3 LP(R)A: LL will then require leave of court to proceed with a
remedy

DAMAGES
Contractual damages: Can be claimed, but are also subject to the LP(R)A, where:
•
•

The lease was originally granted for more than 7 years; and
There is a minimum of at least 3 years of term left to run;
… the LL must serve a s
...
146 NOTICE
Type: Breach

Forfeiture

Damages

Repair

Special s
...
146 notice, if;

•
•

•
•

< 7 year’s lease; and
Min
...
146 notice

None

Rent

None

None

< 7 year’s lease; and
Min
...
CONTENTS OF LEASE (2)

ALTERATIONS

Key lease provisions;

General points on Alteration clauses:

Term/Break Clause

•

Rent

•

Service Charge

Alterations

Use

3 types of Lease covenant:

TERM/BREAK CLAUSE
Commercial leases are generally for a fixed term (3, 5, 10, or 15 years)
•

The lease term need not begin on the grant of the lease – often they start
on the quarter day preceding the lease
o
25 March, 24 June, 29 September, 25 December
o
‘From and including’: e
...
10th March 2010  9th March 2015
o
‘From […]: e
...
10th March 2010  10th March 2015

Break Clause: An option to end the lease before the CED for the benefit of the LL
or the T, or for both – they often specify:
•
•

That T is to have paid all the rent; and
T must have performed all its covenants (lease obligations)

•
•
•

Commercial lease rents are generally paid on the quarter days and market value

•
•

•

The lease should state
o
The amount payable and the manner of payment
o
Whether rent is payable in advance (usual) or in arrears
The lease will usually allow for a grace period for payment of rent
o
Typically, 7, 14 or 21 days
The lease will also specify that if rent remains unpaid after the grace period,
reasonable interest on the unpaid rent, from the date it was due, to the
date of payment
Rent also includes other payments such as;
o
Insurance payments
o
Service Charge
… allowing the landlord to forfeit the lease without the need for s
...
the square footage of the property)

Acting for Landlord’s

Acting for Tenant

Covenants:
T must covenant to pay the Service
Charge

The LL must covenant to provide the
Services (reasonable cost etc
...
Discretionary Obligation:
Discretionary obligation preferable;
Use ‘use monies to provide services
as the LL deems necessary’

Insist on an absolute obligation; Use
‘use monies to provide services in the
reasonable interest of T’

•
•
•

Payment for compensation if a loss in value post reversion
Reinstatement of premises if reasonable (at end of term)
Payment of LL’s expenses in giving consent

Section 1 LTA 1988: Doesn’t apply: No time limit for LL consent response;
•

T may wish for a fully-qualified alteration clause to expressly state ‘consent
not to be unreasonably withheld/or delayed’

License for Alteration:
•

These can allow the LL to give express permission to a T to violate an
absolute covenant within the lease

Deed of Variation:
These can allow the LL and T to delete, amend, and add clauses into the
already agreed lease

USE
General points on Use clauses:
•
•
•

T can use the premises for whatever purpose, unless there is an express
restrictive covenant from the T (a user clause)
When drafting use restrictive wording; ‘not to use other than as purpose [x]’
(normally referred to as the permitted use in the definitions)
The more restrictive the user clause, the depressing this will be on the value
of rent which may be charged

Section 19(3) LTA 1927: Reasonableness is not implied into user covenants
•
•

However, it does prevent a landlord for demanding payment for granting its
consent for a change of use (unless structural)
If structural, LL can charge T a lump sum, or increase the rent (premium)

License to Change Use:

Definition of Premises:
Ensure as extensive definition of
premises as allowable

Lambert v FW Woolworth: ‘Improvement:’ to be widely construed as works
which improve the premises from T’s perspective
Iqbal v Thakrar: ‘Unreasonably withheld’: little case law but if LL has serious
concerns as to structural consequences of works to building this may not be
deemed unreasonable

Section 19(2) LTA 1927: Allows the LL to require a (reasonably and properly
incurred) condition for;

•

SERVICE CHARGE

Absolute:
The T shall not do […]
Qualified:
The T shall not do [
...

Both the license and deed would normally contain provisions for the
necessary supplement of planning permission and building regulations

11
...
] without consent of LL
Fully Qualified: The T shall not do […] without consent of LL, which is to not
be unreasonably withheld

SECTION 19(1)(a) LTA 1927
Section 5 LT(C)A 1995: Removed privity of contract for new leases (Granted from
and including January 1st 1996)
•

This means upon alienation (assignment of the lease) the Tenant (but not
the Landlord) is released from its covenant obligations under the lease

ASSIGNMENT
Assignment: The sale of a remainder of a lease by T to an assignee (A1) (No new
lease is created, merely the current one assigned)
•

•
•

The assignee is buying the leasehold interest, therefore investigation the
title involves examining the;
o
Lease itself;
o
Official copies (if registered) relating to lease); and
o
Any subsequent documents/variations/licenses
License to Assign: Often LL consent is required by T to assign, in which this
license is formally recorded, with LL, T and A1 all parties
Lenders Consent: If the property is subject to a mortgage, the lenders
consent to assign the lease may also be required

DOCUMENTATION
Section 52 LPA 1925: Assignment of a lease must be made by deed
•
•

Unregistered Land: purchase deed used is; Deed of Assignment
Registered Land: purchase deed used is; TR1

Alienation provision of lease usually require LL to be given written notice postassignment completion by A1

Section 19(1)(a) LTA 1927: Converts ‘Qualified covenants’ into ‘Fully Qualified
Covenants’ for alienations, therefore LL consent may not be unreasonably
withheld;
•
•
•

Section 19(1)(a) LTA 1927: Allows the LL to require a (reasonably and properly
incurred) condition for;
•
•

a) Pre-condition to Assignment (‘Old Leases’) (pre 01/01/96)
•

UNDERLETTING
Underletting: Where T grants a new sub-lease (or underlease) from its own lease
to a second tenant (UT) (the original lease becomes a headlease/superior lease)
•

The investigation of title involves investigating the immediate landlord (T)
as well as the superior landlord (LL);
o
Lease itself;
o
Official copies (relating to lease); and
o
Any subsequent documents/variations/licenses

(If T’s lease is unregistered you only need the lease and subsequent docs
...
144 LPA 1925: LL may also charge a fine/premium if the lease originally
expressed this – this is very unusual and not commonly agreed)

PRE-CONDITIONS TO ALIENATION

REGISTRATION
•
•

International Drilling Fluid Ltd: LL not reasonable to withhold consent on
grounds not based on landlord & tenant relationship
Moss Bros Group: LL capable of refusing consent based on tenant-mixing
policy of a shopping centre (e
...
clothes shop in food court = no)
Ashworth Frazer Ltd: LL reasonable in refusal of consent where assignment
gave rise to a use purpose that would breach a lease covenant

Often LL will offer assignment on the condition that the outgoing tenant (T)
enters and AGA with the incoming assignee (A1) to perform the obligations
under the lease, if A1 defaults

Section 17 & 19 LT(C)A 1995: Assistance to former Tenants
•

•

Section 17: LL must serve a default notice on a former tenant liable under
an AGA within 6 months of payment becoming due to recover payment
missed by A1 from T
Section 19: A former T who has made a s
...
CONTENTS OF A LEASE (4)
RENT REVIEW
Rent review is only applicable to FRI leases (fully repairing and insuring) with the
purpose of keeping the rent in line with the (local) market value
Pattern: dictates the period in which rent is reviewed (e
...
every 5 years)

METHODS OF REVIEW
•

•

•

•

Stepped Rent Review:
o
The LL and T agree to an increase in the rent by fixed amounts
periodically
Turnover Rent:
o
The annual rent is calculated as a percentage of T’s turnover at
the property for that year (common for retail or leisure leases)
Index Linked Rent Review:
o
Annual rent is increased by reference to an agreed measure of
annual inflation (e
...
the retail prices index (RPI)
Open Market Rent Review:
o
The rent is review by reference to the market rent for leases of
comparable properties in the same locality as the premises at
the time of the review

ASSUMPTIONS
Assumption

Commentary (for/on T)

‘The premises are available to let…
with vacant possession’

Fair
Actual possession would mean no
hypothetical T would want to rent
(depresses rent value)

‘The T has complied with all of its
obligations’

Fair
If T had not complied, depressing
effect on revised rent

‘The T and LL have complied with all
of their obligations’

Unfair
This can have an upwards effect on
rent by assuming LL has complied
(even if he has not)

‘The premises are fit for immediate
occupation and use’

Fair
This means the premises are ready
to be occupied for fitting-out
purposes

‘The premises are fully fitted out and
ready for immediate occupation and
use’

Unfair
Realistic T would require rent free
period to fit-out; already fully fitted
drives rent value up

‘The term of the lease is [x] years’

Fair
Assuming the length of term is what
was granted to T at beginning

‘The T can recover as allowable input
tax any VAT charged on sums
payable under this lease’

Unfair
Not all T’s can recover VAT – unfair
uplifting effect on rent value

It is most common for rent reviews to be upwards only (in the LL’s interest)

FACTORS OF REVALUATION
The main consideration for the rent re-evaluation is the rental value of
comparable properties in the market but weight is also given to;
•
•
•
•

Location of the property
Size of the demise and buildings
Condition of the property
Terms of the Lease (onerous & restrictive vs
...


Fair
If not included, valuer can infer rent
should be based on wat current T
might pay

The goodwill of T or that of its
predecessors in title, subtenants, or
other lawful occupiers of the whole
or part of the premises

Fair
Current T may have built up a good
reputation and be prepared to pay
higher rent

The Rent Review provisions of the
lease

Unfair
A tenant-friendly lease will attract a
higher rent

Any decrease in rental value of the
demised premises attributable to
improvements carried out by the T…
otherwise than in pursuance of an
obligation to the LL and statutes or
local authority

Potentially unfair / fair
Accounting for voluntary
improvements means T pays twice
(1st being the improvement, 2nd being
the increased rent)
However, can be debated

Any rent-free period

Unfair
Valuer will look at the headline rent
figure on the lease only

•
•
•

The valuer is either nominated jointly by both parties, or by the President of
the Royal Institution of Chartered Surveyors (RICS) or his nominee
The expert’s decision is binding, but unlike an arbitrator, an expert may be
sued for negligence
If the valuation shows and increase, T becomes immediately liable to pay
the difference, if it shows a decrease, the rent review will be agreed at a nil
increase

Rent Review Memorandum: The document which records the new agree, or
decided rent, and is signed by all the parties (including any guarantors) and
usually annexed to the lease
The revised rent should ideally be the rent at which;
•

“the demised premises might reasonably be expected to be let in the open
market on the review date by a ‘willing landlord’ to a ‘willing tenant’
o
Acting for LL: insert the word “[best] rent” to ensure a better
outcome and bids from other tenants with special interest
o
Acting for T: resist any use of the word best/words alike

THE HYPOTHETICAL LEASE
Assumptions and Disregards are instructions to the valuer, usually set on in a
schedule in the lease, which are in principle intended to iron out unfairness when
considering certain factors;
•
•

The outcome of either the assumption or disregard should be both fair for
the landlord and the tenant
Acting for either T or LL would mean different wording should be used for
each assumption and disregard

POINTS TO NOTE
When negotiating rent review provisions, it is essential that the position of the
hypothetical lease created from the assumptions and disregards is not too far
removed from that of the original; the basic principle is;
•
•

The more onerous the terms of the lease on the T, the lower the rent the LL
should be able to command
A LL-friendly lease has a depressing effect on the rent, because it is not in
T’s interest to occupy under such conditions; therefore, would offer less
rent

It is the job the valuer to ensure that during rent review, each of the assumptions
and disregards achieve a fair result in a hypothetical situation



---