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Leases and Rent Review Condensed Notes
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Chapter 7, 8 and 9 – Contents of a Lease and Rent ReviewSGS 8, 9, 10 and 11 – Contents of a Lease and Rent Review
Full repairing and insuring (FRI) lease Tenant directly or indirectly (through service charge) pays for repair and
insurance of property to ensure a clear income stream for the landlord
Anchor tenant Good tenants with strong bargaining power (e.g. pays rent on time, beneficial
to neighbouring properties)
Covenant strength Ability of (proposed) tenants to pay sums under lease (e.g. rent, service
charge) and perform key covenants (e.g. repair maintenance)
Code for Leasing Business Premises (the ‘Code’) Voluntary tenant-friendly guidelines or recommendation
Landlord objectives Clear income stream
Capital growth on investment
Premises are insured
Premises are repaired (value maintained)
Premises used only for permitted purpose (control)
Tenant objectives Flexibility of use, alienation and alteration
Favourable lease provisions
Rent control
Shorter terms
A grant of any significant term of a leasehold is very similar to
purchase of a freehold (e.g. investigate, pre-contract
searches and enquiries)
Differences from conveyance of freehold:
Pre-contract stage –
Consent of landlord’s mortgage lender usually required
Official Search of Register (OS) of landlord’s title
o Form OS1 – lease of whole
o Form OS2 – lease of part
o Provides 30 working days’ priority (from
search date to registration of new lease)
o Identify changes in OC’s from title deduced
SDLT is payable on grant of lease (amount based on
length of term, rent and premium paid for grant)
Contract stage –
Agreement for lease (where there are conditions or a
delay between agreement of terms and grant)
o No deposit paid on agreement for lease
o Needs to be negotiated along with lease
o Agreed form of lease attached to back of
agreement for lease
Completion stage –
Straight to lease – no agreement to lease required
Lease instead of transfer (TR1)
Engrossment – final lease produced in duplicate, on
thick paper and bound, containing
o The original – part signed by landlord
o The counterpart – part signed by tenant
Completion is usually by phone
o Two parts are dated
o Each part is signed and held by the other
following completion
First quarter of rent provided at completion
Post-completion stage –
, Chapter 7, 8 and 9 – Contents of a Lease and Rent Review
SGS 8, 9, 10 and 11 – Contents of a Lease and Rent Review
All purchase of freehold must be registered
Leases granted on or after 13 October 2003 only needs to be registered if for more than 7 years (LRA, s.27(1) and (2)(b)(i))
Leases granted before 13 October 2003 only needs to be registered if more than 21 years
Documents to be sent to Land Registry, along with fee, for registration –
o Certified copy of lease
o SDLT 5 certificate
o Form AP1 – to register charge at Land Registry (if relevant)
Land Registry issues title information document
Lease is given own title number and OC’s
Classes of title available for leases:
o Title absolute – best possible title
o Good leasehold – landlord’s title not deduced at time when lease was granted
o Possessory title – tenant in occupation but no paperwork exists
o Qualified title – no other title can be granted
Contents of a lease includes key terms such as –
1. Demise
2. Repair
3. Insurance
4. Forfeiture
5. Term and break clause
6. Rent
7. Alterations
8. Use
9. Alienation
10. Rent review
L What does the lease say?
L What does the law say?
L What effect does the landlord’s title have?
L What local authority consents are relevant?
What other documents (not included) could be relevant to the matter at hand?
Demise (MP definitions, VL cl.1.18)
Definition The extent of the property let to the tenant set out under ‘Premises’ (or ‘Property)
Lease of a whole property –
Simply refer to the address, postcode and landlord’s title number
Lease of a part –
Typically includes only ‘internal envelop’, excluding structural and external parts
Common parts of the building used with other tenants referred to as ‘common parts’
Common parts not a part of the demise, but right to use them will be given
‘the ground floor and first floors of the Building shown edged red* on Plan 1, bounded by and
including the internal wall and ceiling finishes and floor coverings of that part and the windows and
window frames in those walls, but excluding all Service Media which are within that part but which
do not serve it exclusively and excluding any load bearing or structural part.’
Tenant’s solicitor should ensure –
Only areas within demise are included in repairing obligations
All other parts are (i.e. common parts) are maintained by the landlord (recovered via service charge)
Adequate rights are granted over other parts of the building (e.g. common parts, utilities)
Repair (MP cl.11, VL cl.4.1 and 4.2)
General Three elements of repair in a commercial lease, tenant’s obligation to –
1. Repair premises during term;
2. Replace damaged items within premises during term; and
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