Transcript Deduction and Investigation of Title

Drafting Leases
Audio Lecture
Aims & Objectives
• To understand key drafting issues in
rent, rent review, alienation, user and
alterations provisions in a lease
• To understand the different methods of
reviewing rent
• To understand the fundamentals of an
open market rent review
Why use a lease?
• Problems of repair and maintenance
• Commercial considerations
Drafting leases
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Why are the precedents so long?
Use of precedents
Standard forms of commercial leases
Land Registry prescribed clauses
leases
Commencement
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‘This lease’
Date
Name and addresses of the parties
Land Registry heading
Premium
• Consideration and receipt clause
• Payment of rent
• Promise to perform covenants
Operative words
• Traditional - ‘hereby demises’
• Modern – ‘grants’ or ‘lets’
Title guarantee
• ‘with full title guarantee’
• ‘with limited title guarantee’
Term
• Length of the lease and start date must
be set out
• It must be clear whether or not the date
specified as the commencement date is
to be included in the term
Parcels clause
• Certainty
• Top floor and ground floor units
• Garage and/or car parking space
Easements
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Access and services
Access for repair
New rights
Use of communal facilities
Rubbish
Rent and rent review
• Flat leases
• Commercial leases
• The need for rent review in a
commercial lease
• Regularity of review
Types of rent review
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Fixed increases
Index linked clauses
Turnover and sub-lease rents
Open market review
Open market review
• It is not possible to assess the rental
value of the premises
• It is a leasehold interest which is
capable of valuation
• A hypothetical interest in the premises
is valued not the tenant’s own interest
Hypothetical letting
• Terms of the hypothetical letting must
be set out in the lease
• The date of valuation must be the
review date
• Valuer will be directed to ascertain the
open market rent of a hypothetical
letting of the premises at each review
date
Circumstances of the letting
(1)
• The premises
• The market
Circumstances of the letting
(2)
• The consideration
• Possession
Circumstances of the letting
(3)
• The terms:
– The alienation covenant
– The user covenant
– Rent and rent review
– The length of the term
Assumptions
• Premises fitted out and ready for
occupation and use
• Covenants performed
• Recovery of VAT
Disregards
• Goodwill
• Occupation
• Improvements
The mechanics
There are two ways in which a review
may be carried out:
– By negotiation
– By service of notices
Is time of the essence?
• Express stipulation
• Any other contrary indication
• The interrelation of the rent review
clause with other lease clauses
Negotiated review
• Provides for rent to be agreed at any
time
• But if no agreement by review date,
then a referral may be made to an
independent third party
• Either party should be able to refer
Trigger notices
• Formal timetable for service of notices
• Problems can arise:
– Landlord does not have to be reasonable
in his proposals
– Notice must be clear and unequivocal
The third party
• Usually a surveyor
• Appointment process
• Will act either as an arbitrator or as an
expert
• There are considerable differences
between the two
Ancillary provisions
• Late review
• Record of review
Alienation
• Flat leases
• Commercial leases
Types of covenant
• Absolute
• Qualified
– Section 19(1)(a) LTA 1927
– LTA 1988
Special rules for commercial
leases
• Apply to leases granted on or after
1/1/1996
• Section 19(1A) LTA 1927
– factual
– discretionary
Alterations
• Landlord will want control over
alterations
• Absolute bar on structural alterations
• Qualified covenant for other alterations
• Section 19(2) LTA 1927
Permitted user
• Flat leases – use for residential
purposes only
• Commercial leases – use agreed
between parties
• Reference to use classes?
• May be absolute or qualified
Other lease provisions
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Insurance
Rent suspension
Repair
Service charge
Forfeiture
Conclusion
• To understand key drafting issues in
rent, rent review, alienation, user and
alterations provisions in a lease
• To understand the different methods of
reviewing rent
• To understand the fundamentals of an
open market rent review