We hope that come of the questions
answered on this page will be of some assistance. Remember though that the
information is given in general terms and does not relate to any specific
situation. if you have a particular problem upon which you need advice then you
should consult a solicitor.
Which lease
is most suitable for me ?
What
happens at the end of the lease?
What is security of
tenure?
Which
leases carry security of tenure?
Can
the lease be ended early by the tenant?
Can
the lease be ended early by the landlord?
What is a break clause?
What is forfeiture ?
Can the
rent in a lease be increased?
Who should the tenant serve a notice on
?
Who should the Landlord serve a notice
on ?
Do I have to pay Stamp Duty Land
Tax ?
Does the lease have to include
a plan ?
What are Prescribed Clauses ?
Does the
lease require registration of the Land Registry ?
Is an
Energy Performance Certificate required ?
Which lease
is most suitable for me ?
Please follow this
link for
general information. If you are uncertain of which lease you need then use our
Lease Selector
to assist
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What happens
at the end of the lease?
This depends on whether or not the lease carries security
of tenure. If the lease does not carry security of tenure then when
the agreed fixed term set out in the lease expires then the tenants right to
stay in the property comes to an end and the tenant should give the premises back in
accordance with the terms of the lease this may mean carrying out some work
e.g. repairs, decoration, reinstatement of alterations this will depend on the
terms of the lease. If the tenant does remain in occupation with nothing being
done then the tenant may acquire security of tenure.
If the lease does carry security of tenure then it does not
end on the expiry date in the lease. Rather it continues until terminated by one
of the procedures in the Landlord and Tenant Act 1954 this is generally either
a notice served by the landlord under Section 25 or one served by the tenant
under Section 26.
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What is security of
tenure?
This is the means by which a business lease continues past
the expiry date set out in the lease. The tenant is usually referred to as
holding over. The lease can only be terminated by one of the procedures that
are laid down in the Landlord and Tenant Act 1954. The reasoning behind the
legislation is to protect the goodwill that a business tenant builds up by
running a business from certain premises.
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Which
leases carry security of tenure?
In order for a lease to acquire security of tenure certain
conditions need to be satisfied
-
The lease must be for a fixed term or for a periodic term
-
The premises must be occupied for business purposes
-
The premises must be occupied by the tenant
Dont forget that even if the lease complies with the above
then there are still some leases that do not carry security of tenure such as
-
Where security of tenure has been
specifically excluded (this
will be by way of a Court Order if the lease was entered into before 1st June
2004 or by following a prescribed procedure if after 1st June 2004)
-
Where a licence is granted rather than a lease this is
a grey area and there are not many instances where a true licence of business
premises can be entered into. In a dispute a court would look at the actions
of the parties rather than the label put on the document
-
Where the length of the fixed term lease beginning on the
date the tenant took up occupation is less than 6 months. Note particularly
this runs from the date the tenant took up occupation not the date the lease
is entered into
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Can
the lease be ended early by the tenant?
Save in exceptional circumstances the tenant is not able to
bring the lease to an end before the expiry date unless the lease contains a
break clause
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Can
the lease be ended early by the landlord?
If there is a break clause exercisable by the landlord
then yes but bear in mind that the tenant may have security of tenure
If the tenant breaches any of the terms of the lease then
the landlord can forfeit the lease.
If the tenant becomes insolvent the the
trustee in bankruptcy (or liquidator as the case may be) may well have the right
to disclaim the lease
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What is a break clause?
The lease may contain a clause which says that at either
landlord or tenant or both can bring it to an end. Generally this would require
a notice to be served specifying a certain period often the dates that the
lease can be broken are also set out in the lease. These dates are generally
construed strictly
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What is forfeiture ?
If the tenant breaches the terms of the lease then the
landlord has the right to forfeit the lease which means bring it to an end. If
the breach is non payment of rent and the premises are used for business
purposes then forfeiture can be effected by the landlord re-entering and simply
changing the locks generally speaking bailiffs would be employed for this
purpose. Alternatively the landlord can obtain a court order first.
If the breach is anything other than non payment of rent
then before the right of forfeiture can be exercised the landlord has to serve on
the tenant a notice specifying what the breach is and giving the tenant a
reasonable time to remedy the breach if the breach is remedied then the right
of forfeiture is removed
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Can the rent
in a lease be increased?
Generally speaking a lease will contain provisions for the
rent to be reviewed at regular intervals. Commonly the intervals are every 3
years or every 5 years. The lease will set out the basis of reviewing the rent but
usually the basic idea is that it should be reviewed to whatever the current
open market level is at the time. Often though on an upward only basis i.e.
rent cannot go down even if market levels drop this does though depend on what
the lease says.
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Who should the tenant serve a notice on
?
If you are the tenant of business premises benefiting from
security of tenure and wish to serve a Section 27 Notice (to bring the existing
tenancy to an end) or a Section 26 Notice (to request a new tenancy) then it is
important that the notice is served on the correct landlord. This may not
necessarily be the person whom rent is paid to. The tenant can serve a notice
on the person purporting to be the landlord under Section 40(3) of the Landlord and
Tenant Act 1954 requesting that person
disclose the information. That person is obliged by law to respond to the notice
and give the information. The form of notice can be obtained by following this
link - the price is £5
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Who should the Landlord serve a notice
on ?
Similarly if you are the landlord of
premises occupied by a business tenant and wish to serve a Section 25 Notice (to bring the existing tenancy to an end) then it is important that you
have correct information about the tenant. The occupant may not be the tenant
that the landlord thought it was. A landlord can serve a notice on its tenant
under Section 40(1) of the Landlord and Tenant Act 1954 requesting the
information be disclosed. The tenant is obliged by law to respond and give the
information. The form of notice can be obtained by following this
link - the price is £5
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Do I have to pay Stamp Duty
Land Tax ?
If there is any Stamp
Duty Land Tax to pay then it is for the Tenant to do this. This depends on the
amount of the rent and the length of the lease. Broadly, on a lease, tax is
payable at the rate of 1% on the amount by which the Net Present Value exceeds
£150,000 - this is calculated by multiplying the rent by the term and
then applying a discount. Even if no tax payable the tenant often still has to
complete a Land Transaction Return.
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Does the lease have to include
a plan ?
It is important that the lease is capable
of clearly identifying the property that is leased. A plan will always be
helpful in achieving this. If the lease is one that requires registration at
HM Land Registry then almost certainly the Land Registry will require a plan.
This has to conform to certain standards which briefly are
-
it
should be drawn to a scale of 1:1250 or 1:500
-
the
scale should be marked on the plan
-
the
plan should not be reduced in size
-
the
plan should not be marked 'for identification only' or similar wording
-
the
plan should show a North point
-
if
the lease of of part of a building then it should clearly show on what floor
the premises are
-
any
measurements should be shown in metric
If
the plan does not conform then the tenant will not be able to register the
lease at the Land Registry. If you would like to purchase a Land Registry
complaint plan then try
http://www.leaseplans.co.uk. Alternatively you could try a local
surveyor.
What are Prescribed Clauses ?
Subject to a few minor exceptions all leases that are granted on or after 19th
June 2006 and that require registration at the Land Registry have to
contain certain Prescribed Clauses. These are a set of definitions dealing with the basic terms of
the lease that the Land Registry need to know for the purpose of registration.
They have to be set out in a particular way or else the Land Registry will
refuse registration. All the leases we supply contain these Prescribed Clauses
Does the
lease require registration of the Land Registry ?
If the term of the lease granted exceeds
7 years then the lease needs to be registered at HM Land Registry. You do this
using form AP1 which can be downloaded for free from the Land Registry web site
the Land Registry. There is a fee charged by HM Land
Registry which is based on the amount of the rent
Is an Energy
Performance Certificate required
Yes.
On the grant of a lease the Landlord or, on an assignment (transfer) of a lease
the seller, is required to provide free of charge to the tenant or buyer an
Energy Performance Certificate.
The
documents available on this site have been prepared for use in England &
Wales. They may not be valid if used in other areas.
