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Leasehold Transactions Notes

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Leasehold Transactions Key Covenants/Clauses

LANDLORD'S OBJECTIVES - to ensure the property is insured, repaired and used only for the permitted purpose.

TENANT'S OBJECTIVES - to ensure the are no restrictions on desired purpose, ensure the rent doesn't rise too quickly and that the lease doesn't have onerous provisions. Ensure that it can sell/assign the lease.

Requirements for and structure of a lease:

Exclusive possession of the property by the tenant

s.1 LPA - must have a "term of years" absolute

The ROUGH GUIDE is as follows: o

Parties, date, definitions, interpretation provisions (e.g. "Insured Risks", "Common parts")

o

Demise and rents (operative provisions of the lease where L grants the lease for a specified term in consideration of rents paid and covenants entered into)

***When the lease of part be sure to CAREFULLY DESCRIBE the property and INCLUDE A PLAN

o

Tenant's covenants (issues such as the obligation to pay rent and to repair, the use of the property, alterations, assignment and sub-letting provisions)

o

Landlord's covenants (covenant for quiet enjoyment, services and insurance)

o

Guarantor's covenants (guarantee payments and perform other obligations - e.g. repair)

o

Provisos, agreements and declarations (e.g. forfeiture, damage and destruction by insured risks)

o

Rights granted (e.g. right of way, right of access)

o

Rights excepted and reserved (L may reserve right to access property e.g. to carry out repairs)

o

Other provisions (rent review, service charge, form of future documents such as AGAs and rent deposits)

1) Landlord's Clauses SERVICE CHARGE: C OVENANT TO PROVIDE SERVICES

T will covenant to pay the service charge. o

Service charge will be calculated as a proportion of the premises (i.e. square footage). However, T may argue things the T wont use should be taken into account (e.g. lift if on ground floor). o

Include a proviso that suspends covenant in the event of insured damage (if premises/access is destroyed).

GENERALLY, L will estimate the annual cost of maintaining/provides services and charge T. At the end of the year if there is a shortfall then T will pay difference. If there is a surplus it will be carried forward into the next year.

L may try to resist an obligation to provide services, preferring an obligation to provide "such of the Services as it deems necessary". It may also try to dilute it to "best/reasonable endeavours". Basically to put the obligation on its own terms o

This is unacceptable for T. T should resist efforts to make the provision of the services condition on the T paying the service charge. This is a separate obligation and must remain so.

o

T also doesn't want the include of wording such as "and other services". He wants CERTAINTY via a restrictive list of specified services.

It is reasonable for L to limit its liability to provide services where factors beyond their control prevent them from doing so (e.g. industrial action). In this situation, L should still use "best/reasonable endeavours to restore services as soon as possible".

L must disclose irregular events that would have a significant impact on the amount of future service charges.

L must during negotiations provide the best estimate of the service charges.

INSURANCE - it is common in an FRI lease (where lease part of building/estate) for L to insure the whole development and recover a proportion of the cost from each T.

Define "insured risks" in the definitions section.

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