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The Contents Of A Lease Notes

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Lecture 6-7 - The Contents of a Lease Restrictions in leases For ANY TYPE OF RESTRICTION IN A LEASE, distinguish between absolute, qualified and fully qualified covenants:

Absolute - "the Tenant shall not [X]"

Qualified - "the Tenant shall not [X] without Landlord's consent"

Fully Qualified - "the Tenant shall not [X] without Landlord's consent, such consent not to be unreasonably withheld"

The only way to permanently circumvent an absolute prohibition is for the parties to enter into a deed of variation altering the original covenant in the lease. 1) Alienation Alienation means subletting or assigning the property. It refers to all forms of disposal. Restrictions on alienation In the absence of any restrictions in the lease, the tenant is free to do as it pleases. However, a LL of a commercial lease will normally want to control who is in occupation of the property, and will require the tenant to give covenants relating to assignments and subletting. Statutory intervention (on all forms of alienation)

• S19(1)(a) Landlord and Tenant Act 1927 - applies to all types of leases on all forms of alienation: o

Has no effect on absolute covenants prohibiting alienation.

o

It converts a qualified covenants into a fully qualified covenant.

o

Note, that a LL may incur fees of a surveyor instructed to gather financial information about a proposed assignee or sub-tenant and could reasonably withhold consent if payment of such fees isn't made.

o

LL'S REASONABLENESS IN WITHHOLDING CONSENT :

International Drilling - a LL cannot refuse consent on grounds which have nothing to do with the LL/T relationship. Moss Bros - LL's of (e.g.) shopping centres will usually have a prescribed 'tenant mix' policy so it can control certain types of retail tenant - e.g. clothing shops/food outlets. A LL can refuse a proposed assignee's business if it doesn't fit with the tenant-mix policy.

S.1 Landlord and Tenant Act 1988 - applies to all types of leases on all forms of alienation: o

This provides a further layer of protection for tenants when a tenant applies to a LL in writing for consent to assign/sublet and the LL must not unreasonably withhold his consent.

o

The LL must respond within a reasonable time (either to give consent or a written notice of refusal).

o

If the LL doesn't comply, he may be liable for tortious damages for breach of statutory duty.

o

Dong Bang Minerva - 28 days from the receipt of the notice to alienate was considered reasonable time.

**Form of consent from LL

• It is very IMPORTANT that LL's ensure the terms of their consent are incorporated into a legal document (a licence) so that the conditions on which the consent is given can be outlined.

It is also IMPORTANT to obtain the assignee/sub-tenant's direct covenant with the LL that it will comply with the tenant's covenants in the lease to be sold/granted to it. This creates privity of contract between the LL and the assignee/sub-tenant should the covenant every be breached. o

Aubergine - consent in principle not enough, it needs to be via a formal licence.

Consent of LL's mortgagee

• In addition to a T obtained the LL's consent, it may need to ensure (where applicable) that the lender's consent is obtained. Often, this is required under the lease terms.

Even if it isn't required, the dealing may require an application to the Land Registry to amend the freehold/existing leasehold titles or create a new leasehold title. These application DEFINITELY cannot be made without the lender's consent. o

In unregistered land the lender will also require consent as it will have custody of the title documents needed for any relevant applications. 1a) Assignment

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