In 2005 Miranda sublet the premises for a term of 7 years to Albert, with Jon’s consent. In 2008 Miranda assigned the lease to Dave, without obtaining Jon’s consent. In 2009, unknown to Jon, Albert moved away and his brother is using the premises as an unlicensed betting shop. The premises have not been repaired since 1996. Advise Jon.
Issues
The issues are: what is the option for Jon on the account of compliance of the agreement terms by Miranda?
Summary
On 3 July 2009, the Department for Communities and Local Government published its report on the monitoring of the Code for Leasing Business Premises in England and Wales 2007. The report concluded that awareness of, and advice on, the Code was limited and that it played only a minor role (if at all) in negotiations. The general opinion, among those involved in negotiating leases, was that leases were now "flexible and fair" and that the Code was unnecessary.
Settlements are beneficial interests in land created in favour of a series of persons. Like much in land law, the rules for settlements were changed greatly in 1925; this was designed partly to prevent the creation of long-lasting settlements, and partly to overcome various problems with the old doctrine of ‘strict settlements’. Today all settlements take effect as trusts for land under the Trusts of Land and Appointment of Trustees Act 1996 (TLATA), although some problems still exist. You need to understand the problems under the old law so that you will be able to appreciate the major changes introduced by TLATA.
Summary of relevant statutory provisions
Short legal leases have also been re-categorised, two Schedules allows them to override if they run for seven years or less, a reduction from the former s.70(1)(k) requirement. Leases for more than seven years, or with more than that length of time to run, are now registrable in their own right.
Voluntary first registration is encouraged by the new Act and Rules and is governed by Section 3. This was always possible in compulsory registration areas, but in non-compulsory areas the LRA 1966 limited it to exceptional situations and large developments of land. Since the whole country has now become an area of compulsory registration, voluntary registration is now not only possible in all cases, but is encouraged by the application of reduced fees. It should be an attractive option since it may also make the land easier to sell, and because registered proprietors now have much better protection against adverse possession claims than do their unregistered counterparts.
Five types of legal estate may be registered with their own titles:
- freehold
- legal lease with over seven years to run
- rent charge
- franchise (right granted by the Crown)
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profit à prendre in gross.†
The Right to Pass on or Sell a Leasehold Interest
One of the fundamental principles of a leasehold, which gives an interest or estate in land and property, is the fact that the leasehold interest can be owned and sold or passed on (assigned) to another leaseholder.
This right to assign is generally subject to the permission of the landlord, which cannot be unreasonably withheld.
The lease will normally stipulate that any assignee must meet certain criteria and be qualified as a reliable tenant by the landlord.
This would require similar financial checks and references to which the existing tenant (assignor) was subjected to on taking on the original tenancy.
Landlord's Duties with regard to Assignment
Assignment of commercial tenancies is now regulated under the Landlord and Tenant Act 1988 which imposes certain duties in this regard on the landlord:
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to give consent to an assignment, except where it is reasonable not to do so
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to give written consent without undue delay
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If the landlord also requires the consent of a superior landlord, to take reasonable steps to secure consent without undue delay.
When it is not Reasonable to withhold Consent
It is generally not reasonable to withhold consent on matters outside the lease and the landlord-tenant relationship or if:
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the landlord argues that the tenant will affect the letting of other properties in the vicinity.
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Similarly with the letting of other parts of the building of which the said letting forms a part only.
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The landlord wants re-possession
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The landlord wishes to withhold consent on race, sex or disability grounds.
When it is Reasonable to withhold Consent
However, if the landlord withholds consent on the grounds of a proposed use, it may be held to be reasonable, even if this use was not excluded in the lease.
Reasons a landlord may justifiably give for refusal to assign include:
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Insufficient information supplied on or by the proposed tenant to make a judgement
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Character and financial standing of the assignee,
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Landlord's judgement that the future viability of the building as a whole could be jeopardised.
When the Parties Cannot Agree
If a tenant feels he can justify a claim that the landlord is unreasonably withholding consent she has the option of carrying on with the assignment transaction but risks forfeiture of the lease.
Alternatively the tenant could apply to the court for a judgement, putting up with the subsequent delay.
On-going Liabilities
Under some circumstances the original tenant may continue to have ongoing liabilities in respect of an assigned lease. For example if the original lease was entered into before the 1st of January 1996, or if guarantees have been given at the time of assignment. This would apply where, for example, the new tenant runs up rent arrears.
Survey of case law
UK LaSalle, Inc. v. Lawless, 618 A. 2d 447 - Pa: Superior Court 1992
Royal Ins. Co.(UK) Ltd. v. Ideal Mut. Ins. Co., 649 F. Supp. 130 - Dist. Court, ED Pennsylvania 1986
Vermilya-Brown Co. v. Connell, 335 US 377 - Supreme Court 1948
Cheung v. US, 213 F. 3d 82 - Court of Appeals, 2nd Circuit 2000
Long Term Capital Holdings v. US, 330 F. Supp. 2d 122 - Dist. Court, D. Connecticut 2004
Capps, D. ‘Conveyancing in the twenty-first century: an outline of electronic conveyancing and electronic signatures’ [2002] Conv 443.
Cooke, E. (ed.) ‘Proprietary estoppel and formalities in land law and the Land Registration Act 2002: Theory of unconscionability’ in Modern Studies in Property Law. (Oxford: Hart, 2003) vol. 2 [ISBN 1841131733].
Cooke, E and P O’Connor ‘Purchaser liability to third parties in the English land registration system: a cooperative perspective’ (2004) 120 LQR 640
Jackson, N, ‘Title by registration and concealed overriding interests: the cause and effect of antipathy to documentary proof.’ LQR (2003), 119 (Oct), pp. 660–691.
Thompson, M. ‘Adverse possession: the abolition of heresies’ [2002] Conv, 480.
Discussion of Issues
UK commercial property lease structures have come under considerable scrutiny during the past decade since the property crash of the early 1990s. In particular, tenants complained that the system was unfair and that it has blocked business change. Government is committed, through its 2001 election manifesto, to promote flexibility and choice in the commercial property lettings market and a new voluntary Commercial Leases Code of Practice was launched in April 2002. This paper investigates whether occupiers are being offered the leases they require or whether there is a mismatch between occupier requirements and actual leases in the market. It draws together the substantial data now available on the actual terms of leases in the UK and surveys of corporate occupiers' attitude to their occupation requirements. Although the data indicated that UK leases have become shorter and more diverse since 1990, this is still not sufficient to meet the current requirements of many corporate occupiers. It is clear that the inability to manage entry and exit strategies is a major concern to occupiers. Lease length is the primary concern of tenants and a number of respondents comment on the mismatch between lease length in the UK and business planning horizons. The right to break and other problems with alienation clauses also pose serious difficulties for occupiers, thus reinforcing the mismatch. Other issues include repairing and insuring clauses and the type of review clause. There are differences in opinion between types of occupier. In particular, international corporate occupiers are significantly more concerned about the length of lease and the incidence of break clauses than national occupiers and private-sector tenants are significantly more concerned about leasing in general than public-sector occupiers. Proposed solutions by tenants are predictable and include shorter leases, more frequent breaks and relaxation of restrictions concerning alienation and other clauses. A significant number specify that they would pay more for shorter leases and other improved terms. Short leases would make many of the other terms more acceptable and this is why they are the main concern of corporate occupiers. Overall, the evidence suggests that there continues to be a gap between occupiers' lease requirements and those currently offered by the market. There are underlying structural factors that act as an inertial force on landlords and inhibit the changes which occupiers appear to want. Nevertheless, the findings raise future research questions concerning whether UK lease structures are a constraining factor on UK competitiveness.
In , sublease (or, less formally, sublet) is the name given to an arrangement in which the in a lease assigns the lease to a third party, thereby making the old lessee the sublessor, and the new lessee the sublessee, or subtenant. This means they are renting the property and renting it out at the same time. For example, the owner of an office building may lease the whole building to a management company. This company may then sublease parts of the building to other people. The management company is said to sublet the property to the individual tenants by means of a sublease. In this event, the management company (which was previously the lessee under the original lease) becomes the sublessor, and the individual tenants are subtenants or sublessees. The sublessor remains liable to the original lessor for any damage to the property and for payment of rent. Often the original lessee requires a lower rent payment from the sublessee than what he or she may have originally paid, leaving a partial amount of the rent left up to the original lessee.
An Eviction Notice is created by the landlord or property owner. It terminates the lease and/or instructs a tenant to vacate the property.
Landlord Notices are used to demand compliance from the tenant or inform the tenant of an increase in rent.
Tenant Notices are used to inform the landlord that the tenant is terminating the lease or vacating the property, or that the tenant requests repairs to the property owned by the landlord.
Notice to Repair is used when the Tenant wants to give notice to the Landlord that the Landlord is breaching a term of the Lease or the state legislation in that it is not properly maintaining the Premises.
Conclusion and Recommendation
This is not a question on leases and licences; the key issue is whether Miranda, would be bound by the interests of Jon , a question which required an understanding of the LRA 2002. Thus, Jon’s Seven-year (legal) lease is not compulsorily registrable and would clearly bind Miranda as an overriding interest within Sched.3 para.1. Jon’s contract for a lease, even if not protected on the register, would bind William as an overriding interest within Sched.3 para.2, summing that he is in actual occupation.
Jon would appear to have a (legal) Seven-year tenancy of the barn (LPA 1925 s.54(2)) which would bind Miranda under Sched.3 para.1.
BIBLIOGRAPHY
Statutes
European Convention on Human Rights 1950
Immigration and Asylum Act 1999
National Assistance Act 1948
Nationality, Immigration and Asylum Act 2002
Cases
R v Hammersmith & Fulham London Borough Council ex p M [1998] 30 HLR 10 (CA)
R v Leicester City Council ex p Bhikha [2000] 4 AER 590 (CA)
R (AW) v Croydon London Borough Council [2005] EWHC 2950 (HC)
R (M) v Slough Borough Council [2008] UKHL 58 (HL)
Secretary State for Home Department v Limbuela; Tesema; Adam (Shelter intervening) [2005] UKHL 66 (HL)
Other Sources
Crosby, N., Gibson, V., & Murdoch, S. (2003). UK commercial property lease structures: Landlord and tenant mismatch. Urban Studies, 40(8), 1487-1516.
Bond, S. A., Loizou, P., & McAllister, P. (2008). Lease maturity and initial rent: is there a term structure for UK commercial property leases? Springer.
H Barnett, Understanding Public Law (5th edn Cavendish, London 2009)
J Bowman (ed) and Lord Hailsham of St Marylebone (ed), Halsbury’s Laws of England (5th edn Butterworths, London 2009)
The British Refugee Council Information Service <http://www.rcis.org.uk/> accessed 28 October 2011
G Robson and P Robson and D Roberts, A Practical Approach to Housing Law (Cavendish, London 2005)
