Questions and Answers
What is the role of engrossment in a freehold transaction?
Which document primarily governs the day-to-day relationship between landlord and tenant?
What must be included in the particulars of sale when the property is leasehold?
What is the minimum number of working days a landlord must provide the engrossment to the tenant before the completion date?
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What rule applies to a tenant calling for a deduction of a freehold title?
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Why must a landlord contact the lender before granting a lease?
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If a lease is an underlease, what is a common limitation in negotiating its terms?
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What does SC 8.2.4 (SCPC 11.4) allow a landlord to do?
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What document must the landlord's solicitor provide to the tenant's solicitor during pre-contract inquiries?
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Under what condition can an undertenant request deduction of the freehold title?
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What does a license to underlet signify?
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What is required from the undertenant for granting consent according to the license to underlet?
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What happens if the landlord fails to give consent for an underletting?
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What is the purpose of the SDLT in a lease transaction?
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What does the head-landlord need to obtain with each underlease agreement?
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What should be included in the landlord's receipt upon completion of a freehold transaction?
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Study Notes
Engrossment and Drafting Issues
- Engrossment refers to the final version of a legal document executed by the parties in a freehold transaction.
- The lease or underlease is a critical document governing the relationship between landlord and tenant.
- Negotiation scope is limited in underleases, as they often require terms to align with the headlease.
- An agreement for lease serves as a contract when there is a delay between reaching an agreement and finalizing the lease, often necessary for construction, refurbishment, or obtaining permissions.
- Essential elements in a leasehold sale must specify leasehold property and include the tenant's vested term with agreed lease form.
Title Deduction and Investigation
- A property under mortgage includes restrictions that may affect the landlord's ability to grant a lease.
- Landlords must obtain permission from lenders before granting a lease, especially when tenants wish to deduce the freehold interest.
- General rule: Tenants can only demand freehold title deducing for leases exceeding seven years.
- When the headlease is registered with absolute title, viewing the freehold title is unnecessary.
- If the headlease is unregistered, undertenants can request documents from the last 15 years and must meet duration criteria for title deduction.
Pre-Contract Enquiries and Required Documents
- Landlords' solicitors must provide tenants' solicitors with:
- Draft agreement for lease.
- Draft lease or underlease.
- Evidence of freehold or headlease title.
- Relevant planning consent copies.
- Evidence of lender's consent regarding lease/underlease.
License to Underlet
- A license to underlet is consent for the head tenant to underlet the property, forming a tripartite agreement.
- Consent from the landlord is crucial to avoid breaching the alienation covenant.
- An undertenant must covenant directly with the head landlord to fulfill covenants from both leases.
Contractual Liability
- Direct covenants usually exclude rent payments and pertain to headlease covenants relevant to the underlet property.
- No legal liability exists between head landlord and undertenant, with exceptions for rent non-payment.
- Each underlease agreement requires a new direct covenant from the assignee to the head landlord.
Key Provisions in a License to Underlet
- License provisions include the head landlord's consent and the undertenant's direct covenant to the landlord.
Pre-Completion Formalities
- Upon completion of a freehold transaction, landlords receive:
- Executed counterpart lease from the tenant.
- Executed lease from the landlord.
Completion and Post-Completion Steps
- On completion, landlords obtain the executed counterpart lease/underlease, any applicable premium minus deposit, and apportioned rent for advance payments.
- Landlords must provide certified copies of freehold title deeds and lender's consent to the tenant.
SDLT and LTT (Stamp Duty Land Tax and Land Transaction Tax)
- SDLT is payable on capital sums/premiums charged and the reserved rent in non-residential properties.
- Non-residential SDLT applies to premiums based on the capital sale of freehold land.
- Rental element calculation uses Net Present Value (NPV) to total rent (including VAT) over the lease term, discounted at 3.5% per annum.
- SDLT charges apply to VAT-inclusive amounts and must be paid within 14 days.
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Description
This quiz covers key concepts related to engrossment and drafting issues in legal documents, particularly those governing landlord-tenant relationships. Topics include lease agreements, underleases, and the role of mortgages in leasing arrangements. Test your understanding of essential elements involved in leasehold sales and the intricacies of real estate documentation.
