This form of lease is intended for the letting of a whole building for commercial office purposes. It is for use where the length of the term is 7 years or longer, which is subject to registration at the Land Registry and which therefore includes the Prescribed Lease Clauses.
Landlord and tenant law is a complex area of law and specialist legal advice is always recommended before entering into a lease whether you are a landlord or a tenant.
1. LAND REGISTRY CLAUSES
Land Registry Clauses are a set of standard details, which must appear at the beginning of any lease, which is for a period of 7 years or more. The prescribed clauses contain the information which the Land Registry needs in order to complete registration of the lease. (Refer to the Land Registry website, www.landreg.gov.uk to download Practice Guide 64 entitled ‘Prescribed clauses lease’. If in doubt, take specialist legal advice.)
2. PRINCIPAL TERMS
This section sets out the principal terms of the Lease as to include:
- Grant of Lease - This sets out the basic agreement – namely that the landlord will grant the lease under the terms set out in this document.
- Provisions relating to use of the terms Landlord, Tenant and Guarantor.
- Details of the premises.
- The rent; expressed to be an annual sum and the date the rent starts from.
- Rent review dates for example, if there is a 15 year lease, it might be subject to 5 yearly rent reviews.
- The length of the lease (‘Term’).
- Permitted use: stated as use for offices within Class B1 of the Town and Country Planning (Use Classes) Order 1987.
- Break clauses: this is optional depending on whether it has been agreed that the landlord and/or the tenant will have the right to bring the lease to an end early.
3. INTERPRETING THIS LEASE
This section sets out provisions relating to, for instance:
- The meaning of certain words used in this lease.
- Reference to adjoining property.
- A jurisdiction clause: stating that English law will apply to this lease.
- A description of the use of the word Conduit in the Lease.
- Obtaining any relevant consents from the landlord (e.g. to proposed alterations or to assignments/sub-lettings).
- The exclusion of the operation of the Contracts (Rights of Third Parties) Act 1999, the effect of which might otherwise be to give certain third parties the benefit of provisions in the Lease.
- That the lease is a new tenancy for the purposes of the Landlord and Tenant (Covenants) Act 1995. This means it is a tenancy granted on or after 1 January 1996 (other than following an agreement entered into before that date or an order of a court made before that date).
- The procedure for notices which have to be served in accordance with the terms of the Lease.
This section describes the rights granted to the Tenant and the rights reserved to the Landlord together with other rights to which the Lease is subject. Reference is made to the rights and reservations in the transfer under which the Landlord holds the freehold of the Premises. Clause 4.5 expressly excludes rights any rights over any adjoining property (other than any rights which may be specifically granted under Clause 4.2). 4.5 also excludes the provisions of section 62 of the Law of Property Act 1925 in the absence of which the Lease would confer on the Tenant all easements, rights and advantages enjoyed by the Premises at the date of the Lease.
5. RENT, INTEREST AND OTHER PAYMENTS
This section lists payments the Tenant must make to include Rent and all outgoings in respect of the Premises to include VAT. Note particularly that the rent payment days are expressed to be the modern quarter days, being 1 January, 1 April, 1 July and 1 October in each year.
6. RENT REVIEW
This section deals with the procedure for agreeing a new rent and the possible appointment of an expert if there is disagreement.
7. REPAIR AND DECORATION
This section sets out the Tenant’s obligations to keep the Premises to a high standard of condition including the structural parts of the Premises (excepting repair or damage covered by an insured risk). It also sets out such matters as the obligation of the Tenant to replace landlord’s fixtures and fittings which are beyond repair and to replace damaged or broken windows. It sets out the Tenant’s decorating obligations: to decorate the exterior in every third year of the Term and the interior in every fifth year of the Term.
This section sets out that the Tenant must not make any structural internal or external alterations or additions to the Premises. It requires the Tenant to obtain the Landlord’s consent in respect of all other alterations. It also sets out the procedure for obtaining Landlord’s consent to those alterations. A pro forma in respect of the application for consent is attached to the Lease.
9. USING THE PREMISES
Clause 9.1 sets out the right of the Tenant to quiet enjoyment of the Premises as long as the Tenant is paying the rent and complying with its other obligations under the Lease. Clause 9.2 sets out that the Premises may only be used for the use for which they are let. Clause 9.3 lists restrictions on the Tenant’s use of the Premises.
This section deals with the signs which the Tenant may and may not affix to the Premises.
11. LEGAL OBLIGATIONS
This section sets out the Tenant’s obligations to comply with all lawful requirements in respect of the Premises and to comply with all relevant codes of practice in relation to the way the Premises are used.
This section relates to the Tenant’s obligation to comply with all planning obligations in relation to the Premises and the procedure for making a planning application and implementing it.
13. PROTECTING THE LANDLORD’S INTERESTS
Clause 13.1 obliges the Tenant to give notice to the Landlord of any defect in the Premises or matter in respect of which the Landlord may have a duty of care under the Lease. Clause 13.2 prohibits the Tenant from obstructing any window or right to light which the Premises has and requires the Tenant not to permit any person to acquire rights over the Premises. Clause 13.3 sets out the terms of the indemnity which the Tenant must provide to the Landlord in respect of, for example, the use or condition of the Premises. Clauses 13.4 – 13.6 deal with liability, costs and the exclusion of the right for the Tenant to claim compensation from the Landlord on vacating the Premises.
14. LETTING OTHERS USE THE PREMISES
Clause 14.1 deals with general restrictions to which the Lease is subject. Clause 14.2 allows members of the same group as the Tenant to share occupation of the Premises. Clause 14.3 sets out the restrictions on the Tenant mortgaging or charging the Lease. Clause 14.4 deals with notice provisions on e.g. a mortgage or assignment of the Lease and the fee to be paid to the Landlord in that respect. Clause14.5 sets out that an assignment, charge or other disposition is to be effective on completion of the relevant transaction and not when it has been registered at the Land Registry.
15. ASSIGNMENT AND SUBLETTING
This section prohibits assignment and subletting of part of the Premises and sets out the conditions the Landlord may impose to an assignment or subletting of the whole of the Premises.
16. INSURANCE AND FIRE PRECAUTIONS
Clause 16.1 defines what the insured risks cover. Clause 16.2 sets out the Landlord’s obligations in relation to insurance of the Premises. Clauses 16.3 – 16.5 relate to further insurance obligations and 16.6 sets out what costs are included in the insurance charge and 16.7 lists what the Tenant’s insurance obligations are. Clauses 16.8 and 16.9 set out what happens in the event of the Premises not being fit for use because of loss or damage caused by an insured risk.
17. THE END OF THIS LEASE
Clause 17.1 sets out (1) the right of the Landlord to affix notices for re-letting the Premises during the 6 month period before the end of the Lease and (2) the Tenant’s obligation at the end of the Lease to remove all tenant’s fixtures and fittings and to hand back the Premises to the Landlord with all keys and landlord’s fixtures and fittings in accordance with the Tenant’s obligations under the Lease. Clause 17.2 sets out the Landlord’s rights in relation to forfeiture of the Lease.
This section applies where there is a guarantor either as a party to the Lease or following an assignment. It sets out the obligations and liability of the guarantor during both the currency of the lease and in the event of a disclaimer.
19. [EXCLUSION OF SECTIONS 24-28 OF THE 1954 ACT]
This optional section is to be included only where the security of tenure provisions in section 24-28 of the Landlord and Tenant Act 1954 are to be excluded. This would apply if, for example, parties want to avoid a fixed-term tenancy terminating automatically at the end of the fixed term, or if the landlord to the contract wants the right to end a periodic tenancy by serving a notice to quit on the tenant. NOTE: For further information on the Procedure for Contracting Out please see our free document Z166 or go to http://www.contractstore.com/contracting-out-procedure.