Leases, Tenancies and Leasehold Conveyancing
This domain tests leasehold transactions: whether the lease is good security, what the tenant can and cannot do, and what must be obtained from the landlord before completion.
Creating and protecting leases
- A legal lease for more than three years must be by deed (s.52 LPA 1925); a lease for three years or less at the best rent may be created orally (s.54(2)).
- A grant of a lease for more than seven years is a registrable disposition; leases of seven years or less are overriding interests (Sch 3 para 1 LRA 2002), provided they are legal and the tenant is not a protected business tenant.
Investigating the lease
Read the lease itself, not a summary: term and commencement, ground rent and review provisions, service charge and insurance mechanics, landlord's covenants, repairing and decorating obligations, user and alienation clauses, and forfeiture provisions.
- Assignment usually requires the landlord's licence; consent must not be unreasonably withheld (s.19(1) LTA 1927 for older leases; s.1 LTA 1988 for new ones).
- Alterations often need consent under s.19(2) LTA 1927 or an express clause.
- Service charges: check the current demand, arrears history, reserve fund and whether s.20 consultation was followed for major works.
- Cladding and building safety: ask for the fire risk assessment and any remediation plan; lenders apply specific criteria.
Management pack and lender terms
Order the management pack early; lenders typically require the lease to extend 30-40 years beyond the mortgage term and will query ground rent review clauses.
Worked example
A flat has 82 years unexpired and a ground rent doubling every ten years. A 25-year mortgage leaves 57 years, acceptable on term, but the doubling rent may be treated as a material valuation risk, so the lender may decline or require a deed of variation before completion.
Traps
- Missing arrears because the current demand rather than the full account history was supplied.
- Assuming the previous year's licence to assign covers this transfer.
- Overlooking a tenant's right of pre-emption or obligation to offer a surrender.