1. Can a lease be backdated? No. Backdating a deed may constitute a criminal offence under the Forgery Act 1913, the Theft Act 1968, the Forgery and Counterfeiting Act 1981 or the Fraud Act 2006 and may also constitute conspiracy to defraud. A deed will not have legal effect until it has been signed and delivered by the parties to it, with “delivery” occurring when the parties express an intention to be bound (the deed will usually provide that it is delivered on the date given on the face of it). Inserting a date that pre-dates signing and/or delivery may give the false impression that the deed takes effect on a different date to the date on which this actually occurred. 2. Can a lease term commence on a date preceding the date of the lease? Technically, the contractual term of a lease cannot start until the lease is executed, but the lease can provide that the term is calculated from a date preceding the date of the lease. This approach may be required, for example, where a tenant has been in occupation before lease grant under an agreement for lease. 3. Can a lease term commence on a date following the date of the lease? Yes, this is called a reversionary lease. A reversionary lease is granted with the term commencing on a date in the future, usually where an existing lease of the same premises will expire back-to-back. To be valid, the reversionary lease term must commence within 21 years of the date of grant. Aside from reversionary leases, this would be unusual as it begs the question as to the terms on which the tenant occupied up until commencement of the term and whether the tenant might have acquired protection under the Landlord and Tenant Act 1954 during this period. 4. Is a lease of the reversion the same as a reversionary lease? No. “Reversion” is a term used to describe the landlord’s interest in a property subject to a lease. A lease of the reversion is a lease granted out of that landlord’s interest, granted subject to and with the benefit of the existing lease. A lease of the reversion is sometimes referred to as a concurrent or overriding lease. As mentioned above, a reversionary lease is a lease where the term commencement is delayed until a future date (usually where an existing lease of the same premises will expire back-to-back). 5. Can the rent commencement be a date preceding the date of the lease? Yes. Where this is the case, a tenant should expect a landlord to require payment of the rents due from the rent commencement date to the quarter day following the date of grant of the lease on completion of the lease. 6. Can you grant a lease longer than your own? This would operate as an assignment of your own lease. To avoid this outcome, the underlease (i.e. the lease granted) must expire before the headlease (i.e. the original lease out of which the new lease is granted). If the underlease term is equal to or more than the term of the headlease, it is likely to result in the assignment of the headlease to the undertenant, which is unlikely to have been the intention of either party and may well be a breach of the headlease entitling the head landlord to forfeit. 7. What happens if you grant an option to renew which does not expressly exclude the option to renew in the renewal lease? The option to renew should clearly provide that the renewed lease will not itself include an option to renew, otherwise the lease may be treated as a perpetually renewable lease. Under the Law of Property Act 1922, a perpetually renewable lease is converted into the grant of a lease for 2000 years. Where the intention is to grant one or a limited number of rights to renew, the parties should expressly provide for this. The lease would be expressed to be on the same terms and conditions as the existing lease, save for the exercised option to renew (and any other provisions which the parties do not wish to apply to the renewal lease). Ten lease questions you know you should know the answer to but were afraid to ask/can’t remember! Real Estate Q&A: Back to Basics – Leases Real Estate Talking Points 8. Can you have an option to renew in a lease which is contracted out of the Landlord and Tenant Act 1954? Yes, but before the lease which includes the option is entered into, the statutory exclusion procedure should be followed for both the lease being entered into and for the renewal lease that would be granted if the option were to be exercised. If the tenant assigns the lease during the initial term, the exclusion procedure should be followed again for the new lease by the landlord and assignee/guarantor. It is possible to provide that the option is subject to a condition that the exclusion procedure has been completed, but the safest course is to exclude the lease and the renewal lease upfront. Beware of the creation of a perpetually renewable lease (see item 7 above). 9. Can you have a landlord’s break right in a lease which is not contracted out of the Landlord and Tenant Act 1954? A landlord’s break right in a protected lease will end the contractual lease, but a statutory tenancy under the Landlord and Tenant Act 1954 will come into effect when the contractual lease ends. The landlord would also need to serve a section 25 notice on the tenant in order to bring the statutory tenancy to an end (citing one of the grounds under the Landlord and Tenant Act 1954). It is therefore unusual to see landlord break clauses in protected leases and a landlord who wants to have a break right in the lease it is granting should ensure that the lease is contracted out to be certain of gaining possession on exercise of the break. 10. Can you extend the term/demise of a lease by a deed of variation? No. Where a deed attempts to extend the term or demise of the lease, this will be treated as a surrender and regrant of the lease. The new lease will be on the same terms as the existing lease, save in respect of the matters set out in the deed of variation. There are various implications for both the landlord and the tenant, for example (for the landlord) release of guarantors and (for the tenant) potential payment of SDLT. If a landlord and tenant wish to extend the term of a lease, they could do so by entry into a reversionary lease that takes effect on expiry of the term of the existing lease. If a landlord and tenant wish to extend the demise granted by a lease, they could do so in a separate lease relating to the additional demise only (known as a supplemental lease and by reference to the initial lease as to the remainder of the lease terms). September 2018 If you would like to discuss any of these issues, please speak to your usual Linklaters contact. Real Estate Q&A: Back to Basics – Leases 8394_F/09.18 Imogen Jones Managing Associate, Real Estate Linklaters LLP Real Estate Talking Points
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Real Estate Q&A: Back to Basics - Leases
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