Land Registry Information for Prescribed Clauses Leases

When do you require a prescribed clauses lease?

If your lease term is 7 years or longer and granted on or after 19 June 2006, then you will most likely require a lease that has prescribed clauses. United Solicitors Commercial Lease automatically comes with the prescribed clauses for leases with a term of 7 years or longer.

What are the prescribed clauses for?

Under the Land Registration Act 2002, leases with a term of 7 years or more must now be registered. With more leases being registered, the Land Registry wants all long term leases to come with prescribed clauses in an effort to create greater standardisation and make the registration process more efficient. The new regime requires 14 prescribed clauses and mandatory headings to be inserted into the beginning of every registrable lease. The prescribed clauses are intended to make leases more user-friendly. Key points are now highlighted at the beginning of the lease thereby ensuring that people do not have to search the entire document to understand the main issues that are contained in the lease.

Do I have to provide landlord title number(s)?

If the landlord's title is registered, you should provide title number(s). If the property is not registered, then you should leave this section blank.

If the prescribed clauses lease is granted between a trigger to first registration of the reversion and its lodgement, no title number(s) is required. The same applies to a lease using the prescribed clauses lodged as part of an application for first registration. Otherwise, if you do not complete this section with the relevant title number(s), the Land Registry will be unable to accept your application where use of the prescribed clauses is compulsory.

Do I have to provide other title numbers?

You must provide other title number(s) when there is any title(s) (other than the landlord's) against which you are applying to make entries on matters relating to:

● rights of acquisition;

● restrictive covenants given in this lease by the landlord in respect of land other than the property;

● easements; or

● an application for a standard form of restriction.

If you do not complete this section with the relevant title number(s), the Land Registry will be unable to accept your application where use of the prescribed clauses is compulsory.

What are premiums?

A premium is the price a tenant pays to a landlord to purchase a lease. A premium is most often taken in return for the rent being reduced to what would otherwise be payable. For new commercial leases not exceeding 25 years, it is rare to take a premium. Premiums are most commonly used for long leases of residential property

What does “reversion” mean?

Reversion refers to any interest left over after the lease has come to an end (i.e. the freehold or a superior lease).

What is a restrictive covenant?

A restrictive covenant is a legal obligation which limits/restricts the use of land. The party that is burdened by the covenant is sometimes referred to as a "covenantor" and the party that benefits from the covenant is sometimes referred to as a "covenantee." Often, restrictive covenants are used to preserve and protect the physical, social, and economic integrity of the neighbouring property in a subdivision. They may be used to control lot size, control architectural design, or regulate activities.

What is an easement?

An easement is a right to use the land of another. A common example of an easement is a right of way (e.g. the right to pass over your neighbour's land to empty your bins).

What is an estate rentcharge?

The term 'Estate rentcharge' refers to how rentcharge is defined in s.1(2)(b) of the Law of Property Act 1925. In short, a rentcharge works like a ground rent as a (usually small) annual payment. Rentcharges apply only in certain areas of England. If you are not aware of any rentcharges, select “No” to the question “Are there any estate rentcharges burdening the property?”

What is a standard form of restriction?

A restriction is an entry on the register which regulates how an estate or charge may be entered in the register. In effect, a restriction allows the estate or charge entry on the register only to the extent that the entry meets the terms of the restriction. Applicants may place restrictions for many different reasons. For example, an applicant who has a beneficial interest in a property may want a restriction that no disposition in that property can take place without the applicant's consent.

Standard forms of restriction are those restrictions prescribed by the rules. Applicants who fall within one of the standard forms of restriction do not have to satisfy the registrar that they have sufficient interest in the making of the entry. Standard forms of restriction are set out in the Schedule 4 of the Land Registration Rules 2003.

Note: If the restriction affects only part of a title, you must incorporate a description of the affected part within the wording of the restriction along the lines set out below As long as the wording is sufficient to identify the part of the title intended to be affected by the restriction, Land Registry will accept it. The description may take the form of either:

● a verbal description (for example, “No disposition of [the part of] the registered estate [known as 22 Smith Street] by the proprietor of the registered estate is to be registered …”), or

● a reference to the plan attached to the lease (for example, “No disposition of [the part of] the registered estate [shown edged blue on the plan to the lease] by the proprietor of the registered estate is to be registered …”).

Land Registry will only accept a verbal description of the property (eg 22 Smith Street) where the precise extent of that property can be clearly identified on the Ordnance Survey map.

What is the difference between a joint tenancy and a tenancy-in-common?

A joint tenancy is a form of joint ownership where all the joint owners have an identical interest in the property. On the death of one owner, their interest passes to the remaining owner(s) by the right of survivorship. A tenancy-in-common is a form of co-ownership of property where each co-tenant owns a separate share in the property. On the death of one of the co-tenants, their share passes to their own beneficiaries by their will or intestacy. Tenancies in common are sometimes implemented in an attempt to reduce inheritance tax.

Security/Damage Deposit

What is a security/damage deposit?

A security deposit is a sum of money the tenant pays to the landlord to guarantee that the tenant will fulfill all obligations under the lease. The landlord holds the security deposit for the term of the lease to ensure that the tenant does not default on the terms of the lease agreement or otherwise damage the property Should the tenant damage the property (normal "wear and tear" excluded) or if the Tenant has not paid rent, the landlord is entitled to recoup the debt from the security deposit. Usually the tenant must provide the landlord with the security deposit at the start of the lease term. At the end of the lease term, the tenant will receive the deposit back minus any deductions for repairs/restoration.

How much should the damage/security deposit be?

Damage deposits are usually equivalent to the maximum of one month's rent, but can be any amount that the landlord decides upon in a commercial setting. Security deposits can vary from one up to three months rent depending upon the tenant and industry.

What is a schedule of condition?

The schedule of condition is an inspection report for the let property which is completed at the commencement of the lease. This form contains a description of the condition of the property at the time of the tenant's possession and may also include a portfolio of photographs as evidence of the property's condition. The schedule is used at the end of the lease term as a comparison tool to determine if the tenant caused any damage to the property The tenant should ensure that all damage is properly disclosed in this report to prevent a landlord from assuming the tenant has caused the damage.

Landlord Improvement/Signing Incentives

What is a signing incentive?

A signing incentive is an incentive or concession given to the tenant to enter into the lease, such as a month's free rent.

Miscellaneous

What is subletting a lease?

Subletting the lease refers to when the rights to use the property (or a part of the property) under a lease, is transferred by the current tenant to a third party for a portion of the remaining term of the lease.

What is assigning a lease?

Assigning the lease refers to the complete transfer of all rights to occupy the premises for the rest of the term from the current tenant to a third party.

What additional clauses does the long version include?

Some of the additional clauses in the long version include clauses that set out the basic terms and definitions in the lease as well as clauses detailing the parties' insurance obligations and repairing obligations.

When would the tenants have to have the carpets professionally steam cleaned?

The tenants will be required to have the carpets professionally steam cleaned before the final move-out inspection occurs.

Signing Details

I do not know when the lease will be signed. Can I fill in the date later?

Yes, by selecting 'Unsure' as the date the agreement will be signed, a blank line will be inserted into the lease so that you can add the correct date after printing the document.

Who should sign the lease?

Both the landlord and the tenant should sign the lease. Having witnesses to the parties' signatures provides greater evidence that the parties entered into the lease.

Security of Tenure

What is “security of tenure”?

Security of tenure refers to the tenant's right to remain in the property More specifically, the Landlord and Tenant Act 1954 provides commercial tenants security of tenure by giving them the right to renew their tenancy when their lease comes to an end.

What does “contract out” mean?

Contracting out of the Landlord and Tenant Act 1954 allows the landlord and tenant to agree that that the tenant will have no security of tenure. This means that when the lease has expired, the tenant will be unable to apply to the court for a new tenancy (under the Landlord and Tenant Act 1954 tenants with business leases for more than one year generally have security of tenure when the lease expires). If the Landlord and Tenant do not contract out of the Landlord and Tenant Act 1954, then special notices (Section 25 Notice or Section 26 Notice) will have to be filled by the landlord and/or tenant in order to extend the lease.

What is a “break clause”?

Leases may include a provision known as a break clause which allows either the tenant or the landlord (or both) to end the lease at a specified date without waiting for the full term of the lease to expire. This may be beneficial to the party who wants to end the lease early – such as a landlord who wants to redevelop or a tenant who wishes to leave without finding a subtenant or assignee– however early termination may result in problems and/or loss to the other party.

What is the “Warning Notice”?

The Warning Notice is a prescribed form that the landlord must serve on the tenant at least 14 days before the tenant signs the lease. The warning notice sets out the rights the tenant is giving up by contracting out. United Solicitors provides this warning notice with our commercial lease form.

What is the “Simple Declaration Made by Tenant”?

The Simple Declaration Made by Tenant is a form for tenants who are contracting out. The form is used after the 14 day warning period has elapsed. It contains a declaration to be signed by the Tenant stating that the Tenant is entering into a tenancy agreement with the landlord that will exclude security of tenure, the tenant has received the warning notice at least 14 days before entering into the agreement and the tenant is aware of the consequences of entering into the agreement. United Solicitors provides this simple declaration with our commercial lease form.

What is the “Statutory Declaration Made by Tenant”?

The Statutory Declaration Made by Tenant is a form that can be used when both parties want to enter into an agreement excluding security of tenure but cannot wait until the 14 day warning period has elapsed. The form contains a declaration to be signed by the Tenant stating that the Tenant is entering into a tenancy agreement with the landlord that will exclude security of tenure, the tenant has received a notice explaining the rights that are being given up when contracting out and the tenant is aware of the consequences of entering into the agreement. As an additional safeguard, the declaration must be signed before an independent solicitor or commissioner of oaths. United Solicitors provides this statutory declaration with our commercial lease form.

Termination

Can the tenant apply to the courts to renew the lease if the tenant has already agreed to contract out the Landlord and Tenant Act 1954?

No, if the landlord and the tenant have already contracted out then when the lease has expired, the tenant will be unable to apply to the court for a new tenancy.

What are the forms for renewing and terminating the lease?

Assuming that the parties have not contracted out of the Landlord and tenant Act 1954, each party will need to use a specific form to end or renew the tenancy Landlords must use a Section 25 Form while tenants must use a Section 26 Form. If the Landlord has already proceeded with a Section 25 Form, the tenant cannot use the Section 26 Form. Similarly, if the Tenant has already commenced with a Section 26 Form, the landlord cannot use the Section 25 Form.

Section 25 Form

● The Section 25 Notice is a form that can be used by a landlord to either:

1. end a tenancy with a proposal to start a new tenancy or

2. end a tenancy with reasons for refusing a new tenancy.

● If the Landlord wishes to end the tenancy, the landlord must send the Section 25 Notice stating the reasons for refusing the new tenancy to the tenant. The tenant then has 2 options. First, the tenant can do nothing in which case the tenancy will come to an end on the date specified on the Section 25 form. Second, the tenant can apply to the court to renew the tenancy in which case the landlord will have to come to court and provide reason(s) for why the landlord wishes to end the tenancy The reasons must meet one or more of the specified grounds of s. 30(1) of the Landlord and tenant Act 1954.

● If the Landlord wishes to renew the tenancy, the landlord must send the Tenant a Section 25 Form which ends the tenancy and provides the terms for a new tenancy

Section 26 Form

● The Section 26 Notice is a form that can be used by a tenant to request a new tenancy. The form sets out the Tenant's proposed terms for a new tenancy. The form must be sent to the landlord. Upon receipt, the landlord has 2 months to decide whether he/she wishes to continue granting the tenancy If the landlord opposes the tenancy, the landlord can apply to court to end tenancy stating one or more of the specific grounds for ending the tenancy under s. 30(1) of the Landlord and tenant Act 1954.

What are the prescribed grounds under which a landlord can oppose granting a new tenancy?

Under s. 30(1) of the Landlord and tenant Act 1954, the grounds on which a landlord may oppose an application for a new tenancy are:

● where under the current tenancy the tenant has any obligations as respects the repair and maintenance of the holding, that the tenant ought not to be granted a new tenancy in view of the state of repair of the holding, being a state resulting from the tenant's failure to comply with the said obligations;

● that the tenant ought not to be granted a new tenancy in view of his persistent delay in paying rent which has become due;

● that the tenant ought not to be granted a new tenancy in view of other substantial breaches by him of his obligations under the current tenancy, or for any other reason connected with the tenant's use or management of the holding;

● that the landlord has offered and is willing to provide or secure the provision of alternative accommodation for the tenant, that the terms on which the alternative accommodation is available are reasonable having regard to the terms of the current tenancy and to all other relevant circumstances, and that the accommodation and the time at which it will be available are suitable for the tenant's requirements (including the requirement to preserve goodwill) having regard to the nature and class of his business and to the situation and extent of, and facilities afforded by, the holding;

● where the current tenancy was created by the sub-letting of part only of the property comprised in a superior tenancy and the landlord is the owner of an interest in reversion expectant on the termination of that superior tenancy, that the aggregate of the rents reasonably obtainable on separate lettings of the holding and the remainder of that property would be substantially less than the rent reasonably obtainable on a letting of that property as a whole, that on the termination of the current tenancy the landlord requires possession of the holding for the purpose of letting or otherwise disposing of the said property as a whole, and that in view thereof the tenant ought not to be granted a new tenancy;

● that on the termination of the current tenancy the landlord intends to demolish or reconstruct the premises comprised in the holding or a substantial part of those premises or to carry out substantial work of construction on the holding or part thereof and that he could not reasonably do so without obtaining possession of the holding; and

● on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence.