#16676 - Leaseholds Procedure - Property Law and Practice

GRANT & ASSIGNMENT OF LEASEHOLDS

Grant: creation of brand new estate in the land	Assignment: transfer of the remainder of the term of an existing leasehold estate in the land
Pre-Contract
Draft lease instead of Contract Go straight to completion once draft lease has been agreed	Use existing lease Seller cannot vary terms of lease/sublease Need landlord to agree to variation of the existing lease If L agrees to variation, changes need to be effected by deed of variation T will have to pay for changes
Searches & Enquiries: Investigation of title [Official Copies] L’s freehold title Superior leasehold title (if applicable) Sellers Leasehold Information Form (SLIF) or Commercial Leasehold Enquiries Key questions: Compliance with covenants? Relationship with L? Is L’s consent required for assignment?	Searches & Enquiries: Investigation of title [Official Copies] L’s freehold title Superior leasehold title Sellers Leasehold Information Form (SLIF) or Commercial Leasehold Enquiries Key questions: Compliance with covenants? Relationship with L? Is L’s consent required for assignment?
Engross lease and counterpart L executes lease, T executes counterpart
There is no TR1 Pre-completion searches (also check freehold/superior title): OS1 Company search Does L have capacity to grant lease? Any burdens on title that might bind T? Any mortgage of freehold? If L’s title not deduced pre-exchange; completion will be delayed until the Title docs produced (SCPC 11.2.4)	Transfer deed (TR1 or deed of assignment) Pre-completion searches (also check freehold/superior title): OS1 Company search Does L have capacity to grant lease? Any burdens on title that might bind T? Any mortgage of freehold? If L’s title not deduced pre-exchange; completion will be delayed until the Title docs produced (SCPC 11.2.4)
Completion
Documents from Landlord: Lease executed by L Certified copy of consent from L’s lender to grant of the lease	Documents from Seller: Lease/sublease Transfer deed (TR1 or deed of assignment) Licence to assign executed by L Evidence of discharge of seller’s mortgage Copies of duplicate noticed served by the seller and predecessors on L according to lease covenant requiring L to be notified of any dispositions
Documents from Tenant: Counterpart lease executed by T Any premium payable for grant (less any deposit paid on exchange of contracts) Apportioned sum representing rent payable in advance under lease	Documents from Tenant: Money due in accordance with completion statement Duly executed counterpart licence to assign Release of deposit
Post-Completion
SDLT calculated on premium + NPV (net present value).	SDLT calculated on premium only.
Registration
Lease for the term of 7+ years	Lease that is already registered Lease that has 7+ years to run
VAT Residential leases: zero-rated Commercial leases: Age of property irrelevant Exempt but L can waive exemption and opt to tax If L wishes to charge VAT, must include express provision in lease

Pre-Contract

Draft lease instead of Contract
Go straight to completion once draft lease has been agreed

Use existing lease
Seller cannot vary terms of lease/sublease
Need landlord to agree to variation of the existing lease
If L agrees to variation, changes need to be effected by deed of variation
T will have to pay for changes

Searches & Enquiries:

Investigation of title [Official Copies]
- L’s freehold title
- Superior leasehold title (if applicable)
Sellers Leasehold Information Form (SLIF) or Commercial Leasehold Enquiries
Key questions:
- Compliance with covenants?
- Relationship with L?
- Is L’s consent required for assignment?

Searches & Enquiries:

Investigation of title [Official Copies]
- L’s freehold title
- Superior leasehold title
Sellers Leasehold Information Form (SLIF) or Commercial Leasehold Enquiries
Key questions:
- Compliance with covenants?
- Relationship with L?
- Is L’s consent required for assignment?

Engross lease and counterpart

L executes lease, T executes counterpart

There is no TR1
Pre-completion searches (also check freehold/superior title):
- OS1
- Company search

Does L have capacity to grant lease?
Any burdens on title that might bind T?
Any mortgage of freehold?

If L’s title not deduced pre-exchange; completion will be delayed until the Title docs produced (SCPC 11.2.4)

Transfer deed (TR1 or deed of assignment)
Pre-completion searches (also check freehold/superior title):
- OS1
- Company search

Does L have capacity to grant lease?
Any burdens on title that might bind T?
Any mortgage of freehold?

If L’s title not deduced pre-exchange; completion will be delayed until the Title docs produced (SCPC 11.2.4)

Completion

Documents from Landlord:

Lease executed by L
Certified copy of consent from L’s lender to grant of the lease

Documents from Seller:

Lease/sublease
Transfer deed (TR1 or deed of assignment)
Licence to assign executed by L
Evidence of discharge of seller’s mortgage
Copies of duplicate noticed served by the seller and predecessors on L according to lease covenant requiring L to be notified of any dispositions

Documents from Tenant:

Counterpart lease executed by T
Any premium payable for grant (less any deposit paid on exchange of contracts)

Apportioned sum representing rent payable in advance under lease

Documents from Tenant:

Money due in accordance with completion statement
Duly executed counterpart licence to assign

Release of deposit

Post-Completion

SDLT calculated on premium + NPV (net present value).

SDLT calculated on premium only.

Registration

Lease for the term of 7+ years

Lease that is already registered
Lease that has 7+ years to run

VAT

Residential leases: zero-rated
Commercial leases:
- Age of property irrelevant
- Exempt but L can waive exemption and opt to tax
- If L wishes to charge VAT, must include express provision in lease

#16676 - Leaseholds Procedure - Property Law and Practice

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