Glossary

A · B · C · D · E · F · G · H · I · L · N · O · P · Q · R · S · T · U · V · W · Y

A

Alienation

Passing a lease on to someone else. Here it takes three forms: assignment, underletting and sharing with a group company. Clause 5.6 forbids any dealing with part of the floor, and allows the whole to be passed on only with Fellgate's consent, except by sharing. Lease 5.6 · Chapter 8 · see Assignment, Underletting, Group sharing

Annual rent

The main rent: £60,000 a year before VAT, paid in twelve monthly instalments of £5,000 on the 2nd of each month. It starts on the Rent Commencement Date, after three months rent-free, and is reviewed once, at year five. Particulars: Annual Rent · Chapter 3 · see Rent review, Rent-free period

Assignment

Transferring the whole lease to a new tenant, the assignee, who becomes the tenant for the rest of the term. Linnet may assign only the whole floor, with Fellgate's consent, which may not be unreasonably withheld or delayed. Fellgate may require Linnet to guarantee the assignee. Lease 5.6 · Chapter 8 · see Authorised guarantee agreement (AGA), Alienation

Assumptions and disregards

Schedule 2's instructions to the surveyor. It assumes the floor is fit to use, both sides kept their covenants and any rent-free period has been given and expired. It ignores Linnet's occupation, goodwill and improvements it made with consent, not under an obligation to Fellgate and not at Fellgate's cost. Lease, Schedule 2, paragraph 2 · Chapter 4 · see Open market rent

Authorised guarantee agreement (AGA)

A guarantee by a tenant that assigns its lease that the assignee will pay the rent and keep the lease's promises. The lease defines it by section 16 of the 1995 Act. It lasts until the assignee assigns with consent, and Fellgate must claim each missed month within six months. Definition: authorised guarantee agreement · Chapter 8 · see Assignment

B

Break clause

A clause that lets a party end a lease early, on a fixed day, by notice. Clause 10 lets only Linnet break, at year five, on at least six months' notice. The break works only if the Annual Rent is paid and the whole floor is empty on that day. Lease, clause 10 · Chapter 9 · see Break date, Notice (giving a), Time of the essence

Break date

2 November 2031, the one day on which Linnet may end the lease early. It is also the Review Date, so Linnet can leave if the new rent is too high. Its notice must be given by 2 May 2031, and the diary says to serve it by 30 April. Particulars: Break Date · Chapter 9 · see Break clause, Rent review

Business tenancy

A tenancy of premises the tenant occupies for its business. Under Part II of the 1954 Act it does not end when its term ends, and the tenant may stay and ask for a new lease. That is why Fellgate contracted Linnet's lease out before Linnet was bound. Chapter 2 · see Security of tenure, Contracting out

C

Common parts

The shared parts of the office block that are not let: the entrance hall, the stairs, the landings, the yard and the car park. Fellgate keeps them clean and in repair, and Linnet pays half the cost through the service charge. Schedule 1 gives Linnet the right to use them. Definition: Common Parts · Chapter 5 · see Service charge, Lease of part

Contracting out

Agreeing, before the tenant is bound, that the security of tenure in the 1954 Act will not apply. Section 38A allows it in three steps: the landlord's warning notice, the tenant's declaration and the agreement in the lease. Clause 11 of Linnet's lease records all three. Lease, clause 11 · Chapter 2 · see Warning notice, Simple declaration, Statutory declaration

Counterpart

The part of the lease the tenant signs. The landlord signs the Lease and the tenant signs the identical Counterpart, and each side keeps the part the other signed. Fellgate keeps the Counterpart as its proof of everything Linnet promised. Lease 14.4 · Chapter 10 · see Deed

Covenant

A promise in a lease. An absolute covenant is a promise never to do something, and a qualified covenant is a promise not to do it without consent. A broken covenant gives a claim for damages, while a missed condition, such as those on the break, makes the clause fail. Chapter 8 · Chapter 9 · see Repairing covenant, Quiet enjoyment

D

Deed

A document signed with special formality, which takes effect only when it is delivered. A ten-year lease must be a deed. A company signs one by two directors, by a director and the secretary, or by one director with a witness (section 44 of the Companies Act 2006). Lease, Execution · Chapter 10 · see Counterpart

Dilapidations

A landlord's claim for the tenant's failure to repair. The schedule of dilapidations is the surveyor's itemised list, and the tenant pays the cost of preparing it (clause 5.10). Damages for disrepair cannot exceed the fall in the value of the landlord's property (section 18(1) of the 1927 Act). Chapter 6 · see Schedule of condition, Repairing covenant

E

Engrossment

The final clean copy of a document, printed for signature from the agreed draft. Fellgate's solicitors print the Lease and the Counterpart and read each one against the draft, page by page, because two copies printed from one draft can still differ. Chapter 10 · see Deed, Counterpart

EPC (energy performance certificate)

The certificate that rates a building's energy efficiency from A to G. A landlord must give a new tenant one, and may not grant a lease of a non-domestic building rated below E unless an exemption is registered. The office block is rated C. Chapter 2

F

Forfeiture

The landlord's right to end the lease because the tenant has broken it, by taking the premises back. Clause 9.1 allows it for rent unpaid 21 days after the due date, any other breach, or insolvency. For a breach other than unpaid rent, a section 146 notice must come first. Lease 9.1 · Chapter 9 · see Relief from forfeiture, Break clause

G

Group sharing

Letting a group company work on the floor without a lease of its own. Clause 5.6(e) allows it without consent if no tenancy is created and Linnet tells Fellgate in writing within ten Working Days. A room of its own, locked against Linnet, would make the other company a tenant. Lease 5.6 · Chapter 8 · see Alienation, Underletting

H

Heads of terms

A short paper from the letting agents recording the main terms of a letting: the floor, the rent, the term and the rest. It is marked subject to contract and binds nobody, but it tells the solicitors what to draft. The lease replaces it at completion (clause 14.2). Chapter 1 · Chapter 2 · see Subject to contract and subject to lease

I

Insurance rent

Linnet's share of the premium Fellgate pays to insure the whole site: a tenth, because the first floor is 400 of the site's 4,000 square metres. The premium is £12,000, so the insurance rent is £1,200 a year, paid within 14 days of Fellgate's demand. Definition: Insurance Rent · Chapter 5 · see Rent suspension, Service charge

Interest rate

The rate on late payments under the lease: 4% a year above the Bank of England base rate. It applies to any of the Rents unpaid 14 days after the due date, and then runs from the due date itself. It was part of Linnet's price for paying rent monthly. Particulars: Interest Rate · Chapter 3 · see Rent deposit, Forfeiture

L

Lease

The document by which a landlord lets premises to a tenant for a fixed term in return for rent. Linnet's lease is for ten years. It opens with the prescribed clauses and the Particulars, has fifteen clauses and five schedules, and is signed as a deed in two parts. The Lease · Chapter 1 · see Term, Lease of part

Lease of part

A lease of part of a building, with the landlord keeping the rest. The tenant takes the inside of its space, and the landlord keeps the structure, the roof and the shared parts. The tenant pays a share of their upkeep through the service charge. Lease 2.4 · Chapter 1 · see Common parts

Licence for alterations

The landlord's written consent to a tenant's alterations, signed for both sides. Linnet's licence covers drawings 1 to 3: partitions, a meeting room and floor boxes. It sets the conditions, including removal at the end if Fellgate gives notice, and was completed with the lease. Lease 5.4 · Chapter 7 · see Reinstatement, Permitted use

N

Notice (giving a)

A notice under the lease must be in writing and given by hand or by first class post, never by email (clause 13). By hand it is given when it is left, and by post on the second Working Day after posting. It goes to the current landlord's registered office. Lease 13.2 · Chapter 9 · see Break clause, Time of the essence

O

Open market rent

The rent a willing landlord and a willing tenant would agree for the floor on the Review Date, if it were let empty for a new ten years on the lease's terms. The surveyor prices this imagined letting, using the assumptions and disregards in Schedule 2. Lease, Schedule 2, paragraph 2 · Chapter 4 · see Assumptions and disregards, Rent review

Option to tax

A landlord's choice, notified to HMRC, to charge VAT on the rent of a building it would otherwise let free of VAT. A landlord that charges VAT can recover the VAT on its own building costs. Fellgate opted so it could recover the VAT on a new roof. Lease 3.4 · Chapter 3 · see VAT on rent

P

Permitted use

The only use the lease allows: “offices and a design studio, with ancillary storage”. Clause 5.5 makes Linnet keep to it. It is a promise to Fellgate, not planning permission, and it keeps a quiet tenant on the floor above Fellgate's own staff. Particulars: Permitted Use · Chapter 7 · see Licence for alterations

Prescribed clauses

The short clauses, LR1 to LR14, that HM Land Registry requires at the front of every lease it must register: in practice, a lease of more than seven years. Each answers a question the registrar would otherwise dig out of the lease, such as the parties or the term. Lease, prescribed clauses · Chapter 10

Q

Quiet enjoyment

The landlord's promise not to interfere with the tenant's possession of the premises while the tenant pays the rent and keeps its promises (clause 6.1). It is not about noise. Heating, cleaning and the other services are a separate promise, which the tenant pays for through the service charge. Lease 6.1 · see Covenant, Service charge

R

Reinstatement

Two things in the lease. Linnet must remove its alterations and make good only if Fellgate asks by notice at least three months before the end of the Term, which includes an early end on the break (clause 5.4(d)). Fellgate must also rebuild after insured damage (clause 7.4). Lease 5.4 · Chapter 7 · Chapter 5 · see Licence for alterations, Yield up

Relief from forfeiture

A court order that gives a forfeited lease back to the tenant. For a broken covenant, the court usually grants it once the breach is put right. For unpaid rent, the tenant can get relief by paying what it owes, and clause 9.3 keeps that right. Lease 9.3 · Chapter 9 · see Forfeiture

Rent commencement date

The day from which the Annual Rent is first payable: 2 February 2027, three months after the lease began. The first £5,000 instalment falls on it. Before it Linnet pays no Annual Rent, but the service charge and the insurance rent run from the date of the lease. Particulars: Rent Commencement Date · Chapter 3 · see Rent-free period, Annual rent

Rent deposit

Money the tenant pays the landlord as security: here £15,000, three months' rent, for the first three years. It stays Linnet's money, in a separate account marked as Linnet's deposit. Linnet charges it to Fellgate as security, and that charge must be registered at Companies House within 21 days. Lease, Schedule 4, paragraph 1 · Chapter 3 · see Interest rate

Rent-free period

A stretch at the start of a lease when the main rent is not charged. Linnet pays no Annual Rent for the first three months, while it fits out the floor (clause 3.2). The service charge and the insurance rent are payable from the first day. Lease 3.2 · Chapter 3 · see Rent commencement date

Rent review

A fixed day on which the rent is reset to what the floor would then let for. Linnet's lease has one review, on 2 November 2031, and the new rent can rise but not fall. If the sides cannot agree it, an independent surveyor decides as an expert. Lease, Schedule 2 · Chapter 4 · see Open market rent, Upwards-only review

Rent suspension

The stopping of the Annual Rent and the service charge after insured damage makes the floor unusable. Under clause 7.3 they are suspended, in full or in a fair part, until the floor can be used again, for three years at most. The insurance rent keeps running. Lease 7.3 · Chapter 5 · see Insurance rent, Reinstatement

Repairing covenant

The tenant's promise to keep what it rents in good repair. On its own, that means putting the premises into good repair first, whatever their state at the start. Clause 5.2 limits Linnet's promise to the state recorded in the Schedule of Condition. Lease 5.2 · Chapter 6 · see Schedule of condition, Dilapidations, Yield up

S

Schedule of condition

An agreed record of the premises at the start of the lease, against which the repairing covenant is measured. Here it is 120 photographs taken by one surveyor for both sides, with her covering schedule, kept in two identical initialled sets (Schedule 5). Lease, Schedule 5, paragraph 1 · Chapter 6 · see Repairing covenant, Dilapidations

Security of tenure

A business tenant's right under the 1954 Act to stay on when its lease ends and ask for a new one. The landlord can refuse only on grounds the Act lists. Fellgate needs the floor back after ten years, so the lease was contracted out. Chapter 2 · see Business tenancy, Contracting out

Service charge

The tenant's share of the cost of running and repairing the shell and shared parts of the building. Linnet pays a fixed half of the office block's service costs listed in Schedule 3, quarterly on account, settled after each year. Costs it must never pay are excluded by name. Lease, Schedule 3 · Chapter 5 · see Service charge cap, Common parts

Service charge cap

A ceiling on what the tenant pays towards the service costs. For each of the first five years Linnet pays no more than £5,000 (clause 8.2). Anything above that is Fellgate's own cost and is not carried forward, so Fellgate cannot collect it in a later year. Lease 8.2 · Chapter 5 · see Service charge

Simple declaration

The tenant's signed declaration, in a fixed form, that it has read the warning notice and accepts that it will have no security of tenure. It is enough if the notice was served at least 14 days before the tenant is bound. Clause 11.2 records it. Lease 11.2 · Chapter 2 · see Warning notice, Statutory declaration, Contracting out

Statutory declaration

The same declaration, but made formally before an independent solicitor. It is needed when the warning notice was served less than 14 days before the tenant is bound, and it is harder to arrange at short notice. Linnet did not need one. Chapter 2 · see Simple declaration, Warning notice

Subject to contract and subject to lease

Words on every offer, email and paper about a letting until completion. They mean nobody is bound yet: either side can walk away or change the terms and owe the other nothing. Nothing binds until the lease and the counterpart are exchanged. Chapter 1 · see Heads of terms

T

Term

The fixed length of a lease: for Linnet, ten years from 2 November 2026, stated in the Particulars. Because the lease is contracted out, the term really does end on its last day. The end of the Term also includes an early end, such as the break (clause 1.2(i)). Particulars: Term · Chapter 1 · see Lease, Break date

Time of the essence

Words that make a deadline exact, with no reasonable extra time allowed. Clause 10.5 makes time of the essence of the break, so every date must be met to the day. A break notice one day late fails as completely as one a year late, and the lease runs on. Lease 10.5 · Chapter 9 · see Break clause, Notice (giving a)

U

Underletting

Granting a shorter lease out of the tenant's own lease. Linnet would stay Fellgate's tenant and become the undertenant's landlord. Clause 5.6 allows an underlease of the whole floor only, with consent, at no less than the market rent, contracted out of the 1954 Act and forbidding further underletting. Lease 5.6 · Chapter 8 · see Alienation, Assignment

Upwards-only review

A rent review under which the rent can rise but never fall. The new rent is the greater of the rent before the review and the open market rent (Schedule 2). In return, Linnet got its break on the same day as the review. Lease, Schedule 2, paragraph 1 · Chapter 4 · see Rent review, Break date

V

VAT on rent

VAT at 20%, added to the rent and other sums under the lease because Fellgate has opted to tax the building. Every figure in the lease is before VAT, and Fellgate must send a VAT invoice for each payment. Linnet is registered for VAT, so it recovers the tax. Lease 3.4 · Chapter 3 · see Option to tax

W

Warning notice

The notice, in a fixed form, that a landlord serves before contracting a lease out. It tells the tenant it is being offered a lease without security of tenure. Served at least 14 days before the tenant is bound, it allows a simple declaration, and clause 11.1 records its date. Lease 11.1 · Chapter 2 · see Contracting out, Simple declaration

Y

Yield up

To hand the premises back at the end of the lease. Under clause 5.8 Linnet must give the floor back empty, in the repair, condition and decoration the lease requires, with any alterations removed that Fellgate's reinstatement notice requires. Lease 5.8 · Chapter 6 · see Repairing covenant, Reinstatement, Schedule of condition