Hello. And in this video today, we're gonna be looking at the procedural steps involved with granting a brand new lease. So this is different to the assignments of a lease. So a lease that is already existing and this is uh in relation to granting something completely new um out of um the reversion. So out of, you know, the, the, the main um so that's the freehold. Um You know, it's going to be from, from the, the parent title. Essentially a draft lease will typically be uh once it's been drafted up, will be attached to a contract once all terms have been agreed. So um up until this point, it's for the landlord and the proposed tenant to negotiate the terms of the lease. So, uh as it says on the s on the slide, um with long residential leases, you know, you'll, you'll draft up the lease all the terms that you want included. Um And then once agreed, you'll attach it to a contract for sale and that contract for sale will be, will be between landlord and lease holder or proposed lease holder buyer. And that contract will stipulate that they have to enter into that lease conversely with a commercial lease. Um It's usual for both parties to proceed straight to the grant of that lease. So you typically wouldn't see a contract drawn up. Um You know, the lease terms would be agreed and then um both landlord and proposed tenant would agree to just complete that lease straight away without having a contract involved. So when we're acting for a landlord, the solicitor acting will need to obtain instructions from their clients. So the the landlord on various things. So it's gonna be, what kind of form of lease do you want? Um What's the length going to be? How long is that lease gonna be in place for? Um Is there rent chargeable if so how much? Um and you know who's gonna be responsible for maintaining and repairing a property uh including responsibility as to insurance. So you need to stipulate what is actually being um leased. So the the actual um you know what's included and then also, you know how long it's going to be granted for uh who's responsible for maintaining repairing and insuring? Um And is there any rent or service charges that are payable by the tenant? The landlord solicitor? When they actually draft at this lease, they're gonna need to consider um the freehold title, the the parent title, the the landlord's title and consider what kind of rights need to be granted to the tenant to make it a workable lease now because you're only leasing a certain part of the property out to the tenant. They uh are gonna probably need to pass over areas that belong to the landlord in order to, to get around and do things. So a landlord solicitor is gonna need to think about the setup of the building of the land, whatever it is and think about what does this tenant physics need from, from the landlord's title to be able to effectively do the things they need to do. So, um you know, once you've established what you need to give, then you need to think about, can the land actually actually legally grant those those rights to do those things? It might be that for example, a client needs to, I don't know, pass over a side passage way. Um But actually if the landlord doesn't own that side passageway or, and they don't have legal rights to go over it, then they're not going to be able to pass on any rights to the tenants. So you've got to make sure that everybody has um you know, the, the rights that they need to be able to grant, you know, extended rights to tenants. A landlord solicitor will also need to check the covenants that affect the title and ensure that there's nothing actually preventing them from granting a lease. So, are there any restrictive covenants on the title that says, you know, not to grant any leases or, you know, anything as to the use of the land. Um You know, it might say you can only use it for private residential purposes. But if you're intending on granting a lease for a commercial space, that could potentially be a breach of that. So a landlord solicitor is gonna need to make sure that they can actually um you know, there's nothing preventing them from granting that lease in the first place next up is mortgages. So the landlord solicitor is going to need to identify any mortgages or financial charges, any, any restrictions, any portions notices that kind of thing, anything that could indicate a financial liability, um Anything like that that's noted on the landlord's title. Um And once you've established what kind of financial charges there are, then the landlord solicitor needs to consider how those charges are going to be dealt with. So are they going to be paid off? So is the landlord going to simply just pay off all mortgages um on, on or before completion at the lease or is the landlord going to obtain formal consent from a lender to grant the lease? Now, uh this would mean the charge would stay on the parent title on the landlord's title, but that lender will be giving specific consent to say, yeah, we're gonna let you grant this lease to the tenant. Um And that's what we call consent to dealing. The landlord solicitor will need to then draft the lease as I said, just like they'll draft the contract. So I put those two on the side there. So as I said, commercial leases may not be, there may not be a contract, it might just be the lease. But uh usually with residential transactions, you're still gonna need a contract. So once the drafting of the leasa and where applicable the contract is completed, the landlord solicitor will then need to send this to the buyer solicitor for approval at which point any negotiations on terms can begin. So the buyer solicitor may then um you know, push back on certain clauses, they may want things changed, um they might want things added. So at that point, there's a bit of a negotiation process. Ok? So now we're going to think about what we, what we would expect to see within a contract pack from a landlord solicitor on the grant of a new lease. So it it's very similar to an assignment of a lease, but instead of a tr one that's gonna be provided by the seller to the buyer, then the draft lease takes its place. Now, a transfer, you can't have a transfer because there is no existing existing interest yet and use a tr one where there are existing leasehold interests where there isn't an interest yet, you've got to create one and the creation is through the lease itself. So, you know, as I said, very similar to an assignment, but you just go to swap that tr one out for the draft lease itself. In addition, you're probably likely to have quite little management information um because probably the building is in its infancy, service charges may not be collected yet. The the management is, is very young. So you might be limited in kind of what, what documentation you have. You might find that the the landlord solicitor send you a budget perhaps for the next year, what they expect that they're going to charge tenants um for the running of the building. But you're probably not going to get much much else. If the building is in its infancy, you will want to see an energy performance certificate though. Um an energy performance certificate is always needed when a building is constructed, sold or rented. So you are still gonna want to see that um And you're gonna want to check that it's still in date and that it is at an appropriate rating. Uh So, you know, to, to rent out property, it has to be um e or above. Um Anything below is, isn't permitted. So you're going to need to check that uh make sure that that's adequate. So once a buyer's solicitor has reviewed the contract and lease, the lease will then be annexed to the contract. So essentially just attached to the back of the contract and that confirms agreements with the terms once the contracts are exchanged, so once the contracts are formally changed and the parties are, um, you know, committed to the purchase or the grant of the lease. Then, um, you know, by attaching the lease itself, it confirms that there's an agreement and to the terms that are included in that lease. Now, a buyer's solicitor should, should carry out any usual searches that they would with a freehold property. So, um, you know, you should still think about carrying out a local search, an environmental search, a water and drainage search and any other uh searches that might be relevant to that property. Um This is, you know, exactly the same as a freehold. You're still gonna want to do all of those things to make sure that there's nothing adverse that could affect your client's position or their lender perhaps. Um, now a landlord might provide those searches within the contract pack. So that's a slight difference. You might find that the landlord has already obtained those searches, um, and they're ready and, uh, you know, you're able to use those, um, you know, to pass them on to your buyer um, survey as well. You're still going to want a client to do a survey um on the property just to make sure it's structurally adequate and there's no uh health and safety risk there, you will say to give consideration to any lender and their requirements as well. So the lender requirements are in the UK, if in our handbook. Um, and you some examples um of lender requirements um that most lenders will stipulate in relation to leasehold properties are things like the minimum number of years that can be granted. So, you know, a lender is going to want a good number of years on the lease. Um You know, if it's less than 60 years, it's probably not going to be acceptable. Anything from 60 to 90 you know, you need to be checking and making sure that the lender is ok with that. Um that reduced lease length, they're probably also going to say that there have to be appropriate provisions in place for maintenance and repair of the building. So, you know, they're gonna want you to check the lease terms to make sure that the landlord is properly ensuring they're properly maintaining. And there are adequate covenants on the relevant parties to do those things. The buyer solicitor obviously also needs to advise their client on the contents of the lease before committing them to that lease. So you need to actually go through and break it down for the client and actually tell them about each section of the lease and what it means for them. So the advice should include what the main covenants are, what they are permitted to do and what they're not permitted to do in the property. Um And it should be pushed with the client that a breach of any covenant could result in their lease being forfeited. So essentially the the the landlord petitioning for that lease to be dissolved essentially and absorbed back into the freehold, um which you would be terrible for a client because they will have invested money. They will have paid a premium for that lease. Um And if they breach a covenant, they could end up losing that altogether. The landlord solicitor will, once you know, we will agree the lease, they'll prepare what's called an engrossment copy and they'll distribute them for signing. So they have to give at least five working days before completion for this. There has to be adequate time to allow landlords and tenants to be able to sign those documents. Now, in reality, and in practice, it's better to just get that lease out and signed as soon as possible. And you don't really want to be leaving at five working days before completion because there could be delays with the post, there could be unforeseen circumstances that means that there's a delay. So as soon as it's been agreed, it's best to get it signed then there. Um Prior to completion, the landlord will send a completion statement, you'd buy a solicitor confirming the final balance due. Um And this balance is going to include the premium for the lease of purchase price. Um and probably in a portion that for any rent that's payable by the buyer. So if you're part way through a financial year and the rent is say 100 pounds, then you're gonna pay. Um you can or the la the landlord is gonna want the buyer to pay for their portion of ownership. Um In the case of residential leases, ground rents uh won't be chargeable on the grant of the brand new lease. So if it's commercial, then you might have just normal rent and in which case, that's fine. But if it's a residential lease, um you know, and you've got a brand new lease now, then they will not be committed to grant um to, to charge any ground rent, um more than one Capricorn. So that is essentially nothing. Uh So if you do see any brand new leases where you've got landlords trying to add a ground rent, then that is uh essentially illegal. Now, each party will um now once they've signed the lease ahead of completion, um their solicitor will hold on to their signed part until completion takes place at which point you swap. So the landlord will send their part to the buyer's solicitor and the buyer's solicitor will send their part to the landlord's solicitor after completion. Then we need to consider registration. Now, any long leases over seven years will be register at land registry. And once you've completed that lease, it will be allocated its own leasehold title. So once I'm register, have processed your application, they will uh create a brand new register and allocated an a title number and then the freehold title will then be updated and it will be your leasehold title will be noted on that freehold register, short leases aren't register, so anything under seven years isn't register but will be considered an overriding interest. So it will still be legally binding and it, you know, the the land will still be subject to it, but it's um it did, it's not going to be register, so you won't get a lease or title for sure. Leases, the tenant may also be liable to pay stamp duty land tax on the premium payable for that lease and on any rent payable. Now, as I said, brand new leases, um you know, you're not allowed to, to charge ground rent now. So that's not really an issue, but you are gonna have to be paying stamp duty land tax on the premium if it's over the threshold. Um So if, if the price exceeds um 4000, then it's, you're going to have to submit a tax return. Um And uh and depending on how much you're paying for the property, then there'll be different rates available um for, for tax. So sometimes you don't have to pay, but other times you will. So um if it's over 40,000, you will need to tell HMRC that you've um that, you know, it's a red, it's a notifiable transaction, but uh it depends on actually how much the premium is, will be. The decider is how much you'll pay. Finally notice of uh transfer in charge or transfer of of lease will be required under the terms of the lease. So the new lease will stipulate that um a notice needs to be given to the landlord to say this is the new owner, this is the new lease holder um and that needs to be served as soon as possible. Um Now, with the grant of new leases, it is entirely possible that this is taken care of by virtue of liaising with the the landlord solicitor during the course of the transaction. But you'll have to check that. Um You know, if you're already corresponding with them, it's likely that they're not gonna want you to actually serve a formal notice confirming you're now the owner they will know um but they may want you to do it as a formality. So it's always important to check that. Um But in, in any event, if there's a mortgage lender or a new charge, then you'll need to tell the landlord who that lender is gonna be. So, in conclusion, again, this is similar to the assignment of a lease um and of a freehold sale or purchase. Um But there are key differences. So it's all about potentially the, the, the procedure that we go through. Um The advice is essentially the same that we will give to a client. I'm gonna still need to be telling them about that lease term about any onerous covenants making sure they've got the right rights. There is more flexibility on the grant of a new lease because you've got, um, it hasn't registered yet or um you know, if it is reg hasn't been completed, if it's a short lease, um So if it hasn't been completed, you can still change things, you can add things. So it's quite a good way for a um, a buyer solicitor to kind of try and negotiate good terms. Um Whereas with an assignment of the lease, it has already been, it's already set in stone. So, you know, unless you vary the lease, um, you can't change it. So, you know, there's, um, there's definitely pros with the grant of a new lease and you, you'll have a little bit more control, but in essence, it's, it's got very similar bones. Um, so, you know, if you can follow that similar procedure, um, you know, that, that will certainly help.
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