Granting or taking on a Lease can be a new experience and the leasehold documents may contain lots of terms that you have not come across before, such as:-

• Landlord - The person who owns the property. Sometimes called the Lessor.
• Tenant - The person being granted the Lease. Sometimes called the Lessee.
• Term - The length of time that the Lease is granted to the Tenant for.
• Rent - The amount that the Landlord will charge the Tenant on an annual basis for using the premises.
• Authorised/Permitted use - The use to which the Tenant is allowed to put the premises to. This is generally quite restricted.
• Covenants - The obligations that the Landlord and the Tenant must comply with. These are set out within the Lease itself. The Tenants Covenants are the main part of the Lease.
• FRI or Full Repair - A full repairing and insuring Lease. This means that the Tenant must keep the premises “in full repair” which means that they must keep them to a very high standard of condition including the structural parts of the property. The “insuring” part is somewhat contradictory as it does not indicate that the Tenant must insure the premises. Instead the Landlord insures the premises but the Tenant then pays the Landlord the cost of the insurance premiums.
• Internal Repairing Only - This applies to a Lease which is not a Full Repairing Lease. Instead of being responsible to repair the entire property, the Tenant only has to repair the internal surfaces of the Premises such as ceilings, carpets and paint work. Generally the Landlord is responsible for maintaining the structural parts and may charge the Tenant a proportionate cost of such maintenance through Service Charge.
• Rent Review - The basis on which the rent can be increased during the Term. Rent Reviews often take place every 3 or 5 years. The Lease will set out how the rent is to be reviewed. This is usually “Open Market Rent” whereby the rent is increased to the amount at which the Landlord could rent the premises on that date on the open market. An alternative is the “Index Linked” rent review whereby the rent is increased in accordance with the inflation.
• Insurance Rent - The amount the Tenant must pay to the Landlord to cover the costs of insuring the property.
• Service Charge - The amount that the Tenant has to pay to the Landlord for maintaining and repairing common parts of the Property or building such as repairing structural parts with an Internal Repairing Only Lease or areas of a building or estate that are used in common with other Tenants.
• Landlord & Tenant Act Protection - Under the terms of the Landlord & Tenant Act 1954, Tenants of business premises have the right to automatically renew their Lease at the end of the Term unless the Landlord can raise specific grounds for not doing so. Such protection can, if the parties agree, be excluded by way of service of a notice by the Landlord on the Tenant prior to completion of the Lease. The Tenants then have to make a Declaration that they are aware of the exclusion of the protection but are entering into the lease.
• Break Clause - A right to bring the Lease to an end early. These can either be exercised solely by the Landlord or the Tenant or by both, depending on what the Parties agree.
• Assignment - The transfer of the Tenant’s interest in the Lease to another person (the Assignee).
• Underletting - The granting of an additional Lease by the Tenant to a third party to another person (the Undertenant) of all or part of the premises with the existing lease staying in place.
• Alienation - The provisions within the Lease relating to the Tenants ability to assign or underlet the area that they have leased from the Landlord. The Lease usually has various restrictions and requirements as to alienation.
• the Demise - The area that is let to the Tenant under the terms of the Lease.
• Forfeiture - The ability of the Landlord to bring the Lease to an end during the Term as a result of the Tenant not having paid rent, not having complied with covenants or becoming insolvent.
• Licence - A document by which the Landlord gives consent usually to alterations to the premises or the assignments or underlettings.

These are some of the Terms that you will come across with Leases. If you wish to discuss any of the above or have any queries regarding any part of any Lease transaction, please give us a call.

• Leases: What Happens Next?