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Terms of a lease

This content applies to England

Information contained in a lease, the terms that apply, and varying the terms of a lease.

Information in a lease

The lease is a written agreement that establishes the relationship of freeholder and leaseholder, and sets out the contractual terms that are binding upon each person named on the lease. Leases are often long, complex documents. There is no 'standard' lease, although all leases will contain certain information:

  • the names of the parties to the lease (the freeholder and leaseholder)
  • the address of the property concerned
  • the length of the lease (the term)
  • the rent ('ground rent' – for more information see below)
  • the leaseholder's obligations (for example for service charges and repairs)
  • the freeholder's obligations (for example to insure the property or repair the common parts).

A typical lease is made up of a main contract and a set of schedules at the end of the document that will deal with specific issues such as service charges. Modern leases tend to have helpful subtitles or margin titles. Because of the great variety of leases, it is important to read the whole of the lease and to note all the matters that may be relevant, before giving advice on particular issues.

Terms

As well as the express terms of the lease, certain terms can be implied into the agreement.

Express terms

An express term is a term actually agreed by the parties and contained in the lease. Any ambiguity in one of these terms would generally be interpreted in favour of the leaseholder.

Implied terms

Sometimes the lease does not give full details of what has been agreed. This can be due to omissions or ambiguity in the lease but also where the law contains provisions that are implied into leases. Statute can impose terms on the parties. Such terms operate even if there is an express term to the contrary in the lease. For example, the right to a court order or to extend the lease will apply no matter what is said about giving up possession in the lease.

Ambiguity and omissions generally arise in one of two circumstances:

  • where only the most important parts of the agreement are set out, leaving the remaining details to be understood; or
  • where there are certain situations that are not provided for in the agreement.

In these cases, it may be possible to find that the freeholder and leaseholder agreed something additional, implicitly, at the time the lease was signed. The question is then whether a court can imply a term to remedy the deficiency or cover the unexpected situation. Whether or not a term can be implied depends upon the intention of the parties at the time of the agreement, taking into consideration the words of the agreement and the surrounding circumstances.

A court can imply a term in either of the following circumstances:[1]

  • if it is necessary to give business efficacy to the agreement – the court will add a term on the basis that without it the contract will not work;[2] or
  • where the term to be implied represents the obvious, but unexpressed, intention of the parties - the court will not imply such a term unless it is satisfied that both parties would, as reasonable people, have agreed to it, had it been suggested to them at the time of the agreement.

The Supreme Court held that were a long lease contained an absolute covenant prohibiting leaseholders from carrying out alterations to the structural parts and provided for the landlord’s enforcement of this covenant at another leaseholder’s request, there was an implied term that the landlord would not be able to prevent this covenant from having effect by permitting one leaseholder to carry out structural works before another leaseholder objected.[3]

Charges

Leaseholders may be required to make three different kinds of regular payment to their landlord:

  • service charges
  • ground rent
  • administration charges

Service charges

Service charges are paid for specific services provided by the freeholder or her/his agents. Typical services include maintenance, exterior repairs, insurance, cleaning of common parts, caretaking, and porterage. They are normally payable annually. For more information see Service charges.

Ground rent

Ground rent is a fee, separate from any service charge or administration charge, payable by the leaseholder as a condition of the lease. The lease will specify how much the ground rent is, when it is due and who it must be paid to. A leaseholder does not have to pay the ground rent unless s/he has been given notice of payment in the prescribed form by the freeholder.

The notice must be in the prescribed form and specify:[4]

  • the amount of the payment
  • the date on which the ground rent is due, which must be:
    • not less than 30 days or more than 60 days from the date the notice was given, or
    • no earlier than the date set out in the lease for payment of the ground rent.

The ground rent can be increased if:

  • the lease contains a term that allows it
  • the leaseholder agrees to an increase
  • the property is sold.

A leaseholder can apply, free of charge, for an Order of Apportionment to legally separate her/his share of the ground rent from that payable on neighbouring properties.[5]

Administration charges

An administration charge is an amount payable by the leaseholder, directly or indirectly, in respect of:[6]

  • an approval under the lease, for example to sublet or carry out works
  • the provision of information or documents
  • her/his failure to make a due payment
  • her/his breach of a lease covenant.

An administration charge must be reasonable in order for the landlord to recover the charge, and a demand for payment must be accompanied by a summary of the leaseholder’s rights and obligations in respect of administration charges. If the summary is not included, the charge is not regarded as being payable unless, and until, the demand is made with the summary.[7]

For proceedings that began on or after 6 April 2017, where the lease specifies that the costs of legal proceedings incurred by the landlord are to be paid as an administrative charge by the leaseholder, the leaseholder can apply to the specific court or tribunal to exclude some or all of such costs from the amount demanded.[8]

Varying the terms of a lease

The terms of a lease may be varied by a deed of variation, which is an agreement subsequent to the lease by which the freeholder and leaseholder agree to vary terms in the lease. These may include: the extent of the property, the duration of the lease, or service charges. The lease must be read together with variations. Most leases will have been registered at the Land Registry, where any variation should also be registered. To establish the full position, it is necessary to check the registered title and obtain copies of any variations of the lease as well as the lease itself.

Applying for a deed of variation

Part 4 of the Landlord and Tenant Act 1987 enables a leaseholder or a freeholder of a flat held under a long lease to apply to the First-tier Tribunal (Property Chamber) for a variation of the terms of the lease if it is defective in respect of certain terms.[9]

The Act permits holders of long leases to apply for a variation. It defines a long lease as:[10]

  • a lease or a fixed term exceeding 21 years, whether or not it can be terminated before the end of the fixed term by notice by the leaseholder or forfeiture
  • a lease for a term fixed by law under a grant with a covenant or obligation for perpetual renewal
  • a lease granted as a result of the right to buy or right to mortgage provisions in Part 5 of the Housing Act 1985.

Where a single lease applies to three or more flats in the same building, or where the lease comes under the business tenancy regime of Part 2 of the Landlord and Tenant Act 1954, there is no right to apply for a variation.[11]

An application can be made where the lease fails to make satisfactory provision with respect to one or more of the following:[12]

  • the repair or maintenance of the flat, or the building containing the flat
  • the insurance of the building containing the flat, e.g. where the freeholder is not obliged to insure under the lease or where the insured risks specified in the lease are inadequate
  • the repair or maintenance of any installations reasonably necessary to ensure that the occupiers enjoy a reasonable standard of occupation
  • the recovery of expenditure incurred by one party to the lease for the benefit of the other, for example where the freeholder cannot recover the full costs under the lease
  • the calculation of the service charge. See the page Obligation to pay for services for more on this.

It is a question of fact in each case for the Tribunal to decide whether the lease fails to make satisfactory provisions. While each case is decided on its own merit, the ‘failure to make satisfactory provisions’ usually goes beyond imposing unequal burdens on different leaseholders, generating expenditure for the freeholder that cannot be recovered from leaseholders or causing inconvenience.[13]

In one case, it was held that in the absence of any evidence of the need for major repairs or structural works beyond the means of the freehold company, the fact that one leaseholder was not required to contribute towards the cost of repair or renewal of the structure of the building and employing staff or agents did not make their lease unsatisfactory.[14]

Variation orders

If the Tribunal decides to vary the lease, the variation does not have to be that requested in the application: the Tribunal can vary the lease as it sees fit. The Tribunal should not make an order for a variation if the effect would be to substantially prejudice any person – whether s/he is mentioned in the application or not – and that person cannot adequately be compensated for the loss. The Tribunal has the power to award compensation in appropriate cases.[15]

The order varying the lease is binding on the current freeholder, and on past and future freeholders, even if they were not involved in, or notified of, the proceedings. However, a person not notified of the proceedings may have a right to apply to the Tribunal to modify or cancel the change, or to obtain damages from any person who should have notified her/him.[16]

The Act also gives leaseholders of houses the ability to apply to the Tribunal to vary the terms of their leases in relation to insurance only.[17]

Where a lease is varied so as to include additional land, this has the effect of a surrender of the original lease and the regrant of a new lease to include the original and additional land.[18] The new lease will have equivalent terms and conditions, and a term equal to the unexpired term under the surrendered lease.

Other leases with the same freeholder

When an application to vary is made, the freeholder or leaseholder can apply to the Tribunal for an order for corresponding variations to other leases of flats with the same freeholder. The other flat or flats need not be in the same building, and their leases need not be drafted in identical terms, but for the application to succeed it must be in the interests of the applicant or the affected leaseholders to have all of the leases varied to the same effect.[19]

There is also a provision for the variation of other leases held by other leaseholders of the same freeholder. These leases need not be of flats in the same building, nor be drafted in identical terms. However, such an application can only be made if the object of the variation cannot be achieved unless all the leases are varied to the same effect. This provision could be used to make common improvements to a number of leases drafted in defective terms, or to bring into line a number of leases with inconsistent provisions.

There are limitations on such an application, i.e. a required number of all leaseholders must consent as follows:

  • two to eight flats – all but one leaseholder must consent
  • nine or more flats – 75 per cent of leaseholders must consent and the application should not be opposed by more than 10 per cent.[20]

Varying the lease as part of lease extension procedure

Under the Leasehold Reform, Housing and Urban Development Act 1993, where a leaseholder of a flat successfully applies to extend her/his lease, the new lease will generally be on the same terms as the previous one. However, the legislation provides various exceptions which allow for the lease to be varied.[21]

See the page How to buy the freehold of flats for more information.

[1] Liverpool CC v Irwin [1976] 2 All ER 39 HL.

[2] See Yeung v Potel and Summers [2014] EWCA Civ 481 for an example.

[3] Duval v 11-13 Randolph Crescent Ltd [2020] UKSC 18.

[4] s.166 Commonhold and Leasehold Reform Act 2002; Landlord and Tenant (Notice of Rent) (England) Regulations 2004 SI 2004/3096 as amended by para 29 Sch.2 Transfer of Tribunal Functions Order 2013 SI 2013/1036; Cheerupmate2 Ltd v de Luca Calce [2018] EWCA Civ 2230.

[5] DCLG Guidance August 2011: Application for the apportionment of a ground rent - leasehold land in different ownership.

[6] para 1 Sch.11 Commonhold and Leasehold Reform Act 2002; Proxima GR Properties Ltd v McGhee [2014] UKUT 59 (LC).

[7] paras 2 to 4 Sch.11 Commonhold and Leasehold Reform Act 2002.

[8] para 5A Sch.11 Commonhold and Leasehold Reform Act 2002 as inserted by s.131 Housing and Planning Act 2017; Housing and Planning Act 2016 (Commencement No. 5, Transitional Provisions and Savings) Regulations 2017 SI 2017/281.

[9] ss.35-37 Landlord and Tenant Act 1987.

[10] s.59(3) Landlord and Tenant Act 1987.

[11] s.35(6) Landlord and Tenant Act 1987.

[12] s.35 Landlord and Tenant Act 1987, as amended by ss.162-163 Commonhold and Leasehold Reform Act 2002.

[13] Camden LBC v Morath & Ors [2019] UKUT 193 (LC); Triplerose Ltd v Stride [2019] UKUT 99 (LC); Cleary v Lakeside Developments Ltd [2011] UKUT 264 (LC).

[14] Triplerose Ltd v Stride [2019] UKUT 99 (LC).

[15] s.38 Landlord and Tenant Act 1987, as amended by the Commonhold and Leasehold Reform Act 2002.

[16] s.39 Landlord and Tenant Act 1987, as amended by the Commonhold and Leasehold Reform Act 2002.

[17] s.40 Landlord and Tenant Act 1987, as amended by the Commonhold and Leasehold Reform Act 2002.

[18] Tweedie v Souglides [2012] EWCA Civ 1546.

[19] s.36 Landlord and Tenant Act 1987.

[20] s.37 Landlord and Tenant Act 1987.

[21] s.57 Leasehold Reform, Housing and Urban Development Act 1993.

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