Demise: Getting it right

Prior to entering any lease agreement, it is essential that the parties are aware of exactly what is, and what is not, included in subjects of the letting. Taking time to properly identify the property and whether fixtures belong to the landlord or the tenant can prevent issues arising when interpreting other important parts of the lease.

The physical extent of the property impacts on other key elements in a lease, including the repair obligations of the parties, rent reviews, alterations and the service charge. The definition of the property will therefore be looked at closely by surveyors when dealing with these other matters.

There are three main options:

• The tenant leases the whole of the property owned by the landlord including the structure. In this case, a reference to the property title is usually sufficient to identify the subjects.
• The tenant leases solely the internal elements of the property with the landlord retaining control and responsibility for common parts including the external walls, roof, foundation, the solum, the malls, lifts, escalators, stairs, service area and parking areas. This limits the tenant's responsibility for repairs to internal parts of the property only. The landlord will be responsible for any repairs to the larger property and common parts, with the costs recovered from the tenants of all the lettable units in the larger property via a service charge. Permitted alterations will normally be limited to internal, non-structural alterations.
• The tenant leases property which includes the roof and external walls of the unit, but the landlord retains areas such as car parks, access roads and landscaped areas with those costs being recovered through the service charge.

The use of a plan to identify the location and extent of the property is always recommended and, in some cases, necessary particularly if the lease is over 20 years and will be registered in the Land Register.

It is advisable that the parties also take the time to identify the additional rights they will need during the course of the lease. In the case of the tenant, they will need rights in respect of the use of the common parts and to other parts of the development. Consideration should be given to matters such as: rights and times of access; rights to exhibit signage on communal areas; rights to gain access for repairs; and rights to install air conditioning on common parts. The landlord will need to reserve rights over the property let to ensure they can manage their larger property. This can include rights to carry out communal repairs, to extend their development, to inspect the leased property, and to alter the access road or other common parts.

Brodies can assist clients in avoiding potential issues and in identifying additional rights required. Please do not hesitate to get in touch with Breda Deeley or your usual Brodies' contact.