Glossary of Terms

Adverse Possession

Adverse possession is the rule under which a person in possession of land owned by someone else may acquire the land. There are strict/ specific requirements that must be met.

Agreement for Lease

A contract – the landlord agrees to let a building/land to a tenant, with completion of the lease taking place at a later date or after an event has happened – e.g. when the landlord has constructed a building or altered it to suit the tenant’s needs.

Assignment

A document by which a tenant transfers an existing lease to a new incoming tenant.

Break clause

This can allow either a tenant or landlord or both to end the lease early by notice (usually 6 months) – be wary of conditions which may invalidate a break notice.

Collateral warranty

A document in which (typically) a building contractor, architect, engineer or other professional involved in a construction project agrees that its duties are owed to a buyer, tenant or funder of the project – similar to a guarantee.

Conditional contract

An agreement for sale of a building/land with completion of the sale taking place once a condition has been satisfied – e.g. planning permission is obtained for a development or change of use or certain works are completed.

Covenants

Covenants are promises to do something, or not do something, which is meant to be binding on the party giving the covenant. Covenants may also be binding on or enforceable against persons who were not party to the original covenant.

Easements/rights

A right (e.g. a right of way or to a water/electricity supply) to be enjoyed by property over neighbouring/nearby property.

Forfeiture of Lease

A lease often contains a clause which allows the landlord to terminate (or forfeit) the lease if the tenant breaches its obligations.

Heads of Terms

A note of the main terms on which a building or land is to be sold or let – usually prepared by the seller’s or landlord’s agents for approval by the buyer/tenant.

Indemnity policy

An insurance policy providing cover for costs of a challenge/claim in respect of a defect e.g. an informal right of way or lack of planning permission.

Landlord and Tenant Act 1954

This gives business tenants a right to a new lease at the end of an existing lease. There are exceptions (e.g. if the landlord wants to redevelop the building or to occupy it himself). If the terms of the new lease cannot be agreed the parties can go to court to settle them. This right can be excluded by agreement.

Lease re-gearing

A landlord agrees to reduce the rent payable by a tenant in return for the tenant e.g. agreeing a longer lease term or not implementing a break clause.

Leasehold Enfranchisement

The right for tenants to buy the freehold of the building.

Licences to Assign/Underlet/Alter

Most leases require the landlord’s consent to an assignment/underletting/alterations to the building. The licence document is the formal consent containing obligations on the tenant, assignee or undertenant.

Licence to Occupy

A licence to occupy is a personal agreement between an owner of a building/land and an occupier in which the owner allows the occupier occupation of the building/land for a short period.

Option

A contract to buy – one party can give notice to the other to trigger completion of the contract at a set price. Notice must be given within a fixed period; if not given, the contract falls away.

Overage/clawback

This is where following a sale of property the buyer has to make a top up payment to the seller if at a later date the buyer e.g. (i) obtains a more valuable planning permission for the property or (ii) sells it (or plots within it) for more than an agreed price.

Overriding interests

These are interests that are not protected by being noted on the registered title of a property but which bind the property and anyone who obtains an interest in it.

Pre-emption

A right of first refusal – where this applies if an owner of property wants to sell the property it has to offered first to the person who has been given this right at the agreed price. If the offer is not taken up within the agreed time limit the owner can sell to someone else.

Rent review

The landlord can require the rent to be reviewed (usually every 5 years but can sometimes be every 3 years) and usually upwards only. The new rent is agreed between the landlord and the tenant – if not agreed, an independent surveyor will usually decide.

Reservations

Right retained by the seller/landlord over the land/building being sold or let – e.g. the right to run water/electricity through pipes/wires in the land/building which serve also the seller’s/landlord’s neighbouring or nearby land/building.

Security of Tenure

The right of a business tenant to a new lease – see Landlord and Tenant Act 1954.

Solicitor’s undertaking

A (solemn) commitment by a solicitors firm to pay (often costs) or do something. Any breach is regarded ultimately as a matter for the Solicitors Regulation Authority.

Sublease & Underlease

An existing tenant gives a new sublease/underlease to an incoming subtenant/undertenant with the lease to the existing tenant remaining in place. The existing tenant will be the landlord of the incoming subtenant/undertenant.

Unregistered Title

This is land which has not been registered at the Land Registry. Unlike with registered land, proof of title is based upon original deeds and documents which need to be produced when selling or letting the land.