Ideally, leases are to be deduced by the landlord as the tenant pays a premium for the payment of lease. The following discusses the provisions related to the same.
Leases
Usually the landlord will have to deduce the title and prove that he holds a freehold title to the property. This is because a premium is paid for the grant of a lease, or because the tenant pays a significant rent for the property. When there is no freehold title on the property, the tenant or his successors would abstain from obtaining a lease or register it, unless it is already registered.
At common law the tenant cannot call for deduction of the freehold reversionary title on the grant of a lease. This rule does not apply to the grant of leases for more than seven years under Sch 11 to the LRA 2002. When the lease is for more than seven years, under SC 8.2.4 the landlord should deduce the title so as to be able to register with an absolute title in the Land Registry. The prospective tenant can thus insist that the freehold title is deduced and the same is registered with absolute leasehold title.
Sub leases
When a sub-lease out of an unregistered head-lease is to be granted, the sub-tenant can ask to inspect the head-lease out of which this sub-lease is derived. He can also ask for the investigation of all subsequent assignments under which the lease was held in the past 15 years. But when S 44 of the LPA 1925 is applied, the tenant cannot call for production of the freehold title.
This is again not enough when a premium is paid for the sub- lease, or when it is to be provided as a security, or when the tenant pays a significant amount of rent for the property. This has been amended under Sch 11 to the LRA 2002 with respect to leases that are granted for more than seven years. Hence, this rule does not apply in the case of leases that extend for more than seven years, thereby allowing the prospective tenant to insist on production of title to the head-lease and the freehold. Standard Conditions 8.2.4 also applies to the grant of sub-lease.
Providing the above mentioned details may sometimes cause a problem to the head tenant wanting to grant a sub-lease, when he did not call for deduction of freehold title when he took the head-lease. The above mentioned conditions may not be complied with, thus forcing him to exclude these requirements by a special condition in the contract. The Sch 11 amendments to s 44 apply when the title to the head lease is registered with its own title. When the head-lease is registered with an absolute title there shall not be a need for the property to be freehold. When the title to the reversion is registered, the Open Register rules shall always allow the prospective tenant to check that reversion.
Photo courtesy: Brett VA
