A Guide to the Property Market of England & Wales
Part II - Property Leases
Introduction
The basis of the legal relationship between the landlord or lessor (who can either be the freehold owner or a superior leaseholder) and the tenant or lessee is contained within a written contract, the lease, and is supplemented by Common Law and the statutory legal framework. There are essentially three main types of commercial leases: short term, medium term (or more commonly, "institutional") and long term.
Short Term Leases
These usually run for a term of up to five years, being particularly attractive to occupiers who anticipate a change of circumstance such as rapid growth, which will require them to move at the expiration of the term. Many such lettings are undertaken by tenants who have taken larger premises than they require initially with the view of expanding into the additional space at a later date, e.g. after five years.
Medium Term or "Institutional" Leases
These are the most common and run historically for 20, 25 or 30 years. However in situations of oversupply the leases may be for no more than 10 or 15 years. The name mainly derives from the fact that the freehold is normally held as an investment by an institution such as an insurance company or pension fund, with the lease being drawn upon a full repairing and insuring (FRI), or clear lease, basis. Such a lease confers responsibility upon the lessee for the whole cost of repairing and maintaining (and insuring) the property.
Long Term or Building Leases
These commonly run for at least 99 years. They are usually of interest to occupiers who wish to acquire a long term interest in land where the freehold is not available and are regarded, in general, as investments.
Building leases also fall within this category and arise when a tenant takes a long term lease in land and is required by the landlord to erect one or more buildings on it. Such leases are often taken by developers who will develop the land and in turn let the building(s) to occupiers.
Part I - Property Tenure
Part II - Property Leases
Part III - The Legal Principles in the Acquisition of Office Property
Part IV - The Legal Principles in the Disposal of Office Property
Part V - Lease Provisions
Part VI - Property and Associated Costs
Part VII - The Steps to Acquiring Offices
Part VIII - Conclusion
Glossary of Terms