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Key elements of a lease agreement

Key elements of a lease agreementA lease begins with the words ‘This lease’, followed by the date of grant of lease, and the names and addresses of the parties to the contract. The date of grant of lease is the date when transaction is completed. With respect to a lease of registered title, the document carries details about the county and district, the landlord’s title number, a brief description of the property, and the date at the top of the first page.

Payment of premium and receipt

A capital sum or premium is payable for the grant of long term residential lease. This premium is around the same value as one would pay for the purchase of a freehold property. A receipt clause is usually attached to lease; it has the same effect as a receipt clause would in a freehold transfer. Besides paying premium, the lease would also include consideration for the grant that includes payment of rent and the promise that various obligations placed under the lease shall be carried out. These are usually mentioned as a part of the consideration. It is worded as such … “In consideration of the sum of XXX, Mr. XX (Name of the Landlord) and of the rent reserved and of the covenants by the Tenant contained in the lease….”

Operative words

The operative words in a lease are usually, “hereby demises”. Sometimes as a modern approach, solicitors add ‘grants’ or ‘leases’.

Title guarantee

The benefit of a full or limited covenant guarantee is given in the same manner as it is given in the transfer of a freehold property. The words, ‘with full title guarantee’ or ‘with limited title guarantee’ are used (as the case may be) along with the express modifications made in the covenants. These are included in the document after the operative words.

Term

It is very important that the length of the term (of the lease) is clearly and properly mentioned. This is because a lot of issues are connected with it. For instance, in the case of commercial leases, rent is reviewed annually. This is done on the commencement date every year. More often than not, the date specified as the start date is before the actual signature of the lease. This is especially common in leases of flats and offices where the landlord may want all the leases in the block to commence and end from/on a stipulated date. It should also be clearly mentioned if the commencement date is to be included in the term. Thus, if the lease is to commence from the 1st of November onwards, it probably commences from the next day, i.e. 2nd November and hence expires midnight of 1st November. The use of words should be carefully examined. For instance, if the lease mentions the word ‘from’, the lease begins on the next day. And if it mentions, ‘from and including’, it begins on the same day as mentioned.

Photo courtesy: La Citta Vita

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