Case Study: Creating a Commercial Lease With Complex Title Issues

Year Published: 2020

Ben Thomas, Solicitor in our Commercial Property team, gives an example of how the team recently dealt with creating a commercial lease through a surrender and re-grant despite complex title issues on behalf of a client.

Our commercial property team acted for a landlord in the restructuring of an investment property’s tenancy. The client owned an office building which was subject to a lease of part over the first floor units in addition to car parking spaces outside of the office.

The tenant in occupation of the office’s first floors under the lease was looking to increase the length of their lease term by another 10 years in addition to taking a lease of the remaining floors and car parking spaces.

In order to do this, the parties were required to enter into a new tenancy and bring the existing one to an end. This is because a variation to the demise or length of a lease is such a fundamental change to its terms that it results in what is known as a deemed surrender and re-grant, which results in the closure of the old lease and the creation of a new one.

Usually, a surrender and re-grant can be dealt with in a simple deed, however in this instance the parties were required to enter into an entirely new lease agreement, whilst surrendering the existing one under a separate deed. This is because the car park land that was to be added under the lease was separate to the office building which was subject to the previous lease.

The matter was further complicated by the fact that the title to the office building was freehold, whilst the car parking spaces were leasehold. This meant that the tenant would be required to not only observe the freehold covenants under the office title, but also the leasehold covenants under the car park’s superior lease.

Rather than draft two separate leases for the office and car park, we instead drafted one lease for both properties in a way that protected our client’s position but also allowed the tenant to occupy both properties under one agreement.

This case successfully demonstrates how we were able to work with our client and all parties to find creative solutions to progress and complete the new lease despite complex title issues.

For information and guidance about creating a commercial lease, please contact Ben Thomas on 01244 305952 or email [email protected].

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