In Brief - July 2005

In this Edition:

• Stamp Duty Land Tax

• Landlords - Proving Termination Right

• Difference between Leases and Licences

• Yielding up the Property.

Stamp Duty Land Tax

Stamp Duty Land Tax can bite before the lease is executed. The Act determines that the tax is payable when there is ‘substantial performance’ of a lease transaction. Instances of substantial performance include the time when:

1. 90 per cent or more of a lease premium is paid;
2. the rent starts to be paid; or
3. the tenant goes into occupation of the premises.

Landlords must prove basis of termination claim

For landlords to terminate a lease on the grounds that they need the property for their own occupation, they must prove that this is in fact the case. Recently, a landlord was considered not to have proved his case when he alleged that he wished to operate a Chinese restaurant in partnership with his wife, when they had previously kept all their business affairs entirely separate.

The Difference between Licences and Leases

A recent case which tested the difference between licences and leases has confirmed that the crucial test (which is important for a variety of purposes) is that a licence to occupy a property allows you to occupy a space, whereas a lease allows exclusive occupation of the property.

Yielding up the Property

One of the standard clauses in lease agreements is the one that says that at the end of the lease, the tenant will 'yield up' the property to the landlord. Surprisingly, perhaps, there is no statutory definition of what 'yielding up' means.

Recently, a case involving builders John Laing Construction Ltd addressed this issue. Laing was the tenant of an office block it no longer required and took advantage of a break clause to surrender the lease. Laing then vacated the premises, but was claimed by the landlord not to have 'yielded up' the property, because the company had left the building under the care of security people and fenced it off to prevent unauthorised access and had not handed back the keys.

The landlord lost. Laing had not acted to prevent the landlord from recovering the keys and did not create a hindrance to the landlord’s reoccupation.