Leases and underleases - Use and planning permissions

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Overview

Understanding the connections between leases, underleases, and planning permissions is essential in property law and particularly relevant for the SQE1 FLK2 exam. This guide explores the legal principles and practical considerations involved, highlighting potential challenges and solutions. Familiarity with these concepts equips future legal professionals to handle complex property transactions and succeed in their exams.

Leases and Underleases: Legal Framework and Considerations

Nature and Creation of Leases

A lease provides a legal interest in land, allowing exclusive possession for a set duration. According to Street v Mountford [1985] AC 809, its key components include:

  1. Exclusive possession
  2. Defined term
  3. Consideration (typically rent)

Differentiating leases from licenses is vital due to differing legal outcomes. AG Securities v Vaughan [1990] 1 AC 417 emphasizes that the nature of the agreement, rather than its label, defines it.

Underleases: Structure and Relationships

An underlease emerges when a tenant, acting as a sublandlord, transfers part of their leasehold to a subtenant, creating these relationships:

  1. Head landlord
  2. Tenant/Sublandlord
  3. Subtenant

While the subtenant generally lacks a direct contract with the head landlord, they may still be bound by certain covenants through estate privity.

Key Considerations in Underletting

Legal and practical factors when establishing an underlease include:

  1. Consent: Often required by the headlease, with landlords not allowed to unreasonably withhold it per the Landlord and Tenant Act 1988.
  2. Term: Underleases must be shorter than the headlease, as noted in Milmo v Carreras [1946] KB 306.
  3. Covenants: These should align with the headlease, avoiding less stringent terms for the subtenant.
  4. Rent: Often higher than headlease rent, subject to headlease terms.

Planning Permissions: Legal Framework and Application

Statutory Basis and Scope

Planning permissions, governed by the Town and Country Planning Act 1990, are necessary for any land development. "Development," broadly defined by Section 55, includes:

  1. Various operations on land
  2. Significant changes in land use

Material Change of Use

Determining "material change of use" can be complex, as shown in Kensington and Chelsea Royal London Borough Council v Secretary of State for the Environment (1981) 42 P&CR 185.

Use Classes and Permitted Development

The Town and Country Planning (Use Classes) Order 1987 categorizes land use. Changes within a class don't require planning permission, but inter-class shifts might. The General Permitted Development Order 2015 grants some developments automatic permission, with conditions.

Interaction Between Leases, Underleases, and Planning Permissions

Covenant Compliance and Planning Requirements

Leases may limit property use and enforce compliance with planning laws:

  1. User Covenants: Define permissible property use, with changes potentially breaching both lease provisions and planning laws.
  2. Alterations Covenants: Often need landlord approval, with separate planning permission possibly required.
  3. Statutory Compliance: Leases typically mandate adherence to relevant statutes, including planning laws.

Example: Office to Retail Conversion

Consider a tenant converting an office (Use Class E(g)(i)) to a retail space (Use Class E(a)):

  1. Lease Compliance: Confirming the lease allows retail use, and obtaining landlord consent if necessary.
  2. Planning Permission: Although both uses fit Class E, significant alterations may still need approval.
  3. Building Regulations: Compliance is required even without planning permission.
  4. Underletting: Confirming headlease permissions and advising the subtenant on conditions and compliance.

Case Study: Mixed-Use Development

For a developer leasing an industrial site (Use Class B2) and creating a mixed-use space:

  1. Lease Terms: Checking lease allowances for proposed uses and altering if needed.
  2. Planning Permission: Major changes require a full application, addressing impacts like traffic and the environment.
  3. Underleases: Drafting documents to match headlease terms and ensure necessary consents.
  4. Residential Leases: Consider compliance with legal standards and tenant rights.

Conclusion

Leases, underleases, and planning permissions intertwine significantly in property law, influencing practice and the SQE1 FLK2 exam. Key factors include:

  1. Differentiating leases from licenses and their legal implications
  2. Managing underletting complexities and legal duties
  3. Examining planning permissions and related property use issues
  4. Addressing conflicts between lease covenants and planning laws

Familiarity with this material ensures candidates can tackle complex scenarios, pinpoint legal issues, and offer effective solutions, preparing them for success in their exams and professional endeavors.