Rack rent meaning

Pre-emption period Ensure the agreement specifies a defined period during which the buyer enjoys the benefit of the right of pre-emption, with that entitlement confined to the stated timeframe. Trigger event Consider whether the event that obliges the seller to offer the property to the buyer (often captured by the definition of ‘Disposal’) is drawn too broadly. For example, will granting a lease at a rack rent set off the pre-emption right? Many sellers regard such lettings as simple upkeep of their investment in the property. Also think about carving out from ‘Disposal’ (or the pre-emption trigger) a contract for sale of the property that is conditional upon the right of pre-emption being exhausted. This can assist a landowner when concluding a sale with a third party, particularly where it is plain that the buyer has no intention of exercising the option. Avoid phrasing the trigger as arising when the seller ‘proposes to dispose’ of the property, as that may merely invite a dispute about precisely when...

This Checklist is illustrative rather than comprehensive and will not anticipate every scenario in every deal. It sets out the principal actions and issues to review when representing a landlord in relation to a tenant’s request for a licence to assign. It proceeds on the basis that the tenant holds a rack rent lease of commercial premises. Undertaking for costs If the lease or the Heads of Terms place the landlord’s consideration costs on the tenant, seek an undertaking from the tenant’s solicitors covering the landlord’s legal and surveyor fees (plus VAT and disbursements), regardless of whether the assignment proceeds and irrespective of whether consent is given. Ensure your estimate is adequate, or expressly retain the right to uplift the sum if the case becomes unusually complex or drawn out. Assess whether the undertaking should also include any superior landlord’s charges, where relevant. Does the lease permit assignment? Review the lease’s alienation clauses to confirm whether assignment is allowed and, if so, the conditions attached. Where...

This Checklist is primarily for use on the assignment of a commercial lease This is a guidance tool for assignments of commercial leases. It is not comprehensive and may not address every circumstance on each deal. You should always consider whether any additional matters require attention. It works on the basis that: the lease relates to commercial premises let at an open market rent to an occupier, on terms under which the landlord insures the premises the assignor has used the premises for business purposes and the assignee likewise intends to use them for their business the lease is a head lease and the premises are not held under any underleases the lease is not subject to a fixed charge (this would be uncommon in practice), and no premium is payable If the assignment forms part of a wider or more complex arrangement, you may find further relevant material in Acquisition of commercial property (buyer)—checklist and Practice Note: Transferring...

This Practice Note highlights the principal points to weigh up when acting for an outgoing tenant and advising on the assignment of a rack rent (occupational) commercial lease. See also Practice Note: Transferring commercial property—a practical guide, together with the Assignment of a rack rent lease (assignor)—checklist. Is the landlord’s consent required to the assignment? Carry out the following checks in sequence, in particular: Carefully scrutinise the lease terms, together with any deeds of variation and, where necessary, any other supplemental documents. If the lease is registered and contains HM Land Registry prescribed clauses, the register will confirm whether or not the lease includes provisions that restrict or prohibit dispositions, as shown by clause LR8 of the lease. Consider whether a restriction has been entered on the title expressly barring assignment without the landlord’s consent. Where relevant, review any superior lease carefully to establish if assignment is constrained—for example, a prohibition on assigning an underlease without consent...

ARCHIVED : This Practice Note is archived and no longer maintained, and is not being updated further. It set out the anti-avoidance regime for transactions in land, created to subject gains of a capital character arising on the disposal of land to income tax or to corporation tax on income. First introduced in 1969, the provisions were located in sections 815–833 of the Corporation Tax Act 2010 (for corporation tax) and in sections 752–778 of the Income Tax Act 2007 (for income tax). The measure considered in this Practice Note was later replaced and widened by the offshore property developer rules, which took effect from 5 July 2016. For additional information on those rules, see Practice Note: Transactions in UK land—tax rules. As a consequence, CTA 2010, ss 815–833 (for corporation tax) and ITA 2007, ss 752–778 (for income tax) ceased to have effect from 5 July 2016. HMRC can also deploy a variety of other counteraction tools to address avoidance relating to land for income tax, corporation tax,...

Negotiation Guide This Negotiation Guide sits within the Practical lease negotiation collection. See also Practice Note: New starter guide—entering into new commercial leases. It examines the core components of an insurance clause intended for a commercial property lease. Such a clause defines the respective obligations and liabilities of landlord and tenant concerning insurance of the property, including: who arranges the buildings insurance, the scope of what is insured, who bears the cost, and which risks are covered. It also allocates risk and responsibility if the property is damaged or destroyed by an insured, or an uninsured, risk. This Negotiation Guide focuses on the usual position that the landlord insures, which is standard in a commercial rack rent lease. Even where the tenant takes a lease of whole, the landlord typically seeks to protect the capital value of its asset (freehold or long lease) with sufficient insurance. Landlords are unlikely to rely on a tenant’s covenant to insure, as the consequences...

WARNING These model replies to enquiries are offered solely as a framework and a starting aid for a Seller preparing bespoke responses. They are neither recommended, exhaustive nor definitive, and must not be adopted without careful thought and tailored alteration for the specific deal. As replies to enquiries form part of the contract, it is crucial they are precisely adapted to the matter at hand and contain no inaccurate or off‑hand remarks. Avoid stock phrases, for example ‘Not to the Seller’s knowledge’, unless the Seller has actively sought a fuller answer. Using such wording carries an implied assertion that the Seller has made reasonable enquiries about the issue raised. Emphasise to your client the necessity of scrutinising draft replies with great care and, where appropriate, involving managing agents and property managers. If statements given in replies prove to be wrong, whether intentional or not, the Buyer may pursue the Seller for misrepresentation, which could lead to a claim for damages or even rescission of the contract...