Introduction
The most important thing you need to know is that this law simply does not apply to leases for less than seven years.
This is a two part article. This part describes the law. Part 2 provides a detailed explanation of how to complete the “clauses”. If you are settling the terms of a new lease, you need to follow part 2 here.
Many of the legal terms which appear in the rules are explained in part 2 of this article.
The use of prescribed clauses in leases were brought in under the Land Registration (Amendment) (No 2) Rules 2005, (the new rules). The new rules came into force on 19 June 2006 for all leases completed after 18th June..
This information article summarises the current position on Land Registration and emphasises the new rules that apply. For bespoke documents, or help amending the document so that it suits you, please see our drafting service.
These changes are intended to quicken and simplify the registration process, and result in a more accurate and complete title register. An example of what details you must enter can be found here.
What are the Prescribed Lease Clauses (PLCs)?
PLCs are a set of standard details, which must appear at the beginning of any lease which is for seven years or more. The prescribed clauses contain the information which the Land Registry needs in order to complete registration of the lease.
The ‘clauses’ require you to enter details of the lease. You can either enter the details at the top of the lease, or cross-reference to the relevant parts of the document. This change will quicken and simplify the registration process, and result in a more accurate and complete title register.
These clauses required are:
- LR1 Date of lease
- LR2 Title number(s)
- LR3 Parties to the lease
- LR4 Property
- LR5 Prescribed statements etc.
- LR6 Term for which Property is leased
- LR7 Premium
- LR8 Prohibitions or restrictions on disposing of the lease
- LR9 Rights of acquisition etc.
- LR10 Restrictive covenants given in this lease by the Landlord in respect of land other than the Property
- LR11 Easements
- LR12 Estate rent burdening the Property
- LR13 Application for standard form of restriction
- LR14 Declaration of trust (where there is more than one tenant)
For an example of exactly what you need to enter, please see below.
Do the new rules apply to me?
The new rules apply to you if your lease is:
- for a registered estate in land; and
- required to be completed by registration
If you need a lease for 7 years or more, it must now be registered at the Land Registry, using the new method. If your lease is for less than 7 years, the changes do not apply.
Leases that do not have to contain PLCs
Essentially, if your lease is for a term of 7 years or more, then it is registrable. If it is registrable, then you have to include the new “clauses”. However, there are exceptions, which we will include for the sake of completeness. If you think your lease is the one in 1000 to which one of these exceptions may apply, see a solicitor.
These leases do not qualify:
a lease created or arising from:
- an agreement entered into before 19 June 2006
- an order of the court
- an enactment
- a necessary consent or licence for the grant of a lease given before 19 June 2006.
· a deed of variation that takes effect as surrender and re-grant, whether or not the original lease was a prescribed clause lease.
These leases are exempt:
- leases of franchises, manors or profits
- leases incapable of registration
Of course, you can use the clauses voluntarily in any lease. You may find it convenient to draw attention to the matters they contain. But if you do use them, make sure you complete them accurately.
What if my lease is signed but not yet completed?
If an agreement has been made, but is not yet completed, you can claim that the agreement was entered into before 19th June 2006 (see above). However, if you do this, you must have a certificate from a conveyancer to state this. Depending on how “finished” the lease is, it might be easier to start afresh, knowing that the lease will be accepted. This way you can avoid extra conveyancing fees.
What has changed?
From 19 June 2006 use of the clauses is compulsory for leases completed on or after this date.
Applications for the first registration of a lease of a property or land must include completed forms AN1, AP1 and UN1. If the application is for a lease which has been leased before, there is no need to complete separate forms. Instead, the clauses LR9, 10, 11 and 12 suffice. You can buy these forms from NetLawman.
· A new heading will appear at the top of all registers of title relating to leasehold estates. New specific register entries relating to the inclusion or exclusion of easements in the lease will also be made in the register. This will help to make clear which easements in the lease are included or excluded from the registration. The absence of any register entry will mean that no easements are included in the registration.
How does it affect leases signed up recently?
As long as the Land Registry received the lease before 19th June, the old rules still apply. You will not need to create a new lease. Contractual duties and obligations are not affected. When the lease ends and a new one is drawn up, it will have to comply with the new rules, and will require the clauses to be entered at the top of the lease document.
As a landlord, what actions do I have to take, step by step?
New leases must be in the correct format. Here is an example for you to see. You must make sure that any leases which are agreed after 19th June 2006 re in the prescribed format. Old lease ‘templates’ will not be accepted.
What is the benefit of all this?
The Land Registry can process the lease faster, saving time and money in the long run because all the information they need is in one place.
Points to remember
- If you claim exemption from the use of the clauses, you must write and say why.
- The clauses are not a Land Registry form, and should not be made to look like one.
- Use black text with a font size of at least 10pt.
- Remember to add all appropriate title numbers for clauses LR2.1 and 2.2.
- Easements: failure to complete clause LR11 means that these details will not be included in the register of title. It follows that they may not enforceable as between the parties to the lease.
- All Net Lawman lease documents contain detailed drafting notes to assist you in making up your lease. Detailed information on the prescribed clauses is set out in part 2 of this article.
All Net Lawman documents in this category comply with the new rules. You can find the documents here.
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