Frequently Asked Questions
For Community Growing Groups
Part Five: Leases (England & Wales)
Introduction
Please Note – Leases and associated law varies throughout the UK. This document applies to England and Wales. There is also a version for Scotland available from CLAS and we hope to have a version for Northern Ireland in the future.
The overall aim of this pack of FAQs is to provide general advice to community groups on frequently raised issues relating to finding, securing and sustaining land for formal and informal amenity open space, gardening and food growing. For ease of reference, the term ‘community garden’ will be used as a generic terms for these activities. This is the fifth in a series of five FAQs for Community Groups – see the end of this document for further details.
Q: How do we get a legal right to use land we don’t own?
A: There are two options available – to buy/sell the land or to lease the land.
Advantages/Disadvantages of buying/selling the land. The advantage of a purchase of the land for the community group is to give the community control of it, securing it for the future, leading to greater financial self-sufficiency and opening up new avenues of funding.
However it is important to take legal advice on a sale/purchase (see below for finding a lawyer). For the landowner, although the future benefit of owning the land and any income from it is lost, they do not have the burden of managing a tenant nor any legal issues arising from the ownership of land such as the Health and Safety and risk management.
If the land is not available for sale then consider a lease which will allow both owner and user to agree and record the details of how a site is to be used.
Q: Can I just go ahead and use land without a formal legal right to do so?
A: Yes, you can but there are risks in doing so. It would be more difficult for the landowner to control how land is used, to regulate any development and to recover any costs for damages.
A tenant might invest time and money and find the owner able to remove them from the site whilst also being unable to attract funding. Neither party would be protected.
Q: What is a lease?
A: A lease is an agreement between the landowner, usually called a Landlord, and the user, usually called the Tenant, which allows for exclusive use of a site for a specified period of time in return for a specified amount of rent.
This agreement can also include many other terms and conditions (such as access, uses, permitted development or change etc.) A lease does not have to be in writing, though it is usual and preferable.
Q: What are the advantages of having a lease for a community group or a landowner? Are there any disadvantages?
A: A lease protects both the landowner and the tenant, or tenant, by setting out their responsibilities and benefits clearly.Both parties can rely in law on the agreement contracted by the other party. In other words, a landowner can rely, amongst other things, on getting the rent, on getting the land looked after as agreed, on getting the land back when specified and can take court action to ensure this happens or the lease is ended.
Similarly, a tenant can rely on getting sole and uninterrupted use of the land for the length of time agreed and can take court action to ensure this happens or that the lease, and their liability to pay, is ended. The only disadvantage is the potential cost of getting the lease formalised but it is important to recognise that in paying a lawyer to do this, all the choices, rights and responsibilities will be explained to you and your lawyer will act to protect your best interests.
There are some aspects of the law which will apply to a landlord and a tenant which are not obvious from a lease and the effect of which can be influenced by the content of the lease; taking legal advice allows you to make choices and to be aware of the consequences of those choices.
Q: Are there different types of leases?
A: Yes, depending on the predominant use of the property/land and if you will be carrying out a trade or business. A farming tenancy (known as a Farm Business Tenancy) may be more appropriate for your needs than a “standard” lease. There are many different elements that may be included in any lease and these relate to the complexity of the project and what is included– thus a simple, straightforward rental of ground to grow on will be covered by a shorter and less complicated lease than a development site with many buildings.
Therefore different leases will include different provisions and are sometimes referred to by different names reflecting this.For example, if there is a building included in the lease, there will be a whole section on the repair and maintenance of that building and such a lease might be called a Full Repairing and Insuring (FRI) lease or an Internal Repairing lease (IR). However, in reality it is up to the parties to agree on what is to be included and that is not limited by any general classification of lease names. See below for more on FRI leases.
Q: Where can I get a lease?
A: Draft forms of leases for land are available on this website. This may be used as a template for beginning negotiations and to optimise the effort and cost of employing a lawyer. It will not cover every eventuality and legal advice should be taken before it is signed as it will form a binding contract.
Q: Do I need legal help?
A: Yes. If you enter into a contract, you will be bound by the terms of that contract and to any relevant legislation relating to it, ignorance of which will not remove your liability. There are financial and legal implications resulting from signing any contract. A lawyer will explain all the rights and responsibilities that go with any contract you are considering: you will not be able to avoid those responsibilities by saying you are not aware of them. Community groups or small landowners may have concerns about the cost of legal advice but the possibilities for things to go wrong have cost implications too. See below for how to find and instruct a lawyer.
Q: How do I find a lawyer?
A: Ask around and see if anyone you know has a recommendation for a local lawyer who specialise in property law orsee:
Q: How do I instruct a lawyer?
A: Most lawyers will give you a free initial consultation by telephone to find out the scope of the job; use that to check what details you will need to send, how much they will charge for what work and when they can do the work. You will need to give them clear and concise details of who you are, what you want done and what has been discussed or agreed already. Use the lease requirements template – Heads of Terms on the CLAS website.
A plan, copies of any correspondence and your constitution, if applicable, together with your contact details, will be required. You should receive written Terms of Engagement which set out in detail what is to be done and how much it will cost.
Q: What might it cost to get a lease?
A: Legal fees vary from company to company and there are also other fees.These include fees for searches to check ownership of the land, for registration of a lease if it is for more than 7 years, to ensure it can be enforced, for any additional outgoings such as having a plan made andother administration charges like copying. It is unlikely that Stamp Duty Land Tax will be payable on the lease, but it is possible if your rent is particularly high or the lease is for a very long time. A Stamp Duty Land Tax calculator is available from HMRC.
It is usual also for the Landlord’s reasonable legal costs to be borne by the tenant, though you should seek to cap this at a sum to be agreed in advance. The cost of not putting a formal lease in place for a community group, however, could be the loss of everything on the site and the potential to be sued by the landowner for damages, for which members of a community group could be personally liable.
As a landowner, the cost of having no formal lease could be in the cost of court action to enforce the removal of an occupier and action for damages to ensure restoration of the site, all of which takes time and may prevent other plans going ahead.
To agree and to formalise the use of land is always preferable. There may be grants available to help in this process.
Q: What needs to be included in a lease?
A: The Heads of Terms template is a good starting point; including the length for the lease, the rent, insurance, maintenance of any buildings, access, uses, changes to the lease, management of the land etc. Discussing these early on will ease the relationship between owner and user.
Download the Lease Requirements Template- Heads of Termson the CLAS website and use itto negotiate the terms of your agreement and as a basis for instructing your lawyer.
Q: I have heard of a licence or a licence to occupy. What is that?
A: A licence is where the occupier shares the property with the landlord and/or other parties such as the public. This is known as not having exclusive occupation. The occupier is known as the Licensee and the landowner the Licensor.
Even if the parties sign a licence agreement, if the licensee has exclusive occupation it will be treated as a lease in law and the licensee will be the tenant. This means that the licensee may well have greater rights to remain on the property than anticipated. See the right to renew question below.
Q: I have heard of a meanwhile lease. What is that?
A: The Meanwhile Projectencouraged the use of land and buildings until they are put to an alternative use. The project has now finished but you can follow this link to our website to find Meanwhile Project templates for Meanwhile leases. Meanwhile was a key aspect of the Government’s 'Looking after our town centres' document, launched on 14 April 2009 including the empty shops revival plan to prevent high street decline and has been included in policy on making land available for community growing.
Q: I have heard of Landshare. What is that?
A: Landshare is a web-based initiative that aims to connect those who have land to share with those who need land for cultivating food. It was launched in 2009 and has an extensive website with resources to download. Note the emphasis is on the shared use of land and not exclusive use.
Q: I have heard of an FRI lease. What is that?
A: FRI stands for Full Repairing and Insuring. It relates to a lease of a building and is simply a colloquial name for a lease typically containing clauses which require the tenant to fully repair and insure the premises for the length of the lease.It is usual to find this sort of obligation on a long lease, say 15 years plus. There are other conditions relating to the length of an agreement which would also be included.
Q: I have heard of an IR lease. What is that?
A: IR stands for Internal Repairs. Again, it relates to lease of a building and is a colloquial name for a lease where a tenant is to make internal repairs only and would usually be found where the length of the lease is shorter, say 5 years or less. There are other conditions relating to the length of the lease which would also be included.
Q: There are lots of specialised words in the lease which I don’t understand. Where can I find out what they mean?
A: CLAS plans to create a “Jargon-buster” page on its website to help with this.
Q: Can the tenant stay on after a lease ends?
A: A Tenant has the right to renew the lease at the end, unless the parties agreed prior to signing the lease and signed the relevant documents. This is known as “Contracting out of the Right to renew”.
There is no right to renew with Farm Business Tenancies, but the tenancy will continue from year to year on the same terms if the initial length was for more than 2 years, until a 12 month notice to quit is served.
Q: Who should sign a lease?
A: The lease should be signed by a legally empowered representative of both the landlord and the tenant.Who is legally empowered to sign will depend on whether the parties are individuals, community groups with a constitution, limited companies etc. and you should seek legal advice to ensure the correct persons sign the agreement. The signatures may require to be witnessed in certain circumstances.
Q: I have heard of Registration of a lease. What is that and do I need to do it?
A: If the lease is for more than seven years the lease must be registered with the Land Registry in order for the tenant to obtain a “real right” enforceable against third parties. This right is enforceable even if the tenant does not take possession of the premises.
If the lease is not longer than seven years it is not capable of registration and the tenant must have taken possession of the premises to obtain a “real right” enforceable against third parties.
Q: What if the community group stops or falls apart? Can a lease be ended early?
A: If both parties to the lease, the landlord and the tenant, agree, then the lease can be amended in any way including early termination.
The lease may contain provisions for a break clause which means that the lease can be ended early without the agreement of the other party. There may be conditions that have to be met in order for the break clause to operate.
If no such provision is included then the tenant has the right to continue to occupy the site and the obligation to continue to pay the rent and perform the other obligations specified in the lease. The landlord has the right to continue to receive the rent and the obligation to continue to allow the tenant sole and uninterrupted use of the land.
If either party fails to perform some significant obligation eg failure to pay rent or failure to provide uninterrupted use of the site, then the other party can take legal action to seek to end the lease.
Q: Can the landowner visit the site?
A: A lease typically provides the landlord a reasonable right of entry to his or her land in order to inspect it or, just before the end of the lease, to arrange advertising. However, such a right of entry should be done reasonably, with due notice and care, and any damage to the tenant’s goods should be compensated for.
If you have a licence agreement, then the landlord/other parties can come and go as they wish and the licensee cannot limit their access.
Q: Can the landowner raise the rent?
A: Only if there is provision in the lease for the rent to be reviewed can the rent stated be changed. If there is no provision for review of the rent, both parties could agree to a change of rent if they chose to do so.
Typically, a lease for more than three years would make provision for the rent to be reviewed: some leases specify that such a review may be upwards only, some make provision for determining how the rent is to be set and that it is to be reviewed on a regular date (once every 5 years on the anniversary of the date of entry, for example).
In longer, more complex leases, usually but not only involving buildings, there will be significant clauses detailing what may and may not be taken into account in the review of rent. If a tenant intends to improve the site, legal advice must be taken to ensure these improvements are treated correctly for the purposes of any review of rent.
Q: Can the landowner throw a tenant off the site?
A: Not unless the tenant has committed a “material breach” of the terms of the lease. The purpose of a lease is, amongst other things, to give a tenant protection and a right to the uninterrupted use of the site. If, however, the tenant fails to perform an obligation, such as failure to carry out agreed works or failure to pay the rent, this may be a material breach of the terms of the lease and the landlord could seek to end the lease and remove the tenant.
Alternatively, it is possible to agree to insert a provision for the early ending of a lease into the agreement and to specify dates or reasons which allow this. Such a clause can be in favour of one or both parties.
Q: Does having a lease mean no other permissions to use the land are necessary?
A: No, various other permissions will be required depending on the use of the site.A lease will typically oblige the tenant to be responsible for obtaining any necessary permissions for their use of the site. The landlord’s consent is to the use stated in the lease.
A tenant needs to check whether, amongst other things, any planning consent, building regulations, employment, insurance and local bye-law or statutory permissions may be required. Any change in the use of the site may mean additional or repeat consents will be required.