Learning Outcomes
After reading this article, you will be able to identify and explain the main pre-contract enquiries and searches required when granting a lease or underlease. You will understand how to verify the landlord’s title and authority, check for planning and use restrictions, identify legal encumbrances, and conduct essential searches such as local authority and environmental searches. You will also be able to apply these principles to practical SQE1 scenarios and avoid common pitfalls.
SQE1 Syllabus
For SQE1, you are required to understand the pre-contract due diligence required when granting a lease or underlease. Focus your revision on:
- The purpose and process of pre-contract enquiries and searches in lease transactions
- Verification of the landlord’s title and authority to grant a lease
- Identification of planning permissions, use restrictions, and compliance with statutory requirements
- Detection of legal encumbrances such as covenants, easements, and third-party rights
- Conducting and interpreting local authority, Land Registry, and environmental searches
- The practical implications of search results for lease drafting and negotiation
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- What is the main purpose of pre-contract enquiries when granting a lease?
- Which search would reveal whether a property is subject to a planning enforcement notice?
- Why is it important to verify the landlord’s authority to grant a lease?
- What legal risks might arise if restrictive covenants are not identified before granting a lease?
Introduction
When granting a lease or underlease, it is essential to carry out thorough pre-contract enquiries and searches. These steps are designed to uncover any legal or practical issues that could affect the validity, enforceability, or value of the lease. Failure to conduct proper due diligence can result in costly disputes, unenforceable rights, or professional negligence claims. This article outlines the key pre-contract enquiries and searches required for lease transactions, focusing on title verification, planning, legal encumbrances, and the main statutory searches.
Pre-Contract Enquiries: Purpose and Scope
Pre-contract enquiries are questions raised by the prospective tenant (or their solicitor) to the landlord (or their solicitor) before entering into a binding lease. The aim is to ensure that the tenant receives what they expect and that there are no hidden problems affecting the property or the lease.
Key Term: pre-contract enquiries
Questions raised by the tenant’s solicitor to clarify matters about the property, title, use, and any issues that may affect the lease.
Title Verification and Authority to Grant a Lease
Before granting a lease, it is important to confirm that the landlord has the legal right and authority to do so. This involves reviewing the landlord’s title documents or official copies from the Land Registry.
Key Term: verification of title
The process of checking the landlord’s ownership and right to grant a lease, including any restrictions or lender consents required.
If the landlord’s title is subject to a mortgage, lender consent may be needed. If the landlord is a company, a company search should be conducted to confirm its existence, solvency, and power to grant leases.
Key Term: company search
A search at Companies House to confirm a company landlord’s status, powers, and any insolvency or charge registrations.
Planning, Use, and Statutory Compliance
The tenant must ensure that the property can be lawfully used for their intended purpose. This involves checking:
- Existing planning permissions and any conditions attached
- The property’s use class under the Town and Country Planning (Use Classes) Order 1987
- Whether any planning enforcement notices or breaches exist
- Compliance with building regulations and listed building or conservation area controls
Key Term: planning permission
Formal approval from the local authority for the use or development of land or buildings.
If the intended use is not permitted, or if there are outstanding breaches, the tenant may face enforcement action or be unable to use the property as planned.
Legal Encumbrances: Covenants, Easements, and Third-Party Rights
It is essential to identify any legal restrictions or obligations affecting the property, such as:
- Restrictive covenants limiting use or alterations
- Positive covenants requiring expenditure or action
- Easements (e.g., rights of way, rights to light)
- Wayleaves or third-party rights (e.g., utility company rights)
Key Term: restrictive covenant
A binding promise restricting the use or development of land.
If these are not identified and addressed, the tenant may be unable to use the property as intended or may incur unexpected liabilities.
Essential Searches Before Granting a Lease
Local Authority Search
A local authority search is essential to reveal:
- Planning permissions and conditions
- Planning enforcement notices
- Conservation area or listed building status
- Tree preservation orders
- Financial charges or local land charges
Key Term: local authority search
A search of the local authority’s records to uncover planning, environmental, and statutory matters affecting the property.
Land Registry Search
For registered land, a Land Registry search confirms:
- The landlord’s ownership and any restrictions on title
- Registered charges, notices, or restrictions
- The property’s boundaries and extent
For unregistered land, the tenant’s solicitor should review the title deeds and conduct a Land Charges search to identify any registered interests.
Environmental Search
Environmental searches are increasingly important, especially for commercial leases. They reveal:
- Contamination risks
- Flood risk
- Proximity to landfill or hazardous sites
Key Term: environmental search
A search to identify environmental risks such as contamination or flooding that may affect the property or result in liability.
Additional Searches
Depending on the property’s location and history, further searches may be required, such as:
- Water and drainage search (to confirm connection to mains services)
- Highways search (to confirm access)
- Commons registration search (for rural or greenfield sites)
- Mining search (in former mining areas)
Interpreting Search Results and Acting on Findings
The results of pre-contract enquiries and searches may reveal issues that require further investigation, negotiation, or action. For example:
- If a restrictive covenant is identified, the tenant may require the landlord to obtain a release or indemnity insurance.
- If planning permission is missing for an existing use, the lease may need to be conditional on obtaining retrospective consent.
- If environmental contamination is found, the tenant may negotiate for remediation or a rent reduction.
Worked Example 1.1
A tenant intends to open a restaurant in a property currently used as a retail shop. The local authority search reveals that the property’s planning use is for retail (Class E), and there is a restrictive covenant prohibiting use as a restaurant.
Question: What steps should the tenant’s solicitor take before exchange?
Answer: The solicitor should advise the tenant that planning permission for change of use will be required and that the restrictive covenant must be released or indemnity insurance obtained. The lease should be conditional on obtaining the necessary permissions and consents.
Worked Example 1.2
The landlord’s title is subject to a mortgage, and the Land Registry entry includes a restriction requiring lender consent for any lease.
Question: What must the landlord’s solicitor do before granting the lease?
Answer: The solicitor must obtain the lender’s written consent to the lease and provide evidence of this to the tenant’s solicitor before completion.
Consequences of Inadequate Enquiries and Searches
Failure to conduct proper pre-contract enquiries and searches can result in:
- The tenant being unable to use the property as intended
- Liability for breaches of planning or covenants
- Unexpected costs or enforcement action
- Professional negligence claims against the solicitor
Exam Warning
If a lease is granted without verifying the landlord’s authority or without identifying restrictive covenants, the tenant may have no remedy if they are later prevented from using the property as planned. Always check for lender consents and all legal encumbrances.
Revision Tip
Always review the results of all searches and enquiries together. A single issue may have multiple legal implications for the lease.
Key Point Checklist
This article has covered the following key knowledge points:
- Pre-contract enquiries and searches are essential before granting a lease or underlease.
- Verification of the landlord’s title and authority is required, including lender or company consents.
- Planning permissions, use classes, and statutory compliance must be checked.
- Legal encumbrances such as covenants, easements, and third-party rights must be identified.
- Local authority, Land Registry, and environmental searches are standard requirements.
- The results of searches may require negotiation, lease conditions, or further action.
- Failure to conduct adequate enquiries and searches can result in serious legal and financial risks.
Key Terms and Concepts
- pre-contract enquiries
- verification of title
- company search
- planning permission
- restrictive covenant
- local authority search
- environmental search
