Leases and underleases - Use and planning permissions

Learning Outcomes

After studying this article, you will be able to distinguish between leases and underleases, explain the legal requirements for user covenants and planning permissions, and apply the rules on change of use and alterations in leasehold property. You will also be able to advise on the interaction between lease covenants and statutory planning controls, and identify practical steps for ensuring compliance in property transactions.

SQE1 Syllabus

For SQE1, you are required to understand the legal and practical aspects of leases and underleases, especially in relation to user covenants and planning permissions. Focus your revision on:

• The distinction between leases and underleases, and their legal requirements
• User covenants and restrictions on use in leases and underleases
• The relationship between lease covenants and statutory planning controls
• The rules on change of use and the need for planning permission
• The consequences of breach of user covenants or planning law
• Advising clients on compliance with lease and planning requirements

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.

1. What is the main legal distinction between a lease and an underlease?
2. When does a change of use in leasehold property require planning permission?
3. What is the effect of a user covenant in a lease if the tenant wishes to change the use of the premises?
4. True or false? A tenant can always rely on planning permission to override a restrictive user covenant in their lease.

Introduction

Leases and underleases are central to property transactions in England and Wales. They regulate the occupation and use of land, and are subject to both contractual covenants and statutory planning controls. Understanding how user covenants and planning permissions interact is essential for advising clients and ensuring compliance in practice.

Leases and Underleases: Structure and Legal Requirements

A lease is a legal estate in land granting exclusive possession for a fixed or periodic term, usually in exchange for rent. An underlease (or sublease) is a lease granted by a tenant out of their own leasehold interest, for a term shorter than their own.

Key Term: lease
A legal estate in land granting exclusive possession for a fixed or periodic term, usually in exchange for rent.

Key Term: underlease
A lease granted by a tenant out of their own leasehold interest, for a term less than the tenant's own lease.

To be valid, both leases and underleases must comply with statutory formalities. A lease for more than three years must be made by deed. An underlease must always be for a shorter term than the headlease; otherwise, it will operate as an assignment.

User Covenants in Leases and Underleases

Most leases and underleases contain a user covenant restricting the use of the premises to a particular purpose or class of use.

Key Term: user covenant
A clause in a lease or underlease restricting or regulating the use of the premises by the tenant.

A user covenant may be absolute (prohibiting any change), qualified (requiring landlord's consent), or fully qualified (requiring consent not to be unreasonably withheld). Breach of a user covenant can lead to forfeiture or damages.

Planning Permissions and Change of Use

The use of land and buildings is also regulated by statutory planning controls. Under the Town and Country Planning Act 1990, planning permission is required for "development," which includes a material change of use.

Key Term: planning permission
Formal approval from the local planning authority to carry out development or a material change of use of land or buildings.

Key Term: material change of use
A significant change in the purpose for which land or buildings are used, requiring planning permission unless permitted development rights apply.

The Town and Country Planning (Use Classes) Order 1987 (as amended) groups uses into classes. Changes within the same class generally do not require planning permission, but changes between classes usually do.

Interaction Between Lease Covenants and Planning Law

It is important to distinguish between contractual restrictions in the lease (user covenants) and statutory planning controls. Obtaining planning permission does not override a restrictive user covenant, and vice versa. A tenant must comply with both.

Exam Warning Do not assume that planning permission allows a tenant to ignore lease restrictions, or that landlord's consent to a change of use removes the need for planning permission.

Landlord's Consent and Alterations

Many leases require the tenant to obtain the landlord's consent before changing the use of the premises or making alterations. The Landlord and Tenant Act 1988 requires the landlord to respond to written applications for consent within a reasonable time and not to unreasonably withhold consent, where the covenant is fully qualified.

Key Term: landlord's consent
Permission from the landlord required under a lease for certain actions, such as changing use or making alterations.

Planning Enforcement and Lease Breaches

If a tenant changes the use of premises without planning permission, the local authority may take enforcement action. If the tenant breaches a user covenant, the landlord may seek to forfeit the lease or claim damages.

Worked Example 1.1

A tenant holds a lease of a shop with a user covenant restricting use to retail sales. The tenant wishes to convert the shop to a café. What steps must the tenant take?

Answer: The tenant must check if the proposed use is within the same use class as retail sales. If not, planning permission for change of use may be required. The tenant must also obtain the landlord's consent if the lease restricts use or requires consent for change of use. Both planning and lease requirements must be satisfied.

Worked Example 1.2

A tenant grants an underlease of part of their premises to a subtenant, who intends to use the space as an office. The headlease restricts use to "light industrial." What are the implications?

Answer: The underlease must not permit a use that would breach the headlease user covenant. The tenant remains liable to the head landlord for any breach. The subtenant may also need planning permission if the change from industrial to office use is a material change of use.

Revision Tip

Always check both the lease covenants and planning law before advising on a proposed change of use or alterations. Compliance with one does not guarantee compliance with the other.

Summary

Leases and underleases regulate occupation and use of land through contractual covenants and are also subject to statutory planning controls. User covenants restrict the tenant's use, while planning law governs material changes of use and development. Both must be complied with independently. Breach of either can result in enforcement action by the landlord or local authority.

Key Point Checklist

This article has covered the following key knowledge points:

• The distinction between leases and underleases, and their legal requirements
• The function and types of user covenants in leases and underleases
• The requirement for planning permission for material change of use
• The relationship between lease covenants and planning law
• The need for both landlord's consent and planning permission for changes of use or alterations
• The consequences of breach of user covenants or planning law

Key Terms and Concepts

• lease
• underlease
• user covenant
• planning permission
• material change of use
• landlord's consent