Privity and property lending

Article Abstract:

Many observers have stated that the loss of privity of contract which came into effect with the Landlord and Tenant (Covenants) Act 1995, which eliminates part of a bank's security when lending on property, will have a considerable impact on property lending. However, it is possible to argue that the impact will not be as great as has been predicted. Indeed, the abolition of privity of contract could eventually boost the overall quality of lending on UK property, with bankers focusing on property fundamentals, rather than simply on the quality of tenant.

Privity

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Life post-privity?

Article Abstract:

Landlords have traditionally relied quite heavily on privity of contract to protect property investments. This allowed the landlord to recover any rent arrears, regardless of how many times the original tenant had assigned his lease. However, new legislation means that this no longer applies after the first assignment. Landlords are therefore looking at new lease clauses which could protect their rental income. Draft lease clauses have now been produced by a working party controlled by the British Association of Insurers.

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Privity on parade

Article Abstract:

The property industry in the UK still lacks uniformity over the use of assignment clauses despite the Landlord and Tenant (Covenants) Act being enforced at the beginning of 1996. A recent survey of 3,000 leasing agreements covering many types of property showed that provisions in lease contracts between landlords and tenants varied and excess time was spent in negotiation. There is a call for uniformity of terms from both sides.

Dwelling operators, exc. apartments, Lessors of Dwellings ex Apt, Lessors of Residential Buildings and Dwellings, Lessors of Apartment Bldgs, Apartment building operators, Real estate industry, Landlords, Apartment building landlords

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