The Bank's Consent on Creation of Lease
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The Bank's Consent on Creation of Lease

04/04/2014

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There is no longer a requirement for a Deed of Mortgage and Charge to expressly state that a Banks written consent is required prior to entering into a Lease. This provision is now implied since the enactment of the Land and Conveyancing Law Reform Act 2009 (“2009 Act”).If a Borrower / Landlord seeks the written consent of a Bank prior to creating a Lease, the Bank cannot unreasonably withhold its consent. The Bank should seek a copy of the draft Lease which should be revi...

There is no longer a requirement for a Deed of Mortgage and Charge to expressly state that a Banks written consent is required prior to entering into a Lease. This provision is now implied since the enactment of the Land and Conveyancing Law Reform Act 2009 (“2009 Act”).

If a Borrower / Landlord seeks the written consent of a Bank prior to creating a Lease, the Bank cannot unreasonably withhold its consent. The Bank should seek a copy of the draft Lease which should be reviewed by the Banks legal representatives. This will ensure that any issues with the Lease can be raised and the Banks position protected from the outset. The issues to be considered will include whether the Lease creates statutory rights in favour of a tenant, the term, the passing rent, break clauses, repairing and insuring covenants and generally the commerciality of the transaction.

In the event that the Borrower / Landlord enters a Lease without seeking the written consent of the Bank, the Lease is voidable where the Bank establishes that : -

  1. The Tenant had actual knowledge of the mortgage at the time the Lease was granted.

If the Deed of Mortgage and Charge is not registered on title at the time the Lease was created, the Tenant may not be aware of the existence of the Deed of Mortgage and Charge and therefore the Bank may not be able to rely on this provision.

2 .  The granting of the Lease had prejudiced the Bank.

This may arise for example where the Bank can prove that the rent obtainable under the Lease is below the market value at the time the Lease was created.

Where the term of the Lease exceeds 21 years, the Lease must be registered in the Property Registration Authority (“the PRA”). The PRA now requires evidence of written consent from the Bank prior to registering a Lease.

The 2009 Act and the PRA have copperfastened the requirement for every Borrower / Landlord to obtain the written consent of hte Bank prior to hte creation of a Lease.

Should you have any query in relation to this article or a related legal issue, please contact a member of our Property Banking Team.  

Property Banking Team  Thomas O Malley, Partner    Breen Purcell, Partner     Julisa Flanagan, Associate                                                                                                                                       

Remember that this article is for information purposes only and does not constitute legal advice. Case law is fact specific and readers should understand that similar outcomes cannot be assumed. Specific advice should always be taken in given situations.