What a landlord sells during a lease is the reversion
A worked RES examination question on leases and reversions, from our Paper 1 bank — with the rule it turns on, and why each of the four options is right or wrong.
The question
An owner grants a lease of his warehouse to a logistics company for a term of thirty years, the tenant having fitted out the building at its own expense. Fourteen years into the term the owner decides to realise his investment and sells the property to a buyer who is looking for an income stream. The buyer takes with the tenant in occupation, inspects the lease before committing, and signs nothing at all with the tenant. Two months after completion the tenant asks the buyer whether it should now be paying its rent to him.
Consider the following statements.
- (i) The lease ends on the sale, the tenant's agreement having been with the former owner.
- (ii) The buyer takes subject to the lease.
- (iii) The buyer may enforce the lease against the tenant.
- (iv) What the seller sold was the reversion.
The answer, and why
Answer: C
The rule. What a landlord sells during a lease is the reversion. The buyer takes subject to the lease and may enforce it.
Why C is correct. (ii), (iii) and (iv) hold. (i) is false.
The other options.
- B and D carry the false (i).
- A drops the correct (iv).
Exam note. The lease survives the sale. That is the whole point of buying a tenanted property.
More on Leases and reversions
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