11: Enforcing Covenants and Remedies Flashcards
What is a leasehold covenant?
Promises made by the landlord and tenants to each other. These are different to restrictive covenants. E.g. to pay rent, be responsible for maintenance.
Which piece of legislation governs leasehold covenants?
Landlord and Tenant (Covenants) Act 1995.
What is the difference between an ‘old’ and a ‘new’ lease?
Pre 1996: Old leases
Post 1996: New leases
Due to the Landlord and Tenant (Covenants) Act 1995.
When did the LT(C)A 1995 come into force?
From 1996 onwards, leases were then referred to from 1996 as a ‘new’ lease.
What is ‘privity of contract’?
Where the landlord and tenant have agreed to a contract with each other - if one breaks a contractual term, they may be sued by the other.
What is ‘privity of estate’?
Where a landlord and tenant relationship exists between them. Privity of estate refers to the legal relationship that two parties bear when their estates constitute one estate in law.
Can a landlord sue the original tenant if the assignee has not paid their rent in an old lease?
Yes, because there is privity of contract between the original tenant and the original landlord, which makes the tenant liable for the defaults of assignees.
Can a landlord sue the original tenant if the assignee has not paid their rent in a new lease?
No, in respect for leases granted after 1 January 1996, the previous rules, which made the original tenant liable for the defaults of assignees, cease to apply.
Which 3 pairs of people are bound by privity of contract?
Landlord and tenants
Tenants and assignees
Landlords and Reversioners
How are landlord and assignees connected?
Through common law, Spencer’s Case [1583], the burden of covenants are attached to the leasehold estate and so bind subsequent assignees.
What are the four criteria for assignees to be liable for the benefit and burden of covenants via Spencer’s Case [1583]?
Legal lease (fulfilling requirements)
Assigned by deed
Privity of estate (relationship over same land)
Touches and concerns the land
Does Spencer’s Case [1583] apply to equitable leases?
No, it does not apply to equitable leases, only legal leases.
Is there privity of estate between landlord or tenant assignees?
Yes, because the assignee merely ‘steps into the shoes’ of the landlord or tenant, so assumes all their rights and obligations. There is no privity of contract between L and A1, but there is privity of estate.
What are the three criteria for when the covenant ‘touches and concerns the land’?
A covenant touches and concerns when it:
only benefits the landlord when they hold the reversion.
affects the nature, quality and mode of user or value of land.
is not expressed to be personal.
For old leases pre 1996, how is the fact that tenants were still liable for non-payment from their assignees mitigated?
Via implied rights of indemnity via either:
s77 LPA 1925
Moule v Garrett [1872]
What does s77 Law of Property Act 1925 provide for?
For old leases pre 1996, it provides that any assignment of a lease for valuable consideration shall be deemed to include an indemnity in favour of the assignor by the assignee. It therefore can create a chain of indemnity.
Does s77 LPA 1925 apply to both the assignment and reversion of the lease?
No, s77 LPA 1925 (this method of indemnity) applies only to an assignment of the lease, not the reversion.
What does Moule v Garrett [1872] provide for?
It provides the quasi-contractual right of indemnification, meaning that if the tenant T had assigned to A1 and A1 then assigned to A2, the tenant T, if sued for non-payment of rent by the landlord, could claim directly against A2.
How are reversioners and tenants connected?
Through s141 and s142 LPA 1925.
What is the difference between s141 and s142 LPA 1925?
s141: Reversioner takes the benefit of the tenant’s obligations by virtue of s141.
s142: Reversioner suffers the burden of the landlord’s obligations by virtue of s142.
Which condition must the covenants meet in s141 and s142 LPA 1925 in order for a reversioner to take the benefit and burden?
The covenants must have reference to the subject-matter of a lease.
What does the covenant needing to ‘reference the subject-matter of a lease’ mean?
It is the same as ‘touch and concern the land’, so it must be related directly to the land/property.
Can reversioners sue for past breaches in old leases?
Yes, reversioners can sue for past breaches, even if they did not hold the reversion at the time of the breach.
In the picture below, how is there a relationship between R and A3?
There is no contractual relationship between R and A3. The various leasehold covenants will be mutually binding, however, if the four conditions in Spencer’s Case are satisfied (so the leasehold covenants run to A3) and the benefit and burden of the leasehold covenants have run to R under ss141 and 142 LPA 1925
In the picture below pre-2000, can L sue S for non-payment of rent? What would L’s remedy be?
L cannot directly sue S for non-payment of rent, because there is no privity of contract or estate (as there is no landlord-tenant relationship between them).
Remedy: L’s primary remedy would be against T because there is privity of contract between L and T. T would then recover the rent from S.
In the picture below pre-2000, can R sue S for non-payment of rent? What would R’s remedy be?
R cannot sue S for non-payment as there is no privity of contract or privity of estate (no landlord-tenant relationship between them).
Remedy: R’s primary remedy would be to sue L through s141 LPA 1925.
In the picture below pre-2000, can R sue S for non-payment of rent? What would R’s remedy be?
R cannot sue S as there is no privity of contract or estate (no landlord-tenant relationship between them).
Remedy: R’s primary remedy would be against A2 if the conditions in Spencer’s Case are met and through s141. A2 could then recover the rent from S through privity of contract.
How are reversioners and assignees connected?
The assignee has to make sure Spencer’s Case is satisfied so the covenant is mutually binding and then can use s141/2 LPA 1925 for benefit and burden of the covenant.
How are sub-tenants connected to the tenant?
Sub-tenants only have privity of contract between themselves and the tenant.
Can covenants mutually bind sub-tenants?
Covenants cannot mutually bind sub-tenants, unless Contracts (Rights of Third Parties) Act 1999 applies (post May 2000) or it is a restrictive covenant that runs with the land, binding everyone except a bone fide purchaser.
When did Contracts (Rights of Third Parties) Act 1999 come into force?
May 2000.
How did Contracts (Rights of Third Parties) Act 1999 affect old leases?
Contracts (Rights of Third Parties) Act 1999 allowed a third party to enforce a term in a contract if the contract allows it or the term claims to confer a benefit on them. Only applies post 2000.
Why can restrictive covenants bind sub-tenants?
Because restrictive covenants that run with the land, therefore binds everyone but the bone fide purchaser for value of a legal estate without notice of the covenant. So, if the sub-tenant has notice, it will bind them. (Tulk v Moxhay [1848]).
Apart from restrictive covenants, what other method could a landlord use in order to take direct action against a sub-tenant of a pre-May 2000 lease?
Right of re-entry (forfeiture clause). A right of re-entry attached to a legal lease is itself a legal interest in land, by virtue of s1(2)(e) LPA 1925: it binds the world. The landlord can, therefore, enforce forfeiture against the sub-tenant.
Which sections of the LT(C)A 1995 cover old leases (pre-1996)?
s17 - limits original tenant’s liability for fixed charges + landlord must service notice within 6 months
s18 - if covenant has changed since tenant assigned, tenant is not liable
s19 - allows an overriding lease between the landlord and the current tenant.
What does s17 LT(C)A 1995 cover?
It limits the liability of tenants in old leases (pre-1996) in respect of fixed charges (e.g. overdue rent, service charges). s17(2) outlines that the (original) tenant will not be liable unless the landlord serves a notice within six months of the due date.
What does s18 LT(C)A 1995 cover?
If the fixed charge covenant (e.g. rent) has changed since the original tenant’s assigned the lease to someone else, they will not be liable at all.
What does s19 LT(C)A 1995 cover?
Overriding leases can arise when the former tenant has made full payment in respect of their liability (the defaulting tenant’s debts).
What is an overriding lease?
When an original tenant has paid all the defaulting tenant’s debts to the landlord, they can apply for an overriding lease, which puts them in the position of landlord to the defaulting assignee. It gives the former tenant control over the defaulting tenant.
What are the three things that overriding leases allow the former tenant to do?
They give the former tenant control over the defaulting tenant and allows them to:
sue the defaulting tenant in the future for outstanding rent
Sue for damages for breach of covenant
Regain possession of the property for which they are liable through forfeiture
What is the procedure for obtaining an overriding lease?
The former tenant must write to the landlord with a request for an overriding lease, referencing payment that gives rise to the right within 12 months of the payment date.
For new leases (1996 onwards), what did LT(C)A 1995 do for the benefit and burden of all landlord and tenant covenants?
The benefit and burden of all landlord and tenant covenants (whether express, implied or imposed by law) will now automatically pass to an assignee of the lease or the reversion unless the covenant is expressed to be personal.
Do the new rules around the burden of the tenant’s covenants running with the land (from 1996 onwards) from the LT(C)A 1995 stretch to equitable leases?
Yes, the benefit and burden of all landlord and tenant covenants will now automatically pass to an assignee of an equitable lease. This is different to the problem in the past where the burden of the tenant’s covenants did not run if the lease was equitable.
Does a personal covenant need to be explicitly identified as being personal in nature?
In order to be a personal covenant, the covenant does not have to be explicitly identified as being personal in nature; words used in the lease which convey an intention that the covenant is personal in nature are sufficient.
What is the rule in s5 LT(C)A 1995?
That a tenant under a new lease will be liable in respect of leasehold covenants only while the lease is vested in them. Where a tenant assigns the whole of the premises, they are released from the tenant covenants and cease to be entitled to the landlord’s covenants.
If a tenant assigns part of the premises post 1996, are they released from those covenants that relate to that part?
Yes, they are.
Where are ‘excluded assignments’ found in LT(C)A 1995 and how are they defined?
s11 - assignments which arise in breach of covenant or by operation of law.
What are the assignments that are excluded from the rule in s5 LT(C)A 1995?
Assignments by operation of law, e.g. assignment on the death of a joint tenant of the legal estate, or assignment to a trustee when the tenant becomes bankrupt.
What is the reason behind s11 LT(C)A 1995 and excluded assignments?
They don’t allow the tenant to release themselves from liability until the next assignment (provided it is not excluded). This is because the assignee may not have voluntarily agreed to be liable for all the covenants.
What does an ‘AGA’ stand for?
An authorised guarantee agreement.
What is the definition of an authorised guarantee agreement?
Under s16 LT(C)A 1995, an AGA is where the tenant guarantees the performance of the relevant covenants by the assignee.
Why do authorised guarantee agreements exist?
It is a way to protect the landlord for an assignee who does not fulfil the covenants that were passed on by the tenant.
When would an authorised guarantee agreement usually be entered into?
When the tenant needs consent from the landlord to assign - they can make it a condition of their consent. If the tenant does not need consent, the landlord cannot impose an AGA.
When would an authorised guarantee agreement come to an end?
As soon as the assignee whose name it was attributed to assigns the lease again. It only is in play whilst that assignee is in possession.
What three things can an authorised guarantee agreement impose on a tenant?
- Liability as the sole debtor of the assignee’s obligations
- Liability as guarantor of the assignee
- If the tenancy is disclaimed (if the assignee becomes bankrupt), they would have to take on a new lease for the duration of the term.
What are the rules around liability of fixed charges and overriding leases for new leases (1996 onwards)?
The same as the rules from LT(C)A 1995 for existing leases. (Must be given notice within 6 months + overriding leases can be granted to take over the landlord responsibility).
What does LT(C)A 1995 state about suing for breach prior to the assignment? + exception
s23 reverses Re King [1963] - an assignee of the reversion cannot sue for any breach that occurred before the assignment except for forfeiture proceedings, which can be brought for pre-assignment breaches.
Does LT(C)A 1995 provide a provision to allow landlords to be released automatically from their covenants?
No, it does not.
What is the process for a landlord who wants to release themselves from their covenants (via assignment of the reversion)?
They must serve notice on the tenant 4 weeks before the assignment of the freehold reversion. If the tenant objects in that 4 week period, the landlord must apply to the County Court for a release. This is to give the tenant some protection.
Is release from a covenant retrospective?
No it is not.
