9. Remedies for Breach of Leasehold Covenants

Question 1

Liability for tenants wrt covenants in an OLD LEASE

Answer 1

1. The original tenant remains liable for covenants under the lease for the full term (regardless of whether they have assigned)
2. Allowing landlord to sue original tenant (privity of contract) and current tenant (privity of estate)
3. Landlord can also sue intervening tenants under privity of contract if they gave the landlord a direct covenant on the assignment

Question 2

Liability for tenants in NEW leases wrt tenant covenants

Answer 2

the original tenant is released from liability from covenant as soon as it assigns the lease to another tenant. The current tenant is liable under s 3 of the Landlord and Tenant (Covenants) Act 1995

Question 3

How can a landlord ensure the original tenant remains liable for breaches of tenant covenants on a NEW lease?

Answer 3

Landlord can require outgoing tenant enters into an AGA (as a condition for the landlord’s consent to the assignment)

Question 4

What is an AGA

Answer 4

promise by outgoing tenant that it will be liable for breaches of covenants in the lease by the incoming assignee

Question 5

How long does an AGA last for?

Answer 5

The AGA lasts for the duration of the assignee’s ownership of the lease (so, if there is a further assignment, the previous AGA is no longer relevant)

Question 6

Main remedies for breach of tenant’s covenant to pay rent

Answer 6

1. Action in Debt
2. CRAR
3. Pursuing guarantors
4. Pursuing former tenants
5. Deducting from rental deposit
6. Forfeiture

Question 7

Notice requirements for CRAR

Answer 7

Landlord must give 7 days notice of its intention to enter

Question 8

Can the landlord personally remove the tenant’s belongings under CRAR?

Answer 8

Must use enforcement agency to enter and remove certain goods

Question 9

What goods can be taken if a CRAR is pursued?

Answer 9

items and equipment up to value of 1350 necessary for tenant’s business like computers and telephones - must be OWNED by tenant

Question 10

If CRAR is pursued and the tenant continues to leave the arrears unpaid, what will the landlord do?

Answer 10

If tenant does not pay the arrears, landlord may sell the goods at a public auction and tenant must be given 7 clear days of notice for the sale

Question 11

Procedure for a debt action + limitations

Answer 11

Non- payment of rent is a debt and so if the current tenant, or one of the other parties mentioned above is liable for the rent, it can be recovered through the High Court or County Court.

• The Limitation Act 1980 puts a limitation of six years on recovery of rent.

Question 12

If a landlord wants to pursue the guarantor of a current tenant to recover a debt, what must be in place?

Answer 12

Guarantor must have entered in written guarantee to pay rent if tenant does not pay and is required to indemnify landlord against loss caused by / breaches of covenant from tenant

Question 13

Pursuing former tenant under an AGA for breach of rent payment covenant: procedure

Answer 13

1. issue s 17 notice (default notice) to recover a fixed charge
2. Default notice must be served within 6 months of the current tenant’s breach (can only recover sums falling within 6 months of the notice being served)

Question 14

What would an overriding lease be granted?

Answer 14

Where the landlord does serve a default notice on a former tenant or its guarantor, that person may be able to regain some control over the property by paying the sum claimed under the default notice and then calling for an ‘overriding lease’,
- headlease between landlord and former tenant/guarantor slotting between landlord and defaulting tenant
- this former tenant / guarantor acquires rights of landlord and can terminate lease in accordance with the remedies relevant

Question 15

When can a rent deposit be used as a remedy for a breach of the covenant to pay rent?

Answer 15

• if there is a deposit and rent deed highlights it can be drawn from in case of rent non-payment
• landlord need not go to court to do this

Question 16

Non-payment of rent: Remedy of Forfeiture
1. What is it
2. Procedural Requirements

Answer 16

1. Brings the lease to an end and enables landlord to gain vacant possession of property
2. There must be a forfeiture clause (can be under ‘provisos’ or ‘re-entry’)
3. Clause specifies when landlord can forfeit and whether formal notice / demand is required
4. Landlord can take peaceful re-entry or obtain a court order

Question 17

Can the tenant prevent the landlord forfeiting the lease if rent has gone unpaid?

Answer 17

Tenant can apply to the court for relief from forfeiture (likely subject to condition that they repay all costs)

Question 18

When will a landlord NOT be able to pursue forfeiture as a remedy

Answer 18

Landlord waives their right to forfeit if they are seen to carry out an act showing they intend to continue the landlord and tenant relationship (ie. demanding or accepting rent after the breach)

Question 19

Is the right to forfeit implied into leases?

Answer 19

No, it must be expressly reserved

Question 20

Specific Performance

Answer 20

The tenant’s failure to repair is a breach of covenant and the equitable remedy of specific performance is available to force the tenant to comply with the positive covenant.

• Will only be granted where other remedies are not appropriate (ie. no forfeiture or self-help clause, damages inadequate because condition of property is deteriorating, clean hands etc.)

Question 21

Self-Help Clause: Meaning

Answer 21

This clause allows landlord to recover cost of repairs (avoiding statutory provisions for damages). Allows the landlord to enter the property and check compliance with the tenant’s repair covenant
- Jervis v Harris clause

Question 22

Damages: what amount can be recovered (by virtue of statute) for a breach of the covenant to repair?

Answer 22

1. Section 18 of the Landlord and Tenant Act 1927: Limits amount of damages to the amount by which the landlord’s reversion has diminished in value as a result of the disrepair (may be less than the cost of the repairs)

Question 23

Breach of repair covenant: Forfeiture
1. Procedure

Answer 23

1. Landlord serves s 146 notice
2. If notice not complied with, landlord can forfeit by court order or peaceful re-entry
3. tenant may apply for relief

Question 24

What must be included on a s 146 notice - when is this relevant?

Answer 24

1. Forfeiture for breach of covenant to repair
2. s 146 notice must:
   - specify the breach
   - require breach to be remedied within reasonable time (if capable)
   - require tenant to pay compensation for the breach

Question 25

Forfeiture (repairs): If the lease is for 7 years or more and has 3 years left to run - what additional requirement must be included on the s 146 notice

Answer 25

Must include notification of the tenant’s right to serve a counter notice within 28 days

Question 26

Forfeiture (breach of repair covenant): what happens if the tenant serves a counter notice?

Answer 26

The landlord cannot continue with forfeiture without leave of the court

Question 27

Self-help clause: Procedural Requirements

Answer 27

1. Landlord serves notice specifying works required to remedy
2. If they fail to do so within 1 month of service, landlord can enter and carry out works themselves
3. Landlord can recover this debt from the tenant

Question 28

Damages (breach of repair covenant): what procedure must be followed in a claim for damages when the lease is granted for 7 or more years with 3 years left to run?

Answer 28

1. Notice must be served on the tenant
2. Tenant has the right to serve a counter notice within 28 days and if so, landlord cannot proceed any further without leave of the court

Question 29

When is specific performance used as a remedy?

Answer 29

1. Breach of Repairs covenant
2. At court’s discretion (equitable remedy)
3. only suitable when other remedies are insufficient

Question 30

Best remedy for a breach of covenant which AVOIDS going to court?

Answer 30

Agreement by landlord and tenant to surrender
1. by operation of law (eg. giving keys back)
2. by deed of surrender (usually commercial leases)