Chapter 9: Covenants in leases Flashcards
- Lease anatomy
Assuming the essential requirements of a lease are present, we will now consider the traditional basic ‘anatomy’ of a lease. No two leases are the same, but as a rough guide the traditional basic ‘anatomy’ of a lease is as
follows.
1.1 Parties, date, definitions, interpretation provisions
Most leases usually start with the date of the lease and the names of the landlord and tenant and their addresses. As with any well drafted legal agreement, there will be a section giving guidelines on interpretation and definitions such as ‘premises’, ‘insured risks’ or ‘common parts’ of a building.
1.2 Demise and rents
These are the operative provisions of the lease where the landlord demises or grants the lease of
the premises to the tenant for a specified term in consideration of the rent paid and the covenants
entered into.
1.3 Tenant covenants
The basic rule is that a tenant may do all things that an owner of an estate can do unless the lease prohibits such actions. Leases are therefore drafted in a prohibitory or negative manner setting out what the tenant cannot do by way of a number of tenant covenants.
This section may either be in the main part of the lease or in a schedule to the lease, but will cover
issues such as the obligation to pay the rent, what the tenant can use the premises for, whether the tenant can make any alterations to the premises and whether the tenant will be permitted to assign or underlet the premises. If there is no mention of an action in a lease, the tenant is free to do it.
1.4 Landlord covenants
Again this section can often be in a schedule to the lease, though there tends to be far fewer covenants given than those by the tenant. If the lease is a lease of part of a building (eg a floor in an office block or unit on an estate) the
landlord may covenant to provide services, maintain common areas and to insure the building.
The most common is the covenant for quiet enjoyment. Quiet enjoyment is a landlord’s covenant
not to interfere with the tenant’s possession or enjoyment of the property during the term of the
lease. It covers the acts of the landlord and the lawful acts of anyone claiming under them.
Example: Breaches of the covenant for quiet enjoyment
These include:
* The erection of scaffolding hindering access to the property (Owen v Gadd [1956] 2 QB 99)
* Persistent intimidation of the tenant to induce him to leave (Kenny v Preen [1963] 1 QB 499)
1.5 Guarantor’s covenants
An individual or company guarantor may also be a party to the lease and will covenant to
guarantee payments that must be made under the lease and the performance of any other
obligations so that if the tenant defaults in payment, the landlord is able to call upon the guarantor.
1.6 Provisos, agreements and declarations
This section of the lease is a kind of miscellaneous section dealing with a number of matters. For example:
* Forfeiture
* What happens in the event of damage and destruction by insured risks
* Clauses dealing with the exclusion of security of tenure provisions in the Landlord and Tenant
Act 1954
Forfeiture
Forfeiture is the right of the landlord to bring the lease to an early end in the event of tenant breach.
Security of tenure
Security of tenure is a right for the tenant to remain in premises at the end of the lease term and to request the grant of a new lease.
1.7 Rights granted
The tenant may need a right of way to access the premises or a right to park cars in a nearby car park. These easements will need to be set out clearly in the lease.
Examples may include rights over other parts of the building (eg to use common parts and conducting media for utilities).
1.8 Rights excepted and reserved
The landlord may need to reserve rights for itself to access the tenant’s premises, perhaps to run
cables through it or to carry out repairs to the rest of the building
1.9 Other provisions
- Rent review (a mechanism to review the rent at regular intervals)
- Service charge (where the lease is of part of a property or an estate)
Service charge
Service charge is a sum of money charged by the landlord to tenants to cover costs of services to tenants within a property (such as an industrial estate, block of flats,
shopping centre). The charges cover costs to do with maintenance and repairs of exteriors (roofs etc) and common parts but exclude the tenant’s demised areas because the tenants will usually have agreed to repair those areas themselves in the lease.
1.10 Execution
The landlord and the tenant and any guarantor will need to execute the document in accordance with normal attestation rules. To be legal, a lease must be granted by deed (LPA 1925, s 52) unless it falls within the exception for short leases of three years or less under LPA 1925, s 54(2).
Prescribed lease clauses
When the Land Registration Act 2002 came into force more leases became registrable. The Land
Registry devised a method to speed up lease registration. Where you are granting a registrable lease, your lease must include a list of prescribed lease clauses at the front.
You will see that, in the majority of cases, the main areas to focus on will be:
Date of lease
* Landlord’s title number
* Parties
* Term
* Easements granted and reserved
1.11 Summary
- Most residential and commercial leases follow a basic structure which includes the following
provisions: - Parties, date, definitions, interpretation provisions
- Demise and rents
- Tenant covenants
- Landlord covenants
- Rights granted/excepted and reserved
- Execution
Summary
- A lease may also contain a forfeiture provision, a clause dealing with insured risks, and
provisions relating to security of tenure, rent review and service charge. - A tenant may do anything not expressly prohibited by the lease.
- A covenant for quiet enjoyment means a landlord must not interfere with a tenant’s possession.
- Covenants in leases
Leasehold covenant
A leasehold covenant is a promise contained in a lease given by a
landlord or a tenant.
Leasehold covenant
We will now explore four of the usual covenants found in most residential and commercial leases
(repair, alterations, user and alienation) and the different types of covenant you may encounter.
2.1 Repair
A lease will generally include a covenant by the tenant relating to repair. Under a general
repairing covenant, the tenant must, according to the Court of Appeal in Proudfoot v Hart (1890)
LR 25 QBD 42, keep the premises in the condition in which they would be kept by a reasonably
minded owner, having regard to
2.1 Repair
- The character and type of premises at the beginning of the lease - the obligation is neither
diminished nor increased by a change in the character of the neighbourhood; - The age of the premises; and
- The express words of the covenant.
2.1 Repair
Note. A covenant to keep the premises in repair also entails an obligation to put them in repair
first, if at the time of the letting they were out of repair. This can be a very onerous obligation if the premises are in a state of disrepair at the beginning of the term. A repair obligation can be limited by a schedule of condition (photographs and verbal description of the premises prepared by a surveyor annexed to the lease). The repair obligation would then state the tenant ‘is under no obligation to put the premises in any better state of repair than as evidenced by the schedule of condition annexed to the lease’.