Covenants In A Lease

Question 1

What is the traditional basic anatomy of a lease?

Answer 1

The traditional basic anatomy of a lease includes: Parties, date, definitions, interpretation provisions; Demise and rents; Tenant covenants; Landlord covenants; Rights granted / excepted and reserved; Execution.

Question 2

What do tenant covenants generally entail?

Answer 2

Tenant covenants outline what a tenant cannot do unless expressly permitted by the lease, covering obligations like paying rent and using the premises.

Question 3

What is the landlord’s covenant for quiet enjoyment?

Answer 3

The landlord’s covenant for quiet enjoyment means the landlord must not interfere with the tenant’s possession or enjoyment of the property during the lease term.

Question 4

What is a guarantor’s covenant in a lease?

Answer 4

A guarantor’s covenant involves an individual or company guaranteeing payments and performance of obligations under the lease if the tenant defaults.

Question 5

What is forfeiture in the context of leases?

Answer 5

Forfeiture is the landlord’s right to terminate the lease early in the event of tenant breach.

Question 6

What is a service charge in lease agreements?

Answer 6

A service charge is a sum charged by the landlord to cover costs of services provided to tenants within a property, excluding the tenant’s demised areas.

Question 7

What is required for a lease to be legal?

Answer 7

A lease must be granted by deed unless it falls within the exception for short leases of 3 years or less.

Question 8

What are prescribed lease clauses?

Answer 8

Prescribed lease clauses are required elements in registrable leases, including the date of lease, landlord’s title number, parties, term, and easements.

Question 9

What is the difference between repair and renewal in lease covenants?

Answer 9

Repair involves maintaining the property, while renewal refers to replacing the whole or substantially the whole of the property.

Question 10

What is an assignment of a lease?

Answer 10

An assignment is the transfer of the remainder of a lease from the tenant to another party, known as the assignee.

Question 11

What is subletting in lease agreements?

Answer 11

Subletting involves a tenant granting a lease out of their own lease, creating an underlease while retaining responsibility for the original lease.

Question 12

What are the types of covenants in leases?

Answer 12

Covenants in leases can be absolute, qualified, or fully qualified, determining the extent of tenant restrictions.

Question 13

What is the significance of reasonableness in fully qualified covenants?

Answer 13

In fully qualified covenants, landlords must act reasonably when withholding consent for actions like alterations or assignments.

Question 14

What is the role of statutory intervention in lease covenants?

Answer 14

Statutory intervention modifies certain qualified covenants, affecting what landlords and tenants can do under the lease.

Question 15

What does privity of contract mean in leasehold covenants?

Answer 15

Privity of contract refers to the direct relationship between the original parties to a lease, affecting enforceability of covenants.

Question 16

What types of covenants can exist?

Answer 16

Covenants can be absolute, qualified, or fully qualified.

Question 17

What happens if a tenant assigns their lease?

Answer 17

The tenant transfers their leasehold estate to a new party who ‘steps into the shoes’ of the tenant.

Question 18

What occurs when a tenant underlets their premises?

Answer 18

The tenant grants a new lease to a third party out of their own lease.

Question 19

What is required to assign a lease?

Answer 19

A deed must be used, and if the lease is registered, the assignment must be registered at the Land Registry.

Question 20

What is privity of contract?

Answer 20

Privity denotes the legal relationship between two or more parties to a contract.

Question 21

What is the significance of privity of estate?

Answer 21

Privity of estate exists between any current landlord and current tenant of the property and lasts only while the lease is vested in the tenant.

Question 22

What happens to privity of contract upon assignment?

Answer 22

Privity of contract remains between the original landlord and tenant, but privity of estate does not exist between them after assignment.

Question 23

What governs old leases created before 1 January 1996?

Answer 23

They are governed by the old system of rules, where privity of contract and estate are very important.

Question 24

What is the liability of original parties in old leases?

Answer 24

The original landlord and tenant remain liable for the covenants for the full duration of the lease term, even after assignment.

Question 25

What did the LTCA 1995 change regarding new leases?

Answer 25

It abolished privity of contract for all new leases, meaning original parties are no longer liable for the full duration of the lease term.

Question 26

What is the effect of an Authorized Guarantee Agreement (AGA)?

Answer 26

An AGA is the guarantee by an outgoing tenant of the obligations of the incoming assignee.

Question 27

What happens if a lease is assigned in breach of an alienation covenant?

Answer 27

This is an ‘excluded assignment’ and the defaulting tenant will not be released from its obligations under the lease.

Question 28

What can a landlord do if the current tenant breaches a covenant?

Answer 28

The landlord can sue the current tenant or the outgoing tenant if they provided an AGA.

Question 29

What is the relationship between a landlord and a subtenant?

Answer 29

There is no direct relationship between the (head) landlord and the subtenant, meaning the landlord might not be able to enforce covenants directly.

Question 30

What does LTCA, s 3(5) allow?

Answer 30

It allows restrictive covenants in new leases to be enforced against any owner or occupier of the premises.

Question 31

What is the outcome if the landlord forfeits the head lease?

Answer 31

The sublease is automatically terminated, subject to a claim for relief.

Question 32

What is the significance of indemnities for outgoing tenants?

Answer 32

An outgoing tenant should ensure their assignee enters into an express indemnity covenant to pay rent and perform all covenants.

Question 33

What sections of the LTCA 1995 apply to all leases?

Answer 33

The sections are s 17 (Tenant Default Notice), s 18 (Liability for Variations), and s 19 (Overriding Leases).

Question 34

What is the Tenant Default Notice under LTCA 1995, s 17?

Answer 34

A landlord must serve notice of a potential claim on a former tenant within six months of a fixed charge becoming due, or they will be precluded from making a claim.

Question 35

What is defined as a fixed charge in LTCA 1995, s 17?

Answer 35

A fixed charge includes arrears of rent, service charge, or insurance premiums, but not unascertained liabilities or damages that require a court order.

Question 36

What does LTCA 1995, s 18 state about liability for variations?

Answer 36

Former tenants and guarantors are not liable for additional amounts due to lease variations they could not have anticipated at the time the lease was entered into.

Question 37

What is an overriding lease under LTCA 1995, s 19?

Answer 37

An overriding lease can be requested by a former tenant who is called upon to pay rent or fixed charges from an assignee, allowing them to become the immediate landlord.

Question 38

What is the term of an overriding lease?

Answer 38

The overriding lease is granted for a term equal to the remaining term of the lease plus three days and contains the same covenants, except those expressed to be personal.

Question 39

What obligations does a landlord have when a former tenant requests an overriding lease?

Answer 39

The landlord is obliged to grant the overriding lease within a reasonable time.

Question 40

What advantages does an overriding lease provide to a former tenant?

Answer 40

It allows the former tenant to ensure compliance by the assignee, terminate the assignee’s lease, or assign the overriding lease to a more reliable tenant.

Question 41

What is the summary of LTCA 1995, ss 17 to 19?

Answer 41

These sections apply to all leases, requiring notice for fixed charges, limiting liability for unforeseen variations, and allowing requests for overriding leases.