Covenants in Leases Flashcards
What is the basic rule in relation to what a tenant can do to a property?
Tenant can do all the things an owner of an estate can do unless the lease prohibits it in some way
What will the landlord normally covenant under a lease?
- covenant for quiet enjoyment
- if lease of part of a building covenant to provide services, maintain common areas and insure building
What is a covenant for quiet enjoyment?
Landlord saying he will not interfere with the tenant’s possession or enjoyment of the property during the term of the lease
Covers acts of the landlord and the lawful acts of anyone claiming under them
What are examples of breaches of the covenant for quiet enjoyment?
- erection of scaffolding hindering access to the property
- persistent intimidation of the tenant to induce him to leave
What additional requirements will there be for registrable leases aside from registration?
Must have the prescribed clauses at front of lease to speed up registration
What is a leasehold covenant?
A promise contained in a lease given my the landlord or tenant to do or not do something
What will a general repairing covenant for the tenant to keep the premises in the condition in which they would be kept by a reasonably minded owner, require the tenant to do?
Tenant will be obliged to keep the premises in repair and if they are not in a state of repair to begin with then the tenant will be required to put them in a state of repair
How can a covenant of repair be limited?
By a schedule of condition
Does a general covenant of repair require renewal of the whole or substantially whole of the property?
Unless stated otherwise than no
What will be seen as repair (responsibility of tenant) and renewal (responsibility of landlord)?
Renewal - whole or substantially whole needs to be replaced
What are the three types of covenant?
- absolute
- qualified covenant
- fully qualified covenant
What is an absolute covenant?
The tenant is completely prohibited from doing something
What is a qualified covenant?
Tenant is prohibited from doing something but can go and ask the landlord for their consent although the landlord is not obliged to give it
What is a fully qualified covenant?
Tenant cannot do something without the consent of the landlord and the landlord has to be reasonable if it is going to withhold its consent
When will it be unreasonable for the landlord to withhold their consent in relation to fully qualified covenants?
When the grounds have nothing to do with the landlord and tenant relationship
If the lease is silent in relation to alterations, is the tenant able to make any alterations it wants?
Yes - subject to doctrine of waste ie not allowed to make alterations which would devalue the premises
What will happen to a qualified covenant in relation to alterations?
It will be upgraded by s 19(2) of LTA 1927 so a qualified covenant against alterations that amount to improvements will be a fully qualified one
The upgrade effect of s 19(2) of LTA 1927 only applies to improvements. What constitutes improvements?
To be viewed from tenant’s perspective so anything that which they deem to be an improvement
What can the landlord require as a condition of consent under s 19(2) of LTA 1927?
- payment of compensation for loss in value to the reversion caused by alterations
- reinstatement of the premises if reasonable (at the end of the lease term)
- payment of the landlord’s expenses in giving consent
What effect will s 19(3) of LTA 1927 have on qualified user covenants?
Will not imply a reasonableness requirement but will prevent landlord from demanding payment for granting its consent unless the change of use also involves a change of structure to the property
What can a landlord do if a change of use also involves a change of structure?
Landlord can increase the rent or charge the tenant a lump sum in return for consent
Landlord will also be entitled to recover costs and expenses involved in the application for consent
What is an alienation of a lease?
Tenant disposing of all or part of their interest in the leasehold
What is assignment of a lease?
Transfer by the tenant of the remainder of their lease to another party
If the lease is silent as to assignment, what can the tenant do?
Then they are free to assign the lease
If there is a covenant against subletting, how is it to be construed?
It is to be construed in the tenant’s favour
If there is covenant against assignment what can the tenant still do?
Providing there is no covenant against it tenant can still sublet all or part of the premises
If there is a covenant against subletting the whole of the premises what can the tenant still do?
They can sublet part
If a landlord’s consent is needed how will that consent be obtained and in what format?
Will be acquired by licence to assign which will be a deed
What are the formalities for the tenant assigning a lease?
- must be by deed (can use TR1 like freehold)
- If the lease being assigned is registered at the land Registry then the deed of assignment must also be registered to update registered proprietor of the lease as assignee
What is subletting?
Tenant granting new lease out its own lease (sublease/underlease)
What are the formalities for subletting?
- creation a new underlease
- should be granted by deed
- must be registered if over 7 years
If there is an absolute covenant against subletting, can the tenant still sublet legally?
Yes if he obtains landlord’s consent
Absolute covenant does not prohibit the parties coming to agreement but the landlord is under no obligation to agree
What will happen if there is qualified covenant against any form of alienation eg subletting or assignation?
It will be upgraded to a fully qualified covenant by upgraded by s 19(1)(a) of LTA 1927
So the landlord will not be able to unreasonably withhold their consent
In the case of a fully qualified covenant, does the landlord need to prove that the conclusion that led them to refuse consent are justified?
No - they just have to be conclusions which might be reached by a reasonable person in the circumstances
What will mean that the landlord’s consent if unreasonably with held with regards to proportionality?
If the detriment to the tenant is disproportionate to any benefit to the landlord
What are the two elements to the landlord’s statutory duty in relation to fully qualified covenants?
- the landlord must give written consent within a reasonable time (unless it is reasonable to refuse)
- the burden is on the landlord to prove reasonable refusal and written reasons must be provided
What is deemed reasonable time whereby landlord should make decision in relation to consent?
28 days
Will run from when the landlord has sufficient information to enable it to reach a decision
What happens if the landlord does not comply with their statutory duty in relation to granting consent?
They may have to pay tortious damages for breach of statutory duty
What reasons have been deemed reasonable in refusing consent in relation to alienation?
- unsatisfactory tenant’s reference
- the proposed assignee’s use of the property would damage the landlord’s own commercial interests as the assignee is proposing to run a rival business next door
- the proposed subletting was at a substantial premium and a rent well below the open market value
- where the existing tenant is already in breach of covenant - the landlord can insist upon breach being remedied before giving consent unless it is clear that the assignee can remedy the breach
What reasons have been deemed reasonable in refusing consent in relation to alienation?
- where the landlord’s intention was to bring the tenancy to an end and the landlord did not therefore propose to give consent to any assignee, not just to the particular assignee in question
- where the proposed assignee was already a tenant of the landlord in another property which would have been difficult to re-let
When will a lease be a ‘new lease’ and an ‘old lease’ in relation to the law surrounding alienation?
- new lease - granted on or after 1 January 1996
- old lease - granted before 1 January 1996
In relation to new leases, what can be done in relation to pre-conditions for assignment?
- the landlord and tenant can agree the circumstances in which the landlord may withhold consent to an assignment when drafting the lease
- the landlord and tenant can agree the conditions subject to which consent may be granted
- any circumstances or conditions will be automatically reasonable if imposed by the landlord when giving consent to assign
What is an authorised guarantee agreement?
Agreement whereby the tenant agrees to perform the incoming assignee’s obligations under the lease, if it defaults
So can be sued by landlord for breach of new tenant
What is the effect of the original parties having privity of contract?
All the terms, regardless of their nature can be enforced by the original landlord against the original tenant and vice versa
What is privity of estate?
Where the landlord and tenant are each owners of a legal estate in the same property there is said to be privity of estate
How long will privity of estate between landlord and tenant last for?
It will only last for the period when the lease is vested in tenant
What effect does assignment have on privity of contract and estate?
Privity of contract remains with the original landlord and tenant but there will no longer be privity of estate between them.
Privity of estate will now be with the landlord and the new tenant
What is the situation in relation to liability of the tenant on assignment and old leases?
Even after assignment of the reversion or the lease, the liability of the original landlord and original tenant continues for the full duration of the lease term so they are liable for breaches of covenant by their successors
What covenants are enforceable by and against a tenant who has been assigned an old lease?
Privity of contract allows successor landlords and tenants to enforce covenants that touch and concern the land
What is the situation with liability on assignment with new leases?
The original tenant are no longer liable for breach of covenants that occur after assignation of their interest
Still liable for any breaches of covenant which occur during their period of occupation
What happens if the tenant assigns in breach of covenant in relation to liability and assignment for new leases?
Tenant will not be released from liability
What happens in relation to the liability of the original landlord if they assign their reversion interest in relation to liability and new leases?
They need to the consent of the tenant to release them from liability
If the tenant does not grant consent they can apply to the court for release
What happens in relation to the benefit and burden of covenants in the lease when a tenant assigns a new lease?
The assignee acquires the benefit and burden of all the covenants in the lease
What happens in relation to the benefit and burden of covenants in the lease when a landlord assigns their reversionary interest in a new lease?
The incoming landlord acquires the benefit and burden of all the covenants
What will happen to covenants on assignment of a new lease if they are expressed to be personal?
The benefit and burden of the covenants will not pass
What covenants are deemed to be expressed to be personal?
Covenant is expressly stated to be between the two parties and not their successors in title
If the outgoing tenant is made to enter into an authorised guarantee agreement, what should they request from the new tenant?
An indemnity allowing them sue the assignee for breach of indemnity covenant and recover any damages they had to pay the landlord under an AGA.
Indemnity also exists at common law.
What must a landlord do if he wishes to pursue a former tenant who remains liable under the terms of the lease for a fixed charge (eg rent, service charge or insurance premiums)?
Landlord must serve notice of the potential claim on such tenant within six months of the charge becoming due otherwise they will not be able to bring a claim against them
Are former tenants and guarantors liable to pay any additional amounts owing in respect of variations to the lease which have been made subsequent to assignment?
Not liable if variations were unanticipated at time lease was entered into
Eg they would be liable for non-payment of rent which has increased due to rent review as that can be anticipated
What is a right to an overriding lease?
Allows former tenant to request from the landlord an overriding lease so they become the immediate landlord of the defaulting party.
Former tenant then better able to see assignee complies with covenants or terminate assignee’s lease and re-let property or overriding lease to more reliable tenant
How long will an overriding lease be?
Will be for a term equal to the remaining term of the else plus three days
If the former tenant requests an overriding lease, is the landlord obliged to grant it?
Yes - within a reasonable time
What can covenants can the landlord enforce against subtenants?
All restrictive covenants but not positive covenants
What will landlords normally insist on when a consenting to a sublet?
Will insist subtenant of the property entering into direct covenants with it to observe and perform the covenants in the lease
