COVENANTS IN LEASES

Question 1

What is a leasehold covenant?

Answer 1

A promise contained in a lease given by a landlord or a tenant.

Question 2

What are 4 common leasehold covenants?

Answer 2

1) Repair
2) Alterations
3) User
4) Alienation

Question 3

What is under a general repairing covenant?

Answer 3

the tenant must keep the premises in the condition in which they would be kept by a reasonably minded owner, having regard to (Proudfoot v Hart):

(a) The character and type of premises at the beginning of the lease.
(b) The age of the premises.
(c) The express words of the covenant.

Question 4

What can a tenant do if they simply want to maintain the premises in the condition they were in at the outset of the lease?

Answer 4

• Employ a surveyor to survey the premises and report on the state of repair prior taking the lease
• Then aschedule of condition(photographs and verbal description of the premises prepared by a surveyor) can be annexed to the lease prior to the grant and the repairing covenant can then refer to it as evidence of the state of repair.

Question 5

What is the difference between repair and renewal?

Answer 5

A covenant to repair doesnot require renewal of the whole or substantially the wholeof the property. It is a question of degree whether the work involves repair or renewal, but if the works constitute ‘renewal’ rather than ‘repair’, they will not fall within the tenant’s repair obligation.

• repair is restoration/ replacement of subsidiary parts
• renewal is reconstruction of the entirety

Question 6

What is an absolute covenant?

Answer 6

• tenant is completely prohibited from doing something (eg ‘The Tenant shall not underlet part of the Premises’);

Question 7

What is a qualified covenant?

Answer 7

• the tenant can go and ask the landlord for his consent although the landlord does not have to give it!
• eg the Tenant shall not make any non-structural alterations to the Premises without the consent of the Landlord

Question 8

What is a fully qualified covenant?

Answer 8

• the landlord has to be reasonable if he is going to withhold his consent.
• eg the Tenant shall not make any internal, non-structural alterations to the Premises without the consent of the Landlord, such consent not to be unreasonably withheld

Question 9

How is reasonableness considered?

Answer 9

Landlord is not entitled to refuse his consent on grounds which have nothing to do with the landlord and tenant relationship (International Drilling Fluids Ltd)
- ability to pay rent/ bad references is fine

Question 10

What is the legal doctrine of waste?

Answer 10

Unless the lease stipulates otherwise, the tenant is free to carry out any alterations to the premises, subject to the legal doctrine of ‘waste’ which prevents alterations which would devalue the premises.

Question 11

How does s19(2) LTA 1927 impact qualified alterations covenants?

Answer 11

• Where there is a qualified covenant against alteration thenLTA 1927, s 19(2)implies into a qualified covenant against improvements a proviso that the landlord’s consent is not to be unreasonably withheld.
• converts a qualified covenant against alterations that amount to improvements into a fully qualified one.
• LTA 1927, s 19(2)only applies to’improvements’.
• landlords can require conditions of giving consent (payment of expenses/ reinstatement)

Question 12

What amounts to improvements?

Answer 12

• construed widely as works that improve the premises from the tenant’s perspective

Question 13

How does s19(3) LTA 1927 impact qualified user covenants?

Answer 13

• Prevents a landlord demanding payment for granting its consent, unless the change of use also involves a change to the structure of the property
• If the change of use does involve a change to the structure, the landlord can increase the rent or charge the tenant a lump sum (in the statute referred to as a ‘fine’ or ‘premium’) in return for the consent.
• The landlord will be entitled to recover its costs and expenses involved in the application for consent eg surveyor’s fees and legal fees.

Question 14

What does alienation mean?

Answer 14

A term used to describe a method for the tenant disposing of the whole, or part, of their interest in a leasehold property.
- usually by assignment, underletting, parting with possession, mortgaging

Question 15

What are the remedies available to a landlord following a breach of the rent covenant?

Answer 15

• Action for debt
• Distress and commercial rent arrears recovery
• Forfeiture

Question 16

What is the action for debt remedy?

Answer 16

• The tenant can be sued on his covenant to pay rent.

- A landlord can only recover six years’ arrears:Limitation Act 1980, s 19.

Question 17

What is the commercial rent arrears recovery regime?

Answer 17

• This requires a landlord to serve an enforcement notice on the tenant givingseven clear days’ notice that he will seize goods.
• Once notice has been served, the tenant can apply for it to be set aside or for its execution to be delayed.
• There must be a minimum of seven days’ rent arrears in order to use this procedure, and the remedy isnot available in respect of mixed use or residential premises.
• The notice requirements clearly reduce the effectiveness of the remedy from a landlord’s perspective because tenants have the opportunity to remove goods from the premises and put them out of the landlord’s reach.

Question 18

What does the forfeiture remedy enable for the landlord?

Answer 18

• involves bringing the lease to a premature end because of the tenant’s breach.

Question 19

What are the remedies for general breaches of covenant?

Answer 19

• injunction
• specific performance
• damages
• forfeiture

Question 20

What are the different ways a lease can end?

Answer 20

• Effluxion of time (lease for fixed term comes to an end)
• Notice to quit (method for determining a periodic tenancy)
• Merger (tenant acquires the landlord’s interest, thus becoming his own landlord, and the lease is absorbed by the reversion and destroyed)
• Forfeiture (right for the landlord to terminate the lease prematurely for breach of covenant by the tenant)
• Break Clause
• Surrender (handing back of the lease by the tenant to the landlord with the landlord’s consent)