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Land > L4: Leasehold Covenants > Flashcards

L4: Leasehold Covenants Flashcards

1
Q

What is a covenant?

A

Whereby the landlord and tenant promise each other to do, or not do certain things in relation to the land (e.g. tenant may promise not to use the premises for any trade or business)

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2
Q

What is unique about covenants?

A

They are capable of running to purchasers of the OL reversion or to purchasers of the original tenant’s lease

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3
Q

What does a covenant entitle a landlord or tenant to do?

A

Both the right to sue (benefit) and the obligation to perform (burdens)

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4
Q

Which 2 questions must be answered to find an action on the covenant between a claimant and defendant?

A

Whether the benefit of the particular covenant runs to the claimant & whether the defendant can be subject to the burden of it

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5
Q

What is the general rule for an action on a leasehold covenant between an OL and OT pre-1996?

A

All covenants are enforceable- liability on the basis of privity of contract, whether they are personal or proprietary

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6
Q

What happens if an OT assigns (sells or transfers) their lease to another?

A

OT remains liable throughout the entire term of the lease (Allied London Investments v Hambro Life Assurance)

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7
Q

What are the exceptions of an OT’s continuing liability pre-1996?

A
  • Liability ends upon a perpetually renewable lease
  • Lease may stipulate expressly that OT’s liability ends upon assignment
  • OT not liable for breaches committed by an assignee where the original term had been statutorily extended under the Landlord and Tenant Act 1954
  • Is a subsequent assignee and landlord surrender the lease and carry out a regrant on new terms
  • May have a right to recover damages or right paid by them
  • Increased rent resulting from term variation
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8
Q

OT’s liability in relation to rent

A

They are not liable for increased rent resulting from term variation (S18 LTCA 1995) , but are liable for originally agreed rent

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9
Q

What is a variation in rent?

A

Where the current tenant and landlord change the terms of the lease between themselves

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10
Q

What does s17 LCTA 1995 say about an OT’s liability for a fixed charge (rent, service charge or liquidated damages for breach of covenant)?

A

Landlord may only enforce liability against a fixed charge by serving statutory notice within 6 months of the charge becoming due- warns OT of potential liability & ensures only max 6 months can be charged

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11
Q

What is the effect of failure to serve a s17 LCTA notice?

A

Relieves OT of all liability for breach of covenant

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12
Q

What are the rights and obligations of the original landlord throughout the lease?

A

OL remains liable throughout the term, even after assignment of the reversion (Stuart v Joy) and to assignees of the tenant if they have the right to enforce covenants (Celsteel v Alton)

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13
Q

What is the effect of s141(1)LPA 1925

A

When the landlord assigns the reversion, benefit passes to assignee even if the right existed in respect of a breach occuring prior to assignment (Re King)

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14
Q

What factors have to be considered when determining whether the burden and benefit of a covenant made between OL and OT run automatically with the land when the lease is assigned?

A

1) Does privity of estate exist between landlord and tenant to allow enforcement
2) DO the covenants touch and concern land

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15
Q

How can privity of estate be established?

A

Claimant and defendant must stand in a relationship of landlord and tenant- no privity between sub-tenant and landlord UNDER A LEGAL LEASE

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16
Q

Is a deed required for privity of estate in leases of 3 years or less where deed is typically not required?

A

Yes- Julian v Crago

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17
Q

What is the purpose of the requirement of the covenant having to touch and concern the land?

A

To distinguish between proprietary and personal covenants

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18
Q

What is the difference between personal and proprietary covenants?

A

Proprietary covenants attach to the land and affect its use, personal covenants intend to confer an individual or personal benefit on the original tenant alone

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19
Q

What is the test for whether a covenant touches and concerns the land according to Swift Investments v Combined English Stores?

A

1) Could the covenant benefit any owner of an estate in land as opposed to the particular original tenant?
2) Does the covenant affect the nature, quality, mode of use or value of the land?
3) Is the covenant expressed to be personal, manifesting the original parties’ intention that it should not run with the land

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20
Q

Does a landlord’s covenant to renew rent touch and concern the land?

A

No- Phillips v Mobil Oil
They are to be treated like third party interests under the land charges and land registration act- must be registered against landlord as a Class C iv Land Charge if it is to bind a purchaser of a legal estate in the land

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21
Q

To what extent does an assignees liability extend to??

A

Breaches committed while the lease is vested in them

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22
Q

What does s141(1) LPA 1925 stipulate in relation to assignment of a landlord’s reversion?

A

The benefit of all covenants that have reference to the subject matter of the lease (no need for privity of estate) Hua Chiao Commercial Bank vs Chiaphua Investment

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23
Q

What happens to the benefit of the covenant upon assignment of a landlord’s reversion pre-1996?

A

New landlord acquires the right to sue in respect of breaches occurring before assignment- old landlord loses this right

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24
Q

What is the test for whether a covenant has reference to a subject matter?

A

Test in Swift for touching and concerning land

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25
Q

What happens to the burden of the covenant upon assignment of a landlord’s reversion pre-1996 according to s141(1) LPA?

A

All covenants having reference to the subject matter of the lease passes to the assignee of the reversion irrespective of privity of estate

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26
Q

What are the exceptions to the rule that burdens pass to the assignee of the reversion pre-1996 ?

A
  • Covenant to renew lease is capable of being enforced against assignees, but does not pass automatically - registrable as a class c (iv) land charge, must be registered to bind assignee of reversion
  • covenant by landlord to repay a deposit does not touch and concern, cannot be enforced against an assignee of the landlord who actually received the money- cannot be enforced against an assignee
  • covenant to sell a freehold to the tenant does not touch and concern the relevant land, cannot be enforced against an assignee
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27
Q

What is the right of re-entry?

A

special rights reserved to a landlord to re enter the property and terminate the lease as a result of the tenants breach of covenant

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28
Q

Does the right of re-entry pass automatically for pre-1996 leases?

A

Every assignee of the reversion obtains his right if included in the original lease because it operates against the land

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29
Q

Where do equitable leases arise?

A

From specifically enforceable written contracts between prospective landlord and tenant- obligated to perform all lease obligations, even if they are personal in nature

30
Q

What rights to the benefit and burdens of covenants does an assignment of a reversion of an equitable lease give to a new landlord?

A

141(1) LPA- assignee of reversion is entitled to enforce all leasehold covenants (benefits) that have reference to the subject matter of the lease & the obligation to perform similar covenants (burden) will pass to the assignee

31
Q

What does the rule in Tulk v Moxhay permit?

A

The enforcement of any restrictive covenant against a preson in possession of the land over which the covenant takes effect

32
Q

How can a landlord enforce a covenant against a sub-tenant?

A
  • enforcement of a right of re-entry against current tenant
  • tulk v moxhay rules to enforce restrictive covenants
  • head landlord may be able to insist that covenants were entered into as a condition of their consent to the grant of the sub-tenancy
33
Q

What is the effect of the LTCA 1995 on tenants?

A

They are automatically released from the burden of leasehold covenants when the tenant assigns the tenancy lawfully (s5 LTCA 1995) they may be required to guarantee performance of leasehold covenants by the sole next assignee s16 LTCA 1995

34
Q

What is the effect of the LTCA 1995 on original landlord?

A

Not released automatically from the burdens of leasehold covenants, may serve a notice for such release

35
Q

When will an original landlords burden of leasehold covenants be released?

A

If the notice is not answered within a specified time, if the landlords application to the county court is successful

36
Q

What does a successful notice for release do?

A

Original landlord is relieved from liability arising only under landlord covenants, not personal

37
Q

BHP petroleum v Chesterfield Properties

A

Original landlords under the LTCA 1995 are not released from personal covenants that have not been passed to the assignee

38
Q

What is the position of the rule that covenants must touch and concern land or have reference to the subject matter for benefits and burdens to pass?

A

Abolished s2 & 3 LTCA

39
Q

What happens to the benefit and burden of all leasehold covenants on assignment of the lease according to s3 LTCA

A

Burden and benefits pass to assignees of the lease and of the reversion

40
Q

AGA

A

Authorised guarantee agreement

41
Q

What is the purpose of an AGA

A

an agreement guaranteeing performance of covenants by the next immediate assignee (only that assignee)

42
Q

What is the proviso for an assigning tenant to pay a sum under an aga

A

Problem notice must be served within 6 months of the liability arising for the guarantee to be enforceable

43
Q

Why do landlords use an AGA as a condition of lease assignment

A

The release of OG tenant from liability deprives landlord from an effective remedy if the current tenant defaults

44
Q

What is the major effect of the LTCA 1995

A

assignees of current tenant acquire the benefit and burden of all leasehold covenants save those expressed to be personal

45
Q

Does the LTCA deprive the assignor of the right to sue for pre-assignment breaches?

A

NO

46
Q

What options does a landlord have in relation to their position after LTCA 1995

A

Can stipulate in OG lease that liability ceases upon assignment of the reversion- London Diocesan Fund v Avonridge = Avonridge Clause

47
Q

What is a commercial rent arrears rent recovery

A

landlord remedy for breach of covenant to recover rent

48
Q

Qualifications for CRAR

A
  • Purely commercial situations
  • Never to oral leases of any type of premises
  • Limited to pure rent (no service charges or insurance)
  • 7 Days notice must be given prior to seizure of goods - certain goods are exempt
49
Q

How can a landlord enforce a covenant to pay rent

A

Action to recover arrears in high or county court

50
Q

What does s19 Limitation Act 1980 say in relation to actions to recover arrears in rent?

A

Limited to 6 years rent for recovery

51
Q

If a landlord fails to observe a covenant to repair the premises, can a tenant withhold rent?

A

No, however, a tenant may claim to ‘set off’ a sum representing damages for breach of covenant unless such right is expressly excluded Lee-Parker v Izzet

52
Q

What does the remedy of damages provide to a landlord

A

puts landlord in the position as if the covenant had not been broken

53
Q

What does the Landlord and Tenant act 1927 say in relation to damages

A

damages for a tenants breach of covenant to repair is limited to the amount by which the landlords interest has diminished in value through lack of repair

54
Q

Remedy of injunction

A

Prevents breach of a restrictive covenant

55
Q

What is the general view in relation to the remedy of specific performance?

A

landlord cannot obtain specific performance for the majority of covenants as they are hard to observe

56
Q

co-op insurance v argyll

A

HOL refused to order specific performance of a tenants covenant to keep retail premises open for a specified amount of time each day

57
Q

What is the remedy of forfeiture

A

termination of lease due to breach of covenant

58
Q

What must there a lease contain for a valid forfeiture

A

lease must contain a right of re entry

59
Q

What is a right of reentry

A

A stipulation that a landlord is entitled to re-enter the premises and retake possession should the tenant fail to observe their covenants- all professionally drafted leases will have one & they are implied in equitable leases (Shiloh spinners v Harding)

60
Q

What are the paths to successful forfeiture?

A

1) Physical re-entry by actual possession (e.g. changing locks)
2) Action for possession in court

61
Q

When is physical re-entry possible?

A

When the tenant is absent from the premises and must be peaceful

62
Q

Forfeiture for non payment of rent

A

s167 CLRA 2002- landlord may not forfeit unless the amount owed exceeds a statutory prescribed sum (£350) or has been unpaid for a prescribed period (3 years)

63
Q

When will a tenant be granted relief from forfeiture?

A

If they pay all rent within appropriate time

64
Q

Requirements for forfeiture for breach of covenants other than rent

A

s146 notice LPA 1925
1) Must specify breach
2) Request compensation for breach
3) Request breach be remedied
4) If forfeiture is in respect of service charge, landlord must inform tenant of safeguards established by s81 housing act 1996

65
Q

What happens where a landowner attempts to forfeit without a s146 notice

A

Bilson v Residential apartments- forfeiture is void

66
Q

How can it be determined whether a breach is remediable

A

Expert clothing service v Hillgate house- if the damage the breach caused could be rectified

67
Q

Will the courts allow relief from forfeiture even if the breach was deliberate?

A

Freifeld v West Kensington- court granted relief for a deliberate breach of subletting covenant- forfeiture has to be proportionate to the breach

68
Q

What must a landlord attempting to forfeit ensure they don’t do

A

They must not waive the right to forfeit

69
Q

When will there be a waiver of forfeiture

A

If there is any act amounting to affirmation of the continuing validity of the lease after the breach has occurred (matthews v smallwood)

70
Q

Breaches for repairing covenants

A

Under leasehold property repairs act 1938, s146 notice triggers tenants right to serve a counter notice - if this is served, landlord may not forfeit the lease without the court’s permission

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