Leasehold covenants

Question 1

When is a qualified covenant converted into a fully qualified covenant?

Answer 1

Alterations

Assignment

Underletting

Question 1

“Reasonable”: alterations

Answer 1

Qualified covenant against alterations converted into a fully qualified covenant if the tenant’s proposed alterations are improvements from the point of view of the tenant

If landlord consents, consent will be documented in a license for alterations which will contain the following tenant’s covenants:

Details of the works consented to and the time limits

Landlord’s requirements for the works (e.g. high-quality materials)

Pay landlord’s costs in dealing with the application (surveyor and solicitor’s costs)

Obtain all necessary consents (planning permissions and building regulations approval)

Reinstate the premises at the end of the lease term

Question 2

“Reasonable”: assignment

Answer 2

Landlord must give its decision on consent within a reasonable time

Reasonable to withhold consent if: prospective assignee’s use of premises doesn’t fit landlord’s policy or landlord has justifiable concerns about assignee’s ability to pay rent

It is unreasonable to withhold consent on grounds not related to the landlord/tenant relationship (e.g. personal dislike or discrimination of protected characteristics)

Question 3

Remedies for breach

Answer 3

Action in debt (costly court proceedings)

Forfeiture

Commercial Rent Arrears Recovery (minimum 7 days’ principal rent owed, excluding VAT and interest)

Damages (costly court proceedings)

Pursue guarantors and/or rent deposit

Self-help / Jarvis v Harris

Specific performance (equitable)

Question 4

Right to forfeiture

Answer 4

Must be expressly reserved in the lease

Peaceable re-entry or court proceedings

Question 5

Forfeiture: section 146 notice

Answer 5

Not needed if the breach is non-payment of rent

Otherwise, notice must specify the breach, require the tenant to remedy the breach (if the breach is capable of remedy, which a breach of repair is likely to be) within a reasonable time and require the tenant to pay compensation for the breach

Question 6

Forfeiture: ‘special’ s 146 notice

Answer 6

Applies to terms over 7 years, with at least 3 years left to run

Must contain a statement informing tenant that they are entitled to serve a counter-notice on the landlord within 28 days (landlord will then require leave of court before proceeding with forfeiture)

Question 7

Forfeiture: waiver

Answer 7

The landlord does some unequivocal act recognising the continuing existence of the lease

With knowledge of the breach in question; and

Communicates that act to the tenant

Question 8

Forfeiture: relief

Answer 8

Court has discretion to offer relief from forfeiture

Non-payment of rent: tenant expected to pay rent arrears and landlord’s costs