Leasehold Covenants Flashcards
Quiet enjoyment
Right to uninterrupted possession
Applies to the landlord and anyone claiming under him
S1 Protection from Eviction Act
The relationship of landlord and tenant automatically implies a covenant for quiet enjoyment on the part of the landlord [Budd-Scott v Daniell]
It gives the tenant the right to be put into possession of the whole of the demised premises and is broken if the landlord, or someone claiming under him, does anything that substantially interferes with the tenant’s title to or possession of the demised premises or with his ordinary and lawful enjoyment of them [LB Southwark v Mills]
What is a leasehold covenant
A covenant is a promise under a seal (i.e. contained in a deed)
Such a promise is enforceable according to the ordinary law of contract, between the persons who are parties to it or their personal representative
Post-1996 Contratual Enforceability
Release of original landlord
- The release of LO from contractual liability is not automatic upon the assignment of the reversion on a lease entered into on or after 1 Jan 1996
- LO may request a release by serving notice upon TO not less than 4 weeks before the assignment of the reversion [s6]
- If TO refuses to agree to the release, the court may grant the release where it is satisfied that it is reasonable to do so [s8]
-
London Diocesan Fund v Phithwa: the HoL decided that a limitation of liability contained within the original covenant and thus, at least technically agreed to by TO, did not offend the prohibition of s25 LTCA
- The majority construed the LTCA as providing an additional route, rather than an exclusive route, by which contractual liability could be limited
- Lord Walker dissented because of the possibility that landlords could so simply bypass the tenant’s approval of a release
The position of assignees
Landlord’s covenants in pre-1996 leases
- The passing of the benefit and the burden of the landlord’s covenants given by the original landlord to the original tenant is governed by s142 LPA
- Upon an assignment of the reversion, the section enables the original tenant to sue LA because the burden of the landlord’s covenants passes the benefit of the landlord’s covenants so TA can sue the current landlord
- LPA s142 does not necessarily pass the burden and benefit of all the landlord’s covenants as the section operates only in relation to those covenants that have “reference to the subject matter of the lease”
The tenant’s covenants in pre-1996 leases
- The passing of the benefit of the tenant’s covenants is governed by s141 LPA
- This section enables the landlord’s assignee to sue the tenant’s assignee or the original tenant for the rent or other tenant’s covenants given by the original tenant by the original landlord
- The passing of the burden of the tenant’s covenants is governed by the common law provided there is privity of estate [Spencer’s Case]
- Covenants that “touch and concern the land” bind the assignee
- While express words ordinarily need not be used, where the promise is to do acts concerning something that is not in esse(as to build a wall on the leased premises), the assignees must be named expressly
Qualifying covenants in pre-1996 leases
- S141+142 LPA apply to covenants that have “reference to the subject matter of the lease”
- Spencer’s Case applies only to covenants that “touch and concern the land”
- S141+142 LPA act to exclude those leasehold covenants which are in essence personal to the identity of a specific landlord or tenant rather than affecting the premises themselves
P&A Swift Investments v Combined English Stores Group
Determining whether a covenant touches and concerns the land
“The covenant benefits only the reversioner for the time being, and if separated from the reversion ceases to be of benefit to the covenantee
“The covenant affects the nature, quality, mode of use or value of the land of the reversioner
“The covenant is not expressed to be personal
“the fact that a covenant to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on to or in relation to the land”
P&A Swift Investments v Combined English Stores Group
Ruling
Reversioner is landlord’s assignee
A surety covenant will satisfy this test [Swift Investments v Combined English Stores] but a covenant to repay a tenant’s deposit does not even though it serves a similar surety function [Hua Chiao Commercial Bank v Chiap Hua Industries]
An option for a tenant to purchase the reversion does not satisfy the test [Woodall v Clifton] but an option for the tenant to renew his or her lease does so [Phillips v Mobil Oil Co]
The latter is because of established practice
To be enforceable against third parties the covenant to renew should be protected by registration
Equitable leases and assignments of pre-1996 leases
- Privity of estate exists only where the lease and its assignment are recognised at law
- S141+142 LPA operate whether the original lease, or the assignment of the reversion, is legal or equitable
- LA of an equitable lease is able to sue and be sued upon the leasehold covenants but they will only be able to sue TO because to pass the burden of the tenant’s covenants Spencer’s Case requires that the lease and its assignment must be in legal form
- This is an inconvenient and one-sided distinction when TO may expressly assign the benefit of the landlord’s covenants under an equitable lease to TA to enable TA to sue upon these covenants
Post-1996 leases and the landlord and tenant (Covenants) act 1995
- The LTCA attempts to overcome the principle difficulties of the pre-1996 law governing the enforcement of leasehold covenants
- S3 LTCA passes the benefit and burden of leasehold covenants to LA and TA by providing a statutory framework of enforceability in relation to leases entered into on or after 1 Jan 1996
- TA is entitled to enforce the landlord’s covenants and is bound by the tenant’s covenants [s3(2) LTCA] and LA is likewise entitled to enforce the tenant’s covenants and is bound by the landlord’s covenants [s3(3)]
- The LTCA dispenses with the need for the covenant to “touch and concern” the land or “to have reference to the subject matter” of the lease
- The statutory framework of enforceability applies to all express or implied leasehold covenants unless the covenant is expressed to be personal to a particular person [s2 and s28]
- Parties can expressly state in the written terms of the lease that a covenant is personal
- In First Penthouse Ltd v Channel Hotels and Properties, the court decided that the personal character of a covenant may also be expressed through the nature of the obligation imposed (harks back to the touch and concern test)
- The statutory framework of enforceability established by the LTCA removes the distinction between legal and equitable leases
- Both landlord’s and tenant’s covenants in post 1996 leases will be enforceable regardless of whether the assignment is legal or equitable
The position of sub-tenants
- A sublease creates a new legal estate in land with contractual liability and privity of estate between the tenant (as landlord under the sublease) and the subtenant
- Privity of estate exists between the tenant (as landlord under the sublease) and an assignee of the sub-lease
- There is no privity of estate between the landlord under the head lease and the sub-tenant. ST is not bound by the leasehold covenants in the head lease, nor can they enforce them
- It is unwise for ST to ignore the head lease covenants
- The sublease is likely to include a covenant requiring ST to observe the covenants in the head lease
- The sublease is created out of the head lease and will fail if the head lease is brought to an early end
- The negative covenants in the head lease will be directly enforceable by the head landlord against ST
Implied covenants
- Quiet enjoyment [Kenny v Preen]
- Not to derogate from grant [Molton Builders v Westminster City Council]
- One cannot take away with one hand what has been given by the other
- Repair [s11 Housing Act 1985]
- Fit for habitation [s8 Landlord and Tenant Act 1985]
Implied covenant not to derogate from grant
- In Harmer v Jumbil, the land was leased for the express purpose of storing explosives and the landlord was restrained from using adjoining land so as to endanger the statutory licence necessary for the storage of explosives
- “A rule of common honesty” per Younger LJ. The landlord, or any person claiming under him, cannot act inconsistently with the purpose for which the lease was granted
- Derogation from grant is not limited to the law of property, it also applies to other areas
- It binds not only the grantor but any person claiming under him [Aldin v Latimer Clark, Muirhead & Co]
Tenant’s implied covenants
to pay rent
not to commit waste
to use in a tenant like manner
Tenant’s implied covenant to pay rent
- Rent is
- A periodical sum
- Paid in return for the occupation of land
- Issuing out of the land
- For the non-payment of which a distress is leviable
- Rent is no longer thought of as a thing issuing out of land and recoverable by distrain but as a payment which a tenant is bound by his contract to make to his landlord for the use of the land [United Scientific Holdings v Burnley BC]
- The common law right to distrain for arrears of rent was abolished in 2014
