Leasehold Covenants: Old Leases

Question 1

How does the Landlord and Tenant (Covenants) Act 1995 distinguish between ‘new’ and ‘old’ tenancies?

Answer 1

The 1995 Act applies to ‘new’ tenancies, which are those granted on or after 1 January 1996.

‘Old’ tenancies, which the Act’s main provisions do not affect, include leases granted before this date and some leases granted after, such as those arising from a pre-1996 contract or court order.

Question 2

What is crucial in determining whether a tenancy falls under the Landlord and Tenant (Covenants) Act 1995?

Answer 2

Determining whether a tenancy is governed by the 1995 Act requires examining the lease’s grant date. The date of any subsequent assignment of the lease is irrelevant to this determination.

Question 3

What is the concept of privity of contract in the context of a lease, and how does it apply to the original parties?

Answer 3

Privity of contract in a lease indicates that the lease is not only an estate in land but also a contract between the original landlord (L) and tenant (T), allowing them to enforce each other’s covenants as long as they remain in their original roles.

Question 4

How does the assignment of a lease affect the privity of contract between the original landlord and tenant?

Answer 4

The assignment of a lease does not terminate the privity of contract between the original landlord (L) and tenant (T).

This privity lasts for the duration of the lease, making the original tenant liable for covenants even after assignment to a new tenant (T1).

Question 5

What are the implications of a breach of covenant by an assignee (T1) on the original tenant (T)?

Answer 5

If the assignee (T1) breaches any lease covenants, the original tenant (T) remains liable to the landlord (L) due to the ongoing privity of contract between L and T, irrespective of how many times the lease has been assigned.

Question 6

How does the assignment of the reversion (landlord’s interest) affect the original landlord’s (L) liability to the tenant (T)?

Answer 6

If the original landlord (L) assigns the reversion, they remain liable for any breaches of covenant by the assignee (L1). This liability continues throughout the lease term, even if the freehold reversion is assigned multiple times.

Question 7

In which case was it established that the benefits and burdens of covenants in a lease, concerning the property, transfer along with the lease assignment, emphasizing the principle that such covenants “run with the term granted by the lease”?

Answer 7

City of London Corporation v Fell (1993)

Question 8

Which case determined that covenants related to the actual property (“a thing in esse, parcel of the demise”) are intrinsically connected to the property and therefore “bind the assignee,” showing that certain obligations are passed on to successors?

Answer 8

Spencer’s Case (1583)

Question 9

Which case provideda modern interpretation of the principle that for a covenant to run with the land and bind successors, it must “touch and concern” the land?

Answer 9

P & A Swift Investments v Combined English Stores Group plc (1989)

Question 10

What test did Lord Oliver propose to determine if a covenant “touches and concerns” the land?

Answer 10

P&A Swift Test:
1) Benefits the reversioner and linked to the reversion,
2) Affects the land’s nature, quality, mode of user, or value,
3) Not personal to specific parties, and
4) Money covenants can qualify if related to the land’s use.

Question 11

In the context of an old lease, how do the original parties and their successors differ in liability for breaches of covenant?

Answer 11

In an old tenancy, the original parties remain liable throughout the term, but successors are only liable for breaches while the lease or reversion is vested in them. Successors are not liable for predecessors’ breaches.

Question 12

How does privity of estate and contract apply if a subsequent tenant (T2) fails to pay rent in an old lease scenario?

Answer 12

If a subsequent tenant (T2) fails to pay rent, the landlord (L2) can sue both T2 (privity of estate) and the original tenant (T, privity of contract) due to the doctrine of continuing liability. However, there’s no privity between L2 and the intermediate tenant (T1), releasing T1 from liability.

Question 13

How does obtaining consent to assign a lease affect privity of contract and potential liability?

Answer 13

Obtaining consent to assign creates privity of contract between the landlord and the assignee. If the landlord required a direct covenant from the assignee to observe lease terms, this keeps the assignee liable even after further assignment.

Question 14

What hardship does the original tenant face under an old lease, and how does the Landlord and Tenant (Covenants) Act 1995 intervene?

Answer 14

The original tenant under an old lease faces hardship from being liable for covenant breaches throughout the lease term. Some provisions of the 1995 Act apply to old tenancies, offering potential relief.

Question 15

What does Section 17 of the Landlord and Tenant (Covenants) Act 1995 stipulate regarding the liability of former tenants and guarantors for fixed charges?

Answer 15

Section 17 limits the liability of former tenants/guarantors for fixed charges, requiring the landlord to serve a notice within six months of the charge’s due date. The liability amount is capped at the sum specified in the notice, unless determined to be greater later.

Question 16

What type of covenants do Section 77 of the LPA 1925 and Schedule 12, paragraph 20 of the LRA 2002 imply on lease assignments?

Answer 16

These provisions imply indemnity covenants on lease assignments, ensuring the assignee and, where applicable, the transferor keep each other indemnified against breaches of lease terms, with specifics depending on whether the title is registered or unregistered.

Question 17

To what kind of tenant does section 17 of the Landlord and Tenants (Covenants) Act 1995 apply?

Answer 17

Section 17(1) states that Section 17 applies when a former tenant, due to an assignment, is no longer under the tenancy but has either guaranteed the assignee’s performance under an authorised guarantee agreement (in new tenancies) or remains bound by a covenant (in any tenancy).

Question 18

According to Section 17(2) of the Landlord and Tenant (Covenants) Act 1995, what condition must be met for a former tenant to be liable for fixed charges?

Answer 18

A former tenant becomes liable for fixed charges under Section 17(2) only if the landlord serves a notice within six months of the charge’s due date, informing the former tenant of the due charge and the amount the landlord intends to recover.

Question 19

What does Section 17(3) of the Landlord and Tenant (Covenants) Act 1995 state about a guarantor’s liability for fixed charges?

Answer 19

Section 17(3) stipulates that a guarantor is not liable for fixed charges unless the landlord serves them a notice within six months of the charge’s due date, detailing the due charge and the intended recovery amount.

Question 20

How is the liability amount determined for a former tenant or guarantor under Section 17(4) of the Landlord and Tenant (Covenants) Act 1995?

Answer 20

Under Section 17(4), the liability amount for a former tenant or guarantor cannot exceed the amount specified in the landlord’s notice unless the liability is later determined to be greater, and the landlord informs them within three months of this determination.

Question 21

What provision does Section 17(5) of the Landlord and Tenant (Covenants) Act 1995 make for fixed charges due before the Act’s enforcement?

Answer 21

Section 17(5) treats fixed charges due before the Act’s enforcement as becoming due on the Act’s effective date, but this does not apply if proceedings for recovery were initiated by the landlord before the Act’s enforcement.

Question 22

What are considered “fixed charges” under Section 17(6) of the Landlord and Tenant (Covenants) Act 1995, and who does “landlord” include?

Answer 22

“Fixed charges” under Section 17(6) include rent, service charges (as per Section 18 of the Landlord and Tenant Act 1985, excluding “of a dwelling”), and amounts for failing to comply with tenant covenants.

“Landlord” includes anyone with the right to enforce charge payment.

Question 23

What does Section 77(1) of the Law of Property Act 1925 imply in conveyances for valuable consideration other than mortgages?

Answer 23

Section 77(1) implies that conveyances for valuable consideration will include covenants relating to the entirety of the land affected by a rentcharge or part of it, with specific terms for when rentcharges have been apportioned or retained.

Question 24

How does Section 77(2) modify the application of implied covenants when part of the land affected by a rentcharge is conveyed without the rentcharge owner’s consent?

Answer 24

Section 77(2) states that if part of the land subject to a rentcharge is conveyed without the owner’s consent, the covenants apply as if the entire rent is charged on the conveyed part, omitting any covenants to pay the entire rent.

Question 25

What is the effect of Section 77(2A) of the Law of Property Act 1925 when a part of land affected by a rentcharge, without the consent of the rentcharge owner, is expressed to be conveyed free from the entire rent?

Answer 25

In this scenario, the subsection treats the conveyance as if the entire rentcharge still applies to this portion of land. This means the new owner of this part is treated as if they are responsible for the entire rent, just as the original entire land was before the conveyance, effectively disregarding the claim that the part is free from the rent.

Question 26

According to Section 77(1), how can covenants be implied by a person conveying as a beneficial owner and how can these covenants be varied or extended?

Answer 26

Section 77(1) allows covenants implied by a beneficial owner to be implied in any conveyance, with or without variation, by express reference to this section. These covenants can be varied or extended by deed to operate as if such variations or extensions were directly implied in the section.

Question 27

What is a ‘rentcharge’?

Answer 27

A rentcharge is a periodic payment made by the owner of land to another party, known as the rentcharge owner, typically in exchange for some benefit or right associated with the land.

Question 28

How are ‘rentcharges’ created?

Answer 28

Rentcharges are created by a legal instrument, such as a deed, and may endure for a specified duration or in perpetuity.

Question 29

Are rentcharges enforceable against subsequent owners?

Answer 29

Rentcharges represent a separate legal interest in the land and are enforceable against subsequent owners.

Question 30

What is the purpose of s 77 LPA 1925?

Answer 30

It ensures that when land is conveyed, whether in its entirety or in part, the parties involved are bound by certain implied covenants regarding the payment of rent to the grantor or original owner of the land.

Question 31

What promises are required under Section 77(1)(a) and (b) of the LPA 1925 when dealing with land affected by a rentcharge?

Answer 31

Section 77(1)(a) and (b) of the LPA 1925 require buyers of land affected by a rentcharge to pay the rent.

Question 32

When a piece of land with a rentcharge is divided and sold without the rentcharge owner’s consent, and a new owner is made responsible for the whole rentcharge, what does Section 77(2) of the Law of Property Act 1925 ensure regarding the implied covenants in the conveyance?

Answer 32

Section 77(2) of the Law of Property Act 1925 ensures that the implied covenants in the conveyance are modified to treat the new owner as responsible for the entire rentcharge.

Question 33

According to Section 77(3) of the LPA 1925, when does section 77 not apply?

Answer 33

Section 77 does not apply to certain types of property transactions, such as leases.

Question 34

Who can imply a covenant by express reference to Section 77(4) of the LPA 1925?

Answer 34

Anyone selling land can imply a covenant by express reference to Section 77(4) of the LPA 1925, whether they’re the owner or not.

Question 35

Under Section 77(5), what happens to the benefit of a covenant implied under this section?

Answer 35

The benefit of a covenant implied under section 77 is attached to the land and must be upheld by whoever owns the land, even if it changes hands.

Question 36

How can a covenant implied under Section 77 be varied or extended?

Answer 36

A covenant can be varied or extended by deed, ensuring it operates effectively and with appropriate modifications (Section 77(6) LPA 1925)

Question 37

Accordingto s 77(8), when does Section 77 apply?

Answer 37

Section 77(8) specifies that this section applies to conveyances made after the commencement of the Act.

Question 38

In Moule v Garrett (1872), what principle did Cockburn CJ articulate regarding the liability and duty of ultimate assignees in lease covenants, and the right of the original lessee to seek recovery for damages paid due to the assignees’ default?

Answer 38

Cockburn CJ in Moule v Garrett (1872) stated that ultimate assignees, possessing the leased premises, are duty-bound to perform the lease covenants. If their default causes the original lessee to pay damages, the lessee can recover the sum from those at fault for the breach.

Question 39

How does the Law of Property Act 1925 (ss 141 and 142) determine the transfer of benefits and liabilities of covenants to successors in title to the landlord?

Answer 39

According to the Law of Property Act 1925 (ss 141 and 142), successors in title to the landlord inherit the benefits of tenant covenants and liabilities of landlord covenants if they relate to the subject matter of the lease.

Question 40

According to Spencer’s Case, under what condition do successors in title to the tenant inherit the benefits and liabilities of covenants?

Answer 40

In Spencer’s Case, it was established that successors in title to the tenant inherit the benefits of landlord covenants and liabilities of tenant covenants if the covenants “touch and concern” the land.

Question 41

How are personal covenants, such as providing a free three-course meal to the landlord, treated in terms of their enforceability by or against successors in title?

Answer 41

Personal covenants, like providing a free meal, don’t pass to successors in title because they neither relate to the lease’s subject matter nor “touch and concern” the land, as per Spencer’s Case and ss 141 and 142 of the Law of Property Act 1925.

Question 42

Which leases are excluded from the implied indemnity covenants under Schedule 12, paragraph 20(5) of the LRA 2002?

Answer 42

Schedule 12, paragraph 20(5) excludes leases considered ”new tenancies” under section 1 of the Landlord and Tenant (Covenants) Act 1995 from the implied indemnity covenants regarding transfers of pre-1996 leases.