Leasehold Covenants: Remedies

Question 1

What six actions can be taken in response to a breach of covenant in a lease?

Answer 1

For a lease covenant breach, options include:
1) seeking damages,
2) requesting specific performance,
3) applying for an injunction,
4) lease termination,
5) using dispute resolution like arbitration, and
6) for landlords, lease forfeiture for serious breaches like unpaid rent.

Question 2

Is a covenant to pay rent implied in a lease agreement?

Answer 2

Yes, even if not explicitly stated, a covenant for the tenant to pay rent is implied in a lease agreement, assuming the lease specifies a rental amount, like £600 a month.

Question 3

What contractual action can a landlord take if the tenant fails to pay rent?

Answer 3

A landlord can sue the tenant for debt due to non-payment of rent, akin to any breach of contractual promise to pay money.

Question 4

What is the time limitation for a landlord to sue for rent arrears?

Answer 4

A landlord must sue for rent arrears within six years from when the arrears were due, as per Section 19 of the Limitation Act 1980.

Question 5

What additional step must landlords take when suing former tenants for rent arrears in new tenancies?

Answer 5

When suing former tenants for rent arrears in new tenancies, landlords must serve a default notice in accordance with Section 17 of the Landlord and Tenant (Covenants) Act 1995.

Question 6

What legal provision introduced the Commercial Rent Arrears Recovery (CRAR) process?

Answer 6

The CRAR process was introduced by Schedule 12 to the Tribunals, Courts and Enforcement Act 2007 for the recovery of rent arrears on commercial properties.

Question 7

What did the Tribunals, Courts and Enforcement Act 2007 replace in terms of rent recovery for commercial premises?

Answer 7

The Act abolished the common law right to distrain for non-payment of rent on commercial premises and replaced it with the CRAR procedure.

Question 8

What types of rent can CRAR be used to recover?

Answer 8

CRAR can be used to recover rent payable in advance or in arrears for commercial premises.

Question 9

What is the minimum amount of arrears required to use CRAR?

Answer 9

To use CRAR, there must be a minimum of seven days’ rent in arrears, as prescribed by regulations.

Question 10

What is the notice requirement for exercising CRAR?

Answer 10

To exercise CRAR, at least seven days’ notice of enforcement must be served on the tenant after the rent becomes due and payable.

Question 11

What role does an enforcement agent play in the CRAR process?

Answer 11

An enforcement agent serves the enforcement notice on the tenant under CRAR, which binds the property in the tenant’s goods until the arrears are paid or the goods are sold.

Question 12

What is forfeiture in the context of lease agreements?

Answer 12

Forfeiture is a powerful legal remedy allowing a landlord to bring a lease to a premature end due to the tenant’s breach of covenant.

Question 13

How is forfeiture used beyond non-payment of rent?

Answer 13

Forfeiture can be used for breaches of other covenants in the lease, not just for non-payment of rent, making it a comprehensive remedy for landlords.

Question 14

What legal recourse is available for breaches of covenants other than rent payment in a lease?

Answer 14

For breaches of covenants other than rent, the non-breaching party can seek damages, guided by the principles established in Hadley v Baxendale, focusing on the foreseeability and remoteness of the damages.

Question 15

How does the rule in Hadley v Baxendale apply to claims for damages for breach of lease covenants?

Answer 15

In Hadley v Baxendale, damages for breach of lease covenants are limited to losses that arise naturally from the breach or were likely contemplated by both parties at the contract’s formation as a probable result of the breach.

Question 16

Under what conditions is specific performance granted for lease covenant breaches?

Answer 16

Specific performance is a discretionary equitable remedy granted in exceptional cases where damages are inadequate, and the claimant isn’t barred by other equity rules.

Question 17

What is an appropriate remedy for breach of a negative covenant in a lease?

Answer 17

For a breach of a negative covenant, like unauthorized business use of premises, an injunction ordering the defendant not to contravene the covenant may be appropriate.

Question 18

What ancient common law right do tenants have when the landlord fails to fulfill repair covenants?

Answer 18

If the landlord breaches a repair covenant, the tenant may recoup repair costs from future rents, defending against any rent payment claims, as outlined in Lee-Parker v Izzet and supported by the ancient common law right from Taylor v Beal.

Question 19

Under what conditions can tenants exercise the right to set off repair costs against future rents?

Answer 19

Tenants can exercise the right to set off repair costs against future rents when the landlord is in breach of express or implied repair covenants, provided any necessary notice has been given to the landlord. The extent to which repair costs can be treated as payment of rent is determined on a case-by-case basis.

Question 20

What are the two methods a landlord can use to signify an intention to forfeit a lease for breach of covenant?

Answer 20

A landlord can signify an intention to forfeit a lease for breach of covenant either by peaceable re-entry, physically re-taking possession, or by serving legal proceedings.

Question 21

What is required before a landlord can forfeit a lease for non-payment of rent?

Answer 21

Before forfeiting a lease for non-payment of rent, a landlord traditionally needed to make a formal demand for the exact rent amount at the premises on the last day for payment, a process known as “formal demand.”

Modern leases often include a forfeiture clause that dispenses with the need for this formal demand, allowing the landlord to re-enter when rent is overdue without a formal demand.

Question 22

What restrictions exist on a landlord’s ability to use peaceable re-entry for forfeiting a lease?

Answer 22

Peaceable re-entry for forfeiting a lease is restricted in cases of dwelling leases, where it’s not lawful to forfeit other than by court proceedings if the premises are a dwelling and someone is lawfully residing there, per s 2 of the Protection from Eviction Act 1977.

Additionally, using or threatening violence to obtain possession is a criminal offence under s 6 of the Criminal Law Act 1977.

Question 23

What actions must a landlord take before forfeiting a lease for breaches of covenants other than non-payment of rent?

Answer 23

Before forfeiting a lease for breaches other than non-payment of rent, the landlord must ensure there’s a forfeiture clause in the lease and serve a notice under s 146 of the Law of Property Act 1925 on the tenant.

If the tenant doesn’t remedy the breach following the notice, the landlord may choose to forfeit by serving legal proceedings or peaceable re-entry.

Question 24

What relief options are available for tenants and mortgagees facing forfeiture?

Answer 24

Tenants may seek relief from forfeiture by acting swiftly to remedy the breach, pay arrears of rent, and cover costs, which is usually granted. Mortgagees, whose security is affected by the lease forfeiture, can apply for relief against forfeiture under s 146(4) of the Law of Property Act 1925.

Question 25

What recourse does a mortgagee have if a lease they have an interest in is being forfeited?

Answer 25

A mortgagee can apply for relief against forfeiture under s 146(4) of the Law of Property Act 1925, protecting their security interest in the leasehold property from being terminated by the forfeiture.