Leases Flashcards
Three essential requirements if a lease
- The estate must be for a duration permitted for a leasehold estate.
Must have a definable beginning and a definable end. - The grant must give exclusive possession.
If none then it is a licence.
Don’t have to be in occupation. - The grant must have the correct formalities
No need to pay rent.
Types of lease
- Fixed- term leases
A contract that gives the tenant the right to occupy the premises for a certain fixed period of time.
Can be for any duration. - Periodic leases
Runs from period to period until it is terminated by notice by either party.
Each time a period expires, the term is automatically renewed.
Enforceability of old leases (granted before 1996) - Liability of the original tenant
Privity of contract.
T1’s contractual liability lasts for the duration of the lease even if assigns it.
Enforceability of old leases (granted before 1996) - Liability of an assignee
There is a relationship of privity of estate between the landlord and T2.
T2 is liable for breaches of all real covenants e.g. to pay rent, repair etc.
Test is:
(i) ‘touching and concerning’ covenant must benefit only the dominant owner for the time being, so that, if separated from their land, it ceases to be advantageous to them;
(ii) the covenant must affect the nature, quality, mode of user or value of the land of the dominant owner; and
(iii) the covenant must not be expressed to be personal (ie must not have been given only to one specific dominant owner).
If T2 defaults the landlord has a choice; they can pursue:
* T1 via privity of contract;
* T2 via privity of estate; or
* both of them.
If multiple assignments it’s only the first one and latest one can go after. Can only go after middle ones if tenant have direct covenant to freehold owner to enable privity of contract to subsist.
Enforceability of new leases (granted after 1996) - tenants
The tenant (meaning the original tenant and any subsequent assignee) is bound by the covenants of the lease only whilst the lease is vested in them. Upon an assignment of the lease, all the landlord and tenant covenants pass to the assignee unless they are expressed to be personal.
The covenants do not need to touch and concern the land.
The assigning tenant is automatically released from any liability under the lease.
If the assignee breaches a covenant in the lease, the landlord can only pursue the assignee (ie the current tenant).
Enforceability of new leases (granted after 1996) - landlords
Upon a sale of the reversion, the new landlord takes the burden of the landlord covenants and acquires the benefit of the tenant covenants, provided that the covenants were not expressed to be personal.
The covenants do not need to touch and concern the land.
The outgoing landlord is not automatically released following an assignment of the reversion. The outgoing landlord has to follow the criteria in ss 6 and 8 LT(C)A 1995 in order to obtain a release from the landlord covenants. If a release is not obtained, the outgoing landlord remains liable on the landlord covenants.
The landlord can limit their liability by stating in the lease that their liability ends once they have disposed of the reversion.
Authorised Guarantee Agreement (AGA)
An agreement between the landlord and the outgoing tenant under which the outgoing (or former) tenant guarantees that the assignee (incoming tenant) will perform the lease covenants.
So landlord can take action against the former (outgoing) tenant who has given an AGA.
A landlord can only seek an AGA where:
* the lease contains a covenant against alienation without the landlord’s consent (ie the tenant cannot sell the lease without first asking the landlord’s permission); and
* it is either reasonable to do so or, in the case of a commercial lease, it is a condition of the landlord giving its consent
s17 Landlord and Tenant (Covenants) Act 1995
Relates to the recovery of a fixed charge including rent from a former tenant.
Before the landlord can pursue a former tenant for the payment of rent, they must:
* serve a default notice;
* on the former tenant;
* within six calendar months of the fixed charge falling due.
s19 Landlord and Tenant (Covenants) Act 1995
If the former tenant pays the sum demanded in full, the former tenant can request an overriding lease from the landlord.
Landlord’s remedies for non- payment of rent
- debt action
Limitation period of 6 years from the date on which the arrears became due.
Express covenant in lease or implied. - commercial rent arrears recovery
Enforcement agent seizes goods to sell them for landlord.
Can only be exercised against current tenant
Only for commercial leases. - forfeiture
Landlords takes possession and ends lease.
Can only be exercised against current tenant
Landlord’s remedies for breach of other covenants
- Damages
- Specific performance
- Forfeiture
Before the landlord can forfeit, landlord must serve notice:
(a) specifying the breach;
(b) requiring it to be remedied within a reasonable time, if capable of remedy; and
(c) requiring compensation if desired. - Self- help remedy
Lease must contain clause
that allows the landlord to:
(a) enter and inspect the property;
(b) give the tenant notice that repair is required and a time period for the tenant to undertake the repairs;
(c) if the tenant does not complete the work the landlord can enter the property and do the work; and
(d) the landlord can recover the cost of the work as a debt
Tenant’s remedies for breach of a landlord covenant
- specific performance/ injunction
- damages
- self- help
Ways to determine a lease
- effluxion of time;
- notice to quit;
- break clause;
- surrender;
- disclaimer;
(arises upon the bankruptcy/ liquidation of the tenant) - frustration;
- repudiatory breach;
- merger; and
- forfeiture.
