Leases Flashcards
Quick q:
A tenant leases shop premises and wants to assign his leasehold interest to a friend. The tenant consults a solicitor and is told that the lease contains a qualified covenant against assignment.
What is the legal effect of this covenant?
The landlord can withhold its consent to the assignment if it is reasonable to so.
Option A is correct. The effect of the qualified covenant is that the landlord can withhold its consent to an assignment only if it is reasonable to do so. This is because a qualified covenant is converted into a fully qualified covenant under statute (s19(1)(a) Landlord and Tenant Act 1927).
Option B is wrong as, in the case of a qualified covenant such as this, the landlord’s consent may not be unreasonably withheld.
Option C is wrong as this describes the situation if there was an absolute covenant which prevents assignment.
Option D is wrong as this is not an example of a reasonable condition that could allow a landlord to withhold consent. As a general rule, a landlord will be acting unreasonably unless its reasons for refusal relate to the status of the proposed assignee or the use to which the assignee proposes to put the property.
Option E is wrong as there is no obligation on a landlord to allow an assignment as long as it is acting reasonably.
A freehold owner grants a five-year lease to a tenant. The document creating the lease is described as a deed but the freehold owner’s signature is not witnessed and the document does not contain all the terms agreed by the parties. However, the tenant immediately moved into the property and has paid the freehold owner a regular monthly rent at the market rate.
Has a legal lease been created?
A-Yes, as a five-year lease can be created without any formality.
B-No, the document is not a deed but equity may recognise the agreement.
C-No, it is a licence as the agreement does not contain all the expressly agreed terms
D-Yes, it is a legal periodic tenancy created by parol due to exclusive possession and payment of rent.
E-No, in order to be a legal lease a deed is always required.
The correct option is D.
The document creating the lease does not meet the requirements for a deed. However, certain leases do not require a deed. Therefore option E is wrong.
Equity would not intervene as the document does not contain all the expressly agreed terms. Therefore, option B is wrong.
The tenant immediately took possession and paid a monthly rent at market rent with no fine or premium, thus, creating a monthly periodic tenancy. Therefore, option C is wrong and option D is correct.
A fixed term five-year lease cannot be created informally. Therefore, option A is wrong.
A freehold owner grants a lease of a retail unit to a pharmacist in 1994 for 30 years. In 2000 the pharmacist sold the lease to a shopkeeper. In 2010 the shopkeeper sold the lease to a florist. In each case the freehold owner granted consent to the assignment taking place. In 2015 the freehold owner sold the freehold reversion to a developer. It is now 2020 and the florist has not paid the December quarter’s rent to the developer.
Who can the developer sue for the rent?
A-The developer can sue the florist, the shopkeeper and the pharmacist for the rent.
B-The developer can sue the florist and the pharmacist for the rent.
C-The developer can only sue the florist for the rent.
D-The developer can sue the florist or the pharmacist for the rent but can only sue the shopkeeper for the rent if the shopkeeper gave a direct covenant to the freehold owner when she bought the lease from the pharmacist.
E-The developer cannot sue anyone as she does not have the benefit of the covenant to pay rent.
This is an old lease so the position on privity of contract applies. D is the best answer as it establishes that the shopkeeper may only be sued if she gave a direct covenant to the freehold owner. The developer will have acquired the benefit of the covenants under s41 LPA 1925 so E is wrong in that she can sue someone. The pharmacist will always be liable under privity of contract and the florist will be liable under privity of estate so C and E are wrong. A and B are on the face of it correct but only if we know whether or not the shopkeeper gave a direct covenant to the freehold owner to enable privity of contract to subsist.
A lease created seven years ago contained a covenant, imposed on the tenant by the landlord, requiring the tenant to decorate the interior of the property every three years. Both the landlord and tenant have sold their respective interests to successors. The new landlord has discovered that the new tenant has breached this obligation.
Which statement most accurately describes the liability between the new landlord and new tenant?
A-The benefit of the covenant can pass from the original landlord to the new landlord because it has reference to the subject matter of the lease.
B-The new tenant is bound by the covenant as the burden will pass to the new tenant if the covenant is not expressed to be personal.
C-The new tenant has the burden of the lease covenant as it touches and concerns the land.
D-An authorised guarantee agreement will ensure that the new tenant guarantees that the original tenant will perform the lease covenants.
E-The original landlord will have retained the right to pursue the new tenant when the lease reversion was sold.
Option B is the correct option because the burden of this covenant will have passed to the new tenant as the covenant was not expressed to be personal.
Option A is wrong because this lease is a “new” lease and therefore the benefit of the covenant will pass as all covenants pass to the successor except those that are expressly stated to be personal.
Option C is wrong because this lease is a “new” lease and therefore the burden of the covenant will pass because all covenants pass to the successors except those that are expressly stated to be personal rather than being determined by an assessment of whether they touch and concern the land or not.
Option D is wrong because an authorised guarantee agreement will ensure that the original tenant guarantees that the new tenant will perform the lease covenants, not that the new tenant guarantees that the original tenant will perform the lease covenants.
Option E is wrong because whether the original landlord retains the benefit of the leasehold covenants will depend upon whether the original landlord was released from the burden of his leasehold covenants by the original tenant or the court.
Quick Q:
In 2010, a freehold owner granted a lease of office premises to a firm of solicitors for a term of 15 years. The lease provides for the annual rent to be paid by equal quarterly payments in advance, on the usual quarter days. Further, the lease provides that as a condition of the landlord’s consent to assignment an authorised guarantee agreement (AGA) must be entered into by the outgoing tenant.
In 2015, the lease was assigned, with the landlord’s consent, to a firm of accountants and the firm of solicitors entered into an AGA with the landlord.
In 2019 the lease was further assigned, with the landlord’s consent, to a tech start-up company, the current tenant, and the firm of accountants entered into an AGA with the landlord.
The current tenant has failed to pay the last three quarters’ rent, due on 25 March, 24 June and 29 September. No default notice has yet been served.
Which of the following statements best describes the course of action which the landlord could take to recover the arrears of rent?
The landlord can pursue the firm of accountants for the arrears of two quarter’s rent under the AGA provided that a default notice is served on the firm of accountants within six months of the second quarter’s rent being due and payable on 24 June.
Option E is correct. This is a new lease, as it was granted after 1 January 1996, and is governed by the Landlord and Tenant (Covenants) Act 1995 (the ‘Act’). The firm of accountants were released under the Act from the tenant’s covenants on assignment of the lease to the current tenant but entered into an authorised guarantee agreement on that assignment, guaranteeing the observance of the tenant’s covenants by the current tenant, including payment of rent. The landlord can only claim a fixed charge (which includes rent) from a former tenant if a s17 default notice is served on the former tenant within six months of that sum becoming due and payable. As no s17 notice has yet been served, the landlord cannot claim the rent due on 25 March, as more than six months has elapsed since that sum became due but, provided a s17 notice is served within six months of 24 June, the landlord can claim the last two quarter’s rent from the firm of accountants under the authorised guarantee agreement.
Option A is wrong as the landlord’s ability to make a claim against a former tenant is not lost altogether on these facts. The landlord cannot claim the first quarter’s rent from the firm of accountants as more than six months has elapsed since 25 March but can still claim for the next two quarters, provided a s17 notice is served on them. Further, the s17 notice would not be served on both former tenants as, despite the firm of solicitors entering into an authorised guarantee agreement with the landlord on assignment of the lease to the firm of accountants, this authorised guarantee agreement ceased to be of effect once the firm of accountants assigned the lease.
Option B is wrong as the s17 notice would not be served on both former tenants as discussed above and it is not possible for the landlord to claim three quarter’s rent as it is more than six months since the rent became due on 25 March.
Option C is wrong as, under the Act, the firm of solicitors were released from the tenant’s covenants on assignment of the lease and the authorised guarantee agreement entered into by them with the landlord ceased to be of effect once the firm of accountants assigned the lease. The fact that the firm of solicitors were the original tenant is irrelevant for a new lease. The landlord cannot make a claim against the firm of solicitors.
Option D is wrong as the landlord cannot claim the first quarter’s rent from the firm of accountants, as more than six months has elapsed since 25 March.
read over to confirm
Quick Q
A brother and sister bought a registered freehold property to use as a holiday house 10 years ago. The brother contributed 75% of the purchase price and the sister the remaining 25%. The transfer deed stated that they held the property as joint tenants in law and in equity. Five years ago, the brother sent a letter to his sister saying that he wanted the property sold immediately. He sent the letter by first class post to his sister’s place of work. However, he changed his mind and the property was not sold. Last week the sister was killed in a horse riding accident. In her will, she has left her share in the property to her boyfriend.
How are the legal title and the equitable interests in the property now held?
The brother owns the whole of the legal estate and the brother and the sister’s boyfriend are tenants in common in equity
The legal estate can only be held as a joint tenancy (s1(6) LPA 1925) whereas the equitable interest may be held as either joint tenants or tenants in common.
When the property was bought 10 years ago, the brother and sister held the legal estate as joint tenants and the equitable interest as joint tenants notwithstanding the unequal contributions to the purchase price (there was an express declaration in the transfer deed – Goodman v Gallant). The brother severed the equitable joint tenancy by notice (s36 LPA) and so, at the time of the sister’s death, the legal estate was held by the brother and sister as joint tenants and the equitable interest as tenants in common. When the sister died, the legal estate passed to the brother under the rule of survivorship and the sister’s equitable interest passed to the sister’s boyfriend under the terms of her will. Therefore C is correct. A is wrong as the sister’s boyfriend cannot be the legal owner (and so D is also wrong) and the equitable interest is held as tenants in common. B is wrong as the equitable interest was severed and so the brother would not have the whole of the legal and equitable interests in the property. E is wrong as the sister’s boyfriend is not the legal owner and the legal estate can only ever be held as joint tenants in any event.
Disclaim the lease.
A landlord cannot disclaim a lease. This is a right that arises on insolvency of a tenant.
Ending the tenant’s interest in the lease:
A liquidator or trustee in bankruptcy has the power to disclaim onerous property and contracts. Where a tenant has become insolvent it is highly likely that a lease of its business premises will represent onerous property, and that rent arrears are among the tenant’s outstanding debts and obligations.
Quick Q:
A tenant is occupying commercial premises pursuant to a new lease and now wishes to assign the lease to a third party. The alienation covenant in the lease provides that the tenant is not to assign, underlet, charge or part with possession of the property without the landlord’s consent.
Which of the following best describes whether the tenant is able to assign the lease?
This is a fully qualified covenant; therefore, the tenant must seek the landlord’s consent which is not to be unreasonably withheld or delayed.
**Option E is the best answer – this is a qualified covenant which has been converted into a fully qualified covenant by virtue of s19(1)(a) Landlord and Tenant Act 1927 and which also must not be unreasonably delayed upon written application in accordance with s1 Landlord and Tenant Act 1988.* KEY POINT
Option A is wrong – the tenant is required to seek the landlord’s consent; therefore, it is not an absolute prohibition against assignment.
Option B is not the best answer – as a fully qualified covenant there is an obligation on the landlord not to unreasonably withhold or delay its consent.
Option C is wrong – there are limited circumstances in which a landlord can reasonably withhold consent.
Option D is wrong – the landlord is only entitled to specify the conditions in which it can refuse consent in advance, normally at the negotiation stage.
