Property (Alienation) Flashcards
What happens to the liability of the original tenant or landlord in leases created before 1 January 1996 after assignment?
For leases created before 1 January 1996 (Old Lease Regime), the liability of the original landlord and tenant continues for the full duration of the lease term, even after assignment.
The original tenant and landlord remain liable for covenants even after transfer.
What happens to the liability of the original tenant or landlord in leases created after 1 January 1996
(New Lease Regime)
Under the LTCA 1995, privity of contract for new leases is abolished.
- The original tenant is automatically released from tenant covenants upon assignment
- The landlord does not receive automatic release and must apply to the tenant or court for release.
Does liability automatically pass to the new tenant or landlord upon assignment?
(New Lease Regime)
Yes, the benefit and burden of landlord and tenant covenants automatically pass to the new owner (reversioner) and new tenant (assignee), who become liable from the date of assignment.
What is an exception to the rule of benefit and burden passing automatically?
(New Lease Regime)
Covenants expressed as personal to any party do not pass to a third party and are limited to the original parties for breaches occurring during their occupation.
Can a landlord sue a former tenant for breaches committed by an assignee?
(New Lease Regime)
The landlord can enforce breaches against the current tenant.
If the current tenant cannot comply, the landlord may seek remedy from previous tenants for breaches made by the assignee - this depends on whether an AGA was provided.
What is an Authorised Guarantee Agreement (AGA) and when is it used?
(New Lease Regime)
An AGA is a guarantee agreement where an outgoing tenant guarantees the obligations of their immediate successor. It applies only to their immediate assignee and ends with further assignment.
Simply, should the assignee be unwilling/unable to comply, the landlord may look to a former tenant who provided an AGA.
What is an indemnity covenant and how does it protect the outgoing tenant?
(New Lease Regime)
An outgoing tenant should ensure their assignee enters into an express indemnity covenant
The assignee agrees to pay rent and perform all covenants.
The former tenant may sue the assignee for breach of the indemnity and recoup damages paid to the landlord.
What is a sublease and the enforcement problem it presents?
A sublease is created when the tenant leases part of their interest without transferring it entirely.
There is no direct relationship between the head landlord and the subtenant, complicating enforcement.
How does s.3(5) address enforcement of restrictive covenants in subleases?
What type of covenant can be enforced against sublesees?
Restrictive covenants in new leases can be enforced against any owner or occupier of the premises, even without direct relationship.
Positive covenants, however, cannot be enforced against subtenants.
What is alienation in leasehold terms?
Alienation refers to the disposal of all or part of a tenant’s interest in the lease, often through assignment.
What is assignment and its effects?
In assignment, the tenant transfers their lease to an assignee, making the assignee the landlord’s tenant and passing on obligations to pay rent and perform covenants.
Can a tenant freely assign their lease?
If the lease is silent, assignment is allowed.
However, landlord consent may be required, and covenants can be absolute, qualified, or fully qualified.
What is an absolute covenant against assignment?
An absolute covenant forbids assignment. Common in commercial leases, it prevents splitting the premises.
What is a qualified covenant for assignment?
A qualified covenant allows assignment with landlord consent
s.19(1)(a) LTA converts a qualified covenant into a fully qualified covenant - the landlord **must act reasonably if deciding to withhold consent, and must do so within a reasonable time. **
When can a landlord reasonably withhold consent for assignment?
Consent can be withheld if justified concerns exist about the assignee’s ability to pay rent or other tenant/landlord relationship factors.
Consent cannot be witheld on a basis not related to the tenant/landlord relationship (e.g. disliking the business, or race/age etc)
What liability does an original tenant have after assignment in an old lease?
Under old leases, the original tenant remains liable to the landlord under privity of contract for rent and obligations.
What changes to liability occur after assignment in new leases post-January 1996?
The original tenant is released from liability, and tenant covenants pass to the new tenant upon assignment.
What effect does AGA have on the outgoing tenant? When does the chain stop?
An outgoing tenant only guarantees the next tenant under the AGA.
If there are subsequent assignments, the outgoing tenants liability under AGA end.
What are the pre-exchange steps in assignment?
- The tenant applies for landlord consent,
- Both solicitors prepare necessary documents
- Review title
- Arrange for contract signing.
What is the tenant’s role in a consent application for assignment?
The tenant solicitor applies early for landlord consent and may need to provide an undertaking for landlord’s legal and surveyor costs.
What are CPSE1 and CPSE4 enquiries?
CPSE1 and CPSE4 are standard enquiries for assignments, with CPSE4 specifically addressing lease assignment details.
For an assignment of a long residential lease, is a deposit payable?
For an assignment of a long residential lease, 10% deposit would be usual as with a freehold.
What pre-completion searches are carried out if the lease being assigned is registered (more than 7 years)?
An OS1 search of the whole of the tenants leasehold title.
What is an underlease and how is it different from assignment?
An underlease grants a lease interest without transferring it entirely.
The tenant remains the landlord’s tenant and receives rent from the under-tenant.
