U7. Leasehold Remedies (LIABILITY) Flashcards
When looking at questions regarding a breach of a leasehold covenant, what is the 2 steps to take when thinking about remedies?
First identify the liability of the parties
Then identify what remedy would apply for a breach of covenant in the lease
Who is liable for a breach of a leasehold covenant ?
The Original Parties (Original Landlord, Tenant, Gaurantor) will always be liable to each other under the lease while the lease is vested in them. (unless old lease, in which will be liable for the entire term of lease)
However, if any of the parties have changed, different rules as to liability of the party changes in relation to if it is an old lease or a new lease.
What is Privity of Contract with regards to OLD Leaseholds?
Privity of contract means ALL ORIGINAL PARTIES will be bound by ALL COVENANTS of the lease
What is Privity of Estate in OLD LEASES?
Privity of Estate means ONLY persons with CURRENT INTEREST in the lease will be bound by ONLY COVENANTS THAT TOUCH AND CONCERN THE LAND
Owing to Privity of Contract in old leases, the original tenant will always be liable to the landlord even after they have assigned the lease and have no interest in it.
How is this rectifed?
The assignor should seek indemnity agreement from the assignee if they was to breach a covenant.
If not expressly included, this will be implied on assignment if:
- The transfer of lease is for a value (money)
- The lease is registered
Owing to Privity of Contract in old leases, the original landlord will always be liable to the tenants even after they have transferred the estate and have no interest in it.
How is this rectifed?
The landlord should seek an express agreement from the new landlord to be indemnifed for any breaches.
For landlords, this is not automatically applied.
What is the main diffrence bewtween the liability of parties when there is a breach of lease hold covenant in old leases v new leases?
In old leases, the original parties will be bound by privity of contract and the subsequent tenant or landlord will be bound by privity of estate.
In new leases, there is no disginquishment between original and SUCESSIVE PARTIES, and they all have the same liability.
When will original and successive tenants be liable for breaches of covenants under a old lease ?
As the original tenants have more limited liability under new leases, how can landlords compensate for this?
Will be liable for ALL COVENANT BREAHCES (other than personal covenants of another party) while THE INTREST IS VESTED TO THEM.
Automatically realised from liability on lawful assignment of lease.
To Compensate:
Landlords may request an Authorised Gurantee Agreement from the Assigning Tenant that the Assignor Tenant will comply with all covenants.
What is an authorised gaurantee agreement?
An agreement from the assignor tenant to the landlord that he will be liable for covenant breaches in default of the new assignee.
When will original and successive landlords be liable for breaches of covenants under a new lease?
Landlords will be liable for all covenant breaches.
They will not automatically be released from their liability unless they have an espresso ‘Avonridge Clause’ stating so.
Otherwise, on transferring their interest, they will need to apply for a realse from liability
How can Landlords apply for realse for covenant breaches in NEW LEASES after they have transferred their interest?
1) Landlord Service Notice on tenant either before, or within four weeks of the alignment, requesting to be released.
2) The tenant has 4 weeks notice
a) If no response received, the landlord is released from the landlord covenants (Except personal ones)
b) If tenant objects, the landlord may apply to the Country Court for a declaration that release would be reasonable.
What are the 2 ways Landlords can be released from their liability for covenants under a new lease once they transfer their interest?
- An Avonridge Clause in their lease realsing them upon transfer of interest
- Applying for realse upon transfer of interest
What is the diffrence between original and successive tenants liability and landlords for a breach of covenant in a new lease?
Tenants are only liable when the interest is vested in them, and they are automatically realised from liability when they assign the lease.
Landlords are not automatically released, and must apply for realse unless they have an Avonridge Clause in the lease
What is an Avonridge Clause?
An Avonridge Clause is an express clause in the lease that makes landlords only liable for covenant breaches while they have an interest in the land, and so when they transfer their interest they do not have to apply for release
When are Guarantors liable for breaches of covenants in new leases?
Guarantors are only liable for the performance of guarantees by the person they guaranteed, and so automatically realised from liability when there is a lawful assignment of the lease.
However, the landlord may require them to guarantee the original tenants Authorised Guarantee Agreement, making them indirectly liable for future tenants breaches.
