UNIT 5 - Lease and Leasehold Covenants Flashcards
TRUE OR FALSE:
If A grants B the right to occupy an office without payment of rent until such time as it is required for A’s own business, B will have been granted a lease of the property.
FALSE - There is no certainty to the term. (Note: a tenancy may still arise where there is certainty of duration and exclusive possession, even where no rent is payable Ashburn Anstalt v Arnold [1989]).
TRUE OR FALSE:
A legal lease must always be created by deed.
FALSE - Although the statement is generally true, a lease of three years or less will be a legal lease provided that it complies with the provisions of s.54(2) LPA 1925.
In the event that the title to the freehold is registered, which one of the following statements is correct?
A) A legal monthly tenancy is an overriding interest under Schedule 3 paragraph 1 LRA 2002.
B) An equitable lease must be registered as an interest affecting a registered estate to be binding on a successor landlord.
C) A tenant of a legal lease of 7 years or less has to satisfy the conditions in Schedule 3 paragraph 2 LRA 2002 for the lease to be an overriding interest.
D) A legal lease of more than 7 years will never require registration as it will be an overriding interest if the tenant is in actual occupation.
CORRECT ANSWER A - Legal leases granted for a term not exceeding 7 years are unregistered interests which override under Schedule 3 paragraph 1 LRA 2002: a legal monthly tenancy would fall within this category. Statement C is therefore wrong as a legal lease of 7 years or less would also come within Schedule 3 paragraph 1 and it would not be necessary for the tenant to satisfy the conditions in Schedule 3 paragraph 2 LRA 2002 for the lease to be an overriding interest.
An equitable lease can bind a successor landlord as an overriding interest if the conditions in Schedule 3 paragraph 2 LRA 2002 are satisfied, therefore statement B is also wrong.
Legal leases of more than 7 years require registration as a registrable disposition and so statement D is wrong as if the lease is not registered, it will not be legal but can only be equitable (note that if it is equitable, it can bind a successor landlord as an overriding interest if the conditions in Schedule 3 paragraph 2 LRA 2002 are satisfied).
Jenni has a weekly tenancy of 4 The Spinney. The tenancy began on a Wednesday and last Friday her landlord served her with a notice to quit expiring on Tuesday.
TRUE OR FALSE:
The notice served on Jenni is a valid notice.
FALSE - Jenni is a weekly periodic tenant and the tenancy can be terminated by notice. The notice does not satisfy the common law rule of a full period’s notice - in this case, a week’s notice expiring on a Tuesday. In any event, if 4 The Spinney is a dwelling house, Jenni’s landlord must comply with s 5 of the Protection from Eviction Act 1977 and give not less than four weeks written notice in a prescribed form.
Select the correct phrase from the list below to complete the following statement:
The original parties to a lease granted before 1st January 1996 remain liable on the covenants in the lease for the duration of the lease even after they have disposed of their interest as a result of ___________
A) Privity of estate.
B) Privity of contract.
C) Express provision in the lease.
CORRECT ANSWER B - Between the original parties to a lease there is privity of contract which lasts for the duration of the lease and endures even after the original parties have disposed of their respective interest in the property. Privity of estate describes the relationship between the current landlord and tenant.
A legal lease of a shop granted in 1995 to Tom for 35 years contains a covenant by the landlord, Lionel, to keep the roof and the main structure in repair. Three years ago Lionel sold and conveyed the freehold reversion by deed to Paul. At the time of the sale the roof and main structure were in disrepair and Paul has since failed to take any action to remedy the situation. Last year Tom sold and assigned the lease to Alan by deed.
Which one of the following statements most accurately describes who can be sued for the breach of the repairing covenant and by whom.
A) Alan can sue Lionel only.
B) Tom can sue Paul only.
C) Alan can sue Lionel and Paul.
D) Tom and Alan can sue Lionel only.
CORRECT ANSWER C - Alan can sue Lionel for his and Paul’s breaches under privity of contract. Lionel is bound by his covenants for the full term of the lease, even after he sells his interest in the property. Under s.142 LPA 1925 Paul acquires the burden of Lionel’s covenants which ‘have reference to the subject matter of the lease’ and can be sued for his breaches of them while he owns the reversion. Alan can enforce the covenants against Lionel and Paul because he has acquired the benefit of the landlord’s covenants which ‘touch and concern’ the land (Spencer’s Case). Between Alan and Paul there is privity of estate.
Which of the following answers identifies the correct statutory provision that matches this statement:
A lease created on or after 1 January 1996 is often referred to as a ‘new’ lease. For new leases, when the tenant assigns the lease, they are automatically released from the tenant covenants.
A) s.5(2)(a) of the Landlord and Tenant (Covenants) Act 1995
B) s.6(2)(a) of the Landlord and Tenant (Covenants) Act 1995.
C) s.3(3)(a) of the Landlord and Tenant (Covenants) Act 1995
CORRECT ASNWER A - s.5(2)(a) releases a tenant on assignment automatically. s.3(3)(a) passes the burden of the landlord covenants to a purchaser of the reversion. s.6(2)(a) provides for a landlord who sells/assigns the reversion to apply to be released from the landlord covenants.
In 2015 Lucy granted a legal lease of a shop to Troy for a term of 15 years. The lease contained a covenant by the tenant to use the property only as a retail shop. Lucy sold the reversion to Paula in 2021 and two months later Troy sold the lease to Sandra after having entered into an AGA with Paula. Sandra has recently converted the shop into a bar.
Which one of the following statements is correct?
A) Paula can sue both Troy and Sandra.
B) Paula can sue Sandra only.
C) Paula does not have the benefit of the tenant covenant as she is not the original landlord.
D) Paula can sue Troy only.
CORRECT ANSWER A - Paula will acquire the benefit of the tenant covenant under s.3(3)(b) of the Landlord and Tenant (Covenants) Act 1995. Sandra will acquire the burden of the covenant under s.3(2)(a) of the Landlord and Tenant (Covenants) Act 1995. Troy is liable on the promise in the AGA given to Paula. Paula can therefore sue both Troy and Sandra.
In 2017 Sue granted a 15 year lease to Paulo. The lease contained a covenant by Paulo to pay the rent. Two years ago, Paulo assigned the lease to Ruth after having entered into an AGA with Sue. Ruth has failed to pay the rent for four months.
TRUE OF FALSE:
Sue will need to serve a default notice on Paulo within the next two months to be able to recover all the rent arrears from him.
TRUE - S.17 of the Landlord and Tenant (Covenants) Act 1995 provides that a landlord cannot recover a fixed charge against a former tenant who has, under an AGA, guaranteed the performance by his assignee of a covenant to pay rent, unless, within six months of the date upon which it became due, the landlord serves on the former tenant a default notice seeking recovery of the rent arrears from the former tenant.
(Note: a default notice is also required if a landlord seeks to recover rent arrears from the original tenant under an old lease who remains liable for breach of covenant under privity of contract).
In 2020 Laura granted Tomsco Ltd a 15 year lease of a factory by deed. The lease contains tenant’s covenants to repair the premises and to pay the rent.
Tomsco Ltd has allowed the factory to fall into disrepair and has failed to pay the last quarter’s rent.
Which one or more of the following remedies may Laura have against Tomsco Ltd?
To obtain credit for this question you must identify all correct remedies.
Hide answer choices
a) Action for damages.
b) Rescission.
c) Commercial rent arrears recovery.
d) Forfeiture.
e) Injunction.
f) Inspection.
g) Specific performance.
h) Action for debt.
CORRECT ANSWERS A, C, D, G & H - The remedies available to Laura for breach of the repairing covenant by Tomsco Ltd are: action for damages, forfeiture and specific performance, although specific performance will only be granted in exceptional cases. For non-payment of rent by Tomsco Ltd, the remedies available to Laura are: action for debt, commercial rent arrears recovery (CRAR ) and forfeiture. Remember forfeiture is only available if there is a forfeiture clause in the lease.
The freehold owner of a shop agreed to give exclusive possession of the shop to a jewellery designer for a period of three years. The agreement, which contained all the terms agreed between the parties, was contained in a document which only the jewellery designer signed.
The jewellery designer paid a premium of £5,000 to the freehold owner and took possession of the shop immediately afterwards. The document provided for the jewellery designer to pay a monthly rent, which represented the market rent for retail properties of that size in that area.
What is the nature of the jewellery designer’s interest in the shop?
A) A legal fixed term lease for three years.
B) A legal periodic lease for a period of one month.
C) An equitable fixed term lease for three years.
D) An easement for a fixed period of three years.
E) A licence for a fixed term of three years.
CORRECT ANSWER E - because the formalities and requirements for creating a legal lease and, in the alternative, an equitable lease have not been satisfied on these facts. The occupier therefore has a licence rather than a lease.
Options A and B are wrong. Although a deed is not required to create a legal lease for a fixed term of three years, the requirements of s54(2) LPA 1925 need to be satisfied for such a lease to be legal (this is called the parol lease exception). The lease is for a term not exceeding three years, the lease has taken effect in possession and the rent payable is the best rent reasonably obtainable (i.e. a market rent) but the tenant has paid a premium and the payment of the premium prevents this lease from falling within the parol lease exception.
There is also another reason why Option B is wrong. Had the requirements of s54(2) LPA 1925 been satisfied on these facts, the lease would have been a legal lease for fixed term of three years rather than a legal periodic lease for one month.
Option C is wrong. The lease cannot be an equitable fixed term lease for three years because the document was signed by the jewellery designer only and not by the freehold owner. This is one of the formalities stipulated in s2 LP(MP)A 1989 (the other required formalities have been satisfied: the document is in writing and records the agreed terms).
In 1995, the freehold owner granted a commercial lease (by deed) to a company for a term of 40 years. The lease contained a repair obligation on the part of the tenant. The company quickly expanded its business and moved to larger premises and assigned the lease to a distributor in 2010. In 2015, the lease was assigned to a warehouse business. Each assignment was by deed and with the consent of the freehold owner. The property is in disrepair and the warehouse business does not have the financial resources to undertake the work. The freehold owner does not wish to bring the lease to an end as it would be hard to find a new tenant.
Which of the following provides the best advice to the freehold owner?
A) Forfeit the lease and relet the property.
B) Enter the property, conduct the repairs and recover the cost from the warehouse business as a debt due.
C) Pursue a claim for damages for breach of repair against the distributor via privity of estate.
D) Pursue a claim in damages for breach of repair against the warehouse business via privity of estate.
E) Pursue a claim in damages for breach of repair against the company via privity of contract
CORRECT ANSWER E - The freehold owner does not wish to end the lease so forfeiture is not a good option. Option A is, therefore, wrong.
The warehouse business does not have the resources to pay for the repairs so it is not sensible to pursue it either via privity of estate or a Jervis v Harris self-help remedy. Options B and D are, therefore, wrong.
The freehold owner can pursue a damages claim against the original tenant via privity of contract. As the business expanded, the original tenant seems a better target to recover the cost of repair.
Option E is, therefore, the best answer.
The distributor was only responsible for the covenant to repair whilst the lease was vested in him. Option C is, therefore, wrong.
Grosvenor Estate Developments (‘GED’) built a small industrial estate made up of six office units in the early 1990s and in 1995 granted leases of each of the units. Unit 5 was let to P & J Engineering (‘P & J’) for 35 years. The lease contained a covenant by the landlord to maintain the estate roads and the tenant covenanted to pay an annual rent of £60,000.
In 2000, GED sold and transferred the freehold of the estate to Venture Investments (‘VI’). In 2012, with the consent of VI, P & J assigned the lease to Allisons Electrical (‘AE’). AE have not paid last year’s rent and VI have allowed the estate roads to fall into disrepair.
Which ONE of the following statements is CORRECT?
A) GED, as the original landlord, will wish to sue AE for breach of the tenant covenant to pay rent.
B) VI has the benefit of the tenant covenant to pay rent due to the principle in Spencer’s case.
C) S141 of the Law of Property Act 1925 gives VI the benefit of the tenant covenant to pay rent.
D) AE has the burden of the tenant covenant to pay rent as a result of s 142 of the Law of Property Act 1925.
CORRECT ANSWER C - this is an old lease: s.141 LPA 1925 governs the passing of the benefit of the covenant to pay rent to the successor landlord, VI.
Option A is wrong as the original landlord will have no interest in suing AE for breach of the covenant as he has disposed of his interest in the land to VI.
The principle in Spencer’s case only applies to successor tenants, so Option B is wrong, and s.142 LPA 1925 only applies to successor landlords, so Option D is wrong.
Grosvenor Estate Developments (‘GED’) built a small industrial estate made up of six office units in the early 1990s and in 1995 granted leases of each of the units. Unit 5 was let to P & J Engineering (‘P & J’) for 35 years. The lease contained a covenant by the landlord to maintain the estate roads and the tenant covenanted to pay an annual rent of £60,000.
In 2000, GED sold and transferred the freehold of the estate to Venture Investments (‘VI’). In 2012, with the consent of VI, P & J assigned the lease to Allisons Electrical (‘AE’). AE have not paid last year’s rent and VI have allowed the estate roads to fall into disrepair.
Which ONE of the following statements is WRONG?
A) P & J is released from liability for the tenant covenant to pay rent when P & J assigns the lease to AE.
B) P & J, as the original tenant, has liability for the tenant covenant to pay rent for the duration of the lease due to privity of contract.
C) If P & J is sued for breach of the tenant covenant to pay rent, P & J can seek to recover its losses from AE through an express or implied indemnity or under the principle in Moule v Garrett.
D) VI has a choice of suing both P & J and AE for breach of the tenant covenant to pay rent.
CORRECT ANSWER A - The original tenant (P & J) is not released from liability for the tenant covenants on assignment of the lease due to privity of contract, therefore Option A is wrong and Option B is correct. AE also has liability for payment of rent due to the principle in Spencer’s case, so Option D is correct. Option C is correct.
Grosvenor Estate Developments (‘GED’) built a small industrial estate made up of six office units in the early 1990s and in 1995 granted leases of each of the units. Unit 5 was let to P & J Engineering (‘P & J’) for 35 years. The lease contained a covenant by the landlord to maintain the estate roads and the tenant covenanted to pay an annual rent of £60,000.
In 2000, GED sold and transferred the freehold of the estate to Venture Investments (‘VI’). In 2012, with the consent of VI, P & J assigned the lease to Allisons Electrical (‘AE’). AE have not paid last year’s rent and VI have allowed the estate roads to fall into disrepair.
Which ONE of the following statements is WRONG?
A) The burden of the tenant covenant to pay rent ‘touches and concerns’.
B) AE has the burden of the tenant covenant to pay rent due to the principle in Spencer’s case.
C) S 142 of the Law of Property Act 1925 gives VI the burden of the landlord covenant to maintain the estate roads as the covenant ‘has reference to the subject matter of the lease’.
D) VI does not have the burden of the landlord covenant to maintain the estate roads as VI was not an original party to the lease.
CORRECT ANSWER D - The burden of the landlord covenant to maintain the estate roads does pass to VI as a successor landlord, as the covenant ‘has reference to the subject matter of the lease’ (s 142 LPA 1925). It does not matter that VI was not the original party to the lease, so Option C is correct and Option D is wrong. Options A and B are correct.
