Creating a lease/leasehold covenants

Shorter leases= less formalities. 

Fixed term leases- count as a conveyance of legal estate S1 LPA 1925

LPA 1925 s52- 'all conveyances of land or of any interest therein are void for the purpose of creating a legal estate unless made by deed.'

Law of Property (Miscellaneous Provisions) Act 1989 s1- requirements for a deed. Agreement must clearly say its a deed, be signed by witnesses and delivered. 

Leases for a term not exceeding three years are an exception to the rule- LPA 1925 s52(2)(d)- ' this section does not apply to leases or tenancies or other assurances not required by law to be made in writing. 

LPA 1925 s54(2) says that leases under three years can be created however eg orally. If not definitely for 3 years or less it wont apply. 

Doesnt apply if the tenant doesnt take possession straight away nor to reversionary leases. Exception to the exception. 

Leases for a term of more than 3 years but less than 7- default rule applies. LPA 1925 s52- void unless made by deed. 

Leases for more than 7 years- created by deed under s52 of LPA 1925. Also has to be registered as a registrable disposition under LRA 2002 s27 (2)(b). 

Equitable lease- a failure to comply with the requirements may result in an equitable lease. These have their own formalities though. General formality requirements relating to validity of contracts concerning land. 

Law of Property (Miscellaneous Provisions) Act 1989 s2- valid contract to create a lease is needed. This needs writing and terms and to be signed by both parties (landlord and tenant). Specific performance must be available to be valid in equity. 

E-conveyancing LRA 2002 s93(2).

Equitable lease v Implied periodic tenancy- Walsh v Lonsdale 1882- where the facts give rise to both equitable lease takes primacy. Happened in this case. 

The contents of leases- rights and obligations.

A lease is a contract. 

3 categories of leasehold covenant- express, implied by law, and imposed by statute. There are landlord and tenant covenants. 

Landlord covenants- to provide quiet enjoyment. This has nothing to do with noise. First and biggest, this is implied into all leases. Obligation on the landlord. It is the duty of the landlord to provide the tenant with what he has contracted for. 

Southwark LBC v Mills 1999- 'the covenant to quiet enjoyment is broken if the landlord or someone claiming to be under him does anything that substantially interferes with the tenants title to possession of the demised premises, or with his ordinary and lawful enjoyment of the demised premises. 

Acts of the landlord- Lavender v Betts 1942

Kenny v Preen 1963- 'an invasion of her rights as tenant to remain in possession undisturbed.' 

Southwark LBC v Mills 1999- non physical interference could amount to a breach of covenant to quiet enjoyment. 

Acts of the landlords agents or other tenants- the covenants can be breached by these as well and the landlord will be liable for the disturbance. Sanderson v Berwick- upon- Tweed Corp 1884. 

Quiet enjoyment only operates prospectively: the tenant must take the premises as he finds them. Cannot allege breach where circumstances causing the breach are in existence before the tenancy is granted. Lylleton Times v Warners 1907. 

Southwark v Mills 1999- building with no soundproofing so tenants could hear other tenants. There was no breach because thats how the building was and the problem existed before the grant of the tenancies. 'If they cannot complain of the presence of other tenants as such, then their complaint is solely as to the lack of sound proofing. And that is an inherent structural defect for which the landlord assumed no responsibility. The council granted and the tenant took tenancy of that flat.' 

Remedies are an injunction or damages. 

Breach= harassment? (criminal defence)- Protection from Eviction Act 1977 s1(3)- withholding services means turning off utilities. 

Non derogation from grant- Landlord covenant- implied into all leases. Eg using retained land in a way that is incompatible with the lease. Having granted a tenancy the landlord cant undermine it in anyway. Cant reduce the usability of the land. 

Southwark v Mills 1999- 'the principle is the same in each case: a man may not give with one hand and take away with the other.' 

Browne v Flower 1911- 'the grantor or lessor comes under an obligation not to use the land retained by him in such a way as to render the land granted or demised unfit or materially less fit for the purpose for which the grant was made.' 

Landlord must be aware of the purpose of the tenancy. They can only be liable if they are. 

Harmer v Jumbil (Nigeria) Tin Areas 1921. 

Remedies: injunction and damages. Same as quiet enjoyment. 

Covenant to repair- normally express in the contract. There are basic repair obligations that all landlords are under. 

Furnished premises must be fit for human habitation- at start of tenancy only. Not throughout term. Smith v Marrable 1843. 

Collins v Hopkins 1923- 'the meaning of the phrase must vary with the circumstances to which it is applied. In the case of unclean furniture or defective drains or a nuisance by vermin the matter is not, as a rule, one of difficulty. The eye or the nostrils can detect the fault and measure its extent.' 

Keep common areas in good repair- hallways, lifts etc. Liverpool City Council v Irwin 1977. 

Keep a dwelling house in repair if lease is less than seven years- Landlord and Tenant Act 1985 s11 is a provision about repairing obligations in short leases. 

Re Irwins Estate 1990- window frames= structure and exterior, garage and yard separate= no. 

Remedies= 

Damages

Specific performance- landlord repairs.

Set off- not paying rent. Have to cross claim for damages, equitable right to set off cross claim against non payment of rent. 

Administrator- quite rare, tenant can get court to appoint administrator, pay money to admin and use that rent money to pay for repairs. Assessed by difference in value from disrepair and good repair. 

Not to disclaim the landlords title- cant do anything which illustrates intention to no longer be bound by the landlord eg trying to sell the house.

Not to commit waste- waste= physical alteration of the land by tenants action or neglect. 

Mancetter v Garmanson 1986.

Voluntary waste and permissive waste. 

Are tenants under an obligation to repair? No they are not unless there are express covenants to that effect. 

Covenant to pay rent- not unless it is express otherwise this would be a requirement of a lease. Ashburn Anstalt v Arnold 1989- rent is an indicator of a lease but isnt a necessary requirement. 

Landlords remedies when a tenant is in breach- forfeiture, distress, damages, recovery of arrears, and specific performance. 

Forfeiture- very powerful remedy. Can be used if the tenant disclaims the landlords title, if the obligation in question is formulated as a condition of the contract or if there is an express forfeiture clause. 

Exception to forfeiture, it can be waived, expressly or impliedly. If the right to forfeiture is waved the lease cannot be forfeited. Matthews v Smallwood 1910- 'waiver of a right of re-entry (forfeiture) can only occur where the lessor, with knowledge of the facts upon which his right to re-enter arises, does some equivocal act recognising the continued existence of the lease. It is not enough that he should do the act which recognises, or appears to recognise the continued existence of the lease.' eg continuing to accept rent.

Kammins Ballrooms v Zenith Investments 1971.

Cornillie v Saha 1996- the landlord will only be taken to have waived the breach if he had knowledge (actual or constructive) of the breach having occured. 

Exercising forfeiture- has to be done via court proceedings. Protection from Eviction Act 1977 s2- 'where any premises are let as a dwelling on a lease which is subject to a right of re-entry or forfeiture it shall not be lawful to enforce that right otherwise than by proceedings in the court..

... while any person is lawfully residing in the premises or part of them.' Without a court order this would be the criminal offence of harrassment. 

What if the landlord tries to exercise forfeiture for the non payment of rent? Common Law Procedure Act 1852 s210- depends on the type of lease. 1) must make formal demand for rent, if more than 6 months is not paid then no demand is required. 

Covenants other than rent- LPA 1925 s146- notice specifying the breach, requires leasee to remedy the breach. Reasonable period of time must be given to comply with the request. Depends if what has happened can be fixed. 

Positive covenants v negative covenants. Positive are likely to be remediable. Negative are more difficult to correct, as it says the tenant isnt allowed to do something.

Can distinguish between covenants that cant be undone and those of a continuing nature which if stopped can be undone. Expert Clothing Services v Hillgate House 1986- 'to stop doing what is forbidden by a negative covenant may or may not remedy the breach even if accompanied by compensation in money. Thus to remove the window boxes and pay for the repair to any damage done will remedy the breach, but to stop using the house as a brothel will not, because ...

the taint lingers on and will not dissipate within a reasonable time.' Repuatation harm is hard to undo. 

Distress- this is a feudal remedy when tenant is in arrears of rent. Landlord can seize goods on land and sell them to recover owed rent. Walsh v Lonsdale- tenant tried to argue unlawful. Rent had to be paid upfront so landlord could exercise it. 

Lots of limitations on distress- such as not available for rent that is more than 6 years overdue, landlord cannot gain access to the land by force and some items are not allowed to be seized. Law Commission recommended abolition of distress. But it is quite effective and so still exists. 

Damages/Action for arrears/specific performance are available for breach of covenant. 

Contracts between landlord and tenant. Original parties- privity of contract. Parties no longer original parties so no privity of contract, limited means to enforce against non original parties. 

Privity of estate- covenants become printed upon the estate. Proprietary character binds those who stand in privity of estate. Common law- in order to bind successor in title. Must be direct relationship of landlord and tenant under legal lease. 

City of London Corporation v Fell 1993- 'annex to the term and the reversion the benefit and the burden of the covenants which touch and concern the land.' All leases are estates in land and proprietary interests, the covenants take on this character. 

Which covenants touch and concern the land? City of London Corporation v Fell 1993- 'the contractual obligations which touch and concern the land having become imprinted on the estate, the tenancy is capable of existence as a species of property independently of the contract.' 

P and A Swift Investments v Combined English Stores Group 1989- provided a test- 'formulations of definitive tests are always dangerous but it seems to me that without claiming to expound an exhaustive guide, the following provides a satisfactory working test for whether in any given case, a covenant touches and concerns the land.

• Test is a) the covenant benefits only the reversioner for the time being, and if separated from the reversion ceases to be of benefit to the convenantee.
• b) the covenant effects the nature, quality, mode of user or value of the land, of the reversioner.
• c) the covenant is not expressed to be personal (that is to say neither being given only to a specific reversion nor in respect of the obligations only of a specific tenant.) 
• d) the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three forgoing conditions are satisfied and the covenant is connected with something to be done on to or in relation to the land. 

Examples are quiet enjoyment and obligation to repair. 

Hua Chiao Commerical Bank v Chiaphua Industries 1987.

How does this work in practise? (pre and post 1st Jan 1996, when there were new more simple rules) 

If a landlord assigns his reversion to another landlord, the new land lord is the successor in title. There is still continuing contractual liability between the first landlord and the tenant. The tenant may sue the first landlord for breach of covenant even if it happened under landlord 2. 

Require indemnity- if tenant sues L1, L1 can get money from L2. Statute regulates the relationship between assignee of reversion and tenant. If the tenant breaches he is only liable to current landlord, even if there was a right to sue on breach before the assignment took place. 

LPA 1925 s142(1): 'an assignment of the reversion carries with it the burden (obligation to perform) all of the covenants that have reference to the subject matter of the lease. (landlord covenant). 

This is statutory transfer of burden of all landlord covenants that touch and concern the land. 

LPA 1925 s141(1): 'an assignment of the reversion carries with it the benefit (right to sue) all covenants that also have reference to the subject matter of the lease. (tenant covenant). 

When a tenant assigns the lease- L and T1 have privity of contract, L and T2 have privity of estate. Still have contractual liability of original tenant. They remain liable for any breach of covenant, even those committed by T2. It lasts for whole of the lease. 

All original tenant can do to prevent this is to get an indemnity to break the chain. Centravincial Estates v Bulk Storage 1983.

RPH v Mirror Group Newspapers 1993- this case led to changes in the law. 

Gets very complicated when both landlord and tenant reversion are assigned. S141 LPA- continuing contractual liability. 

Arlesford Trading Co v Servansingh 1971- 'an original lessee remains at all times liable under the lessee's covenants throughout the lease, and that assignment of the reversion does not automatically release him from that liability.' 

It was decided that law reform was urgently needed to prevent these complex chains of liability. 

Landlord and Tenant (Covenants) Act 1995- ends the continuing contractual liability of the original tenant and it drops the distinction for enforcability through privity of estate on the basis that covenants touch and concern the land. 

Applies to tenancies created AFTER January 1st 1996- not retrospective.

LT(C)A 1995 s3- Transmission of the benefit and burden of covenants- most important section- statutory framework which governs enforcability of covenants between successors in title. Benefit and burden of covenants will be annexed. All covenants run with the land but has a qualifier. Qualifer in LT(C)A 1995 s3(6)(a)- covenants that are expressed to be personal shall not run. 

No longer have to deal with the requirement of touching and concerning that land. 

Original tenants- LT(C)A 1995 s5- when a tenant assigns he is released from the covenants of the tenancy and ceases to be entitled to the benefits. Landlords were not happy as there are less people to sue to get money back. 

Contraversial rulings- London Diocesan Fund v Avonridge Property Company 2005- you cannot contract out of s5. 

Not as black and white as seems- Authorised Guarantee Agreement: LT(C)A 1995 s16(3). This is a system of guarantees. Only enforceable against the direct assignee. LT(C)A 1995 s16(4). This details the rules on the guarantees.Tenant can only be liable for immediate assignee T2. Need a guarantee for each assignment. The circumstances are listed in the above section. 

Scottish and Newcastle v Raguz 2007

Original landlord? LT(C)A 1995 s8 and 6(2)- unlike original tenant the landlord isnt automatically released if he assigns the reversion. Only released if expressly released by tenant. Have to apply to be released from the covenants. Need to be released in a way that is in accordance with s8.

Have to serve notice to tenant within 4 weeks of assignment and request to be released from covenants because you have assigned the reversion. Tenant has to send counter notice allowing or not allowing the release.