Leasehold covenants notes

HideShow resource information

Smith 'Property Law'

  • Courts have been inclined to apply normal contract rules to leases. This doesnt mean they can be treated as nothing more than contracts though. Repudation-can be used where there is no express forfeiture clause. Other application of contract principles- misrepresentation and mistake apply to the forming of leases. Courts have willingness to imply terms on normal contract principles in Liverpool CC v Irwin. Mitigation of losses can apply but is limited- landlord is under no obligation to re-let to mititgate loss if T leaves before the end of the lease. Covenants are independent meaning if the landlord doesnt repair, that doesnt mean I can not pay my rent. Statutory contract rules apply- Unfair Terms in Consumer Relations Act 1999. Bruton shows about contractual leases. Not clear which statutory provisions would apply to it. It was decided the repairing obligation did but seems unlikely you'd be able to register the lease. HoL in Kay v Lambeth LBC held that the Bruton lease is not a proprietary interest capable of affecting the licensor. Lord Scott described it as a 'non estate tenancy.' 
  • Interference with the tenants holding and use of the land- quiet enjoyment is implied into every lease. No quiet enjoyment if T doesnt get possession of all the premises, if there is subsidence caused by L's activities or if a neighbours easement prevents full use of the property. L is not liable unless the interference is caused by him or someone he has granted rights. HoL said in Southwark that this cannot be used to impose obligations which go beyond duties to repair accepted by the parties or imposed by statute. 
1 of 11

Smith 'Property Law'

  • Covenant only has prospective effect. Threatening conduct- damages are likely to be low unless in tort. Now offence under Protection from Eviction Act 1977 if a person does acts 'likely to interfer with the peace or comfort of a residential occupier, or persistently withdraws or withholds services reasonably required for the occupation of the premises as a residence' with the intention that the residence be given up. s27 and 28 of the Housing Act 1988 say that if T is made to leave as a result of conduct under Protection From Eviction Act then compensation is payable. Protection from Harrasment Act 1997 makes the tort of unreasonable harrassment. 
  • Derogation from grant- underpinning the implication of covenants for quiet enjoyment. Kept in narrow limits eg cant be used to stop competition with T's business. It isnt wrong for L to develop retained land in such a way that diminshes the value of leased property. 
  • Repairing obligations- most leases make extensive provisions for repair. Sometimes are implied. Such implications are inappropriate where the lease makes express provisions for the repair. Southwark displayed a marked reluctance to go beyond the statutory repairing obligations. Is the no duty to repair appropriate now? Even the shortest lease may require some repair, and it is unrealistic to expect the tenant to do this. However when an obligation is expressly imposed on L, leases commonly provide for the cost to be charged to the tenants. 
2 of 11

Smith 'Property Law'

  • a) obligations on tenants- traditionally expressed in the language of waste. All tenants are liable for voluntary waste- causing damage to the property. Traditional view is that tenants for years are liable for permissive waste- failure to maintain the property to the state it was in when the lease started. Have the other obligations in a periodic tenancy but not permissive waste or a general duty to repair. Duties owed by a yearly tenant may be more demanding than a weekly tenant. 
  • b) obligations on landlords- i) fitness for habitation- In Smith, a letting being infested with bed bugs was held to justify the tenant giving up occupation. Is restricted to furnished accomodation. Obligation only applies to the initial state of the accomodation. ii) statutory duties- common law has been seen as unsatisfactory. Requirement of s8 in the Landlord and Tenant Act 1985 is that the landlord should keep the house fit for human habitation during the lease, but doesnt apply to leases of more than 3 years. Maximum rent limit of £52 meaning this section pretty much never applies to modern leases. S11 of the act imposes specific repairing obligations. Applies to leases of less than 7 years and cannot be excluded. Three heads of duty- 1) to keep structure and exterior in repair (not gardens) 2) to repair and keep in proper working order installations for the supply of water, gas, electricity and sanitation. Kitchen applicances are not covered. 3) to repair and keep in working order heating and water heating. 
3 of 11

Smith 'Property Law'

  • the meaning of repair- standard of repair under s11(3) is to be determined by reference to the locality, together with the age, character and prospective life of the dwelling house. Major problem is the line between difference in repair and improvement. Quick v Taff Ely BC held that 'disrepair is related to the physical condition of whatever has to be repaired and not to questions of lack of amenity or inefficiency.' No general and unqualified obligation is imposed on local authorities in relation to the condition of their housing- Lee. An exception is where the only sensible action is to correct the initial defect in order to prevent rapid recurrence of the disrepair, then there will be a duty to make that improvement. For defects on the leased land an important defence is that notice must have been given to L. HoL held that notice is still necessary for latent defects. Although s11(6) gives L a right of entry to inspect the property OBrien rules that L has no obligation to discover defects. T is in the best position to know defects. L's have been bound if theyve found out through someone else, not T. 
  • c) enforcing obligation requirements- s18 of Landlord and Tenant Act 1927 restricts damages to the reduction in value of the landlords reversion and precludes them all together if the building if to be pulled down or to become worthless. The maximum that can be awarded is the rent for the period of the breach unless there are special circumstances. Ill health afterwards has been awarded with up to £50'000. T can also get an order for specific performance. 
4 of 11

Smith 'Property Law'

  • Specific performance against T will be rare and will not be allowed to harrass tenants. Where L fails to repair T has a right to undertake the work. T can then sue for the cost or take it out of a later rent. Law Commission looked at reforming in 1996. 
  • Forfeiture- virtually every lease involves a covenant allowing forfeiture for T's failure to comply with covenants. Need to inserted expressly. It is very unusual for T to be able to forfeit because of L's breach. Forfeiture cannot be insisted if T pays off the arrears. 
  • Leases- parties and the running of covenants- both the lease and freehold reversion may be assigned. The covenants in the lease can then be relied upon by and against the assignees. For a pre 1996 lease this only applies to the covenants that touch and concern the land. Why do covenants run? 1) assignments of the reversion and the lease are common. 2) a lease necessarily involves obligations which must bind sucessors in title in order for the landlord and tenant relationship to remain viable. A1 must be liable for the covenant to pay rent. Repair covenants are also essential. Continued enforceabiilty is 'necessary for the effective operation of the law of landlord and tenant.' Assign to cut all liability to the land, however in pre 1996 leases both landlord and tenant may remain contractually liable after assignment. 
  • Sub leases- tenant can create a lease just as a freeholder can. Creates a separate leasehold relationship. The terms of the two leases can be different. A sublessor isnt in privity of estate with the freeholder. 
5 of 11

Smith 'Property Law'

  • By assignment T terminates all relationship with the lease and becomes a stranger to the land. An assignee takes over the obligations and benefits. However a sublease enables T to retain the headlease and to impose different obligations on the sub tenant. 
  • Landlord and Tenant Covenants Act 1995- general structure remains but details amended. Only applies to tenancies after 1996. Two separate rules for leasehold covenants. The old rules will continue to operate centuries in the future. 
  • 1) assignment and subletting- any lease can be assigned or sublet. Valid even if done in breach of covenant (s26 of LRA 2002). The breach will normally be grounds for forfeiture though. Failure to obtain consent will also result in liability for losses resulting from the assignment or sublease. T will be liable for rent unpaid by the assignee. b) any attempt to assign for a period shorter than T's lease can only create a sublease. If longer than T's lease it is an assignment, no matter the label or intention of the parties. Can get around it by creating a sub lease a few days shorter than T's term. Law Commission wants to get rid of this rule. c) virtually every lease contains a covenant restricting assigment and sub letting. If not it will be implied. May say you need landlords consent. Statutory controls- Landlord and Tenant Act 1927 says that L cannot refuse consent without reasonable cause. Procedure for consent is in LL and Tenant Act 1988 requiring decisions within reasonable time and reasons for refusing.
6 of 11

Smith 'Property Law'

  • Reasonable period is weeks. Reasonable cause- consent should be given if personal is able to pay rent and comply with covenants. Factual. L can only rely on the reasons given in writing within the reasonable period allowed by the LLTA 1988. 
  • Concurrent leases- T's lease will have priority and T2 will have no right for possession during T's lease. The effect of T2's lease is to make T2 landlord for T as long as both leases last. T2 can enforce covenants and collect rent. T2's liability to L relys on terms. Forfeiture on T2's lease would have no effect on T> 
  • Enforcing covenants after assignment- s3 of the 1995 Act provides for the running of covenants on assignment and reversion, the benefit and burden pass. s4 says that forfeiture clauses run. Old tenancies- only run if they touch and concern the land. New tenancies after 1996 say that they will run whatever. Limits in the 1995 act is that there is an exception for personal covenants. s3(6)(a) says that the benefit and burden will not pass 'if expressed to be personal to any person.' Old tenancies- touching and concerning- 3 categories- touch and concern, personal and ones which are not personal but that do not touch and concern (eg option to buy L's interest.) 
  • Test from Congleton Corporation- 'the covenant must either affect the land as regards to mode of occupation or it must be such as per se and not merely collateral circumstances, affects the value of the land.'
7 of 11

Smith 'Property Law'

  • Repairing covenants touch and concern. Restricting use of the land touch and concern but not absolutely. Complex and unpredictable. Oliver proposed a test in P and A Swift Investments- 1) whether the covenant ceases to be of benefit if it doesnt pass 2) whether the covenant affects the nature, quality, mode of user or value of the land of the reversioner 3) that the covenant is not expressed to be personal 4) in the case of a covenant to pay money whether it is connected with something to be done on or in relation to the land. Doesnt replace Congleton. Covenants to renew leases have long been seen as touching and concerning. 
  • Breaches committed after assignment- the current assignee of the lease or reversion is liable on the covenants. Under 1995 Act s5 the liability of the original tenant ceases on assignment. 
  • Contractual liability- original landlord and tenant- the law before 1995 said the original party remains liable for the duration of the lease. To stop the lease being given to someone who cant pay. Problems- this rendered many assignees insolvent and unable to pay rent. Extent of liability very wide. May be for a higher rent for a longer period. Liability was unlimited and L could choose who to sue. Now Landlords have to consent to the assigning so they should have the fall for the loss caused. 
  • Tenant protection under the 1995 act- s5 abolishes T's liability for breaches after assignment. Two exceptions- s11- T remains liable if the assignment is in breach or by operation of law.
8 of 11

Smith 'Property Law'

  • 2) T can enter into an 'authorised guarantee arrangement' in s16. Imposed on T as part of L giving consent to the assignment. Means T has to taken care choosing assignee. Guarentee will terminate if it is assigned again. s18 says that T is not liable for any post assignment variation of the lease which L had abosolute right to refuse. S17 is meant to avoid T being surprised by built up rent arrears. T should have been served notice of sum due within 6 months. Once T has made full payment there is a right to be granted an 'overriding lease.' Same terms and length as original, takes effect as a concurrent lease. T can control assignee to make sure they comply with covenants or forfeit their lease. 
  • The 1995 act cannot be contracted out s25. Old tenancies- the contractual liability of T continues as before. Protections in s17-19 (notices, variation and overriding leases) apply to old tenancies. 
  • Contractual liability- assignees of the lease- s5 means the assignee cannot be liable after further assignment, unless under agreement. L normally has to consent to a covenant. L may require a direct covenant from the assignee to comply with the lease terms. Contractual liability is the same as the others. 
  • Recovery in respect of contractual liability- liability of T as guarantor involves a right to recover against the assignee- the primary debtor. Old tenancies- restitutionary remedy available to T against the current tenant. 
9 of 11

Smith 'Property Law'

  • Assignment of the reversion- L remains liable on the covenants. L will be released from liability if notice of the assignment is given to T and either T doesnt object or the court declares that it is reasonable for L to be released. Notice must be in prescribed form and be given within 4 weeks of assignment. 
  • Breaches committed before assignment- obligations- assignees arent liable for breaches before the date of their assignment. Covenants to repair are continuing so a covenant to repair will be enforcable even if in disrepair when move in. Similar rules apply to old tenancies. Forfeiture proceedings can be brought in relation to breaches before assignment. 
  • Set off claims- principally relevant for old tenancies. Rights to sue- s23 of the 1995 Act says that an assignee enjoys no rights in relation to any time before the assignment, save forfeiture. If there is a continuing breach then assignor and assignee can sue for their respective periods as land lord and tenant. Old tenancies- any action on a touching and concerning the land covenant must be brought by assignee of the reversion- the price paid will reflect this. 
  • Equitable leases and assignments- old tenancy equitable leases- problems arise about the burden of positive covenants, which dont run if there is no privity of estate. Two ways to solve issue- 1) apply Walsh v Lonsdale to treat equitable leases as legal ones. Should allow to run. 2) contractual- crucial question is if specific performance is available. LPA s141 and 142 are treated as applying to reversions on equitable leases.
10 of 11

Smith 'Property Law'

  • Both benefit and burden of covenants run on the assignment of the reversion. Cases are against liability of an equitable assignee. Various techniques can make them liable. Equitable tenancies under the 1995 Act- same way as legal assignments, has the benefit and burden of the covenants, but only in posession of the premises or reversion. 
11 of 11

Comments

No comments have yet been made

Similar Law resources:

See all Law resources »See all Land resources »