7): Key Covenants and the Law Relating to their Breach

Question 1

What are prescribed clauses and where must they appear?

Answer 1

Required by HMLR for registrable leases.

Must be at the start of the lease.

Include:
LR1–LR14 e.g., date, parties, title no., property, term, restrictions, etc.

Question 2

When are prescribed clauses mandatory in leases?

Answer 2

Leases granted out of registered land & compulsorily registrable.

Leases requiring first registration (e.g., superior title just registered).
Post 19 June 2006.

Question 3

What happens if prescribed clauses are incorrect or missing?

Answer 3

HMLR will reject registration.

Question 4

What does a typical repair covenant in a lease require?

Answer 4

Keep premises in repair.

Includes obligation to put into repair, not just maintain.

Question 5

What does a “full repairing lease” mean in different contexts?

Answer 5

Whole building: tenant responsible for entire property’s repair.

Part of building: tenant responsible for their specific part only.

Question 6

What’s the difference between ‘good repair’ and ‘good repair and condition’?

Answer 6

‘Good repair and condition’ = more onerous, may include modernisation.

Tenant must put into repair, not just maintain.

Disrepair must exist before obligation arises.

Question 7

How does a full repairing lease vary in whole vs part leases?

Answer 7

Whole building: tenant repairs entire property.

Part only: tenant repairs only their demised area.

Question 8

Who chooses the method of repair?

Answer 8

Normally tenant, unless lease requires repair to landlord’s surveyor’s satisfaction.

Question 9

Who insures in a lease of the whole building, and what is insurance rent?

Answer 9

Landlord insures, tenant pays insurance rent.

Covers:
Full reinstatement value.
Loss of annual rent if building unusable.

Landlord uses proceeds to reinstate.

Question 10

How is insurance handled in a multi-tenanted building?

Answer 10

Landlord insures entire structure; tenants cannot insure separately.

Tenant obligations:
Pay premium.
Let landlord handle claims & reinstatement.

Question 11

Why do landlords retain insurance control in multi-let buildings?

Answer 11

Avoid conflicts:
Multiple insurers.
Inconsistent applications.
Rebuilding overlap.

Question 12

Can tenants make alterations if the lease is silent?

Answer 12

Yes, but not waste or breach boundaries.

Question 13

What are typical lease restrictions on alterations?

Answer 13

No alterations to structure/exterior.

Allow non-structural interior changes.

Restrict changes to service media (e.g. electricity).

Question 14

What rights does the LTA 1927 give tenants regarding improvements?

Answer 14

If lease covers trade/business premises:

s.19(2): landlord can’t unreasonably withhold consent for improvements.

s.3: tenant may make improvements even if forbidden.

s.1: tenant may claim compensation at lease end.

Question 15

What about alterations outside LTA 1927?

Answer 15

Repairs under a repairing covenant don’t count.

Landlord may insert covenants requiring tenant to:

Comply with landlord’s requirements.

Notify landlord and provide plans.

Question 16

What restrictions are usually included in commercial leases regarding use?

Answer 16

Permitted purposes (e.g. retail, office).

Tenant’s right to request change of use.

Question 17

Why is user clause flexibility important for tenants?

Answer 17

To meet current/future business needs.

To allow assignment/subletting to others with different uses.

Question 18

What should leases clarify about Use Classes Orders?

Answer 18

Whether reference is to the Use Classes Order in effect at lease date, and in England or Wales

Question 19

What additional user restrictions might landlords impose?

Answer 19

Shopping centres: control of tenant mix.

Compliance with law and bans on illegal/nuisance use.

Question 20

What rent-related matters are typically included in leases?

Answer 20

Rent amount and payment dates.

Whether paid in advance or arrears.

Start date for rent (may differ from lease start due to rent-free period).

Apportionment and first rent calculation.

Method of payment.
VAT on rent.

Whether tenant may deduct/withhold rent for landlord breaches.

Question 21

What is typically included in rent review provisions?

Answer 21

Usually upward-only rent reviews.

May be based on open market value.

Question 22

What remedies does a landlord have for non-payment of rent?

Answer 22

Sue for rent + interest/damages.

Forfeit the lease.

Use CRAR (Commercial Rent Arrears Recovery):

Instruct enforcement agent to seize goods to recover rent value.

Question 23

What does “alienation” mean in leasehold property?

Answer 23

Disposal of leasehold interest. Includes:

Assignment (transfer of lease to another).

Underletting/Subletting (grant of new lease out of the original).

Charging lease to a lender.

Parting with possession (sharing occupation).

Question 24

How do leases control tenant alienation?

Answer 24

May contain:

Absolute prohibition (no alienation at all).

Qualified prohibition:

tenant may assign/underlet with landlord’s consent.

Question 25

What does s.19(1)(a) of the LTA 1927 provide?

Answer 25

If lease contains qualified prohibition, landlord’s consent cannot be unreasonably withheld.

Question 26

What is the effect of s.19(1A) LTA 1927?

Answer 26

Applies to commercial leases from 1 Jan 1996. Allows landlord & tenant to pre-agree: Circumstances where consent may be withheld. Conditions under which consent may be granted.

Question 27

When will landlord not be deemed unreasonable under s.19(1A)?

Answer 27

If acting in accordance with pre-agreed terms.

Question 28

What are the landlord’s duties under s.1 of the LTA 1988 (assignment only)?

Answer 28

Must give consent unless it’s reasonable not to. Must respond within a reasonable time. Must give written reasons if: Consent is conditional; or Consent is withheld.

Question 29

What types of lease terms can be granted?

Answer 29

Fixed-term lease: ends automatically, no notice needed. Periodic tenancy: renews automatically unless terminated. Leases may include break clauses allowing early termination.

Question 30

What statutory issues arise with lease terms?

Answer 30

<6 months: generally not protected under LTA 1954. Leases ≤7 years: no substantive HMLR registration required.

Question 31

What is the purpose of the Lease Code for business premises?

Answer 31

Improve fairness and clarity in commercial lease negotiations. Promote use of heads of terms.

Question 32

Is the Lease Code mandatory?

Answer 32

Mandatory for RICS members (e.g. landlords/agents). Others must justify departures from best practice terms. Not binding unless incorporated into the lease.

Question 33

What liabilities arise under leases granted before 1 Jan 1996?

Answer 33

Privity of contract: original tenant always liable unless released. Privity of estate: successor tenants/landlords liable for covenants that touch and concern the land.

Question 34

How does the Landlord and Tenant (Covenants) Act 1995 apply?

Answer 34

Replaces privity of contract and estate. On assignment: All covenants pass to assignee (except personal ones). Assignor is released from liability automatically.

Question 35

Can the landlord require further security after 1996?

Answer 35

Yes, via an Authorised Guarantee Agreement (AGA) where: Lease has qualified covenant against assignment. Landlord reasonably requires assignor to guarantee assignee. Guarantee lasts while assignee holds lease.

Question 36

What is an action in debt for breach of a lease?

Answer 36

Landlord can sue: Current tenant (for unpaid rent). Former tenant (via privity of contract). Guarantor (under AGA). Lease continues – not terminated.

Question 37

What is forfeiture and when is it used?

Answer 37

Landlord’s right to re-enter and terminate the lease. Requires: Express forfeiture clause in lease. May occur by peaceable re-entry or court order.

Question 38

What is CRAR and how is it enforced?

Answer 38

Landlord can seize tenant’s goods to recover rent arrears. Lease not terminated. Must follow statutory process via enforcement agent.

Question 39

How do guarantees protect the landlord?

Answer 39

Guarantee ensures payment of rent and performance of covenants. Creates direct contractual claim against guarantor.

Question 40

What is the purpose of a rent deposit deed?

Answer 40

Tenant pays cash deposit held by landlord as security. Used without court action if breach occurs. Terms are governed by the rent deposit deed.

Question 41

When is specific performance available?

Answer 41

Discretionary remedy. Used to enforce positive covenants. Only if damages are inadequate.

Question 42

When can a landlord claim damages for breach of covenant?

Answer 42

For breach of repairing covenants, claim allowed but: May be costly/litigious. Limited by statute: s.18(1), LTA 1927 – limits to diminution in value. Leasehold Property (Repairs) Act 1938 – only applies to leases ≥7 years with ≥3 years left.

Question 43

What is a Jervis v Harris clause (self-help)?

Answer 43

Allows landlord to: Enter the property. Do repairs. Recover costs from tenant as debt (not damages). Not subject to statutory limits on damages.

Question 44

What is termination by effluxion of time?

Answer 44

Lease ends automatically when the fixed term expires. No notice required.

Question 45

What is a surrender of a lease?

Answer 45

Tenant yields up the lease. Landlord accepts the surrender. Usually by deed of surrender.

Question 46

What is merger in leasehold termination?

Answer 46

Tenant acquires freehold, lease merges into landlord’s (reversionary) title.