covenants in leases Flashcards
(101 cards)
1
Q
lease anatomy
A
- Parties, date, definitions, interpretation provisions
- Demise and rents
- Tenant covenants (rent, use, alterations, assignment, underletting).
- Landlord covenants (quiet enjoyment)
- Gurantor’s covenants
- Provisos, agreements and declarations (e.g, forfeiture, what happens following damage and destruction by insured risks, security of tenure LTA 1954)
- Rights granted (easements, use of common parts, utilities)
- Rights excepted and reserved for the landlord (access to T’s premises e.g., to run cables thru it, to carry out repairs to the rest of the building)
- Other provisions (rent review, service charge)
2
Q
if the lease is silent on a matter, can the tenant do that thing?
A
yes, the tenant can go ahead
3
Q
what would constitute a breach of quiet enjoyment?
A
- The erection of scaffolding hindering access to the property (Owen v Gadd [1956] 2 QB 99)
- Persistent intimidation of the tenant to induce him to leave (Kenny v Preen [1963] 1 QB 499)
4
Q
what is forfeiture
A
the right of the landlord to bring the lease to an early end in the event of tenant breach.
5
Q
what is security of tenure?
A
a right for a resi or commercial tenant to remain in premises at the end of the lease term and to request the grant of a new lease.
6
Q
service charge
A
a sum of money charged by the landlord to tenants to cover costs of services to tenants within a property (such as an industrial estate, block of flats, shopping centre). The charges cover costs to do with maintenance and repairs of exteriors (roofs etc) and common parts but exclude the tenant’s demised areas because the tenants will usually have agreed to repair those areas themselves in the lease.
7
Q
landlord and the tenant and any guarantor will need to execute the document in accordance with what?
A
normal attestation rules
8
Q
a legal lease must be granted by deed unless
A
it falls within the short lease exception of three years or less
9
Q
when did more leases become registrable
A
when Land Registration Act 2002 came into force
10
Q
when you are granted a registrable lease, your lease must include a list of prescribed lease clauses at the front, with the main areas being:
A
- Date of lease
- Landlord’s title number
- Parties
- Term
- Easements granted and reserved
11
Q
leasehold covenant
A
a promise contained in a lease given by a
landlord or a tenant
12
Q
what are the four main covenants in residential and commercial leases:
A
- repair
- alterations
- user
- alienation
13
Q
repair covenants - what should tenants have regard to?
A
- The character and type of premises at the beginning of the lease - the obligation is neither
diminished nor increased by a change in the character of the neighbourhood; - The age of the premises; and
- The express words of the covenant.
14
Q
what is the full meaning of ‘keep the premises in repair’?
A
an obligation to put the premises in repair if, at the time of the letting, they were out of repair.
15
Q
how can a repair obligation be limited?
A
by a schedule of condition
16
Q
what is a schedule of condition
A
photographs and verbal description
of the premises prepared by a surveyor annexed to the lease
17
Q
will works that constitute ‘renewal’ rather than ‘repair’ fall within the tenant’s repair obligation?
A
no
18
Q
Lurcott v Wakely [1911] 1 K.B. 905: the front external wall of a 200-year-old house had to be
taken down to ground floor level and rebuilt. The defects were attributable to old age
A
The tenant
was held liable under his repairing covenant. The courts said ‘repair is restoration by renewal or
replacement of subsidiary parts. Renewal, as distinguished from repair, is reconstruction of the
entirety’.
19
Q
Brew Brothers Ltd v Snax (Ross) Ltd [1970] 1 All ER 587
A
works required to the
property did not fall within the scope of the repairing covenant because the cost to undertake the works was only slightly less than the value of the premises.
20
Q
absolute covenant
A
tenant is completely prohibited from doing something (eg
‘the Tenant shall not underlet part of the Premises’) and will be at the mercy of the landlord, who will be able to consider or ignore any request.
21
Q
qualified covenant
A
(eg ‘the Tenant shall not make any non-structural alterations to the Premises without the consent of the Landlord’) then the tenant can go and ask the landlord for its consent although the landlord does not have to give it!
22
Q
fully qualified covenant
A
(eg ‘the Tenant shall not make any internal, non-structural alterations to the Premises without the consent of the Landlord, such consent not to be
unreasonably withheld’) the landlord has to be reasonable if it is going to withhold its consent.
23
Q
examples of reasonableness in fully qualified covenants
A
not reasonable:
- landlord does not like the proposed assignee
- landlord supports a different football team
reasonable (anything related to the landlord-tenant relationship re the lease):
- proposed assignee’s ability to pay the rent
- bad references.
24
Q
can the tenant normally make some alterations to the premises?
A
Unless the lease stipulates otherwise, the tenant is free to carry out any alterations to the
premises, subject to the legal doctrine of ‘waste’ which prevents alterations which would devalue
the premises.
25
what is the effect of LTA s19(2) on qualified covenants for alterations?
19(2) implies into a
qualified covenant against improvements a proviso that the **landlord’s consent is not to be
unreasonably withheld**
i.e., converts a qualified covenant which amounts to improvements >>> **fully qualified**
26
what constitutes an 'improvement'?
works which improve the premises from the tenant's perspective
27
does s19(2) allow the landlord to require conditions of giving consent?
* Payment of compensation for loss in value to the reversion caused by the alterations;
* Reinstatement of the premises if reasonable (at the end of the lease term); and
* Payment of the landlord’s expenses in giving consent.
28
where are alteration conditions usually set out?
Licence for Alterations (a deed documenting
the landlord’s consent)
29
if the alteration conditions are not set out in a Licence for Alterations, is the landlord still permitted to ask for conditions?
yes
30
what is the effect of LTA s19(3) on qualified **user** covenants?
- no reasonableness proviso
- but **prevents a landlord demanding payment for granting its consent**
- unless change of use involves a change to **structure**
31
what happens if the change of use involves a change to the structure?
in return for its consent:
- landlord can increase the rent; or
- charge the tenant a lump sum ('fine’ or ‘premium’)
32
will the landlord be entitled to recover its costs and expenses involved in the application for
consent
yes
eg surveyor’s fees and legal fees
33
what is alienation?
describes a method for the tenant disposing of:
- the whole
- or part,
of their leasehold interest
34
types of alienation
- assignment
- underletting
- parting with
possession
- charging/mortgaging the lease
- surrendering the lease
35
are restrictions on alienation common in longer or shorter leases?
shorter
36
what is assignment?
the transfer by the tenant of the remainder of their lease to another party (the ‘assignee’).
37
if the lease is silent on assignment, can the benefit of a lease be freely assigned?
yes
38
for registered leases, where does the change in the proprietor (tenant) show?
proprietorship register of the leasehold title
39
how are covenants construed in the tenant's favour?
* A covenant against assignment does not prohibit subletting of the whole or part (Church v
Brown (1808))
* A covenant against sub-letting the whole does not prohibit a subletting of part (Wilson v
Rosenthal (1906))
40
how does a landlord formally consent to assignment?
licence to assign
41
who is party to a licence to assign?
- landlord
- tenant
- assignee
42
formalities to transfer a lease
- deed (as with freehold, a TR1 is often used; deed used even for short leases)
- if registered lease, then deed of assignment must also be registered to update the registered proprietor of the lease as the assignee
43
what is subletting?
involves a tenant granting a lease out of its own lease. This lease is called an
underlease (or sublease).
44
what is the lease out of which the sublease/underlease was granted called?
headlease or superior lease
45
why assign rather than sublet?
subletting means the tenant would remain responsible for performing the covenants in the lease and still be in the picture until the end of the lease term
46
why sublet rather than assign?
- tenant does not need the property for a temporary period so can earn an income from the undertenant for this period.
- tenant may have tried to market the property for an
assignment but found that no one came forward because the rent payable under the lease was
too high against the backdrop of the current market rents.
- Perhaps underletting at a lower rent
means the tenant at least goes some way to minimising its outgoings.
47
formalities for underlease
- lease must be granted by deed; and
- registered if the term is for over 7 years
48
is the landlord's consent required for underletting?
generally the headlease will require it
49
what is the name of the document where the landlord consents to underletting?
deed - licence to underlet
50
who are the parties to a licence to underlet?
- landlord
- tenant
- undertenant
51
what is the effect of s19(1)(a) on alienation covenants?
converting a qualified covenant against alienation into a fully qualified covenant
i.e., where landlord’s consent is required, it is not to be unreasonably withheld
52
which type of covenants is most commonly found in leases?
fully qualified against assignment or underletting
53
what is the effect of LTA 1988, s1?
applies to fully qualified covenants and all forms of alienation:
Where a tenant applies to the landlord in writing for consent:
* The landlord must give written consent within a **reasonable time** (unless it is reasonable to
refuse).
* The **burden is on the landlord to prove reasonable refusal** – s 1(6), and written reasons must
be provided.
54
what constitutes **reasonable time**
landlord must respond to request for alienation, in writing, 28 days from receipt of the application and references by the landlord (*Dong Bang Minerva (UK) v Davina [1996]*)
55
what happens if a landlord does not comply with the LTA 1988?
may be liable for tortious damages for breach of statutory duty
56
reasonable refusal of consent in alienation
* Unsatisfactory tenant’s reference.
* Proposed assignee’s use of the property would damage the landlord’s own commercial
interests as the assignee proposed to run a rival business next door.
* The proposed subletting was at a substantial premium and at a rent well below the open
market value.
* Where the existing tenant is already in breach of covenant – the landlord can insist upon the
breach being remedied before giving consent unless it is clear that the assignee can remedy
the breach.
57
unreasonable refusal of consent in alienation
* Where the landlord’s intention was to bring the tenancy to an end and the landlord did not therefore propose to give consent to any assignee, not just to the particular assignee in question.
* Where the proposed assignee was already a tenant of the landlord in another property which would have been difficult to re-let.
58
which leases does LTA 1927, s19(1A) apply to?
granted on or after 1 Jan 1996 (new leases)
59
what is the effect of LTA 1927, s 19(1A)?
the following can be agreed in advance:
1. The landlord and tenant can agree the circumstances in which the **landlord may withhold consent to an assignment**.
2. The landlord and tenant can agree the conditions **subject to which consent may be granted**.
3. Such circumstances or conditions will be **automatically reasonable** if imposed by the landlord when giving consent to assign.
60
in relation to 1. The landlord and tenant can agree the circumstances in which the **landlord may withhold consent to an assignment** - what is one of the common conditions for assignment under s19(1A)?
in most commercial leases, the outgoing tenant enters into an
authorised guarantee agreement (AGA) promising to perform the incoming assignee’s obligations
under the lease, if it defaults.
61
can an AGA bind anyone other than the current tenant and the the tenant immediately prior?
no, just those two
62
what is the issue regarding enforceability of leasehold covenants?
can leasehold covenants made by the original landlord and tenant be enforced by or against the new parties:
new owner of the freehold reversion (reversioner)
new tenant (assignee)
63
what is privity of contract?
the landlord and tenant can enforce the lease terms against each other
64
what is privity of estate?
applies to any current landlord and current tenant. Where each are owners of a legal estate in the same property, there
is **privity of estate** between them
65
how long does privity of estate last?
only for the period while the lease is vested in the tenant
66
upon assignment of either:
- the lease; or
- the reversionary interest
what happens to privity of contract and privity of estate?
- privity of contract will remain between the original landlord and the tenant, but
- there will no longer exist privity of estate
between them, because the estate has passed to original party's successor in title (the reversioner or the assignee)
- so privity of estate exists between the current landlord and tenant **only**
67
old leases
granted before 1 January 1996
68
new leases
granted on or after 1 January 1996
69
enforceability of leasehold covenants under old leases
original tenant and the
original landlord of an old lease **remain fully liable for the covenants they entered under the lease**, even after assignment of the reversion (landlord’s interest) or the lease (tenant's interest)
70
what is the effect of LTCA 1995?
abolishes privity of contract for all new leases
i.e., original landlord and original tenant are no longer liable for the covenants for the full duration of the lease
71
when would a party be liable for breaches of covenant?
during their period of
occupation (s 23(1)).
72
tenants of new leases: general rule
tenant with a new lease will (generally) obtain an automatic release (s 5) from the tenant’s
covenants upon assignment
73
when will a tenant with a new lease NOT obtain an automatic release (s 5) from the tenant’s covenants upon assignment?
if it is **an excluded assignment (s11)**
74
what is **an excluded assignment (s11)**?
in breach of the alienation covenant
75
landlords of new leases: the rule
There is no automatic release of the landlord upon assignment of the reversion of a new lease, so the landlord must apply for such a release from the tenant (s 6).
76
what can the landlord do if the tenant refuses to release the outgoing landlord from their obligations?
landlord can apply to the court (s 8).
77
new rules: can an assignee of the lease sue or be sued for a breach of covenant?
When a tenant assigns a lease, the **assignee acquires the benefit and burden** of all the
covenants in the lease.
78
new rules: can an assignee of the reversion sue or be sued for a breach of covenant?
When a landlord assigns the reversionary interest, the **incoming landlord acquires the benefit
and burden** of the covenants.
79
what is the rule in LTCA 1995, s3?
provides for the automatic transmission of the benefit and burden of all landlord covenants to the new owner of the reversion, and of the benefit and burden of all tenant
covenants to the assignee
80
what is the exception to the rule in LTCA 1995, s3?
for those covenants which are **‘expressed to be personal to any person’**: the benefit and burden of covenants which are expressed to be
personal will not pass to a third party
81
what might 'expressed to be personal' mean?
the covenant is expressly stated to be between two named parties to the lease.
82
If the outgoing tenant has been automatically released from its obligations under the lease on
assignment under LTCA 1995, s 5, will it be liable?
no
83
if the outgoing tenant has provided an authorised guarantee agreement (AGA) under LTCA 1995, s16 on assignment, can the landlord sue the that outgoing tenant?
the landlord could sue the former tenant
84
what choice does an AGA present a landlord with?
- It could sue the current tenant and
may be able to obtain an equitable remedy, such as specific performance.
- If the current tenant is not worth suing, the landlord could sue the outgoing tenant who is acting as guarantor for the assignee (**limited to damages** because the former tenant is no longer in possession/control of premises)
85
how can a former tenant recoup damages?
- express indemnity covenant
- indemnity at common law (Moule v Garrett)
86
what is an express indemnity covenant?
an outgoing tenant should ensure that their assignee enters into an **express
indemnity covenant** on assignment whereby the assignee agrees with the assignor to pay the rent and to perform all the covenants for the remainder of the lease
87
what is an indemnity at common law under the rule in Moule v Garrett?
a former tenant can
theoretically sue directly a subsequent assignee in respect of breaches committed by that assignee
88
are these indemnities really worth it?
they are of limited practical value. If the assignee in possession were worth suing, the landlord would have sued it in the first place!
Instead, the outgoing tenant ought to make sure that it assigns to a financially sound and trustworthy assignee
89
which provisions of LTCA 1995 apply to both ‘old’ and ‘new’ leases?
* Section 17, Tenant default notice
* Section 18, Liability for variations
* Section 19, Overriding leases
90
who does s17.s18.s19 apply to?
former tenants who remain liable either:
- under an old lease (original tenant liability); or
- because of their liability under an AGA
91
what is s17 tenant default notice?
where a landlord wishes to pursue a former tenant who remains liable under the terms of the lease for a fixed charge, the landlord must serve notice of the potential claim on such tenants **within 6 months of the charge becoming due**, otherwise the landlord will be precluded from making the claim
92
what is a fixed charge?
includes:
- arrears of rent
- service charge or
- insurance premiums
does not include:
- unascertained liabilities or
- damages which become ascertained
only after a court order has been obtained.
93
what is s18 liability for variations?
former tenants and guarantors are not liable to pay any
additional amounts owing in respect of variations which have been made to the lease **subsequent
to assignment which they could not have anticipated at the time when the lease was entered into**
94
example of s18 - liability for anticipated variations
The former tenant who is still liable for the rent under an old lease or under an AGA (in respect of a
new lease) will still be liable for rent which is reviewed after assignment pursuant to the rent review
clause in the original lease. Such a variation was anticipated at the time when the lease was entered into.
95
what is s19 overriding lease
If a former tenant is called upon by the landlord to pay rent or other fixed charges due from an assignee under s17, that former tenant is entitled to request from the landlord an overriding
lease, becoming the immediate landlord of the defaulting party.
96
how long is an overriding lease granted for?
a term equal to the remaining term of the lease in question plus
three days
97
which covenants are contained in the overriding lease?
the same covenants as the lease in question (other than those covenants which are expressed to be personal).
98
what is the purpose of an overriding lease?
former tenant is then:
- better able to ensure the assignee’s compliance under the terms of the
lease, or
- terminate the assignee’s lease and re-let the property, or
- assign the overriding lease to a
more reliable tenant
99
when there is a sublease, is there a direct relationship between the head landlord and the subtenant, and what does this mean?
no, meaning the landlord might not be able to enforce the covenants in the
head lease directly against the subtenant who occupies the land
100
what type of covenants in new leases allow enforcement against any owner or occupier of the premises (*but no direct enforcement by landlord against a subtenant*)?
restrictive covenants (LTCA, s 3(5))
101
what is the effect of LCTA s3(5) restrictive covenants?
* Any tenant (whether the original tenant or an assignee) knowing they are responsible for breaches of the subtenant is likely to include a provision in the sublease in which the **subtenant
covenants to observe and perform the covenants contained in the head lease**. This makes it easier for the tenant to control the actions of the subtenant and **it indirectly protects the
landlord**.
* If the landlord forfeits the head lease, the sublease is also automatically terminated, subject to
a claim for relief. The threat of this should be a strong incentive to a subtenant to observe the
covenants in the head lease.
* In addition, a **prudent landlord will, as a condition of consent to the subletting, insist on any
subtenant of the property entering into direct covenants with it** to observe and perform the
covenants in the lease. This will create a contractual relationship between the landlord and the
subtenant, enabling enforcement of the covenants based upon the law of contract.
