Leases (2)

Question 1

Is there a lease?

Answer 1

1. Certainty of duration (Chiam Heng Luan)
2. Exclusive possession (Street v Mountford)
3. Rent (Prudential Assurance)
4. Formalities
5. Does equity follow the law? (Walsh v Lonsdale, Hu Lee Impex, Steadman)

Question 2

Chiam Heng Luan

Answer 2

Proposition 1:
The commencement and maximum duration of a fixed-term lease must be certain or capable of being made certain

Proposition 2:
If the tenant nevertheless enters into possession of the property and pays rent on a regular basis, the land then becomes held on a periodic tenancy. Either party could give notice to quit at the end of each term. If its weekly, it would be notice by a week. If its yearly, it would be 6 months.

Question 3

Tenancy at will

Answer 3

Tenant remains in land without paying rent but with landlord’s permission. Once tenant pays rent on a regular basis, a periodic tenancy may be created.

Question 4

Tenancy at sufferance

Answer 4

Tenant remains in land without landlord’s permission

Question 5

Street v Mountford

Answer 5

Proposition 1:
A tenant has exclusive possession if it can keep out strangers and keep out the landlord unless the landlord is exercising limited rights reserved to him by the tenancy agreement

In contrast, the occupier is only a licensee if the landlord provides attendance or services which require it to exercise unrestricted access to and use of the premises.

Proposition 2:
If the agreement satisfies all the requirements of a tenancy, then the agreement produced a tenancy, and parties cannot alter this effect by insisting they only intended a lease.

Question 6

Prudential Assurance

Answer 6

(For fixed term leases) Rent is only important to the extent of representing the consideration necessary to establish a contractual bargain between the owner and occupier. If the consideration can be established in another form, there is no impediment to finding a lease

(For periodic leases) The court found it difficult to conceive of the creation of periodic tenancy without a reservation of rent

Question 7

Landlord ‘usual covenants’

Answer 7

Covenant for quiet enjoyment

Covenant to re-enter for non-payment of rent

What is a usual covenant is a question of fact, and may be found by looking at the nature of the premises, the purpose of the lease, the duration of the lease, and social norms.

Question 8

Landlord implied covenants

Answer 8

Covenant for quiet enjoyment of land

Non-derogation from grant (OUE v 360 Degree)

Make premises fit for human habitation (Smith v Marrable)

Keep common areas in reasonable state (Liverpool County Council)

Implied under s 93 LTA

Question 9

Covenant for quiet enjoyment of land

Answer 9

The covenant is broken if LL does anything that substantially interferes with the tenant’s title, possession, or with his enjoyment of them (For example, a loss of business by obscuring the tenant’s shop with scaffolding).

However, there is no positive obligation to perform repairs or effect improvements

If a defect is present at the date the lease was granted, no breach of covenant of quiet enjoyment

Question 10

Non-derogation from grant

Answer 10

There must be some act which renders the premises substantially less fit for the purposes for which they were let.

Cold Storage: There is no derogation from grant if the LL activities were clearly contemplated by the parties, unless the permitted activity was carried out in an unreasonable manner that was not envisaged before.

On the acts, a parking fee levied on the tenant’s supermarket that substantially affected the tenant’s business was not a derogation from grant because the customers still had unrestricted access to the supermarket. The parking fee also did not affect customers who were non-motorists; and did not make it impossible for customers to park.

OUE v Three Sixty Degree: The test is whether there is substantial interference with a tenant’s reasonable use of the premises:
- Landlord is not required to ensure the profitability of tenant’s business
- Landlord has no obligation to take extraordinary measures
- Even non-physical interferences could constitute a substantial interference (e.g. a landlord who purposely constructs buildings near a tenant who had leased land expressly for use as an explosives factory, causing the tenant’s explosive license to be forfeited, would be in breach of non-derogation from grant)
- Existing use of adjoining premises is always a material consideration in the analysis
- The covenant is prospective; The covenant do not apply to acts done BEFORE the tenancy was granted, even if those acts have continuing consequences after the tenancy. The obligation is not to do anything AFTER the date of the grant that would derogate from the grant.

Question 11

Rachel complains that the landlord’s sound insulation between flats is ineffective against the noise generated by the use of adjoining flats. Is the landlord in breach of any covenants?

Answer 11

Covenant for quiet enjoyment: NO, there is no positive obligation to make improvements/enhancements to the premises

Covenant for non-derogation from grant: NO, Rachel must take the property as it is. When she bought the property, she would have known that in a residential area, there would be noise coming from adjoining flats. Also, when she bought the property, the existing sound insulation was already in place. Per OUE v Three Sixty, the covenant is prospective and they do not apply to acts before the grant to the tenancy, even if those acts have continuing consequences for the tenant.

Question 12

Adrian runs a car repair business. The premises were granted to him on a 10-year lease. The landlord decides to impose parking charges on the carpark (it used to be free) and limit each tenant’s unit to a maximum of two cars per lot. Has there been a breach of a covenant for the non-derogation from grant?

Answer 12

For the parking charges, arguably NO. Per OUE v Three Sixty, a landlord is not required to ensure the profitability of the business.

For the limitation of two cars per lot, arguably MAYBE-YES. Since Adrian runs a car repair business, it is expected that he would have multiple cars on the premises. Such an act would substantially interfere with the business and make it almost impossible for his business to run.

Question 13

Liverpool County Council

Answer 13

The landlord was bound by an implied covenant to keep in reasonable state of repair the lifts, the common staircases and rubbish chutes. It would be absurd to expect the tenants to maintain them

Question 14

OUE v Three Sixty Degree

Answer 14

The test is whether there is substantial interference with a tenant’s reasonable use of the proprietary right

1. The covenant does not amount to an implied obligation to underwrite the profitability of T’s business
2. No obligation to take reasonable measures outside the reasonable contemplation of parties, unless those measures were specifically bargained for
3. Even non-physical interference can constitute substantial interference with the ordinary enjoyment of premises in the context of both covenants
4. Existing use of adjoining premises is always a material consideration in considering whether the covenant has been breached

Question 15

Smith v Marrable

Answer 15

There is an implied condition in the letting of furnished places that the premises should be reasonably fit for habitation at the commencement of the term. A breach of this condition entitles the tenant to quit the letting immediately without notice

Question 16

Tenant ‘usual covenants’

Answer 16

Pay rent

Pay taxes except those expressly payable by landlord

Keep and deliver up premises in repair

Allow landlord to enter and view state of repair

More ‘usual covenants’ may be found by looking at the nature of premises, the purpose of the lease, the duration of the lease, and prevailing practices of the area

Question 17

Tenant implied covenants

Answer 17

(Fixed term leases)
Not to commit voluntary waste
Not to commit permissive waste

(Periodic tenancies - weekly/monthly)
Not to commit voluntary waste

(Period tenancies - yearly)
Not to commit voluntary waste
Not to commit permissive waste

(Tenancy at will)
Not to commit voluntary waste
Not to commit permissive waste

Question 18

Voluntary waste

Answer 18

Voluntary, positive acts that cause damage to the premises

Question 19

Permissive waste

Answer 19

Failure to repair and maintain premises

Question 20

What applies to legal leases but not to equitable leases?

Answer 20

Privity of estate

Implied terms, including implied powers of forfeiture, under s 93 LTA (applies only to ‘every lease of registered land made under this Act’)

Question 21

s 6(d) Civil Law Act

Answer 21

A contract is only enforceable if it is made in writing and signed by the other party

Joseph Mathew: Electronic records would meet in ‘writing requirement’

Joseph Mathew: Signature requirement is flexible, only needs to emanate from the person signing them in some way

Hu Lee Impex: Oral agreements do not meet ‘in writing’ requirement

Question 22

Equitable doctrine of part performance

Answer 22

(Relaxed standard - Steadman)
Acts which are, on a balance of probabilities, consistent with the contract

(Stricter standard - preferred by SGHC in Hu Lee Impex)
Acts which unequivocally point to the alleged contract

Question 23

Golden Village

Answer 23

SGCA said equitable remedy is not confined by Walsh v Lonsdale to specific performance. Injunction can be granted as well.

Question 24

When would an injunction be appropriate, as opposed to specific performance?

Answer 24

When specific performance is not legally possible, the same effect can be reached by granting an ‘injunction’ instead

Question 25

When is a contract not specifically enforceable

Answer 25

If there is fraud

If it is not just and equitable to do so

Question 26

Tan Soo Leng

Answer 26

The HC suggested that repudiation could apply to short-term leases where rent is the primary consideration, and there is a continuing relationship between landlord and tenant

Question 27

What are sufficient acts of repudiation? (landlord)

Answer 27

In Hussein v Mehlman, Sedley QC held that the tenants under a 3-year lease were able to elect to terminate the lease for the landlord’s repudiatory breach when the landlord persistently failed to repair the premises

Question 28

What are sufficient acts of repudiation? (tenant)

Answer 28

Per Progressive Mailing, the act should evidence an intention to:

(1) no longer be bound by the contract, or

(2) an intention to fulfil the contract in a way substantially inconsistent with what was agreed.

Rent: The tenant’s non-payment of rent must be persistent or deliberate for it to amount to a repudiatory breach (Progressive Mailing)

Breaches of covenant: Mere breaches do not amount to a repudiation; There must be a catalogue of breaches that might be taken as a whole to constitute a repudiation (Progressive Mailing).

Abandonment of possession: Though abandonment of possession is not necessary, it would be rare that facts which fall short of abandonment would property be seen as a repudiation in the case of a long lease at a rental which was either nominal or but a fraction of the market price (Progressive Mailing)

Question 29

What is the effect of repudiation?

Answer 29

1. Terminate the lease
2. Both parties are discharged from future obligations under the lease. However, the repudiating party must compensate for the innocent party’s expectation losses to place the innocent party in the position as though the lease had been performed This may include the loss suffered not only for rental for the rest of the term, but also the loss sustained by the other tenants quitting as a result of the tenant’s breach.
3. Both parties will remain bound by any obligations or rent accrued until the date of termination, and either parties can sue for breach if they are not performed
4. Election to terminate should be a clear and unequivocal statement or conduct which comes to the repudiating party’s attention in some way

Question 30

Can L treat the lease as continuing after T abandons the premises

Answer 30

Reichman suggests that landlord is entitled to insist on the lease as subsisting and sue for arrears of land, unless it is wholly unreasonable for L to do so

But Tan Soo Leng has pointed out that doing so is economically inefficient and wasteful for society, though the case did not have to decide on this issue

Better view may be that it would be best to allow landlord to repudiate lease and impose a duty on the landlord to mitigate his loss and take reasonable steps to lease the property. This is not prejudicial to the landlord since he is only expected to take reasonable steps, and if he cannot, he can still recover the appropriate amount of damages from the tenant.

Question 31

Can Tenant obtain a right of equitable set-off?

Answer 31

Tenant can legally withhold payment from landlord without the need to commence proceedings

But T’s cross-claim must be closely connected to the landlord’s claim for rent; Overseas Union cited a breach of covenant to repair, the physical condition of premises, and the tenant’s quality of occupation a examples.

Also per Overseas Union, a reference to ‘exclude set-off’ in the contract is sufficient to exclude the right to set-off

Question 32

Can landlord apply for distress?

Answer 32

1. There must be an existing tenancy
2. Failed to pay rent
3. Must be the tenant’s existing landlord
4. Amount to recover includes: Rent not exceeding 12 months, legal costs, sheriff’s fees and expenses
5. Property exempted from distress:
   a. Things in actual use in the hands of the tenant,
   b. Tools and implements (if other movable property is sufficient to cover amounts and costs)
   c. Necessary clothes and bedding for tenant and his family
   d. Goods for the purpose of being carried, wrought, worked up or otherwise dealt with in ordinary business or trade
   e. Goods belonging to guests at an inn
   f. Goods in custody of the law

Question 33

When is something ‘otherwise dealt with’ in the course of ordinary business or trade?

Answer 33

If the tenant was managing the goods sold on his premises as the third-party’s agent, and it is more likely that the tenant is the third-party’s agent if the tenant had to renumerate that third-party on a commission basis

Question 34

What can a tenant do against the distress?

Answer 34

1. The sheriff will give the tenant notice of the seizure and inform him that property will be sold in no less than 6 days.

The tenant can pay the amount due within 5 days from the date of the writ or obtain a court order restraining the sale

2. The tenant can prove that his property should be exempt from seizure

For example, to succeed an exemption under s 8(d) of the DA, the tenant must prove that he was managing the goods as a third-party’s agent and had to account to the third-party on a commission basis

Question 35

What can a third-party whose property has been distrained do?

Answer 35

He can apply to the court to discharge or suspend the writ, or to release the distrained article.

The applicant must prove that:

1. He is not a tenant and has no beneficial interest in the premises
2. He has property rights or lawful possession over the article
3. He must prove that the tenant has no beneficial interest in the article
4. He must not be the tenant’s spouse or partner
5. He must prove that the goods are not comprised in a bill of sale, hire-purchase agreement or settlement made by the tenant
6. He must prove that he is also not the reputed owner; This means that a reasonable informed landlord would have inferred that the goods did not belong to the tenant. If the landlord had actual knowledge that the goods does not belong to the tenant, he would definitely meet this test.
7. He must prove that he does not have an interest in the trade or business that is being carried out

Question 36

What can an under-tenant or lodgor whose property has been distrained do?

Answer 36

He can apply to the court to discharge or suspend the writ, or to release the distrained article.

The applicant must prove that:

1. He is not a tenant and has no beneficial interest in the premises
2. He has property rights or lawful possession over the article
3. He must prove that the tenant has no beneficial interest in the article
4. He must pay the landlord or court an amount equal to the arrears owed
5. He must also undertake to pay landlord any future rent due from him to the tenant (meaning the tenant is the sub-tenant landlord, so instead of paying tenant, pay the landlord instead)
6. He must not be the tenant’s spouse or partner
7. He must prove that the goods are not comprised in a bill of sale, hire-purchase agreement or settlement made by the tenant
8. He must prove that he is also not the reputed owner; This means that a reasonable informed landlord would have inferred that the goods did not belong to the tenant. If the landlord had actual knowledge that the goods does not belong to the tenant, he would definitely meet this test.
9. He does not have an interest in the trade or business that is being carried out

Question 37

Orchard Central

Answer 37

Proposition 1:
A non-tenant seeking to recover distrained goods must prove that a reasonable informed landlord would have inferred that the goods did not belong to the tenant.

On the facts, Forever Jewels failed to argue that jewels on consignment in the shop was a trade custom and that the landlord should have known this.

Proposition 2:
A tenant seeking to exempt his goods from distress must prove that he was managing the goods as a third-party’s agent, and had to remunerate that third-party on a commission basis.

On the facts, Cupid Jewels failed to exempt Forever Jewels’ jewels from distress because Cupid was not selling the jewels on a commission basis. They simply had to account the cost price and could retain any profits.

Question 38

Remedies available for breach of covenant

Answer 38

Damages available as per right

Specific performance/injunction only if damages are inadequate. They will not award SP if it will cause undue hardship, force the tenants to run a business at a loss, or to perform a positive covenant to repair

Distress to recover rent

Forfeiture

Repudiation

Question 39

When will the courts award specific performance/injunction for the breach of a covenant?

Answer 39

When damages are inadequate

Question 40

When will the courts usually not award specific performance/injunction for the breach of a covenant?

Answer 40

If it will cause undue hardship

If it will force the tenants to run a business

If it will force the tenants to perform a positive covenant to repair (unless there are exceptional circumstances - Rainbow Estates)

Question 41

Co-op v Argyll Stores

Answer 41

Specific performance will not be granted to force a tenant to operate a business at a loss

Question 42

Rainbow Estates

Answer 42

A specific performance to perform a positive covenant to repair may be awarded only if it does not cause undue hardship

Question 43

Forfeiture analysis

Answer 43

1. Landlord must have right to forfeit
2. Must not have waived right to forfeit (Protax Cooperative, Expert Clothing)
3. Statutory formalities
   (No formalities for breach of covenant against assign/sublet)
   (Common law formalities for breach of covenant to pay rent)

4 Exercise right of re-entry

5. Effect of forfeiture
6. Tenant’s relief against forfeiture
7. Sub-tenant’s relief against forfeiture

Question 44

Protax Cooperative

Answer 44

Proposition 1:
Waiver may be implied where L has (1) knowledge of the cause of forfeiture and (2) does any positive act which recognises the continued existence of tenancy

Proposition 2:
A landlord cannot reserve his right of waiver by stipulating that rent was accepted ‘under protest’ or ‘without prejudice’

Proposition 3:
If a landlord has already shown a final determination to forfeit, such as by taking action to recover possession, no subsequent act will operate as a waiver

Proposition 4:
A new breach that surfaces, or an existing breach which continues after an act of waiver will give rise to a fresh right of forfeiture

Question 45

Expert Clothing

Answer 45

Accepting rent after knowing the breach is a waiver. But the rent should be due after the cause of forfeiture. Merely accepting rent accrued before the breach will not amount to waiver

Question 46

What are examples of an implied waiver?

Answer 46

Accepting rent after knowing of the cause of forfeiture

Applying for distress

Asking for rent (if unambiguous)

Question 47

What are the procedural requirements under s 18(1) CLPA?

Answer 47

Notice must be served on tenant and specify breach complained of. If the breach is capable of remedy within a reasonable time, the notice must also require the tenant to remedy the breach, and the tenant must have failed within a reasonable time.

A breach of positive covenant will usually be remediable. Question is whether harm resulting from it can be remedied by combination of compliance and compensation.

A breach of negative covenant may sometimes be remediable. Question is whether the harm resulting from it can be remedied by combination of compliance and compensation.

In considering reasonable time, can consider the time that had already passed to fulfil the covenant.

Question 48

Billson v Residential

Answer 48

Proposition 1:
When exercising right of self-help, L cannot use physical violence to take away the property, but it can peacefully re-enter the premises and change the lock

Proposition 2:
A tenant may still apply for relief if the landlord has only exercised its right of self-help. This is because the landlord is regarded as still ‘proceeding’ to enforce his right to forfeit.

But once a court order has been given, a tenant cannot apply for relief

Question 49

Duncliffe

Answer 49

The English court interpreted s 11 of the CLPA to mean that the tenant can only sue the landlord’s successor-in-title for damages resulting from a landlord’s breach if these damages were sustained AFTER the assignment

Landlord’s successor is not liable for any damages resulting from the landlord’s breach if the damages were sustained before the assignment

Note that this only applies if the covenant in question touches and concern land (per s 11 CLPA)

Question 50

Re King

Answer 50

The court held that the words ‘shall go with the reversionary estate’ in s 10 CLPA meant that any covenants that touch and concern land (and any forfeiture rights) would go with the land.

Means that landlord cannot enforce the covenants that touch and concern land (and any forfeiture rights) after assigning the lease or selling the land to a successor-in-title. Only landlord’s successor-in-title can enforce those covenants.

Re King goes against the privity of contract / City of London v Fell

Question 51

City of London v Fell

Answer 51

There remains privity of contract between the landlord and tenant, despite any assignment.

Landlord will remain liable for any breaches, including those of landlord’s assignees.

Tenant will remain liable for any breaches, including those of tenant’s assignees.

Question 52

There is only a lease in equity and thus privity of estate does not apply. What alternative authorities can you rely on to help the tenant or landlord get a remedy?

Answer 52

Firstly, per Boyer v Warbey, given the fusion of law and equity, it can be argued that the tenant’s assignee should nonetheless be bound if the covenants touch and concern land given.

While this rule has been criticised for mischaracterising the fusion of the administration (and not substance) of law and equity, the learned authors of TSY Principles of Land Law has suggested that the idea of fusion by analogy can be used; While the common law and equity has not fused substantively, equity should develop an analogous doctrine to privity of estate.

Secondly, per Buckworth v Johnson, there may be an implied contract by conduct between the tenant’s assignee and the landlord. The usual covenants may be implied into this contract.

Question 53

Spencer’s Case

Answer 53

Covenants that touch and concern land will bind the landlord and the tenant’s successors-in-title

Only applies to legal leases

Question 54

Examples of covenants that touch and concern land

Answer 54

Covenant to pay rent

Covenant to pay water charges

Covenant to repair premises (Kumar v Dunning)

Covenant to insure against fire

Covenant to cultivate land in a particular manner

Question 55

What are some covenants that would bind a sub-tenant in the head lease?

Answer 55

Restrictive covenants, such as a covenant not to assign/sublet or covenant not to commit voluntary waste

Question 56

What are the two opportunities that a tenant has to obtain relief when there is a forfeiture for breach of covenant to pay rent under s 18(A)?

Answer 56

Within the time for acknowledging the writ

and before the court makes the possession order

But once the possession order is made, the tenant has no relief as long as order remains unreversed.

Also, this allowance does not apply if landlord is forfeiting the lease for other reasons as well (i.e breach of other covenants)

Question 57

What kind of relief can the under-tenant get for a landlord’s forfeiture pursuant to a tenant’s breach of covenants under s 18(6) CLPA?

Answer 57

The court can vest in the sub-tenant a lease under the landlord, but the lease cannot be longer than what he had under the sub-lease

Question 58

Why does s 10 and s 11 CLPA apply to both legal and equitable leases?

Answer 58

Because the definition of lease under s 2 CLPA includes an agreement for a lease

Question 59

Why does s 10 and s 11 CLPA apply to both legal and equitable leases?

Answer 59

Because the definition of lease under s 2 CLPA includes an agreement for a lease