Remedies for Breach of Leasehold Covenants

Question 1

Under an old lease (pre 1 Jan 1996), who is liable for breach of a leasehold covenant?

Answer 1

The current tenant (& any guarantor)

+

Original tenant (will be liable for full term regardless of whether have assigned)

Question 2

Under a new lease (on or after 1 Jan 1996), who is liable for breach of a leasehold covenant?

Answer 2

Current tenant (& any guarantor)

+

An outgoing tenant who has given an AGA

(Original tenant released as soon as assign if no AGA)

Question 3

What are the 5 possible remedies for breach of covenant to pay rent?

Answer 3

1. Action for debt
2. Commercial Rent Arrears Recovery
3. Pursue guarantors
4. Deduct from rent deposit
5. Forfeiture

Question 4

What is the limitation period for an action for debt?

Answer 4

6 years

(non payment of rent is a debt)

Question 5

What is the remedy of Commercial Rent Arrears Recovery?

Answer 5

Landlord can get enforcement agency to seize & sell goods belonging to current tenant where there are at least 7 rent days outstanding

Applies to: commercial premises only in relation to rent paid for possession & use

Must give 7 days notice of intention to enter (& also of sale of their goods at public auction)

Question 6

Which premises and which type of rent does the remedy of Commercial Rent Arrears Recovery apply to?

Answer 6

Commercial premises only in relation to rent paid for possession & use

(not eg. insurance rent)

Question 7

What are the notice requirements for Commercial Rent Arrears Recovery?

Answer 7

Must give 7 days notice of:

1. Intention to enter
2. Sale if landlord sells tenant’s goods at public auction

Question 8

What does a tenant’s guarantor promise to do in the guarantee? (2)

Answer 8

1. Pay the rent & any other sums due under lease if tenant does not pay
2. Remedy or indemnify landlord against loss caused by any breaches by tenant

Question 9

Can a landlord sue the guarantor of a current tenant?

Answer 9

Yes - sued in same way as tenant

Question 10

Can a landlord sue a guarantor of a former tenant?

Answer 10

Old lease: yes - liability of original guarantor likely extends thru duration of lease

New lease: guarantor automatically released from liability on assignment

If pursuing former tenant / guarantor of former tenant for fixed charge, must serve default notice within 6 months of current tenant’s breach

Question 11

What are the notice requirements for pursuing the guarantor of a former tenant?

Answer 11

If pursuing former tenant / guarantor of former tenant for fixed charge, must serve default notice within 6 months of current tenant’s breach

Question 12

What is the remedy of deducting from rent deposit?

Answer 12

Landlord may have reuqired T to deposit cash sum as security for payment of rent & performance of covs

Rent deposit deed sets amount & circumstances (eg. which breach) entitle landlord to withdraw

Question 13

What is the effect of forfeiture?

Answer 13

Ends lease & enables landlord to gain vacant possession of the property

Question 14

Is forfeiture an automatic right?

Answer 14

No - lease must contain forfeiture clause setting out circumstances

Question 15

What is the process of forfeiture in relation to non-payment of rent?

Answer 15

Landlord effects forfeiture by taking possession either thru peaceable re-entry or by obtaining court order

• T can apply to court for relief
• L can waive right to forfeit by carrying out any act demonstrating intention to continue relationship

Question 16

How can a landlord waive their right to forfeit?

Answer 16

By carrying out any act demonstrating intention to continue relationship of landlord & tenant (eg. demanding or accepting rent after breach)

Question 17

What is the forfeiture process for breach of a covenant other than non-payment of rent?

Answer 17

Landlord must serve s146 notice on tenant:

1. Specifying breach
2. Requiring breach to be remedied within reasonable time if capable of remedy and
3. Requiring tenant to pay compensation for breach

If T doesn’t comply, landlord can forfeit by peaceable re-entry or court order

Question 18

What are the extra requirements for the s146 notice in a breach of repair claim?

Answer 18

s146 notice must include notification of tenant’s right to serve counter-notice within 28 days where claim is for:
1. Breach of repairing covenant
2. Lease is for more than 7 years &
3. Has at least 3 years left

If T serves counter notice, landlord can only bring forfeiture claim with leave of court

Question 19

When must a s146 forfeiture notice include notification of the tenant’s right to serve a counter-notice within 28 days?

Answer 19

Where claim is for:
1. Breach of repairing covenant
2. Lease is for more than 7 years &
3. Has at least 3 years left

Question 20

How much can a landlord recover in damages?

Answer 20

Limited to the reduction in value of the landlord’s reversion as a result of the breach

Question 21

When must a landlord serve a s146 notice on a tenant as part of an action for damages claim?

Answer 21

Where claim is for:
1. Breach of repairing covenant
2. Lease is for more than 7 years &
3. Has at least 3 years left

Notice must include notif of tenant’s right to serve counter-notice within 28 days

Question 22

When will specific performance be granted?

Answer 22

Where
i. positive covenant (eg. to repair)
ii. Performance or supervision over period of time not required and
iii. Damages not adequate remedy

Question 23

What is a self-help / Jervis v Harris clause?

Answer 23

Allows landlord to recover cost of repairs as debt (instead of damages)

Rather than wait for specific performance, landlord may enter & carry out the works

Question 24

Is self-help an automatic right?

Answer 24

No - must be expressly reserved in lease