#4639 - Lease Covenants - GDL Land Law

A valid lease must:

1. Comply with the necessary formalities; and

2. Be certain as to the identity of the landlord, tenant, the property to be demised, the term, the commencement expiration dates and any consideration

Express Covenants

Landlord:

• Quiet Enjoyment: Covenant not to interfere with the tenant’s possession or enjoyment of the property

  • E.g. erection of scaffolding was a breach in Owen v Gadd; intimidating the tenant in Kenny v Preen was also a breach – but failing to adequately soundproof a flat (Southwark LBC v Mills) was not

  • Protection from Eviction Act 1977 –harassment and unlawful eviction of residential tenants are criminal offences

• To Insure: If a landlord is able to recover insurance premiums or a proportionate part, there is usually a reciprocal landlord’s covenant to insure

• To Repair: Often where the tenant has covenanted to pay its proportion of the costs of repairing the whole building (service charge)

• To Enforce Covenants in Other Leases in the Same Building

Tenant:

• To Pay Rent

  • Usual to treat other monetary payments (e.g. insurance premiums) as rent so that the landlord can use the particular remedies for rent recovery

  • Unless there is an agreement to the contrary, a written covenant to pay rent is construed as requiring payment in arrears

  • Usually payable quarterly in advance on the “usual quarter days”

  • Frustration:

    • Rent continues to be payable even though the premises cannot be used (e.g. if destroyed in fire)

    • In exceptional cases doctrine of frustration could in principle apply

  • Rent review: must be express as there is no implied right to call for a review

• Repair: there will usually be express provisions stipulating who has the obligation to repair

  • But: statutory provisions relating to repair – e.g. s11 Landlord and Tenant Act 1985 imposes repairing obligations on a landlord

  • Ambit of repairing covenant: usually tenant must keep premises in the condition in which they would be kept by a reasonably minded owner – but a covenant to repair DOES NOT require renewal of the whole or substantially the whole property

    • Distinction between repair and renewal is a question of degree

      • Lurcott v Wakely: Front external wall of a house had to be rebuilt- but this was classed as repair as it was the result of old age – tenant was liable

      • Lister v Lane: rotting timber resulted in house being condemned – CA held that tenant was not liable – ‘a covenant to repair … is not a covenant to give back a different thing from that which the tenant took when he entered into the covenant’

    • Consider the cost of the works in relation to the value of the property

      • Ravenseft v Davstone: Necessary work only affected a trivial part of the building - thus falling within the ambit of the covenant

      • Contrast: Brew Brothers Ltd v Snax: Necessary underpinning works cost 8,000 - and the whole building was valued at between 7.500-9,500 – here the work did NOT fall within the scope of the covenant

    • Restrictive interpretation of ‘repair’ in Quick v Taff – no disrepair where there was condensation but no actual damage to the fabric of the building

  • There may be a clause exempting tenant from liability for ‘fair wear and tear’ : but the tenant must nevertheless do repairs to prevent further consequential damage: Regis Property v Dudley

• Alienation: assignment (parting with the whole – assignee drops out of the picture) and sub-letting (creation of a sub-lease of all or part of the demised property – original tenant retains a reversion)

  • No implied restriction on alienation – thus it must be expressly imposed

  • Construction: will be construed in favour of the tenant - so that:

    • A covenant vs. sub-letting the whole does not prohibit sub-letting of part (Wilson v Rosenthal)

    • A covenant vs. assignment doesn’t prohibit sub-letting (Church v Brown)

    • But if the aggregate of individual sub-lettings amounts to disposal of the whole, there will be a breach

  • Qualified covenant: Covenant may be qualified by a requirement for the landlord’s consent

    • S19(1) Landlord and Tenant Act 1927: consent shall not be unreasonably withheld

    • S144 LPA 1925: landlord has no right to demand payment of a ‘fine’ for his consent

    • If the landlord refuses unreasonable – the tenant may:

      • Assign regardless (risky in case landlord is found to be reasonable)

      • Apply to the court for a declaration that the landlord is being unreasonable

      • Sue under the LTA 1988 (statutory duty not to refuse consent unreasonably)

    • Midland Bank v Chart Enterprises: if there were suspicious circumstances then the landlord would be entitled to take time to investigate – but here there were no reasonable grounds for delay

    • Eastern Telegraph v Dent: if the tenant assigns without seeking consent then he is in breach even if the landlord could not reasonably have withheld consent

  • It is for the court to decide whether refusal is unreasonable (s19(1) LTA 1927)

    • Burden of proof is on the landlord to prove reasonableness (s1(6) LTA 1988)

      • International Drilling Fluids v Louisville Investments (Uxbridge ) Ltd

        • Principles of when it will be reasonable/unreasonable to refuse consent

1. Purpose of covenant is to protect the lessor from having premises used in an undesirable way or by an undesirable assignee: reasonable refusal must relate either to the character of proposed assignee or proposed use by the assignee

2. Must ask whether landlord’s conclusions were those that might be reached by a reasonable landlord in the circumstances

3. Landlord is not entitled to refuse consent on grounds that have nothing to do with the relationship between Landlord and Tenant (Bickel v Duke of Westminster)

4. May be reasonable to refuse due to the proposed use of the property, even if that use is not expressly forbidden in lease

5. Court must consider whether there is a disproportion in the benefit to the landlord from the refusal and the detriment to the tenant

6. It is in every case – a question of fact, depending on all the circumstance, whether consent has been reasonably withheld

   • Discrimination: withholding consent on the grounds of colour, race etc. will automatically be deemed unreasonable (Race Relations Act 1976)

   • Examples:

     • Reasonable refusal:

       • Shanly v Ward –where the assignee did not have good financial references

       • Goldstein v Sanders – where the tenant was in breach of a repairing covenant

       • Ashworth Frazer v Gloucester CC – reasonable to refuse consent when the assignee may breach the user covenant

       • Where the proposed assignee’s use of the damage would damage the landlord’s own commercial interests – i.e. assignee proposed to run a rival business next door

     • Unreasonable refusal:

       • Where proposed assignee was already a tenant of the landlord in another property which would be difficult to re-let

       • Where the landlord wished to bring tenancy to an end and so did not intend to give consent to any assignee

   • Result of breach:

     • Assignment / sub-letting is valid to pass (or create) a legal estate but may give rise to a right to forfeit or a claim in damages: Old Grovebury v W Seymour

   • Building leases:

     • Where the lease is a building lease granted for more than 40 years – any requirement in the lease for consent to assign / sub-let may be disregarded, provided:

1. 7 years left on the lease

2. Written notice is given to the landlord within 6 months of the transaction

   • S22 Landlord and Tenant (Covenants) Act 1995

     • Commercial leases: s22 allows the imposition of conditions by the landlord when giving consent to assignments

       • Does not apply to residential leases – and only in relation to assignment (not sub-letting)

       • Under new tenancies (granted after 1 Jan 1996) – landlords and tenants can agree:

1. Circumstances in which consent may be withheld; and/or

2. Conditions in which consent will automatically be deemed reasonable

   • Practical effect: the landlord can make it a condition of consent that the assignor enters into an ‘authorised guarantee agreement’ in which the assignor guarantees the performance of the obligations of the assignee – this sort of clause will always be deemed reasonable

• Covenant to Give Notice of Any Assignment, Sub-letting, Mortgage or Charge

  • To give notice within a specified period (e.g. one month) – without such a clause there is no obligation upon the tenant to disclose of any dealings with the lease

• Alterations

  • Restrictions usually imposed on all external/structural alterations

• Use

  • Ordinarily landlord will restrict the use – e.g. residential or office

  • Joint London Holdings Ltd v Mount Cook Land Ltd – originally meaning of the covenant was binding

  • Qualified consent: there is no provision that the landlord is to act reasonably in refusing consent, but he is not allowed to charge a fine (s19(3) LTA 1927)

Implied Covenants

Landlord

• Quiet Enjoyment:

  • Will be implied into the lease (Markham v Paget)

  • Example of landlord breaching this covenant:

    • Owen v Gadd : erecting scaffolding in front of premises

    • Kenny v Preen: cutting off gas and electricity

    • Southwark LBC v Mills :(HL) Landlord has no duty to soundproof the premises

  • Protection from Eviction Act 1977 s1 – contact tenancy relations officer of the LA – it is a crime under this act to unlawfully evict or harass. Also creates a civil statutory duty.

  • Housing Act 1988 ss27, 28 – can sue for damages, he has to pay to you as damages the profit that he makes from evicting you.

• Not to derogate from grant:

  • If the premises let for particular purpose, the landlord covenants not to do any act which substantially interferes with the use of the premises for that purpose.

  • Aldin v Latimer Clark – premises let for purposes...