#3748 - Leases Leasehold Covenents - GDL Land Law

Terminology

• covenant: promise contained in a deed.

• covenantor: person making the promise (bears the burden).

• covenantee: person to whom promise made (takes benefit).

• assignment: transfer of whole of residue of existing lease to 3^rd party.

• sub-letting: grant of new lease to 3^rd party by someone already tenant of same property.

• reversion: landlord’s interest in property – usually freehold (but sub-letting: may be leasehold).

Express Obligations of a Landlord and Tenant under a Lease

- Minimum requirements for valid demise (lease):

• 1. formalities complied with.

• 2. no uncertainty over main terms: identity of landlord + tenant; property to be demised; term; commencement + expiry dates; consideration.

- No other express provisions necessary, but usually included for certainty.

• implied obligations: will be imposed if parties fail to make provisions (+ some implied obligations: override express provisions).

Landlord’s Express Covenants

- Quiet enjoyment: not to interfere with tenant’s possession or enjoyment of property during lease.

• covers: acts of landlord + anyone claiming under him.

• does not cover: acts of someone claiming by title paramount (e.g. through superior landlord).

• breach dep. on facts:

  • Owen v Gadd [1956]: erection of scaffolding hindering access breach.

  • Kenny v Preen [1963]: persistent intimidation of tenant to induce him to leave breach.

  • Southwark LBC v Mills [2001]: failure to soundproof flat NOT breach: t. must take property as he finds it.

• unlawful eviction: statutory protection.

  • Protection from Eviction Act 1977: harassment/unlawful eviction of residential tenants criminal.

  • s27 + s28 Housing Act 1988: statutory damages for tenant.

- Insure: reciprocal covenant where lease allows landlord to recover insurance premiums.

- Repair: usual where only part of building let + tenant covenants to pay proportion of costs (usually in service charge).

- Enforce covenants in other leases of same building: common where building let in multiple units.

• rationale: no privity of contract between individual tenants landlord’s covenant = guarantee that no tenant will be allowed to remain in breach of covenant which might affect other tenants (e.g. being in arrears of service charge).

• usually required by mortgagees: refuse to accept residential leases without this protection as security.

Tenant’s Express Covenants

- To pay rent.

• scope: modern leases – inc. other regular monetary payments (e.g. insurance premiums, service charge) landlord can use rent recovery remedies.

• advance vs. arrears:

  • no contrary agreement: payment required in arrears.

  • commercial leases: in advance in practice – on ‘usual quarter days’ (25 Mar, 24 Jun, 29 Sep, 25 Dec).

• rent payable even If premises cannot be used (e.g. destroyed by fire).

  • but exceptional cases: doctrine of frustration might apply.

    • National Carriers Ltd v Panalpina (Northern) Ltd [1981]: 10 year warehouse lease; only means of access closed for 20 months HoL: not frustrated, but maybe if longer frustration.

    • if land physically destroyed: e.g. falls into sea.

• subject to rent review clause (no implied right, must be express provision): rent can be increased (e.g. pre-determined amounts, or periodically to market rate).

• tenancy deposit schemes: Housing Act 2004 – landlord must use 1 of 3 approved schemes.

- Repair: usually express clause stipulating who has obligation – longer leases: more likely tenant.

• subject to s11 Landlord and Tenant Act 1985: short residential leases – repairing obligations on landlord (s11(4): overrides any express covenant).

• ambit: keep premises in condition in which they would be kept by reasonably minded owner.

  • factors to take into account:

    • 1. character + type of premises at beginning of lease: not neighbourhood.

    • 2. age of premises.

    • 3. express words of covenant.

  • limited: renewal NOT required by repairing covenant – Lurcott v Wakely [1911]:

    • repair: restoration by renewal or replacement of subsidiary parts;

    • renewal: reconstruction from entirety (whole/substantially whole property).

  • repair or renewal: question of degree.

    • Lurcott v Wakely: front external wall of 200-y.o. house needed to be rebuilt tenant liable under repairing covenant.

    • Lister v Lane [1883]: old house on timber platform over boggy soil sank + demolished CoA: tenant not liable under repairing obligation (would be giving back different thing to what t. took).

    • Ravenseft Properties Ltd v Davstone (Holdings) Ltd [1980]: repair entailed insertion of expansion joints omitted from original design tenant liable: did not change character of building + cost trivial vs. value of building.

    • Brew Brothers Ltd v Snax (Ross) Ltd [1970]: necessary underpinning works cost 8k; whole building valued at 7.5-9k tenant not liable under full repairing covenant.

  • repair: interpreted restrictively by courts.

    • Quick v Taff Ely BC [1986]: condensation to property but no damage to fabric of building no disrepair, no liability under repairing covenant.

• fair wear + tear: tenant may be expressly exempted from liability.

  • but: still liable for further consequential damage – must make repairs to prevent.

    • Regis Property Co Ltd v Dudley [1959]: damages skylight (fair wear + tear) let in rainwater t. liable for consequential water damage.

- Alienation: covenants restricting assignment + sub-letting.

• assignment vs. sub-letting:

  • assignment: t. parts with whole term of years assignee takes over lease + assignor drops out of picture (but poss. residual liability on personal covenants).

  • sub-letting: creation of sub-lease of all or part of demised property new estate with original tenant as intermediate landlord.

    • tenant who sub-lets must retain reversion (even if only nominal: 1 day): purported sub-let of whole of residue operates as assignment.

• no implied restriction: t. can assign/sub-let unless expressly restricted.

  • absolute covenant: t. completely prohibited from assigning or sub-letting.

  • express covenant construed in tenant’s favour:

    • covenant against assignment does not prohibit sub-letting of whole or part – Church v Brown [1908].

    • covenant against sub-letting whole does not prohibit sub-letting part (although part includes whole) – Wilson v Rosenthal [1906].

      • but: breach if aggregate of individual sub-lets amount to disposal of whole.

… qualified covenant: landlord’s consent needed for assignment or sub-letting (more common).

• consent cannot be unreasonably withheld – s19(1) Landlord and Tenant Act 1927 (not excludable).

  • landlord cannot demand payment for consent – s144 LPA 1925.

  • but: can claim reasonable legal/other expenses – s19(1)(a) LTA 1927.

• if landlord unreasonably refuses consent – tenant’s remedies:

  • 1. assign regardless: risky – breach if held that consent withheld reasonably.

  • 2. apply to court for declaration that refusal unreasonable: but involves expenditure + delay.

  • 3. sue landlord for damages under Landlord and Tenant Act 1988: statutory duty not to withhold consent unreasonably + to reply to tenant’s request in reasonable time with written reasons for refusal.

    • Midland Bank plc v Chart Enterprises [1990]: landlord’s solicitors did not reply for 2.5 months after request; then further delay unreasonable failure to give consent (no special circs. requiring investigation).

• tenant must always seek consent (even if landlord could not properly have withheld consent if sought) – if not: breach – Eastern Telegraph Co Ltd v Dent [1899].

• reasonableness of landlord’s refusal – court decides:

  • burden of proof: landlord – s1(6) LTA 1988.

  • guidelines – Int’l Drilling Fluids Ltd v Louisville Investments Ltd [1986; CoA]:

    • 1. reasonable refusal must relate to (1) character of proposed assignee or (b) proposed use of premises.

      • rationale: purpose of covenant to protect lessor from undesirable use or undesirable assignee – Bates v Donaldson [1896]; Houlder Bros & Co Ltd v Gibbs Donaldson [1896].

    • 2. landlord cannot refuse on grounds unrelated to landlord-tenant relationship re: lease (i.e. to achieve collateral purpose unconnected with lease) – Bickel v Duke of Westminster [1977]; Bromley Park Gardens Estate v Moss [1982].

    • 3. objective not subjective test: landlord need not prove conclusions justified if might have been reached by reasonable man in circs.

    • 4. may be reasonable to refuse on ground of intended use: even if use not forbidden by lease.

    • 5. in case of disproportion between benefit to landlord + detriment to tenant: may be unreasonable for landlord to withhold consent.

    • 6. question of fact: dep. on all circs.

  • discrimination: refusal automatically unreasonable if withheld on grounds of colour, race, ethnic/national origins, disability, religion, sex, sexual orientation.

    • statutory rules: Race Relations Act 1976; Sex Discrimination Act 1975; Disability Discrimination Act 1995; Equality Act 2006.

    • exception: ‘small premises’ (accommodation shared with landlord or near relative).

  • examples:

    • reasonable refusal:

      • unsatisfactory tenant’s reference – Shanly v Ward [1913].

      • proposed use would damage landlord’s commercial interests;

      • proposed sub-letting at substantial premium + at rent below market value;

      • existing tenant in breach of covenant: landlord can insist on remedy before giving consent (unless assignee can clearly remedy breach) – Goldstein v Sanders [1915].

    • unreasonable refusal:

      • proposed assignee protected by diplomatic immunity;

      • landlord intends to bring tenancy to end: would not give consent to any assignee;

      • proposed assignee already tenant of landlord in another property which would be difficult to re-let.

• result of...