Summary
Summary Leasehold covenants
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- Land Law - MA in Law / GDL
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- Land Law - MA In Law / GDL
Summary of 5 pages for the course Land Law - MA in Law / GDL at Land Law - MA in Law / GDL (Leasehold covenants)
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6 Leasehold covenantsEnforceability of covenants in leases
The extent to which a successor in title to either the original landlord or the original tenant is able to enforce covenants entered into by those
parties
Consider the enforceability of covenants in leases between both the original parties and successors in title
The Landlord and Tenant (Covenants) Act 1995 changes the law;
- It applies to most tenancies granted on or after 1/Jan/1996 – ‘new’ tenancies
- Most provisions don’t apply to most granted before/some granted after 01/01/96 – ‘old’ tenancies
First, decide whether the tenancy you are considering is an old tenancy or a new one – look at date of the lease
→ (date of any subsequent assignment is irrelevant)
Enforceability of Covenants in ‘Old’ Leases
Liability of the original parties to the lease
A lease is also a contract – there is a ‘privity of contract’ between original parties
The landlord and tenant can enforce each other’s covenants
If the original tenant assigns the lease, it doesn’t end privity of contract between him and the original landlord
→ Privity of contract lasts the duration of the lease, so for the life of the contract
If T1 breaches any of the covenants in the lease, T remains liable to L
L’s liability continues throughout the whole term notwithstanding that the freehold reversion may have been assigned many times
Liability of successors to the original parties
Spencer’s Case [1583] – burden of covenant will pass to new tenant (applies to covenants that ‘touch and concern’ the land)
Modern interpretation in City of London Corporation v Fell [1994] – ‘after an assignment, the benefit of a covenant by the original landlord which
touches and concerns the land runs with the term granted by the lease. The burden of a covenant by the original tenant which touches and concerns
the land also runs with the term’, Lord Templeman
T2 → when the original tenant covenants with the landlord, eg to repair property, it is an obligation that passes with the land. T1 and all other
successors in title to the original tenant will have the benefit of covenants entered into by the landlord with that tenant, BUT they must also accept
the burden of the original tenant’s covenants, provided that they are covenants that ‘touch and concern’ the land
Even with no contract between L and T1, T1 has replaced T as tenant.
L and T1 are in the position of landlord and tenant- there is a privity of estate between them
Law of Property Act 1925;
S141 Rent and benefit of lessee’s covenants to run with the reversion → entitlement to the rent and the benefit of all the tenant’s
covenants in the lease that have ‘reference to the subject matter thereof’ are annexed to the reversionary estate. They will pass to L1
and any subsequent owner of the reversion, thus allowing L1 to sue T
S142 obligation of lessor’s covenants to run with reversion → obligations under any covenant entered into by the landlord ‘with
reference to the subject matter of the lease’ are similarly annexed to the reversionary estate. These obligations will be binding on L1 and
subsequent owners of the reversion. There will thus be privity of estate between L1 and T since L’s estate is now vested in L1.
Covenants have ‘reference to the subject matter of the lease’ in s141 and 142. Spencer’s Case refers to covenants that ‘touch and concern’ land
Covenants which don’t relate to land have nothing to do with landlord/tenant
The two expressions are identical in meaning – often referred to as ‘real’ covenants as opposed to ‘personal’ covenants’
To decide whether benefit and burden of covenant passes, establish if its covered by one of these phrases
(Grant v Edmondson [1931] – ‘in connection with the subject of covenants running with the land, it is impossible to reason by analogy. The
established rules concerning it are arbitrary and the distinctions for the most part quite illogical’, Romer LJ)
, P&A Swift Investments v Combined English Stores Group plc [1989,] Lord Oliver– ‘whether a covenant touches and concerns the land;
(1) The covenant benefits on the reversioner for the time being, and if separated from the reversion ceases to be of benefit to the covenantee
(2) The covenant affects the nature, quality, mode of use or value of the land of the reversioner
(3) The covenant is not expressed to the personal (neither being given only to a specific reversioner nor in respect of the obligations only of a
specific tenant)
(4) The fact that a covenant is to pay a sum of money won’t prevent it from touching and concerning the land so long as the three above
conditions are satisfied and the covenant is connected with something to be done on to or in relation to the land’
Eg T’s covenant to pay rent to L, T’s covenant to repair the demised premises, L’s covenant to insure the demised premises, T’s covenant not to
assign without L’s consent, T’s covenant to pay £40 towards redecoration on quitting premises, L’s covenant to renew the lease
‘L’s covenant not to open another pub within 2 miles’ is a non-competition clause – it relates to business carried out on the land, not to the land
itself, so doesn’t ‘touch and concern’ (Thomas v Hayward [1869])
Situation where both the reversion and the lease have been assigned
The original tenant is liable on the tenant’s covenants throughout the entire term of lease due to privity of contract
L can sue T for T1’s failure to pay rent (since privity of contract passed under s141
L could also sue T1 for, eg breaching covenant restricting use of the land since the burden of covenant not to use land for specific reason
will have passed (Spencer’s Case)
A privity of estate between current landlord and current landlord –
o so, any burden to keep property in good repair has passed to new landlord, as it is a covenant in reference to the subject
matter of the lease (s142)
Although the original parties to the lease will remain liable throughout the term, their successors in title are only liable for breaches committed
whilst the lease or reversion is vested in them
If Ts fails to pay rent, L can sue R (relying on privity of estate) or T (relying on privity of contract) – so T1 is ‘off the hook’
= considerable hardship to T
Case where rent is owed by T2:
T is still liable for the covenant throughout the entire lease. L has the right to sue T
L must first serve a notice informing him that the charge is now due and specifying the amount. The notice must be served within 6
months of the charges becoming due (s17 Landlord and Tenant (Covenants) Act 1995)
If he T pays, he may have following rights ;
Moule v Garrett – where one person discharges the liability of another, that person may seek to recover the amount he has paid from the person
whose liability he has discharges
Indemnity Covenant – when T assigned the lease to T1, he may have obtained an express covenant to indemnify him. Even if he didn’t, one is
implied either under s77 LPA 1925 (if title is unregistered) or under Sch12, para 20 Land Registration Act 2002 (if title is registered). T may
therefore succeed in recovering from T1 any money he has to pay to L
(Also, possible for T to ask L to grant him an overriding lease under s19 Landlord and Tenant (Covenants) Act 1995 – would enable T to regain an
interest in the premises – to then seek a remedy against T2 to recover some of the money T had to pay – include a remedy of forfeiture, which
would end T2’s lease) → beyond scope of Manuel
Personal covenants
Imagine covenant where tenant will give the landlord a free 3-course mean every month = a personal covenant
Ss141 and 142 LPA and rule in Spencer’s Case don’t apply to personal covenants as it doesn’t have reference to the subject matter of the lease,
neither does it touch and concern the land. The benefit and liability for this personal covenant wont pass to successors in title
Summary:
A successor in title to the landlord takes the benefit of the tenant’s covenants and is liable on the landlord’s covenants if the covenants
have reference to the subject matter of the lease (ss141 and 142 LPA).
Similarly, a successor in title to the tenant takes the benefit of the landlord’s covenants and is liable on the tenant’s covenants if the
covenants touch and concern the land (Spencer’s Case)
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