Leasehold Covenants
- The fee simple owner's estate can be described as the 'reversion'
- The landowner can assign the reversion to another
- The lease is a proprietary right so the landowner would be bound
- The leaseholder can assign their lease
- The current landlord and tenant do not have to be the original parties to the lease
- When a lease is created, the original parties will have included leasehold covenants, regarding matters of rent, repair, insurance etc.
- This creates problems when either party assigns their estate: some need to bind; some don't
- The assignee was not a party to the original contract
- Old tenancies are those originally granted before 1/01/1996
- New tenancies are after
- Assignment after 1996 does not turn it into a 'new tenancy'
- Privity of contract is between L1 and T1
- Privity of estate is between the current L and current T
- The covenants that do bind are real covenants
- Congleton Corp. v Pattison 1808:
Lease originally granted in 1752
Tenant was given a right to build a mill on the land
Covenant to not hire those outside the parish
Didn't affect the user of the land, so made no difference to the mill
Assignee of the lease wasn't bound
- Hua Chiao Commercial Bank Ltd v Chiaphua Industries Ltd 1987:
- P & A Swift Investments v Combined English Stores Group PLC 1989:
- There is no scientific working test
- Cf Thomas v Hayward 1868-9
- Lewin v American & Colonial Distributors Ltd:
When the tenancy was passed on, the new leaseholder acted in disregard of that covenant
Named individual was openly involved in the business
Despite the ruling of Congleton, the covenant was held to be real in this case
Can't exclude a class, can exclude one person
- If you take what appears to be a real covenant and name it a personal covenant, it will not bind
- T1 and L1: all covenants apply (privity of contract)
- T2 and L2: only real covenants apply
- T2 and L1: if T2 breaks a real covenant, L1 can sue T1
- T1 and L2: the benefit is conferred to L2 from L1
- L2 and T2: L2 can still sue T1 and T2
- Position in 1980s:
Rent reviewed every 7 years
Promise not to make alterations to the premises without the landlord's consent
Within a few years T1 assigned onto T2
T2 installs toilets on the premises
First rent review comes up
Increased the rent because the alterations made the premises more valuable
T2 couldn't pay rent, L1 sued T1 for higher rent due to the alterations
L1 could sue T1 for higher rent
- Friends Provident Life Office v British Railway Board 1996:
Extent of the original tenant's liability
If there was a 25 year lease, granted in 1995, and T3 doesn't pay 1st Jan 2012 rent. Can T1 be sued? Original landlord can in principle sue T1, but we have to look at s 17: if L1 wishes to sue T1 for the unpaid rent, L1 must serve problem notice within six months of the due date. The last potential date to serve notice is the 30th June 2012. If it is not served, T1 is off the hook.
Section 18 is a statutory confirmation of Friends Provident. If T1 is sued for T3's breach, T1 may seek to be indemnified by their immediate assignee (T2).
Landlord and Tenant (Covenants) Act 1995