Land S5b: Enforceability of leasehold covenants, remedies for breach.

Old leases (pre-1996)

Privity of contract means that…

Relying on privity of contract, if the current (successor) tenant fails to pay rent, the landlord may…

covenants will be enforceable between the original landlord and the original tenant for the duration of the lease.

pursue the original tenant to claim the arrears.

Old leases (pre-1996)

Privity of estate exists between…

If privity of estate exists, then the current successors in title to the original landlord and original tenant may be ? provided ?

a landlord and the successor in title (current tenant) to the original tenant.

liable to each other (meaning the benefit and burden of the covenants will pass on) provided that the covenants ‘touch and concern the land’ and are not personal.

Old leases (pre-1996)

If the original tenant is sued by the landlord for a breach by the current tenant (the assignee), then the original tenant may…

rely on the indemnity implied into any assignment by s.77 LPA 1925 and claim the money back.

New leases (post-1996) - The Landlord and Tenant (Covenants) Act.

Upon assignment of the lease, all covenants…

Upon assignment, the original tenant is…

pass to the assignee (successor tenant) as long as they are not personal.

automatically released from liability for the covenants.

New leases (post-1996) - The Landlord and Tenant (Covenants) Act.

How can an outgoing landlord be released from liability for the leasehold covenants?

It is NOT automatic.

The Landlord can serve notice on the tenant seeking a release, and will be released unless the tenant serves a written counter-notice within 4 weeks objecting to the release.

New leases (post-1996) - The Landlord and Tenant (Covenants) Act.

Where a new lease contains a qualified covenant against assignment, and the current tenant asks for permission to assign, the landlord may ask the current tenant (the assignor) to enter…

Through an…

into an authorised guarantee agreement (AGA).

AGA, a tenant can only be made to guarantee the liability of their immediate successor.

New leases (post-1996) - The Landlord and Tenant (Covenants) Act.

If a tenant becomes liable under an AGA, they will be able to recover from the assignee based on (2 options)…

the principle in Moule v Garret OR on the basis of an express indemnity from the assignee on assignment.

There are no statutory implied indemnities for new leases (only old).

Basic summary of potential liability of tenants.

1) Pre-1996, old leases:

2) Post-1996, new leases:

1) Current tenant + Original tenant.

2) Current tenant + Immediate predecessor if AGA.

Remedies for breach of leasehold covenants - non-payment of rent.

Action for debt:

The landlord may simply…

sue for non-payment of rent.

Statute puts a limitation of 6 years on the recovery of rent.

This action does not bring the lease to an end.

Remedies for breach of leasehold covenants - non-payment of rent.

Commercial rent arrears recovery (CRAR):

The landlord enters the premises and…

seizes the current tenant’s goods and sells them to pay any arrears of rent.

The landlord cannot seize goods up to value of £1350 that are necessary for the tenant’s business.

Only applies to commercial leases.

This action does not bring the lease to an end.

Remedies for breach of leasehold covenants - non-payment of rent.

Forfeiture:

Forfeiture is the right to re-enter and is exercised against the tenant in possession.

What must the lease contain?

What must the landlord first make?

The landlord then takes what?

To forfeit a lease of a dwelling, what is needed?

What can the tenant do?

An express forfeiture clause.

A formal demand for the rent due by attending the premises.

Physical possession of the property and prematurely terminates the lease.

Dwelling = A court order is required.

The tenant can apply to the court for relief from forfeiture. The court has discretion to allow the lease to continue (on the condition that the tenant paid all arrears and costs).

Remedies for breach of leasehold covenants - covenants other than rent.

Forfeiture:

Forfeiture is the right to re-enter and is exercised against the tenant in possession.

What must the lease contain?

The landlord must first serve what?

What is the additional requirement where the lease was for 7 years with at least 3 years unexpired?

The landlord may then forfeit either by…?

What can the tenant do?

An express forfeiture clause.

S.146 notice on the tenant specifying the breach of covenant, requiring it to be remedied and compensation.

7 years, 3 years unexpired: The s.146 notice must include notification of the tenant’s right to serve a counter notice within 28 days.

Serving proceedings or peaceable re-entry.

The tenant can apply to the court for relief from forfeiture. The court has discretion to allow the lease to continue (on the condition that the tenant paid all arrears and costs).

Remedies for breach of leasehold covenants - covenants other than rent (e.g. covenants to repair).

List 4 potential remedies (excepting forfeiture):

-Damages (limited under statute to the diminution in value of the landlord’s reversion).

-Specific performance (rare - only where other remedies not appropriate).

-Injunction.

-Self-help by means of set-off (debt instead of damages).

Before the landlord can pursue a former tenant for the payment of rent, what must they do?

What can they recover?

They must serve a s.17 default notice on the former tenant within 6 months of the rent falling due.

They can only recover the sum owed for the past 6 months (payments defaulted over 6 months ago cannot be recovered).

What is a rent deposit?

A landlord can require a tenant to deposit a cash sum as security for payment of the rent and performance of the tenant’s covenants contained in the lease.

The landlord can draw upon the money as soon as the tenant is in breach.