Land - Covenants in Leases

What are the key parts of a lease?

key terms, tenant covenants, landlord covenants, landlord rights.

What is the basic rule of a lease regarding tenant use/rights?

A tenant may do all things that an owner of an estate can do unless the lease prohibits those actions

What are the demise & rent sections in a lease?

Operative provisions where landlord demises or grants the lease of the premises to the tenant for a specified term in consideration of rent paid

In what way are leases drafted?

In a prohibitory manner - setting out what a tenant cannot do by tenant covenants

What issues are covered in the tenant covenants?

Obligation to pay rent, use of premises, alterations, assignment/underletting

What is a common landlord covennat?

covenant for quiet enjoyment - agreement not to interfere with tenant's possession or enjoyment of the property

What is the general rule for what a tenant can do in a lease?

All the things an owner of an estate can do unless the lease prohibits such actions.

Can a tenant do something if the lease is silent on it?

Yes !

Will a tenant be obliged out to carry out renewal of the property under a repairing covenant?

No - renewal (eg replacing something) will not fall under repairing obligation

What kind of things will the landlord covenant to do in a commercial lease of part?

Provide services, maintain common areas & insure the building.

What are the guarantor covenants?

Covenants by an individual or company to guarantee payments/obligations which must be made under the lease

What is the provisos, agreements and declarations section in a lease?

Misc section, deals with:

Forfeiture

What happens if damage/destruction by insured risks

Clauses excluding security of tenure provisions

What is forfeiture?

Landlord's right to end the lease early if tenant breaches the lease

What is security of tenure?

A right for the tenant to remain in premises at the end of the lease term and to request the grant of a new lease.

What kind of rights might be granted in a lease?

Right of way, access, parking, to use common parts, etc.

What rights might a landlord reserve in the premises?

Access, running cables through, repairs to rest of building

What is execution of a lease?

- Landlord, tenant and guarantor will need to execute the document in accordance with normal attestation rules.

- Lease must be granted by deed, unless under 3 years.

What are the 4 key covenants areas in a lease?

Repair

Alterations

User

Alienation

What are old leases?

Leases created before 1 January 1996

- regardless of when later assignment of the lease takes place

What is the old tenant's liability under old leases after assignment?

old tenant's liability to the landlord (and vice versa) will continue for the duration of the lease term, even after assignment has occured many times over

What is privity of contract for old leases?

the original landlord and tenant are liable for breaches of covenant by their successors for the whole duration of the lease

What is privity of estate for old leases?

- covenants that 'touch and concern' the land are enforceable between successor landlord and tenants

- (personal covenants between original tenant and landlord will not pass)

What will a landlord of an old lease require from an assignee?

- will want them to enter into a direct covenant to observe obligations for the rest of the lease

- if this is obtained, the tenant in occupation can be sued (as well as the original tenant)

What are the formalities to create a sublease (depending on length of lease)?

sublease of more than 7 years = must be granted by deed and registered

sublease of 7 years or fewer = must be granted by deed but does not need to be registered, as it is an overriding interest

sublease of 3 years or fewer = no formalities required

What was the effect of the LCTA 1995 on covenants? (move from old leases to new leases)

- abolished privity of contract for all new leases

- therefore, the original landlord and tenant are no longer liable for the whole duration of the lease term

What are the obligations on an outgoing tenant of a new lease, upon assignment?

will obtain automatic release from their covenant as a tenant upon assignment

- UNLESS the tenant has assigned the lease without permission, in breach of the lease terms (an 'excluded assignment)

- OR the tenant has breached a covenant prior to the assignment - will remain liable for their own breach

- OR the tenant in a commercial lease has entered into an authorised guarantee agreement (AGA)

What are the obligations on a landlord of a new lease, upon assignment to a new landlord?

- no automatic release of the landlord upon assignment to a new landlord

- must apply to the tenant for this

- if the tenant refuses to allow this, landlord can apply to the court

How does an AGA work?

- outgoing tenant acts as guarantor to the assignee

- if the assignee breaches a covenant, landlord can sue the tenant

(for commercial leases)

What is the difference between liability for old leases and liability for new leases with an AGA?

- tenant of an old lease is liable for all subsequent assignees' breaches during the length of the term

- tenant under a new lease under an AGA is only liable for the incoming assignee, and no one after that

Will this covenant pass upon sale of the reversion/assignment of the lease:

"Jane covenants to only use the premises as a hair salon"?

Will not pass, as it is a personal covenant

What is the effect of s. 17 LCTA 1995? (default notices for fixed charges)

- applies to new and old leases, when a landlord wants to pursue a former tenant for a fixed charge, and they remain liable under old lease or AGA

- landlord must serve notice of the claim on the former tenant within 6 months of the charge becoming due

- but cannot claim for longer than 6 months' arrears

What is the effect of s. 18 LCTA 1995? (liability for variations to the lease)

- applies to former tenants still liable under old lease or AGA

- former tenant will only be liable to pay anything arising due to a variation to the original lease, if the variation was foreseeable and anticipated when the lease was entered into

e.g., rent has been increased because of rent review clause

What is the effect of s. 18 LCTA 1995? (former tenant granted overriding lease)

- Where the former tenant pays the sum demanded in full, it is entitled to an overriding lease from the landlord

- e.g., landlord serves default notice to former tenant because current tenant is in default, former tenant can request an overriding lease, which makes them the landlord of the current tenant

- therefore, as landlord to the current tenant, they can choose to forfeit the lease because of the default, and either assign or sub-let to a new tenant

What is the relationship between head landlord and subtenant when there is a sublease in place?

- no automatic direct relationship between them

- landlord will usually ask for a direct covenant from the sub-tenant that it will observe the covenants in the lease