Leasehold Covenants

Absolute prohibitions

short-term lease, landlord may impose an absolute covenant against alterations

when can tenant that has agreed to an absolute covenant against alterations, rely on statutory exceptions

tenant of business premises can use s3 Landlord and Tenant Act 1927 - can serve a notice on landlord, landlord has 3 months to object and if does then tenant can apply to court for authorisation to carry out improvements. Court can authorise if improvements add to letting value of property, are reasonable and are suitable to the character of property

landlord can offer to carry out works in return for a reasonable increase in rent - s3(1)

Equality Act 2010 - implied consents reasonable adjustments

Qualified prohibition

qualified covenant against alterations prohibits alterations without the landlord’s prior consent. under s19(2) term is implied into a qualified covenant against making improvements that landlord cannot unreasonably withhold consent. In relation to improvements, landlord cannot withhold consent unreasonably, alterations they can.

Fully qualified covenant

clear that landlord cannot withhold consent unreasonably to an alteration, whether or not it amounts to an improvement

compensation for tenants of business premises

tenant entitled to claim compensation for improvements at the end of the term that add to the letting value of the holding, tenant must have obtained prior authorisation and must claim within time limits

different approaches to insurance

tenant can be made solely responsible or landlord can take out insurance and charge tenant for the cost

risks covered

risks insured should be stated expressly - e.g. fire, storm flood but also to say such other risks as landlord may reasonably require or tenant may reasonably request

amount of cover

must be for full reinstatement value

application of policy monies - insurance

should be a covenant by the landlord to use the proceeds to reinstate the premises, ideally includes an obligation for the landlord to make good any shortfall in proceeds out of their own pocket

rent suspension

in absence of express term, rent continues to be payable even if unusable so lease should provide for payment of rent to be suspended during any period that premises can’t be occupied following damage by an insured risk

termination - after insured risk

unless lease says otherwise, if building totally destroyed, only in exceptional circumstances that doctrine of frustration will apply and lease will be terminated

permitted use

needs to be defined e.g. commercial use only, a very restrictive user clause may cause reducing of rent in rent review

often defined by use classes