Unit 7: Landlord's Remedies and Lease Termination

How long does the original tenant remain liable under a lease granted before 1 January 1996?

For the whole term of the lease, even after assigning it (privity of contract).

On what basis can the landlord of an old lease sue the current tenant?

Privity of estate.

When can the landlord of an old lease also sue intervening tenants?

In privity of contract, if each incoming tenant gave the landlord a direct covenant on the assignment.

Which Act governs liability on covenants in leases granted on or after 1 January 1996?

The Landlord and Tenant (Covenants) Act 1995.

What happens to the original tenant of a new lease when it assigns the lease?

It is automatically released from the covenants, unless it gave an authorised guarantee agreement (AGA).

What is an authorised guarantee agreement (AGA)?

A promise by the outgoing tenant that it will be liable for breaches of covenant by the incoming assignee. The landlord can require one in certain circumstances as a condition of consent to assignment (commercial leases only).

How long does an AGA last?

Only for the duration of the assignee's ownership of the lease. When the assignee assigns on, the tenant who gave the AGA is released, and the assignee must give its own AGA.

What is the position of a guarantor of a former tenant under an old lease?

Liability is likely to extend through the whole term of the lease, regardless of an assignment by the guaranteed tenant.

What is the position of a guarantor of a former tenant under a new lease?

The guarantor is automatically released on assignment. An attempt to make the guarantor directly guarantee the incoming tenant is likely to be void.

How can the landlord of a new lease indirectly keep the outgoing tenant's guarantor liable?

By requiring the guarantor to guarantee the outgoing tenant's obligations under the AGA, which indirectly guarantees the incoming tenant until a further assignment.

What are the first two things to check where rent has not been paid?

That there is a covenant to pay rent in the lease, and that the tenant failed to pay by the due date.

Where can an action in debt for unpaid rent be brought, and what is the limitation period?

High Court or County Court. Six years under the Limitation Act 1980.

What is Commercial Rent Arrears Recovery (CRAR)?

A remedy allowing the landlord to enter commercial premises and seize and sell the current tenant's goods to recover rent arrears.

What are the procedural requirements for CRAR?

Seven days' notice of intention to enter, an enforcement agency must be used to enter and remove goods, and sale must be by public auction with at least seven clear days' notice to the tenant.

Which goods cannot be taken under CRAR?

Tools of the trade necessary for the tenant's business (up to £1,350, e.g. computers, telephones) and goods that do not belong to the tenant (e.g. leased or hire purchase items).

What arrears can be recovered using CRAR?

Only rent paid for possession and use of the premises, and at least seven days' rent must be outstanding. Other payments (e.g. insurance rent) are not recoverable, even if reserved as rent.

Why might a landlord pursue a guarantor or former tenant rather than the current tenant for unpaid rent?

They may be better prospects, especially if the current tenant is in financial difficulty.

Why would a landlord require a guarantor, and what form must the guarantee take?

Because it has reservations about the proposed tenant's ability to pay rent (e.g. a newly formed company). The guarantee must be in writing.

What must a guarantor do under a guarantee?

Pay the rent and any other sums due if the tenant does not, and remedy or indemnify the landlord against loss caused by the tenant's breaches of covenant.

What is a s 17 default notice and when is it needed?

A notice under s 17 Landlord and Tenant (Covenants) Act 1995 that the landlord must serve on a former tenant or their guarantor to recover a fixed charge from them.

What is a fixed charge for the purposes of s 17?

A monetary payment such as rent, service charge or another liquidated sum.

What is the time limit for serving a s 17 default notice?

Within six months of the sum falling due (the current tenant's breach), otherwise the landlord cannot claim it from the former tenant or guarantor.

Does the landlord have to start proceedings when serving a s 17 notice, and which leases does s 17 apply to?

No, the notice simply gives notice of the claim. It applies to all leases, old and new.

What is an overriding lease?

A headlease between the landlord and the former tenant or guarantor, slotted in above the defaulting tenant. The former tenant or guarantor can call for it after paying the sum claimed in a default notice, becoming the defaulting tenant's immediate landlord.

What is a rent deposit and how much is it usually?

Cash deposited by the tenant as security for payment of rent and performance of covenants, generally 6-12 months' rent, governed by a rent deposit deed.

When can the landlord draw on a rent deposit?

As soon as the tenant is in breach of a relevant covenant (provided the landlord is not in breach of the deed), without court action. The deed normally requires the tenant to top it up.

When is the rent deposit balance normally returned to the tenant?

At the end of the term or on an earlier lawful (approved) assignment.

What does forfeiture do and what does it require?

It ends the lease and gives the landlord vacant possession. The lease must contain a forfeiture clause.

Is a formal demand needed before forfeiting for non-payment of rent?

Common law requires one, but the lease can dispense with it. The landlord must also wait the period stated in the lease (e.g. 21 days) after the rent becomes payable.

What are the two ways a landlord can forfeit a lease?

Peaceable re-entry (without force) or, if that is not possible, a court order.

What is relief from forfeiture?

The tenant can apply to the court, which has discretion to allow the lease to continue, usually on condition that the tenant pays all arrears and costs.

How can a landlord waive its right to forfeit?

By any act showing an intention to continue the landlord and tenant relationship, e.g. demanding or accepting rent after the breach has arisen.

What practical factors affect the choice of remedy for non-payment of rent?

Relative cost of the procedure, time it will take, effect on the continuing relationship with the tenant, and the likelihood of the problem recurring.

A landlord pursues a former tenant (AGA) for nine months' unpaid rent. How much can it recover under s 17 in the worked example?

Only six of the nine months' rent, because the landlord can only recover sums falling within six months of the notice being served.

What is the downside of forfeiture where the property market is depressed?

The landlord could be left with an empty property for some time, and a successful relief application would frustrate the forfeiture and waste time. The threat of forfeiture may still persuade the tenant to pay.

When will specific performance be granted for breach of a repair covenant?

Only where other remedies are not appropriate, as it is an equitable and discretionary remedy.

What factors led the court to grant specific performance in Rainbow Estates v Tokenhold?

No forfeiture or self-help clause in the lease, damages not adequate (property deteriorating), the order was not sought to harass the tenant, and it was appropriate in the circumstances.

Is damages always available for breach of a repair covenant, and what limits it?

Yes, as a breach of contract, but the landlord may not recover the full cost of repairs because of s 18 Landlord and Tenant Act 1927 and the Leasehold Property (Repairs) Act 1938.

What is the effect of s 18 Landlord and Tenant Act 1927?

Damages are limited to the amount by which the landlord's reversion has diminished in value as a result of the disrepair, which may be less than the cost of repairs.

When does the Leasehold Property (Repairs) Act 1938 apply?

To leases granted for seven or more years with at least three years left to run.

What procedure applies to a damages claim under the Leasehold Property (Repairs) Act 1938?

The landlord must serve notice on the tenant. The tenant has 28 days to serve a counter notice, after which the landlord cannot proceed without leave of the court.

What is a self-help (Jervis v Harris) clause?

A lease clause allowing the landlord to enter, carry out repairs the tenant has failed to do, and recover the cost from the tenant as a debt.

What is the typical process under a self-help clause?

Landlord enters to check compliance, serves a notice specifying the works, and if the tenant fails to start within the specified period (or is not proceeding diligently) the landlord enters, does the works and recovers the cost as a debt.

Why is a self-help clause beneficial to the landlord?

The claim becomes a debt claim, not damages, so the restrictions of the 1927 and 1938 Acts do not apply and the full cost can be recovered.

What are the drawbacks of using a self-help clause?

The landlord must bear the initial cost of the works, and incurs further costs if it has to sue the tenant to reimburse it. A financially struggling tenant may be unable to pay. The clause must also be in the lease.

Which statutory procedure must be followed to forfeit for breach of a covenant other than rent?

Section 146 Law of Property Act 1925.

What must a s 146 notice do?

Specify the breach, require remedy within a reasonable time if it is capable of remedy, and require compensation for the breach.

What happens if the tenant does not comply with a s 146 notice?

The landlord can forfeit by peaceable re-entry or court order, but the tenant can apply for relief from forfeiture.

How does the Leasehold Property (Repairs) Act 1938 affect a s 146 notice for disrepair?

The notice must include notification of the tenant's right to serve a counter notice within 28 days. If the tenant does so, the landlord can only forfeit with leave of the court.

Why does the law give tenants statutory protection against repair claims?

To protect tenants from landlords who would use trivial or remediable disrepair to terminate leases for unrelated commercial reasons.

Does a landlord need to serve a s 17 notice to claim against a former tenant under an AGA for breach of the repair covenant?

No. A s 17 notice is only needed for fixed charges such as rent, service charge or other liquidated sums, and a repair claim is not one.

Give examples of breaches of covenants other than rent and repair.

Changing use or making alterations without consent (and breaching planning and statutory consent covenants), letting third parties into occupation, or assigning or underletting without the landlord's consent.

What remedies are available for breaches of covenants other than rent and repair?

Forfeiture, injunction, specific performance, damages, pursuing a former tenant or their guarantor, and deduction from a rent deposit (if the deed allows).

How does forfeiture for other covenant breaches differ from forfeiture for disrepair?

A s 146 notice is still needed, but it does not need to include notification of the tenant's right to serve a counter notice.

When is an injunction available as a remedy for breach of covenant?

For breach of a negative covenant (e.g. a user covenant), or to prevent an anticipated breach such as an assignment in breach of covenant.

When will specific performance be granted for breach of other covenants?

Only where the positive obligation is sufficiently precise, performance or supervision over time is not required, and damages are not an adequate remedy.

What is surrender of a lease?

A mutual act by tenant and landlord treating the lease as no longer in existence. It is not a remedy in the technical sense but a practical way to resolve problems.

How are commercial lease surrenders usually carried out, and what can they deal with?

Formally by a deed of surrender (informal surrender by operation of law, e.g. handing back keys, is possible). The deed can deal with arrears. It is often quicker and cheaper than forfeiture but needs both parties' willingness.

Which remedy is the only one that entitles the landlord to regain possession?

Forfeiture.

Which landlord remedies are only available if the lease contains a specific clause?

Forfeiture (forfeiture clause) and self-help (self-help clause).

How does a fixed-term lease end at common law?

Automatically by effluxion of time when the contractual term expires. No notice is needed.

How is a periodic tenancy ended at common law?

By notice to quit from the landlord or tenant. Yearly tenancy: at least 6 months' notice expiring at the end of a completed year. Other periods: one full period's notice expiring at the end of a completed period.

What is surrender of a lease?

The tenant yields up the lease to the landlord, who accepts it. Both parties must agree, and it must be by deed (LPA 1925, s 52).

What is the effect of surrender on the lease?

The lease merges in the landlord's reversion and is extinguished.

What is merger of a lease?

Where the tenant acquires the immediate reversion (the landlord's estate), or a third party acquires both the lease and the reversion. The lease is extinguished. It is the opposite of surrender.

Can a lease be preserved on merger?

Yes, if the tenant or third party expressly preserves the lease in the documentation. Otherwise it merges automatically and is extinguished.

When does Part II of the 1954 Act apply (s 23)?

To a tenancy (not a licence) of premises occupied by the tenant for the purposes of a business carried on by them (or for those and other purposes).

How is "business" defined for the 1954 Act?

Widely: a trade, profession or employment and, for a body of persons, any activity carried on by them (e.g. a tennis club or hospital).

What does s 24 of the 1954 Act provide?

A tenancy to which Part II applies does not come to an end unless terminated in accordance with Part II.

Which business tenancies are not protected by the 1954 Act?

Tenancies at will, fixed terms not exceeding 6 months, agricultural holdings, farm business tenancies, mining leases, and contracted-out tenancies.

When can a tenancy of 6 months or less still be protected?

If the tenant (or a predecessor in the same business) has been in occupation for more than 12 months, or if the lease contains a provision allowing renewal or extension beyond 6 months.

How does a landlord contract a lease out of the 1954 Act?

Before the lease starts, the landlord serves a prescribed-form notice warning the tenant and advising professional advice. The tenant then makes a prescribed-form declaration that they received the notice and agree to contract out.

When must the tenant make a statutory declaration when contracting out?

If the notice is given less than 14 days before the grant of the lease, the declaration must be a statutory declaration made before an independent solicitor.

What must the lease contain for contracting out to be effective?

A reference to the service of the notice and the tenant's declaration, contained or endorsed on the lease.

What are the seven ways a protected tenancy can be terminated under the 1954 Act?

(1) Landlord's s 25 notice; (2) tenant's s 26 request; (3) forfeiture; (4) surrender; (5) tenant's notice to quit (periodic tenancy); (6) tenant's s 27 notice (fixed term); (7) tenant ceasing business occupation at end of a fixed term (s 27(1A)).

Can a landlord serve a notice to quit on a protected periodic tenant?

No. Only the tenant can serve a notice to quit. The landlord's only routes are forfeiture, surrender or a s 25 notice.

How can a protected tenant end a fixed-term lease on the contractual expiry date?

By ceasing to occupy for business purposes by the end of the lease (s 27(1A)) or by serving a s 27 notice giving three months' prior written notice.

How can a protected tenant end a fixed-term lease after the contractual expiry date?

Only by serving a s 27 notice giving the landlord three months' notice, or by agreeing a voluntary surrender.

What is a s 25 notice?

The landlord's notice terminating a protected tenancy. It states the termination date, the landlord's proposals for the new lease, and the s 30 grounds if the landlord opposes renewal.

What are the time limits for serving a s 25 notice?

It must be served no less than 6 months and no more than 12 months before the termination date specified in the notice.

What is the earliest termination date a s 25 notice can specify?

No earlier than the date the tenancy could have been ended at common law (for a fixed term, the contractual expiry date).

What happens if a landlord serves a s 25 notice too late to end the tenancy on the contractual expiry date?

The termination date must be at least 6 months after service, so the tenancy continues until then (a continuation tenancy).

If a s 25 notice is served on 25 June 2026, what range of termination dates can it specify?

Between 25 December 2026 (6 months) and 25 June 2027 (12 months).

What must a tenant do if the landlord's s 25 notice opposes renewal?

Apply to court before the s 25 notice expires, or lose its rights under the 1954 Act.

Can a landlord pre-empt the tenant's court application after a s 25 notice?

Yes, by applying for an order to terminate the lease on the grounds stated in the s 25 notice, unless the tenant has already applied for renewal.

What should a tenant do if the s 25 notice does not oppose renewal?

Negotiate the new lease but still apply to court within the time limit to safeguard its position. The deadline can be extended by agreement.

What is a s 26 request?

A tenant's request for a new tenancy. It ends the current tenancy and must state the proposed start date and the tenant's proposals for the new tenancy.

What time limits apply to a s 26 request?

The same as a s 25 notice: the tenant must give between 6 and 12 months' notice of the date the new tenancy is to start, which cannot be earlier than the date the tenancy could have ended at common law.

Why might a tenant serve a s 26 request?

E.g. if rents have fallen and a reduced rent could be achieved, or if the tenant plans to assign and a new fixed term would make the lease more attractive to a buyer.

How must a landlord oppose a s 26 request?

By serving a counter-notice within 2 months of the request, stating the s 30 ground(s) of opposition.

By when must the tenant apply to court after a s 26 request?

Before the commencement date of the new tenancy stated in the s 26 request (unless the landlord agrees an extension), whether or not the landlord opposes renewal.

If a landlord does not oppose renewal after a s 26 request, must it serve a counter-notice?

No. The parties negotiate the terms, but the tenant should still apply to court before the start date in the request to protect its position.

What are the seven s 30 grounds of opposition?

(a) failure to repair; (b) persistent delay in paying rent; (c) substantial breach of other obligations; (d) alternative accommodation offered; (e) tenancy is an underletting of part; (f) demolition or reconstruction; (g) landlord's own occupation.

Which s 30 grounds are discretionary?

(a), (b), (c) and (e). The landlord must show the tenant ought not to be granted a new tenancy in view of the facts giving rise to the ground.

Which s 30 grounds are mandatory?

(d), (f) and (g). The landlord simply has to prove the ground.

What must a landlord prove for ground (f)?

A firm and settled intention to carry out the work (e.g. planning permission and finance), an intention to demolish, reconstruct or carry out substantial works, and that it cannot reasonably do so without obtaining possession.

When will ground (f) fail?

If the tenant agrees to give access so the work can reasonably be carried out without obtaining possession and without substantially interfering with the tenant's use.

What is the five-year rule for ground (g)?

The landlord must have owned its interest for at least 5 years before the ending of the current tenancy (i.e. the termination date in the s 25 notice). This stops a landlord buying the reversion cheaply and then using the ground.

What else must a landlord show for ground (g)?

A firm and settled intention to occupy for its own business or as a residence, practical steps taken by the date of the hearing, and a reasonable prospect of achieving it (not that the business will succeed).

What property is the tenant entitled to under a new lease?

The "holding": the current tenancy's property excluding parts the tenant has underlet. The landlord can insist the new tenancy covers the whole of the originally demised property.