Leases Running Of Covenants Ii Notes

• Introduction – Landlord and Tenant (Covenants) Act 1995

  - 1 Jan 1996: LT(C)A 1995 came into force.

  • app. to all ‘new leases’: all leases created after 1 Jan 1996.

    • some exceptions: where option or agreement to grant lease entered into before 1 Jan 1996.

  • old leases: pre-1996 rules still apply, but modified by retrospective provisions – s17-s19 LT(C)A.

    • date of assignment irrelevant: if lease created pre-1996, old rules apply even if later assignment.

  - Main provisions.

  • liability of original parties:

    • s5: abolishes continuing liability of original T.

    • ss6-8: enables original L to be released for continuing liability.

    • s11: excluded assignments – original parties not released.

    • s16: Authorised Guarantee Agreement (AGA) – T guarantees performance of covenants by assignee.

    • s22: commercial leases – pre-conditions to assignment possible.

  • passing of benefit + burden:

    • s2: app. to all landlord + tenant covenants – ‘touching + concerning’ requirement abolished.

    • s3: passes benefit + burden of all landlord + tenant covenants.

      s3(5): restrictive covenants can be enforced directly on sub-tenant.

      s3(6): NOT covenants ‘expressed to be personal’.

      • replaces Spencer’s Case + ss141-142 LPA 1925.

    • ss23-24: previous L can still sue for breaches before assignment; new L cannot.

  • retrospective provisions – app. to old + new leases:

    • s17: warning notice of rent claim against former T must be served within 6 months of rent arising.

    • s18: former T not liable for unforeseen variations to lease.

    • ss19-20: former T can claim overriding lease within 12 months of paying out.

  • s25: no contracting out.

  Liability of Original Parties: Privity of Contract Abolished

  - Assignment of the lease: T automatically released from liability.

  • s5: T. released from tenant covenants + no longer entitled to benefit of landlord covenants on assignment.

  • s24: T still liable for breaches before assignment.

  - Assignment of the reversion: L can apply to be released from liability.

  • s6: L may apply to be released from landlord covenants under s8 on assignment – no automatic release.

  • s7: former L may apply to be released under s8 on subsequent assignment.

  • s8: procedure for seeking release.

    • s8(1): L serves notice on T within 4 weeks of assignment, asking T for release.

    • s8(2): L released from covenants if –

      • (a): T does not object within 4 weeks of notice.

      • (b): L applies to county court court makes declaration that release reasonable.

      • (c): T consents.

  • s24: L still liable for breaches before assignment.

  • covenants expressed to be personal: continue to bind L – s3.

    • even if relates to land – BHP Petroleum GB Ltd v Chesterfield Properties Ltd [2002]: [Jonathan Parker LJ]: parties free to place contractual limit on transmissibility.

  • rationale: protecting T – can refuse to release L if new L less reliable.

    • but: London Diocesan Fund v Phithwa [2005; HoL]: L can include clause in lease excluding liability after assignment of reversion no need to seek release.

      • controversial: at odds with s25 – cannot contract out.

  - Excluded assignments (in breach of covenant): defaulting party not released – s11.

  • but: next assignment which is not excluded released.

  - Authorised Guarantee Agreements (AGAs): concession to landlord – s16.

  • AGA: T guarantees performance of covenants by immediate successor in title – condition for L’s consent.

    • only immediate assignee: T’s guarantee lasts only as long as assignee holds lease.

  • if AGA in place, L has 2 options:

    • 1. sue current T: can get equitable remedies.

    • 2. sue outgoing T as guarantor.

  - Commercial leases: landlord can stipulate pre-conditions to assignment – s22 (amending s19 LT(C)A 1927).

  Liability of Assignees

  - s3: passes benefit + burden of covenants.

  • s3(1): all landlord + tenant covenants pass on assignment.

  • s3(6): NOT covenants ‘expressed to be personal’.

    • N.B. First Penthouse Ltd v Channel Hotels & Properties (UK) Ltd [2003]: [Lightman J] obiter: not radical change – ‘expressed to be personal’ similar to having ‘ref. to subject matter of the lease’ + intention that cov. be personal can be explicit or implied.

      • but controversial: has not been followed.

  • replaces Spencer’s Case + ss141-142 LPA 1925: not just covs. that ‘have ref. to subject matter of the...

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