Leases 2 Covenants Notes

Land Law: Leases 2, Covenants in Leases

Terminology—landlord & tenant

• Covenant: a promise generally contained in a deed and enforceable without the need for consideration.

• Covenantor: the person making the promise, i.e. the person bearing the burden of the covenant.

• Covenantee: the person to whom the promise is made, i.e. the person taking the benefit of the covenant.

• Assignment: the transfer or passing on of the whole of the residue of the existing lease to a third party.

• Sub-letting: the grant of a new lease to a 3^rd party by someone who is already a tenant of the same property.

• Reversion; the landlord’s interest in the property. Usually the freehold, but the cause of a sub-letting, the reversion may be leasehold.

Whose covenant? What type?

• Tenant’s express covenants

• Landlord’s express covenants

• Tenant’s implied covenants

• Landlord’s implied covenants

Express Obligations of a landlord and tenant under a lease

• A demise (lease) will be valid provided:

  • (a): it complies with the necessary formalities.

  • (b): this is no uncertainty as to the identity of the landlord, tenant, the property to be demised, the term of the demise, the commencement and expiration dates and any consideration.

• The inclusion of any other provision is not strictly necessary, however in most circumstances the will parties want as much certainty as possible from the outset re their obligations—so most drafted lease will include some/all of the following express covenants.

• If not express, courts can imply certain obligations into a lease to gill the gaps. Some implied obligations will take precedence over express obligations, making the latter ineffective.

Tenant’s express covenants

• Basic rule: a tenant may do all things that an owner of an estate can do unless the lease prohibits such actions. For this reason, leases are drafted in a prohibitory or negative manner setting out what the tenant cannot do. Thus, if there is no mention of an action in a lease, a tenant is free to do it.

To pay rent

• Scope of obligation—can include service charge & insurance premiums: in modern leases it is customary to stipulate that, in addition to the agreed rent, certain other regular monetary payments (eg insurance premiums and service charges) are also treated as rent. –hence the landlord can use the particular remedies for rent recovery available to recover those payments too.

• In advance or in arrears? In the absence of a contrary agreement, a written covenant to pay rent is construed as requiring payment in arrears.

• In practice, most commercial leases require the rent to be payable quarterly in advance on the ‘usual quarter days’ (25 March, 24 June, 29 Sep, 25 Dec).

• Frustration: rent continues to be payable even though the premises cannot be used, eg if destroyed by fire.

• In exceptional circumstances, the doctrine of frustration might apply to leases, at lease in principle (National Carriers v Panalpina (Northern) (1981)), where HL held that a 10-yr warehouse lease would not be frustrated by the closure of the only means of access for some 20 months. The result might have been different if access was closed off for a number of yrs.

• Frustration could also possibly occur if the land is physically destroyed, eg if it falls into the sea.

• Rent review

• There is no implied right of the landlord to call for a review of rent during the term of the lease—thus there must be express provision providing for the rent to be increased (for eg by pre-determined amounts on specified dates; or, more usual in commercial leases, by providing for the rent to be increased periodically to an open market rent).

Repair clauses:

• Normally an express clause in lease stipulating who has obligation to repair certain parts of the premises. The longer the lease the more repairing obligations likely to be on the tenant.

• A number of statutory provisions re repair:

  • Eg, for short residential leases, Landlord & Tenant Act 1985, s11: which imposes certain repairing obligations on a landlord. S11(4): a covenant by the lessee for repair of the premises is of no effect, in so far as it relates to the matters mention in s11. So s11(4)-the statute overrides express provisions with regard to these provisions.

  • Except for ‘fair wear & Tear’.

• Ambit of repairing covenant

  • Under a general repairing covenant, the tenant must keep the premises in a condition in which they would be kept by a ‘reasonably minded owner’, having regard to (Proudfoot v Hart, 1890, CA):

    • (a) the character and type of premises at the beginning of the lease—the obligation is neither diminished nor increased by a change in the character of the neighbour;

    • (b) the age of the premises;

    • (c) the express words of the covenant.

    • However, a covenantor to repair does not require renewal of the whole or substantially the whole of the property—is a question of degree whether the work involves repair or renewal

• Distinction between repair and renewal?

  • It’s a question of degree whether repair or renewal.

  • Under a repair covenant, you may have to do some renewal if that’s the only practical means of repair.

  • Stent v Monmouth Council: a defective door, due to a design defect; was leaking, causing damage; HELD: the only sensible way to repair it (there was a repairing covenant), was to replace it—so had to replace, even though was under a repair clause (so this was held to be repair, not renewal

  • But will be ‘renewal’ if asked to replace the whole or substantially the whole of the property

  • Lurcott v Wakeley (1911):

  • The front external wall of a 200-yr-old house had to be taken down to ground floor level and rebuilt. The defects were attributable to old age.

  • The tenant as held liable under a repairing covenant--

  • under a repairing covenant, he had to replace the whole front external wall of the property (held to be repair, not renewal).

  • ‘Repair is restoration by renewal or replacement of subsidiary parts. Renewal, as distinguished from repair, is reconstruction of the entirety’.

  • Lister v...

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