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#3250 - Subletting - Commercial Property

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Commercial Property

Sub-lettings

What remedies do tenants / sub-tenants have if LL is breaching a covenant?

There is NO DIRECT CONTRACT between the LL and Sub-tenant. Therefore the LL cannot be directly forced to provide a remedy to the Sub-tenant. However, in the terms of the under-lease there should be a covenant that the head tenant will enforce the LL covenants [both express & implied] under the head-lease.

Key implied covenant: Landlord’s covenant for quiet enjoyment can be expressly in the lease or implied. The covenant will protect the tenant where there is a substantial interference with the tenant’s use & enjoyment of the premises. The implied covenant does not apply to superior title holder. Often a question of fact:

Owen v Gadd –[1956] Scaffolding on pavements in front of shop which blocked access [i.e. no need to prove physical intrusion. Physical interference with enjoyment is enough]
Booth v Thomas [1926] Flood caused by LL failure to repair
Mira v Aylmer LL repairing the premises but caused prolonged and substantial interference [noise, dust, dirt].

Key implied Covenant: LL should not derogate from grant!

  • Requires LL not to do anything which substantially interferes with the use of the premises for the purpose for which they were let.

Port v Griffith [1938] No derogation from grant where the LL use of the adjoining land merely makes the user of the premises more expensive
Chartered Trust plc v Davies [HOL]:

It is a derogation from grant to stand back while Tenant A, in breach of a covenant, commits acts of nuisance against Tenant B thus driving tenant B out of business.

Tenant / Sub tenant should not be expected to bring his own individual action for a nuisance. T was allowed to repudiate the lease.

Apply: if one tenant does something to adversely effect the common part and LL is in charge of maintaining the common parts – LL must take action or run the risk of derogating from his grant.

Key express Covenant: Express covenant that T will not be a nuisance

Key express Covenant: Express covenant that LL will use his best endeavors to provide the “Services” so long as T pays the service charge and observes obligations under the lease.

What control does LL have over the sub-tenant:

  • Main provisions to look for in the lease =

    • Tenant must get LL consent to sub-let

    • Clauses that grant LL control over the content of the sub-lease [e.g. Sub-least should be contracted out of the 1954 act – so T cannot hold over]

    • Direct covenants by sub-tenant to the LL – to observe the head-lease

What happens to sub-lease upon termination of head-lease:

Method of termination for head-lease Effect on Sub-lease
Break clause

  • Sub-lease is terminated – it falls away with the head-lease

  • If T2 is contracted out of the 1954 Act = he cannot hold over or ask for a new lease [by making a S.26 request]

  • If T2 is NOT contracted out of 1954 act = T2 can hold over and becomes the head tenant. LL would have to serve a S.25 notice on T2.

  • NB. You only get protection from the 1954 Act if you are in OCCUPATION
Forfeited

  • Sub-tenancy is terminated.

  • T2 can apply for relief – S.146(4) notice. Court can grant a new tenancy for T2 at its discretion and impose conditions if it thinks fit [e.g. T2 should pay more]

  • If relief is granted = sub-tenant becomes immediate tenant of the LL but cannot be grant a longer term than that remaining under the sub-lease.
Surrender

  • Sub-tenant becomes the head tenant under the head lease. [Explains why LL wants to have control over the sub-tenant]
T1 is bankrupt

  • Head-lease vests in Trustee in Bankruptcy

    • Both T1 and Trustee are liable to pay rent

    • Sub tenancy continues

  • Trustee can disclaim the head-lease [“onerous property]

    • Sub-tenant should apply for a vesting order to create a direct lease with the LL [only if trustee disclaims]

LTA 1954

Provides protection for business tenants in occupation – gives them security of tenure [the right to carry on the lease once the contractual term has come to an end]

T can hold over / apply for a new lease

S.23(3) Describes “the holding” = any part that the tenant is in occupation of
S.24

Tenancy will not come to an end unless it is terminated in accordance with the act.

  • S.25 notice by LL; or

  • S.26 request
S.25 LL notice to terminate the tenancy
S.26

Ts request for a new tenancy

  • S.26(5): the current tenancy will terminate immediately before the date specified in the request for the beginning of the new tenancy
S.27

  • T can give 3 months notice [within...
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