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LEASEHOLD COVENANTS

Any lease will contain certain agreements between the landlord and the tenant. Because a lease is generally made by deed, these agreements are assumed, lacking clear evidence to the contrary, to take the form of covenants. This assumption is important for at least two reasons:

being covenants, the agreements will in some circumstances bind successors in title (next owners..), and breach of a covenant does not, on its own, allow either party to treat the lease as at an end. On the other hand, there is nothing to stop the lease agreement stipulating certain terms of the agreement to be conditions of a contract. The terms of a lease agreement are generally treated as covenants even where the agreeement is not made by deed. Indeed, a lease of a duration less than three years need not even be made in writing (can oral), and certain covenants will be held to exist. Although a well-drafted lease will contain terms (express covenants) that cover most eventualities, even if it does not the law implies certain covenants into all leases. The remedies for breach of these implied covenants are essentially the same as for express covenants. Implied covenants Any lease, even a weekly tenancy granted orally, is assumed to contain the following covenants by the landlord. A covenant to allow the tenant QuietEnjoyment of the property A covenant not to derogate from his grant (see DerogationFromGrant) Where a domestic property is let furnished, a covenant that it is fit for habitation at the start of the lease term Where a domestic property is let for less than seven years, a covenant to keep the structure and facilities in good repair (s11-14 LandlordAndTenantAct1985). The following covenants are implied concerning the tenant's obligations: A covenant to pay taxes and rates on the property A covenant to make good waste And, maybe: A covenant to pay rent There is some uncertainty about this. It now appears, despite certain remarks by Lord Templeman in StreetVMountford1985, that such a covenant cannot be implied. It is certainly the case that the LPA1925 contemplates the existence of leases that do not involve rent. Express covenants All the usual implied covenants will, in a well-drafted lease, be overwritten by express covenants, usually with similar effect, but with certain obligations clarified. In addition, express covents will usually be included to deal with at least the following matters: the amount of the rent, and the procedure by which it can be modified. Conventionally, the rent clause usually says that the rent must be payed ``whether formally demanded or not''; this is to get around a relic of the mediaeval area which requires that the landlord turn up in person to collect the rent before he can take action for non-payment; whether it is the landlord, or the tenant, or both, who are responsible for repairs and maintenace of various parts of the buiding; whether it is the landlord's or the tenant's responsibility to insure the property; whether the tenant can assign the lease to someone else, either with or without the landlord's consent; whether, and on what terms, the lease term may be renewed; (in a long lease) whether the lessee is granted an OptionToPurchase the freehold reversion. In practice, many more covenants will be included in a long lease. `The usual covenants' Where a contract is made to grant a lease, which is the usual practice for long leases, it is an implied term of that contract that the lease, when granted, will contain `the usual covenants'. What is `usual' depends on the location and duration of the lease, but will usually be taken to include (in addition to the tacit acceptance of the implied covenants described above), the following. A covenant by the tenant to pay rent A covenant by the tenant to keep the interior in good repair If the landlord has covenanted to repair, a covenant by the tenant to allow reasonable access for this purpose That the landlord has a RightToReenter if the tenant defaults on the rent Enforcement of covenants The rules here are a mixture of common law provisions and statutory modifications, and are extremely complicated. The whole situation was changed completely by the LandlordAndTenantCovenantsAct1995, to the extent that we have to consider pre-1996 and post-1996 leases separately. Note that, on the whole, the 1995 Act applies to leases granted after 1996, so if a lease was granted before that, and has subsequently been renewed under its original terms, it is considered to be a pre-1996 lease, even if renewed after that date. Only the briefest outline of this complex area of law is provided in this article. Pre-1996 leases The original covenator and covenantee remain liable between themselves, even if either or both have assigned their interests. Remember that the burden of a contract cannot be explicitly assigned under the ordinary law of contract, in the same way as a benefit can. In addition, s.79 of the LPA1925 says that when a person accepts the burden of a covenant, he does so on behalf of his successors in title as well as himself. The inescapable conclusion is that a person burdened by a covenant will be liable on it, for the whole duration of the lease even after assignment. This conclusion is particular onerous for tenants, who may assign their tenancies and then find to their horror that they are liable for their assignees' breaches of covenant, perhaps many years after assignment. The 1995 Act introduced provisions to help tenants in this position; these provisions apply to pre-1996 leases as well as post-1996 leases. Since this Act, a former tenant cannot be held liable for rent or charges owed by the person to whom he has assigned his tenancy, unless the landlord serves a notice the he intends to recover certain sums. If the landlord does serve such a notice, the tenant can insist that the landlord grant him an OverridingLease. If the former tenant is made to compensate his former landlord, then he can seek to recover the costs from the tenant who is actually in breach. This is unlikely to be helpful, for the simple reason that if this person is solvent and findable, the landlord would have proceeded against him in the first place. The fact that he proceeded against a former tenant indicates how unlikely it will be to recover from the current tenant. If there has been a chain of assignments, with the last assignee in the chain being in breach, then the former tenant can act against his assignee, whether or not that person is in breach or not. This is because when the former tenant assigned his lease, he would have insisted that the assignee indemnify him against breaches of covenants (Even if he did not do so, the Land Registratraion Acts and the LPA1925 all imply such a term into the assignment). Where the original landlord and original tenant have assigned their interests, then the question arises whether the covenants are enforceable between them, notwithstanding the fact that there is no contractual relationship between them. The rule here, which comes from SpencersCase1582, is that the covenant will be enforceable between two parties where it `touches and concerns' the land, and there is PrivityOfEstate between the parties, it was intended to bind successors in title The last point is now usually moot, as the effect of s.78/s.79 of the LPA1925 is that covenants are assumed to be intended to bind successors. Post-1996 leases As far as the original parties to the covenant (the original landlord and tenant) are concerned, while there remains privity of estate between them, their sitation is the same as for pre-1996 leases. The main differences concern the situation when one or both parties have assigned their interests. If the tenant (only) assigns his interest, then he is released from his obligations under his covenants with the landlord in the following circumstances. Where he did not need to seek the landlord's consent to assign, release is automatic. Where the tenant did need the landlord's consent, and if that consent is dependent on the tenant's accepting an AuthorizedGuaranteeAgreement, then the tenant is released when he makes the agreement. If the landlord (only) assigns his reversion, then he may notify the tenant that he wishes to be released from his covenants. If the tenant objects, then the landlord may apply to the court to be released. Where both landlord and tenant have assigned, then the general principle is that all covenants that are not `personal' will run with the land to the assignees. This includes a landlord's RightToReenter, if originally included in the lease.