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Enforceability of leasehold covenants: more questions than answers

Published online by Cambridge University Press:  02 January 2018

Rosy Thornton
Rosy Thornton*
Affiliation:
New Hall, Cambridge
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Extract

The enforceability of the convenants in a lease after an assignment, whether by the landlord or the tenant or both, is a matter of considerable practical importance. In the case of long leases, assignments of the leasehold estate and of the reversion are a common occurrence; both will often change hands many times before the end of the term, creating a welter of potential parties to any action on the covenants. In addition, there may be sureties who have undertaken to guarantee performance of the tenant's covenants. The basic principles governing the parties' rights and liabilities in this field under the present law are well known, centring upon privity of contract, privity of estate and upon statutory rules found in ss 141 and 142 of the Law of Property Act 1925. The area is one of vital commercial significance to landlords, and which potentially affects the residential security and amenity enjoyed by tenants (in the case, for example, of landlords' covenants to renew or to repair). It is also a field in which many of the issues and concepts have been the subject of judicial and academic consideration for more than a century, yet a surprising number of uncertainties remain. The law consists of a complex set of rules, which together form something resembling an intellectual jigsaw puzzle, and one from which several pieces are still missing. The aim of the first part of this article is to highlight some of these gaps.

Type
Research Article
Information
Legal Studies , Volume 11 , Issue 1 , March 1991 , pp. 47 - 70
Copyright
Copyright © Society of Legal Scholars 1991

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References

1. Landlord and Tenant: Privity of Contract and Estate; Duration of Liability of Parties to Leases, Law Commission Working Paper No 95 (London, HMSO, March 1986).

2. Landlord and Tenant Law: Privity of contract and Estate, Law Commission No 174(London, HMSO, November 1988). The proposals are summarised by Harold Wilkinson, ‘An Underdog's Charter?’ (1989) Conv 145.

3. To be legal, an assignment must be by deed; a lease must either by by deed or fall within the exception in Law of Property Act 1925, s 54(2).

4. See, for example, Smith, R. J., ‘The Running of Covenants in Equitable Leases and Equitable Assignments of Legal Leases’ (1978) CLJ 98 CrossRefGoogle Scholar.

5. Walker v Harris (1587) Co Rep 22a at 23a.

6. Allied London Investments Ltd v Hambro Life Assurance Ltd (1985) 50 P & CR 207.

7. Thames Manufacturing Co Ltd v Perrotts (Nichol & Peyton) Ltd (1985) 50 P & CR 1.

8. Warnford Investments Ltd v Duckworth [1979] Ch 127.

9. Orgill v Kemshead (1618) Cro Jac 521; House Property and Investment Co Ltd v Bernardout [1948] 1 KB 314.

10. Centrovincial Estates plc v Bulk Storage Ltd (1983) 46 P & CR 393.

11. Selous Street Properties Ltd v Oronel Fabrics Ltd (1984) 270 EG 643.

12. Baynton v Morgan (1888) 22 QBD 74.

13. (1984) 269 EG 41.

14. Baker v Merckef [1960] 1 QB 656; Re Savile Settled Estates [1931] 2 Ch 210.

15. [1982] Ch I.

16. (1974) 27 P& CR482.

17. (1983) 267 EG 1039.

18. Law Commission No 174 (above), para 2.8.

19. [1982] Ch 1 at 10.

20. Keeues v Dean [1982] 1 KB 685 at 690.

21. Jessamine Investment Co v Schwartz [1977] 2 WLR 145 at 153.

22. Law of Property Act 1925, s 77(1)(c) and Sch 2, Part IX; Land Registration Act 1925, s24(1)(b).

23. Moule v Garrett (1872) LR 7 Exch 101 at 104. For a recent application of the principle, see Selous Street Properties Ltd v Oronel Fabrics Ltd (above).

24. Baton Dickinson UK Ltd v Zwebner [1988] 3 WLR 1376.

25. Wolveridge v Steward (1833) 1 C & M 644 at 658.

26. Harris v Boots Cash Chemists (Southern) Ltd [1904] 2 Ch 376.

27. [1963] Ch 459. The case in fact concerned an obligation to rebuild a factory on the demised land.

28. The main cases upon which Lord Denning relied were Martyn v William (1857) I H & N 817 and Flight v Bentley (1835) 7 Sim 149.

29. [1971] Ch 764. The court expressly overruled Flight v Bentley (above), preferring the authority of Rickett v Green [1910] 1 KB 253.

30. Hua Chiao Commercial Bank Ltd v Chiaphua Industries Ltd [1987] AC 99.

31. Congleton Corpn v Pattison (1808) 10 East 130, per Lord Ellenborough CJ at 135.

34. (1583) 5 Co Rep 16a.

33. Onslow v Corrie (1817) 2 Madd 330.

34. Paul v Nurse (1828) 8 B & C 486.

35. Odell v Wake (1813) 3 Camp 394.

36. Harley v King (1835) 2 Cr M & R 18.

37. Grescot v Green (1700) 1 Salk 199; Churchwardens of St Saviour's, Southwark v Smith (1762) 3 Burr 1271.

38. William v Bosanquet (1819) I Brod & B 238; Walker v Reeve (1781) 3 Doug 19.

39. Granada Theatres Ltd v Freehold Investment (Leytonstone) Ltd [1959] Ch 592.

40. J Lyons d Co Ltd v Knowles [1943] KB 366.

41. Chancellor v Poole (1781) 2 Doug 764.

42. [1972] EGD 924.

43. Ibid, p 926.

44. Law Commission Working Paper No 95 (above), para 6.2.

45. P & A Swift Investments (a firm) v Combined English Stores Croup plc [1988] 2 All ER 885 at 887.

46. A surety undertaking to guarantee T2′s obligations will correspondingly be liable only for breaches occurring while privity of estate continues between his principal and the landlord.

47. Samuel v Howarth (1817) 3 Mar 272.

48. See Allied London Investments Ltd v Hambro Lfe Assurance Ltd (above).

49. Pinemain Ltd v Welbeck International Ltd (1984) 272 EG 1166; Re Dirtributors and Warehousing Ltd [1986] 1 EGLR 90; Coastplace Ltd v Hartley [1987] QB 948.

50. [1987] 3WLR 1167.

51. See above.

52. [1989] 1 All ER 979.

53. [1949] 2 KB 500.

54. Ibid, p 506 (per Tucker LJ).

55. See Megarry, and Wade, , The Law of Real Property, 5th ed (London, 1984), p 762 Google Scholar.

56. Cole v Kelly [1920] 2 KB 106.

57. Re Lyne-Stephens and Scott-Miller's Contract [1920] 1 Ch 472.

58. Thursby v Plant (1669) Wms Saund 268; Bickford v Parson (1848) 5 CB 920.

59. [1971] 1 WLR 1080.

60. Ibid, p 1082.

61. See above.

62. Stuart v Joy [1904] 1 KB 362; Both v Bowles (1905) 93 LT 801.

63. See above.

64. Per Cozens-Hardy LJ at pp 367-368.

65. [1965] 3 All ER 334.

66. Ibid, p 336.

67. National Conditions of Sale, 20th ed, conditions 18(3) and 19(6); General Conditions of Sale, 1984 revision, condition 17(4); Eagon v Dent (above).

68. [1987] 1 WLR 1085.

69. Ibid, p 1087.

70. For examples of cases where L2 was not bound due to non-registration of the estate contract, see Eagon v Dent (above); Phillips v Mobil Oil Co Ltd [1989] 1 WLR 888.

71. Eccles v Mills [ 18981 AC 360.

72. L2 will be liable, however, for continuing breaches ofcovenant, such as a simple backlog of disrepair from before the date of assignment.

73. [1986] CL 173.

74. [1989] 2 EGLR 38.

75. Grescot v Green (above).

76. This is the interpretation suggested by David Gordon, ‘The Burden and Benefit ofthe Rules of Assignment’ (1987) Conv 103 at p 107.

77. Harley v King; Omlow v Corrie (above).

78. Landlord and Tenant Act 1985, s 3(3A), inserted by Landlord and Tenant Act 1987, s 50.

79. [1986] 1 WLR 666.

80. [1987] 1 WLR 291.

81. Ibid, p 296.

82. Law commission Working Paper No 95 (above), para 2.1 1, note 33.

83. Harley v King; Omlorn v Corrie (above).

84. [1986] 1 WLR 666 at 672.

85. City and Metropolitan Properties Ltd v Grvcroft Ltd (above).

86. Law Commission No 174 (above), para 2.1.

87. Auriol v Mills (1790) 4 TR 94 at 99.

88. See Landlord and Tenant Act 1927, s 19(l) (a); Landlord and Tenant Act 1988. Note also the possibility or an absolute covenant against assignment: see, for example, Property and Bloodstock Ltd v Emerton [1968] Ch 94.

89. Harris v Boots Cash Chemists (southern) Ltd (above).

90. Law Commission No 174 (above), para 3.14.

91. Ibid, paras 3.17-3.19.

94. Ibid, para 2.19.

93. Ibid, para 2.16.

94. Ibid, para 3.15.

95. Law Commission Working Paper No 95 (above), para 1.1.

96. Law Commission No 174 (above), paras 3.6-3.7.

97. Ibid, para 3.20.

98. Ibid, para 2.23.

99. See above.

100. Law Commission Working Paper No 95 (above), para 6.2.

101. Law Commission No 174 (above).

104. Draft Bill, clause 1.

103. Ibid, clause 2.

104. Landlord and Tenant Act 1988, s l(4).

105; Draft Bill, clause 2(d).

106. Ibid, clauses 4 and 6.

107. Ibid, clause 4(3).

108. Law Commission No 174 (above), para 4.24.

109. Draft Bill, clause 4(4).

110. Ibid , clause 7.

111. Ibid, clause 10(l)(a).

112. Ibid, clause 13[2) and Schedule.

113. Ibid, clause 9.

114. Ibid, clause 3[1).

115. Note, however, the Law Commission's proposal that a 'termination order' be made available to tenants: Forfeiture of Tenancies, Law Commission No 142 [London, HMSO, 1985).

116. Law Commission No 174 (above), para 2.8

117. Ibid, para 3,1(i).

118. See above.

119. See above.

140. [1986] 1 WLR 666 and [1987] 1 WLR 291.

121. Draft Bill, clause 1(3)(b).

122. See above.

123. See above.

124. [1986] 1 WLR 666 at 672.

125. Draft Bill, clause 4(4)(a).

126. Law Commission No 174 (above), para 4.26.

127. Draft Bill, clause 4(1) .

128. Ibid, clause 8(1).

129. See Law Commission No 174 (above), para 4.16, which denies any need for 'radical change' in this area.

130. See above.

131. Law Commission No 174 (above), para 4.49.

132. See above.

133. See above.

134. See above.

135. See above.

136. See above.

137. See Kumar v Dunning (above).