The covenant
Contractual terms contained in a lease
Implied covenants
Express covenants
Estate in land
Plug gaps when parties fail to agree expressly
Common Law or Statute
Implied covenants always prevail of express covenants
Examples of L’s covenants implied by common law
Covenant for quiet enjoyment
Covenant to keep common parts in reasonable repair
Covenant to pay rent, rates and taxes
Covenant to allow L to discharge his repairing obligation
Examples of T’s covenants implied by common law
Covenants implied by statute
Improve minimum standard of protection provided for L and T by common law
Can usually override express agreement of parties (note contrast with covenants implied by common law)
Express agreements always prevail
Most statutes which imply terms provide that parties cannot contract out by express agreement
Expressly agreed between the parties as result of negotiations
In commercial context L and T can often afford to appoint solicitors and leases can be lengthy and complex
Typical express covenants
Rent
Rent review
Repair
User
Alterations
Alienation (assignment and subletting)
Repairs
Parties free to allocate responsibility as they please
Parties not free to allocate responsibility as they please
L solely responsible (likely to recover cost from T through service charge)
T solely responsible
L and T share responsibility – most common arrangement : – L repairs structure and exterior (likely to recover costs through service charge) - T repairs interior
Most common arrangement for repairing covenant
Steps for disrepair?
1) First identify physical extent of premises to which repairing covenant extends
2) First identify physical extent of premises to which repairing covenant extends
2) Is there disrepair? Must be deterioration from a previous physical state
1) Is there disrepair? Must be deterioration from a previous physical state
Windows - not deteriorated from previous physical state
Lace v Chantler
Walsh v Lonsdale 1882
Quick v. Taff Ely B.C.
Aslan v Murphy
What is the standard of repair?
Guidance in the lease as to the standard of repair
No guidance in the lease as to the standard of repair
‘fair wear and tear’ exception
natural deterioration
T not liable for such damage if there is a fair wear and tear exception
T liable for such damage if there is a fair wear and tear exception
Has to be expressed in the repairing covenant
Implied in repairing covenant
This will define standard of repair by reference to condition of property at start of lease
schedule of condition
schedule of dilapidations
Standard of repair when lease does not give guidance - put premises into state of repair contemplated by covenant and then to - keep premises in repair
Proudfoot v Hart (1980)
Quick v. Taff Ely B.C. [1986]
Implication of ‘reasonableness’ requirement - L must act reasonably when carrying out repairs - T cannot insist that works undertaken more cheaply if L is being reasonable in his approach
FluorDaniel Properties v Shortland Investments [2001]
Calthorpe v McOscar
Proudfoot v Hart (1890)
Many leases require repair but not renewal
Is there liability to do something about the disrepair?
Obligation to renew is more onerous than obligation to repair
Remedying of disrepair and inherent defect fell within scope of T’s covenant to repair Work required was repair not renewal
Ravenseft Properties Ltd v. Davstone (Holdings) Ltd [1980]
National car parks v Trinity Development Co 2001
CA set out three guidelines for repairing covenants
McDougall v Easington D.C. (1989)
Lister v Lane (1893)
Three guidelines: a) Do the alterations..
affect the whole or substantially the whole of the building?
make the building different in character from the building originally let?
cost a significant proportion of the value of the previous existing building?
Three guidelines: b) Do the alterations..
Three guidelines: c) Do the alterations..
Alienation: T disposing of lease
Assign
Sub-let
Mortgage
Part with or share possession
Part with or share occupation
Terminate
Surrender
Alienation
T is free to dispose of premises as he chooses unless lease contains restriction on T’s right to dispose
T is not free to dispose of premises as he chooses unless lease contains restriction on T’s right to dispose
Three categories of restrictive lease covenants:
Absolute covenant
Qualified covenant
Fully qualified covenant
Fully unqualified covenant
Unqualified covenant
T prohibited altogether from doing something
T may do the thing in question but only with L’s consent
T may do the thing in question with L’s consent and that consent must not be unreasonably withheld
Absolute covenants against alienation
If T disposes of premises he will be in breach of covenant but disposal still valid
Note also L may waive prohibition
Prevented from disposing of interest unless can negotiate with L and obtain L’s consent to a disposal
Qualified and fully qualified covenants against alienation
T could request consent but L could still refuse consent on any grounds whatsoever
T could request consent and L could not refuse consent
T is helped when there is a qualified covenant by section 144 LPA 1925 and section 19(1)(a) LTA 1927
T is not helped when there is a qualified covenant by section 144 LPA 1925 and section 19(1)(a) LTA 1927
Section 144 LPA 1925
L cannot demand payment for his consent – only expenses
Converts qualified covenants against alienation into fully qualified covenants against alienation
Section 19(1)(a) LTA 1927
LTA 1988 Section 1(3)
L is under a duty: - to give consent unless reasonable not to
- to serve written notice on T of decision - within a reasonable time stating why any consent is withheld or the conditions subject to which it is granted
T can sue L for damages if L fails to comply with duty
Section 4
What is a reasonable time?
Clear that L must act quickly
Three weeks reasonable in a complex case
When is it unreasonable to refuse consent?
Depends upon circumstances of particular case
General principle = L not entitled to refuse consent for reasons which are not connected to subject matter of lease
E.g. Proposed new T is of insufficient financial standing
Proposed new T’s race or gender
LTA 1927 section 19(1A)
Applies only to leases of commercial premises granted on or after 1st January 1996
Affects only assignments
Applies only to leases of commercial premises granted on or after 1st January 1993