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Published online by Cambridge University Press: 16 January 2009
It is perfectly settled by a multitude of decisions, that, notwithstanding an assignment of his lease, the lessee continues liable on the personal privity of contract, to the payment of rent and the performance of the covenants, during the whole term; although the lessor concur in the assignment, or, by acceptance of rent, or otherwise, recognise the assignee as his tenant; and although the breach be committed after the assignment; and although a tender be made by the assignee for the very rent for which the lessee is sued; for if a plea of assignment and tender could be supported, a lessor might be compelled to accept an assignee contrary to his inclination. Indeed, by no act of his own can the tenant absolve himself from the charge.
1 At p. 351, omitting extensive footnotes.
2 The earliest referred to is Rushden&s Case (1533) 1 Dy. 4; 73 E.R. 10 ("Debt lies for rent against the original lessee of a term, though he have granted over parcel of the land, and his grantee have made a feoffment of that parcel.")- Better known are Walker&s Case (1587) 3 Co.Rep. 22; 76 E.R. 676 (where it is explained in a footnote that once the landlord has accepted rent from an assignee the appropriate action against the original lessee is in covenant, not in debt) and Thursby v. Plant(1668) 1 Wms. Saund. 230; 85 E.R. 254.
3 For the purposes of this article, the original tenant will be termed "Tl", and subsequent assignees of the lease "T2", "T3" and so forth. The original landlord will be referred to as "LI", and assignees of the reversion "L2", "L3" and such. Any guarantor of the tenant will be identified by reference to the person whose liability is being guaranteed: thus Tl&s guarantor will be "Gl", and T2's "G2".
4 Landlords will usually insist on such a covenant as a condition of granting consent to the assignment.
5 For a recent example of the enforcement of privity of contract liability against an assignee who had covenanted directly with the landlord in the licence to assign the lease, see Estates Gazette Ltd. v. Benjamin Restaurants Ltd. [1994] 1 W.L.R. 1528.
6 "In my opinion, the position of the lessor with respect to covenants running with the reversion is now precisely similar to the position of the lessee with respect to covenants running with the lease. In neither case is liability extinguished by assignment." per Cozens-Hardy L.J. in Stuart v. Joy[1904] 1 K.B. 362, 368.
7 See Warnford Investments Ltd. v. Duckworth [1979] Ch. 127, 137, per Megarry V.-C.
8 Baynton v. Morgan (1888) 22 Q.B.D. 74.
9 Norwich Union Life Insurance Society v. Low Profile Fashions Ltd. (1991) 64 P. & C.R. 187, noted Bridge [1992] C.L.J. 425.
10 It is not necessary for the covenant to undertake liability in respect of the tenant "and his assigns": Law of Property Act 1925, s. 79. Indeed, a covenant to pay the rent need not be expressed in the lease to confer continuing liability on the tenant: see Wood/all on Landlord and Tenant, looseleaf (London, 1994), para. 7.039 el seq.
11 [1960] 1 Q.B. 657.
12 Although the argument concentrated on whether the original tenant was acquitted from liability by a surrender and re-grant on exercise of the option in 1952 (see p. 319 below), the wording of the lease is quite sufficient to support the decision of the Court.
13 [1994] 1 A.C. 458 (H.L.); [1993] Q.B. 589 (C.A.), noted Haley [1994] Conv. 247; Bridge [1994] C.L.J. 31. Although this question had not been previously decided by the courts, the general view was that the tenant remained liable (see, e.g., Woodfallon Landlord and Tenant, op. cit., 28th ed., 1989, para. 22.042; Law Com. No. 174, para. 2.8).
14 Had the 1954 Act not effected a continuation, the fixed term would have come to an end in 1986.
15 In the words of Lord Templeman, the 1954 Act was "intended and expressed to protect occupying tenants against their landlords, not to impose liability on former tenants who ceased to have any interest in the property before or after the 1954 Act": [1994] 1 A.C. 458, 463.
16 In Herbert Duncan Ltd. v. Chitons [1993] Q.B. 589, a covenant was qualified by a definition clause stating that "term" included "not only the term hereby granted but also the period of any holding over or of any extension thereof whether by statute or at common law." This was sufficient to impose liability on the original tenant for rent due during the continuation tenancy under the 1954 Act, although not for interim rent payable pursuant to s. 24A of the same Act.
17 As Nourse L.J. put it succinctly, "…everything depends on the contract between the parties": [1993] Q.B. 589, 608.
18 Rent Act 1977, s. 2(1).
19 Thornton, R., "Enforceability of leasehold covenants: more questions than answers", (1991) 11 Legal Studies 47, 49.Google Scholar
20 Housing Act 1988, s. 5(2).
21 (1983) 46 P. & C.R. 393.
22 At p. 396.
23 (1984) 270 E.G. 643; [1984] 1 E.G.L.R. 50.
24 See also CUS Property Management Ltd. v. Texas Homecare Ltd. [1993] 2 E.G.L.R. 62.
25 [1996] 1 All E.R. 336.
26 (1888)22Q.B.D. 74.
27 [1996] 1 All E.R. 336, 351, per Sir Christopher Slade, approving the excellent note on Centrovincial and Selous Street by Patrick McLoughlin at [1984] Conv. 443.
28 The Centrovincial line of cases had caused some to believe that privity of contract liability was virtually open-ended, in that the landlord could even connive with a subsequent assignee and agree a grossly exorbitant rent which the assignee had no intention or means of paying but which the landlord would seek to enforce against the original tenant (or some earlier assignee) pursuant to the privity of contract principle. ("I am aware of a landlord in London who conspired with a weak tenant who was on the point of bankruptcy to sign a renewed lease on a doubled rent. As soon as the tenant became bankrupt, the landlord forced the former tenant to pay the doubled rent. That scam is made legal only through the iniquity of the privity of contract law." per Mr. Peter Thurnham M.P., H.C. Deb. vol. 254, col 800 (14 February 1995).) It is however doubtful whether this was ever the true legal position, in that a variation which was not bona fide would not, even under Centrovincial, bind the former tenant. The Friends Provident Life Office decision makes clear that the former tenant could not conceivably be liable in these circumstances.
29 The Unfair Contract Terms Act 1977 does not apply to contracts in so far as they relate to the creation or transfer of an interest in land, or to the termination of such an interest, whether by extinction, merger, surrender, forfeiture or otherwise (see Sched. 1, para. 1(6) thereof)- This has been widely interpreted as covering all covenants which are integral to the lease, but not provisions which, although included in the same document as the lease, constitute a transaction of a different kind: Electricity Supply Nominees Ltd. v. IAF Group pic [1993] 1 W.L.R. 1059.
30 Where a tenancy of the matrimonial home is transferred by court order from one spouse to another, the transferor spouse will cease on transfer to have any continuing liability under the lease: Matrimonial Homes Act 1983, Sched.l, para. 2(2). Where a perpetually renewable lease takes effect as a lease for 2,000 years, the tenant is only liable for breach of covenants occurring while the lease is vested in him: Law of Property Act 1922, s. 45, Sched. 15, para. 5.
31 In Allied London Investments Ltd v. Hambro Life Assurance Ltd (1983) 269 E.G. 41,46; [1984] 1 E.G.L.R. 16, 19, Walton J. listed three defences only: the defendant has performed the covenants; the relevant assignee has performed the covenants; or there has been some "operation conducted upon the lease—for example: surrender of the whole—which has put a complete end to the liability to pay rent." Subsequent cases have indicated that these dicta may have been a little cautious.
32 Dowling, "Variation of Lease or New Tenancy?" [1995] Conv. 124, provides a very useful exposition of the existing law.
33 [1971] Ch. 477, 496. Author's italics. Of course, surrender may be express, in which case a deed is required for it to be effective at law: Law of Property Act 1925, s. 52(1). 320 The Cambridge Law Journal [1996]
34 Woodfall, 17.018.
35 See Jenkin R Lewis Ltd. v. Kerman [1971] Ch. 477; Gable Construction Co. Ltd. v. Inland Revenue Commissioners [1968] 1 W.L.R. 1426, 1432, per GofT J.; Trustees of J. W. Childers Will Trust v. Anker, [1996] 01 E.G. 102 (rents of two agricultural holdings separately let increased, and combined into single figure: held n o surrender and re-grant).
36 Friends Provident Life Office v. British Railways Board [1996] 1 All E.R. 336.
37 Baynton v. Morgan (1888) 22 Q.B.D. 74.
38 Trustees of Francis Percival Sounders v. Ralph (1993) 66 P. & C.R. 335.
39 Take Harvest Ltd. v. Liu [1993] A.C. 552.
40 Friends Provident Life Office v. British Railways Board [1996] 1 All E.R. 336, 345, 350. See, o n the latter point, Maugham J. in Re Savile Settled Estates Ltd. [1931] 2 Ch. 210,217: "an alteration of an existing term so that it will operate for a term extending beyond the original term can operate, in law, only as a surrender of the old lease and a grant of the new one."
41 [1993] Ch. 151.
42 In Friends Provident Life Office v. British Railways Board [1996] 1 All E.R. 336, a deed of variation between L and T2 effected an increase in the rent. The substitution of this increased obligation did not lead to an inference of a release of Tl from contractual liability for the rent initially agreed.
43 In Deanplan Ltd. v. Mahmoud L and T3 could have come to such an agreement, in which case the action against T2 would have succeeded.
44 See also Re E. W.A., A Debtor [1901] 2 K.B. 642.
45 Re Good, ex pane Armitage (1877) 5 Ch.D. 46.
46 Deanplan Ltd. v. Mahmoud, above, at p. 171.
47 Allied London Investments Ltd. v. Hambro Life Assurance Ltd. (1983) 269 E.G. 41; [1984] 1 E.G.L.R. 16.
48 Milverton Group Ltd. v. Warner World Ltd. [1995] 2 E.G.L.R. 28, noted Haley [1995] J.B.L. 181.
49 Thus the tenant is entitled to credit for these sums, but in the absence of proof of appropriation their payment is unlikely to afford the tenant a defence to an action for unpaid rent.
50 In Deanplan Ltd v. Mahmoud, Judge Baker accepted that the assignee may be absolved through the operation of "the bankruptcy laws" in circumstances which would not necessarily absolve the former tenant: [1993] Ch. 151, 162.
51 [1995] 3 All E.R. 581.
52 An approved voluntary arrangement "binds every person who in accordance with the rules had notice of, and was entitled to vote at, that meeting (whether or not he was present or represented at the meeting) as if he were a party to the voluntary arrangement": Insolvency Act 1986, s. 5(2). In relation to insolvency of individuals, see Ibid.., s. 260(2).
53 [1995] 3 All E.R. 581, 584.
54 [1995] 3 All E.R. 588.
55 Sitting as a Deputy Judge of the High Court, Queen's Bench Division.
56 See also Burford Midland Properties Ltd. v. Marley Extrusions Ltd. [1995] 2 E.G.L.R. 15 (decided as a question of construction whether a voluntary arrangement covered liability for rent accruing subsequent to its date).
57 See below, p. 324.
58 The "coach and horses argument": see Mytre Investments Ltd. v. Reynolds [1995] 3 All E.R. 588, 590.
59 R.A. Securities Ltd. v. Mercantile Credit Co. Ltd. [1995] 3 All E.R. 581, 587; Mytre Investments Ltd v. Reynolds [1995] 3 All E.R. 588, 590.
60 Mytre Investments Ltd v. Reynolds [1995] 3 All E.R. 588, 591.
61 Companies Act 1985, s. 618; Insolvency Act 1986, s. 315. The disclaimer must be of "onerous property", meaning in this context the lease itself. Thus, the trustee in bankruptcy of an assignee cannot disclaim the assignment (and a fortiori the licence to assign) without disclaiming the lease: MEPC Ltd. v. Scottish Amicable Life Assurance Society [1993] 2 E.G.L.R. 93.
62 [1901] 1 Q.B. 660.
63 Hill v. East & West India Dock Company (1884) 9 App. Cas. 448; Warnford Investments Ltd. v. Duckworth [1979] Ch. 127.
64 See Rowlatt on Principal and Surety, 4th ed. (London, 1982) pp. 173–4; Buckley on the Companies Acts, 14th ed. (London, 1981), vol. 1, pp. 753–4; Williams and Muir Hunter on Bankruptcy, 19th ed. (London, 1979), pp. 388–9, 394. The Irish High Court refused to follow Stacey v. Hill: Tempany v. Royal Liver Trustees Ltd. [1984] B.C.L.C. 568.
65 [1996] 2 W.L.R. 262.
66 [1996] 2 W.L.R. 262, 279. The italics are'those of Lord Nicholls.
67 Tl was itself in liquidation and took no part in the appeals from the first instance decision.
68 As Lord Nicholls stated, at p. 279, "Those unversed in the finer points of bankruptcy law will not have had Stacey v. Hill in mind when undertaking their obligations. They would expect to have to pay the rent if the tenant, the principal debtor, became bankrupt."
69 In Re Hans Place Ltd. [1992] 2 E.G.L.R. 179, Mr. Edward Evans-Lombe Q.C., sitting as a Deputy High Court Judge, held that the decision was for the liquidator, and could only be interfered with where it could be shown to have been affected by mala fides or to have been so perverse that no reasonable liquidator could have arrived at it.
70 O n a transfer of a registered leasehold, there is implied (unless an entry in the register negatives such implication) by Land Registration Act 1925, s. 24(1) (b) a covenant by the transferee with the transferor that during the residue of the term the transferee and the persons deriving title under him will pay, perform, and observe the rent, covenants and conditions by and in the registered lease reserved and contained, and on the part of the lessee to be paid, performed and observed, and will keep the transferor and the persons deriving title under him indemnified against all actions, expenses, and claims on account of the non-payment of the said rent or any part thereof, or the breach of the said covenants or conditions, or any of them. A similar covenant is implied into conveyances for valuable consideration of the entirety of (unregistered) land comprised in a lease for the residue of the term or interest created by the lease by Law of Property Act 1925, s. 77(1)(C). The terms of the covenant are set out in Sched. 2, Part IX to that Act. The covenants can be excluded in the terms of a conveyance or transfer: Re Healing Research Trustee Co. Ltd. [1992] 2 All E.R. 481 provides an example where such exclusion had been effected.
71 [1987] 2 E.G.L.R. 69.
72 By Law of Property Act 1925, s. 77(1)(C).
73 The lease was assigned expressly "in consideration of the sum of £1". However, the Court of Appeal considered (following Price v. Jenkins (1877) 5 Ch. D. 619) that it was too literal an interpretation of the transaction to hold that this was the sole consideration, Bingham L.J. stating (at p. 71): "The assignor obtained an obvious benefit because, although remaining liable to the landlord under his original contract, he ceased to be primarily liable and gained the benefit of another party being also liable. The assignee for his part undertook a responsibility in that he undertook a responsibility to pay rent to the original landlord. Looking at the matter as a commercial transaction and ignoring the £1, it is in my judgment quite impossible to regard this transaction as one otherwise than for valuable consideration." As the same can be said of almost all leasehold assignments, "valuable consideration" will rarely be an obstacle to the implication of the statutory covenant of indemnity.
74 (1872) L.R. 7 Exch. 101, 104.
75 See Johnsey Estates Ltd. v. Lewis & Manley (Engineering) Ltd., above.
76 SeeGoff, & Jones, , Law of Restitution, 4th ed., pp. 348–9.Google Scholar
77 (1993) 65 P. & C.R. 252.
78 Such covenant being implied by virtue of Land Registration Act 1925, s. 24(1)(6).
79 (1993) 65 P. & C.R. 252, 255.
80 Note 70 above.
81 [1989] 1 Q.B. 208.
82 Electricity Supply Nominees Ltd v. Thorn EMI Retail Ltd (1991) 63 P. & C.R. 143; [1991] 2
83 Hindcastle Ltd. v. Barbara Altenborough Associates Ltd. [1996] 2 W.L.R. 262, 268.
84 See, respectively, Picton Warlow v. Allendale Holdings Ply. Ltd. [1988] W.A.R. 107 (Western Australia); W.E. Wagener Ltd v. Photo Engravers Ltd. [1984] 1 N.Z.L.R. 412; Fair Investments Lid v. Mahoe Buildings Ltd [1992] 3 N.Z.L.R. 734 (New Zealand); Avlor Investments Ltd. v. J.K. Children's Wear, Inc. (1991) 85 D.L.R. (4th) 239 (Ontario); Kits Developments Ltd v. Sanford Construction Ltd. (1987) 5 A.C.W.S. (3d) 361 (British Columbia).
85 Schoshinski, R.S., American Law of Landlord and Tenant (Rochester, NY, 1980), para. 8:12.Google Scholar
86 In New Zealand, for example, a residential tenant is released from liability on lawful assignment of his interest (Residential Tenancies Act 1986, s. 44(6)). In commercial leases, however, the assigning tenant remains liable throughout the lease: see Property Law and Equity Reform Committee, Final Report on Legislation relating to Landlord and Tenant (Wellington, 1986), paras. 73–77. The Canadian province of Manitoba adopts the same distinction, although its law reform body has recently proposed that a tenant of a commercial lease should not be primarily liable subsequent to assignment, but as a guarantor: see Manitoba Law Reform Commission, Report No. 86, Covenants in Commercial Leases (Winnipeg, 1995), pp. 28–32.
87 See Working Paper No. 95 (hereafter "W.P. No. 95"), Part IV.
88 Ireland is peculiar, in that although a statute, the Landlord and Tenant Law Amendment Act (Ireland 1860) ("Deasy's Act") abrogated the privity of contract principle in respect of the tenant, it is still generally assumed there that the tenant remains liable subsequent to assignment of the lease: see W.P. No. 95, para. 4.10.
89 W.P. No. 95, para. 4.4; Gray's Trustees v. Benhar Coal Co. (1881) 9 R. 225; D.M. Walker, Principles of Scottish Private Law, 4th ed. (Oxford, 1989), p. 217.
90 See W.P. No. 95, para. 4.5. The Landlord and Tenant Act 1927 (see below, p. 345) has no application to Scotland, and there is no equivalent provision to section 19 thereof.
91 Centrovincial Estates P. I. c.v. Bulk Storage Ltd.(1983) 46 P. & C.R. 393; Allied London Investments Ltd. v. Hambro Life Assurance Ltd.(1983) 269 E.G. 41, [1984] 1 E.G.LR. 16; Selous Street Properties Ltd. v.Oronel Fabrics Ltd.(1984) 270 E.G. 643, [1984] 1 E.G.L.R. 50; Thames Manufacturing Co. Ltd. v. Perrons (Nichold Peyton) Ltd. (1984) 50 P. & C.R. 1.
92 W.P. No. 95.
93 W.P. No. 95, para. 7.1. The Commission did however favour allowing parties to contract for continuing liability where it was "fair and reasonable" to do so: Ibid.., para. 6.16. The new rule was to apply to existing leases as well as new leases, subject to transitional provisions exempting existing covenants imposing contractual liability, again where it was fair and reasonable to do so, judged on the basis of the parties' knowledge at the date of commencement of the legislation: Ibid., para. 6.18.
94 HC Deb., vol. 222, col. 196 W (31 March 1993).
95 HC Deb., vol. 224, col. 193 (5 May 1993).
96 H C Deb., vol. 243, col. 554 (16 May 1994).
97 HC Deb., vol. 258, col. 283 W (21 April 1995). (Written Reply of Parliamentary Secretary to the Lord Chancellor's Department to question by Mr. Thurnham: "Following a substantial response to the consultation in favour of the package, the Government will support such a Bill, provided that the principal change concerning controls over assignment of leases will not apply to purely residential tenancies or to farm business tenancies.")
98 Section 19.
99 Landlord and Tenant Act 1988, enacted as a consequence of the Law Commission Report on Covenants Restricting Dispositions, Alterations and Changes of User (Law Com. No. 141): see below, p. 348.
100 The Government initially proposed that the landlord should give notice within nine months of the charge becoming due: HC Deb. vol. 222, col. 196 W (31 March 1993).
101 S.I. 1995/2963.
102 For the purposes of the Act, "tenancy" includes a sub-tenancy and an agreement for a tenancy, but does not include a mortgage term: 1995 Act, s. 28(1).
103 Including an option and a right of first refusal: ss. 1 (6), (7).
104 IM 1995 Act, s. 1(3). The most usual form of court order will be one granted pursuant to the Landlord and Tenant Act 1954, Part II. See further p. 344 below.
105 1995 Act, s. 1(5) For the principles of surrender and re-grant, see above, p. 319.
106 Covenants imposed pursuant to the Housing Act 1985, ss. 35 or 155, or Sched. 6A, para. 1, and to the Housing Associations Act 1985, Sched. 2, paras. 1 or 3: 1995 Act, s. 2(2).
107 "Covenant" includes term, condition and obligation, and covenants contained in an agreement collateral to the tenancy: 1995 Act, s. 28(1).
108 1995 Act, s. 2(1).
109 HC Deb. vol. 263, col. 1255 (14 July 1995). The term "problem notice" does not appear in the Act, where the device is not named, but it was so called by Mr. Thurnham in the Parliamentary debates. It may be that in practice, the notice will be referred to as a "liability notice", or, less colourfully, a "section 17 notice".
110 The only existing protection in relation to rent actions was that conferred by the Limitation Act 1980, s. 19 (rent arrears limited to six years from the date they became due).
111 1995 Act, s. 17(3).
112 1995 Act, s. 17(2). The form of the problem notice is prescribed by regulations (s. 27(1); S.I. 1995/2964, Forms 1 and 2). If a notice is not in the prescribed form, or a form "substantially to the same effect", the notice will be ineffective (s. 27(3)). Notice may be served on the last known abode of the intended recipient (LTA 1927, s. 23, as applied by 1995 Act, s. 27(5)).
113 1995 Act, s. 17(6).
114 1995 Act, s. 17(4).
115 1995 Act, s. 17(5).
116 See Hare v. Gocher [1962] 2 Q.B. 641 (construing a statute (Caravan Sites and Control of Development Act 1960, s. 14) which employed similar wording); Trow v. Ind Coope (West Midlands) Ltd. [1967] 2 Q.B. 899. Cf. the "corresponding date" rule invoiced in relation to applications for a new tenancy pursuant to Landlord and Tenant Act 1954, Part II: Dodds v. Walker [1981] 1 W.L.R. 1027; EJ. Riley Investments Ltd. v. Eurostile Holdings Ltd. [1985] 1 W.L.R. 1139. The 1954 Act, s. 29(3), does not stipulate that the period within which the application is to be made commencing on a certain day, but merely states that application shall not be entertained unless it is made "not less than two nor more than four months" after the giving of the landlord's notice.
117 HC Deb. vol. 263, col. 1247 (14 July 1995).
118 And probably not worth pursuing under the restitutionary principle contained in Moule v. Garratt (1872) L.R. 7 Ex. 101.
119 See further above, p. 322.
120 Insolvency Act 1986, ss. 181, 320.
121 See RA Securities Ltd. v. Mercantile Credit Co. Ltd. [1995] 3 All E.R. 581, 587, per Jacob J.
122 Law Com. No. 174, para. 3.1. However, no proposals were made to deal with this perceived injustice.
123 Or the longest period (less than three days) that will not wholly displace the landlord's reversionary interest expectant on the tenancy: 1995 Act, s. 19(2).
124 The parties are free to agree modifications to the covenants of the existing lease. Personal covenants (so expressed) and "spent" covenants need not be reproduced in the overriding lease.
125 "Intervening lease" may have been a more appropriate, and less confusing, term.
126 Law of Property Act 1925, s. 140 (applying to "old leases"); 1995 Act, s. 15 ("new leases").
127 If the landlord seeks payment of a sum in excess of that owed, the tenant can presumably pay the amount owed and claim entitlement to an overriding lease.
128 1995 Act, s. 19(1).
129 1995 Act, s. 19(5).
130 Most usually by exercise of a right of re-entry for breach of covenant.
131 1995 Act, s. 19(7).
132 The nomenclature is confusing. It is expressly provided that the right to an overriding lease cannot be an overriding interest for the purposes of the Land Registration Act 1925: 1995 Act, s. 20(6).
133 1995 Act, s. 20(1).
134 1995 Act, s. 20(4).
135 If requests are made on the same day, former tenants have priority over guarantors, and as between former tenants, the tenant whose liability commenced the earlier has priority: 1995 Act, s. 19(8).
136 1995 Act, s. 19(9).
137 T2 will probably have entered into a personal covenant with L to pay the rent and observe the covenants for the duration of the term.
138 See Law of Property Act 1925, s. 140.
139 1995 Act, s. 20(2).
140 HC Deb. vol. 263, vol. 1244 (14 July 1995).
141 (1984) 270 E.G. 643; [1984] 1 E.G.L.R. 50; see p. 317 above.
142 [1996] 1 All E.R. 336. See above, p. 317.
143 (1983) 46 P. & C.R. 393.
144 The Court of Appeal did not make any express reference to the legislation which had just been passed.
145 For expositions of the law before the 1995 Act (which will continue to apply to leases granted before 1996), see Gray, Kevin, Elements of Land Law, 2nd ed. (London, 1993), pp. 845–73; Megarry, R.E. & Wade, H.W.R., Law of Real Property, 5th ed. (London, 1984), pp. 742–60.Google Scholar
146 Law of Property Act 1925, ss. 141 and 142.
147 See, e.g. Grant v. Edmondson [1931] 1 Ch. 1, 28, per Romer L.J., ("purely arbitrary… and quite illogical").
148 Hua Chiao Commercial Bank Ltd. v. Chiaphua Industries [1987] A.C. 99;Kumar v.Dunning [1989] Q.B. 193.
149 Law Com. No. 174, Para 4.46.
150 See also 1995 Act, s. 30(4).
151 1995 Act, s. 3(6)(a).
152 1995 Act, s. 3(6)(6). The most important form of leasehold covenant requiring registration is the landlord's covenant to renew the lease, which is an estate contract and registrable as a Class C(iv) land charge in unregistered land: Phillips v. Mobil Oil Co. Ltd. [1989] 1 W.L.R. 888. Where title is registered, however, in default of registration, such a covenant will frequently take effect as an overriding interest: Kevin Gray, op. cit., p. 864, n. 10; cf. Webb v. Pollmount Ltd. [1966] Ch. 584; Kling v. Keston Properties Ltd. (1983) 49 P. & C.R. 212.
153 Where, for example, there has been a waiver or release, which is not merely personal to the assignor: see further 1995 Act, s. 3(4).
154 1995 Act, s. 3(2).
155 1995 Act. s. 3(3).
156 1995 Act, s. 4.
157 Other than as guarantor.
158 1995 Act, s. 12. 1S' See below.
159 See below.
160 This will be of particular significance in relation to "overriding leases": see above, p. 332.
161 1995 Act, s. 15.
162 See Law of Property Act 1925, s. 136.
163 1995 Act, s. 23.
164 HC Deb. vol. 263, col. 1240, 14 July 1995. The Act effects a statutory release. It is important to realise that the possibility of release by deed, or by accord and satisfaction, remains a viable alternative: see 1995 Act, s. 26(l)(a), and above, p. 320.
165 By virtue of an "authorised guarantee agreement": see 1995 Act, s. 16, and below.
166 1995 Act, s. 24(2).
167 1995 Act, s. 25.
168 1995 Act, s. 24(1).
169 1995 Act, s. 24(4).
170 1995 Act, s. 5(3).
171 A covenant is non-attributable if it does not fall to be complied with in relation to any premises comprised in the assignment: 1995 Act, s. 9(6).
172 1995 Act, s. 9(1). Similar provisions apply in relation to landlords.
173 1995 Act, ss. 9(4), 10(1). For prescribed forms, see S.I. 1995/2964, Form 7.
174 1995 Act, s. 10(2). Agreed apportionments remain binding: 1995 Act, s. 26(1)(A).
175 1995 Act, s. 11(1). Where an assignment is excluded, the parties cannot apply for an agreed apportionment to become binding unless and until a subsequent assignment which is not "excluded" takes place: 1995 Act, s. 11(5).
176 1995 Act, s. 11(2).
177 Law Com. No. 174, para 5.1, subpara (2).
178 1995 Act, s. 16.
179 Lawfully. If T2 assigns to T3 in breach of covenant, T2 will not be released (1995 Act, s. 11). Tl's guarantee is of the performance of the covenant to any extent by the assignee ibid. s. 16(2)). Accordingly he will remain liable until T2 is released.
180 This condition will be imposed as a matter of course in relation to most commercial leases granted from 1996 onwards. See below, p. 350.
181 1995 Act, s. 16(3).
182 See further p. 350.
183 1995 Act, s. 16(4).
184 1995 Act, s. 16(5).
185 1995 Act, s. 16(8).
186 See above, p. 315.
187 Hindcastle Ltd. v. Barbara Attenborough Associates Ltd., overruling Stacey v. Hill [1901] 1 Q.B. 660. See above p. 323.
188 By virtue of the rule in Holme v. Brunsill (1878) 3 Q.B.D. 495: see further Law Com. No. 174, Para. 4.11; Rowlatt on Principal and Surety, 4th ed. (London, 1982), p. 222. For a recent application, see Howard de Walden Estates Ltd. v. Pasta Place Ltd. [1995] 1 E.G.L.R. 79.
189 1995 Act, s. 24(2).
190 1995 Act, s. 25(1).
191 See further p. 350 below. If an existing guarantor is willing to participate in such an agreement, and purports to do so, then the guarantee by the tenant will not, it seems, be vitiated (see 1995 Act, s. 16(4), which sets out two factors which will render the agreement void. Neither involves an attempt to join an existing guarantor as a party.) However, the landlord will not be able to sue the guarantor in respect of a tenant default subsequent to the date of his principal's assignment.
192 HC Deb. vol. 263, col. 1250 (14 July 1995).
193 1995 Act, s. 8(1). The application must be in prescribed form: 1995 Act, s. 27(1); S.I. 1995/2964, Forms 3–6. A notice "in a form substantially to the same effect" will suffice: ibid. s. 27(4).
194 It was initially proposed that the application should always precede the assignment. The British Property Federation requested that service of the notice be possible subsequent to assignment. As Mr. John M. Taylor explained on behalf of the Lord Chancellor's Department when the Lords amendments were considered: "There are cases in which confidentiality is very important to the landlord when he assigns, so he cannot afford to make his negotiations public by serving notices before assignment. The tenant has no control over the assignment and will be interested only in whether the new landlord is a secure prospect, such that it is not unreasonable for the assigning landlord to be released. In those circumstances, it was decided that it would not be to the tenant's disadvantage if the notice were not served until after the assignment." (HC Deb. vol. 263, col. 1252 (14 July 1995)).
195 1995 Act, s. 8(1).
196 1995 Act, ss. 8(2),(3). The Act gives no criteria upon which the county court is expected to determine the reasonableness or otherwise of release of the covenant. The tenant is warned, in the notes to the form which has been prescribed, "In deciding whether to object, you should bear in mind that if the court finds that it is reasonable for the landlord to be released, or if you withdraw your objection late, you may have to pay costs."
197 1995 Act, s. 24(1).
198 1995 Act, s. 6(2).
199 1995 Act, s. 6(3).
200 These will apply where the covenant is "non attributable": see 1995 Act, ss. 9(2), 10, and above, p. 338. See also 1995 Act, s. 26(l)(b); S.I 1995/2964, Form 8.
201 1995 Act, s. 7.
202 In 1985, the Law Commission Report on Forfeiture of Leases (Law Com. No. 142) was published.
203 1995 Act, s. 4.
204 1995 Act, s. 23(1), save where such rights are expressly assigned (see s. 23(2)).
205 1995 Act, s. 23(3).
206 Perhaps in the form of a restitutionary action based on the defendant's unjust enrichment.
207 1995 Act, s. 21(1).
208 1995 Act, s. 21(2).
209 Law Com. No. 174, paras. 4A3–4A5.
210 See above, p. 324.
211 Law Com. No. 174, paras. 4.50–4.52.
212 1995 Act, s. 14. Quaere whether it is permissible to extract express covenants of indemnity? The Law Commission wished to prohibit them: Law Com. No. 174, para. 4.52, n. 47.
213 The examples given all relate to tenants. There is no reason why in appropriate circumstances landlords should not be jointly and severally liable for the breach of a landlord covenant, and seek to exercise the redistributive jurisdiction of the 1978 Act.
214 Duncan Fox & Co. v. North & South Wales Bank (1880) 6 App.Cas. 1. This will not of course apply if Tl's liability under the authorised guarantee agreement is expressed to be as sole or principal debtor.
215 By analogy with Moule v. Garrett (1872) L.R. 7 Ex. 101; see above, p. 325.
216 (1872) L.R. 7 Ex. 101.
217 1995 Act, s. 13(3).
218 1995 Act, s. 1(3).
219 O'May v. City of London Real Property Co. Ltd. [1983] 2 A.C. 726.
220 1995 Act, s. 30(1); Sched. 1, paras. 3 and 4, amending Landlord and Tenant Act 1954, ss. 34 and 35.
221 On which see in particular pp. 348–52 below.
222 The professed object was "to put all landlords in the same category as the ideal or good landlord of whom many of us have had experience in the course of our lives" (Sir William Joynson-Hicks, Secretary of State for the Home Department, on Second Reading, HC Deb). vol. 204, col. 2302 (7 April 1927).
223 HC Deb. vol. 210, col. 1327 (18 November 1927).
224 Leases of agricultural holdings and farm business tenancies are specifically excluded, and section 19 applies in a much modified form to mining leases; 1927 Act, s. 19(4), as amended.
225 25 March 1928.
226 This is not the only statutory provision which relates to covenants against assignment etc. See also Law of Property Act 1925, s. 144 (no fine payable in respect of consent unless express contrary provision in lease); Sex Discrimination Act 1975, s. 31 (unlawful to discriminate on grounds of sex against a person by "withholding" consent for disposal of premises); Race Relations Act 1976, s. 24 (likewise on racial grounds).
227 "Assignment will be used here to denote assignment, subletting, charging, and parting with possession of the demised premises.
228 "Section 19(1) did not purport to destroy that freedom of contract of the parties to agree to forbid assignment by the tenant"; per Megaw L.J. in the leading case of Bocardo S.A. v. S. & M. Hotels Ltd [1980] 1 W.L.R. 17, 21. The point was however accepted by counsel on both sides. See also F. W. Wootworth & Co. Ltd. v. Lambert [1937] 1 Ch. 37, at p. 59, per Romer L.J., and at p. 65, per Greene L.J.; Vaux Group pic. v. Lilley (1990) 61 P. & C.R. 446, 454, per Knox J; Sophian (1927) 13 Conv. 55, 56; Report of the Leasehold Committee (1950) Cmnd. 7982, paras. 307–312; Hill & Redman's Law of Landlord and Tenant, 18th ed., A[2600]; Woodfall, Landlord and Tenant, 11.126. The sole questioning voice is that of Danckwerts L.J. in Property & Bloodstock Ltd v. Emerton [1968] Ch. 94, 119.
229 Adler v. Upper Grosvenor Street Investment Ltd. [1957] 1 W.L.R. 227, approve d by the High Cour t of Australi a in Creer v. P. & O. Lines of Australia Pty. Ltd (1971) 125 C.L.R. 84.
230 Bocardo S.A. v. S. & M. Hotels Ltd., above, at p. 23.
231 In 1974, Lord Denning M.R. stated that such a surrender clause was "now common": Greene v. Church Commissioners for England [1974] Ch. 467, 474.
232 It must be registered as an estate contract in order to be effective against assignees of the lease: Greene v. Church Commissioners for England [1974] Ch. 467. Although valid, such a clause in a business tenancy poses problems for the landlord who seeks specific performance of the tenant's agreement to surrender: Landlord and Tenant Act 1954, s. 38(1); Allnatl Properties Ltd. v. Newton [1981] 1 All E.R. 290, Megarry V.-C, upheld on appeal, [1984] 1 All E.R. 423.
233 See M. Ross, Drafting and Negotiating Commercial Leases, 4th ed. (London, 1994), para. 7.7.7.
234 Re Smith's Lease [1951] 1 All E.R. 346. In Bocardo S.A. v. S. & M. Hotels Ltd. [1980] 1 W.L.R. 17,23, the distinction between this formula and that of Adler v. Upper Grosvenor Street Investment Ltd. was described as "semantic", as the practical result was the same. But no attempt was made to overrule the earlier decision.
235 [1986] Ch. 513.
236 Bates v. Donaldson [1896] 2 Q.B. 241, 247, per A.L. Smith L.J., approved in Houlder Brothers & Co. Ltd. v. Gibbs [1925] Ch. 575, C.A.
237 Houlder Brothers & Co. Ltd. v. Gibbs, above; Bickel v. Duke of Westminster [1977] Q.B. 517; Bromley Park Garden Estates Ltd. v. Moss [1982] 1 W.L.R. 1019.
238 Pimms Ltd. v. Tallow Chandlers Company [1964] 2 Q.B. 547, 564, approved (since the Landlord and Tenant Act 1988) by the Court of Appeal in Air India v. Balabel [1993] 2 E.G.L.R. 66, 69.
239 Bales v. Donaldson [1896] 2 Q.B. 241, 244.
240 Ponderosa International Development Inc. v. Pengap Securities (Bristol) Ltd. [1986] 1 E.G.L.R. 66, 68.
241 Bickel v. Duke of Westminster [1977] Q.B. 517, 524; West Layton Ltd. v. Ford [1979] Q.B. 593, 604, 606–607.
242 Landlord and Tenant Act 1988, s. 1 (6). This provision reversed the position at common law (see, e.g., Pimms Ltd. v. Tallow Chandlers Company [1964] 2 Q.B. 547, 564).
243 Law Com. No. 141.
244 Landlord and Tenant Act 1988, ss. 5(4), 7(2).
245 Law Com. No. 141, paras. 4.31; 7.4–7.44. The Commission also proposed that surrender provisions in a lease should not be permissible as a means to prevent the reasonableness of a landlord's refusal of consent being questioned: ibid. paras. 7.62–7.66.
246 Or any other person who may consent to the tenant entering into the proposed transaction: 1988 Act, s. 1(2) (b).
247 1988 Act, s. 1(3). Law Com. No. 141, paras. 8.110–8.131. Unreasonable delay was found in Midland Bank P.l.c. v. Chart Enterprises Inc. [1990] 2 E.G.L.R. 59, where the landlord failed to give a decision within two and a half months. See also Dong Bang Minerva (U.K.) Ltd. v. Daiina Ltd. [1995] 1 E.G.L.R. 41.
248 1988 Act, s. 1(6). Th e standard of proof was not altered b y the 1988 Act: see Midland Bank pic.v. Chart Enterprises Inc. [1990] 2 E.G.L.R. 59, 60 per Popplewell J.; Air India v. Balabel [1993] 2 E.G.L.R. 66, 69. It is not necessary for the landlord to justify as a matter of fact the matters on which he relies.
249 1988 Act, s. 4.
250 This is no t a comprehensive summary of the provisions of the 1988 Act. In particular, a duty was also imposed on landlords and others to pass on applications (s. 2), and a qualified duty imposed to approve an immediate tenant's grant of consent to an assignment by a sub-tenant (s. 3).
251 See 1995 Act, s. 1(3).
252 Defined as a lease by which a building or part of a building is let wholly or mainly as a single private residence: 1927, s. 19(1 E). The new provisions have no application to agricultural tenancies either, as the 1927 Act, s. 19, does not apply to them: see Landlord and Tenant Act 1927, s. 17(1), as amended by Agricultural Tenancies Act 1995, s. 40, Sch., para. 5.
253 The agreement will usually, but not necessarily, be contained in the lease: see also 1927 Act, s. 19(1B).
254 1927 Act, s. 19(1C), as amended.
255 1927 Act, s. 19(1A), as amended.
256 In the debate on Lords amendments, Mr. Thurnham referred to the conditions requiring
257 Sec HC Deb. vol. 263, col. 1263 (14 July 1995).
258 Within the meaning of the Landlord and Tenant Act 1954, s. 42. It is common practice for absolute covenants against alienation to permit such assignments by way of exception: see M. Ross, op. cit., para. 7.7.4.
259 Law Com. No. 141, paras. 7.62–7.66.
260 Law Com. No. 174, para. 4.11. See also 1995 Act, s. 16(3)(6): "lawfully imposed".
261 See p. 339.
262 See p. 340 above.
263 1995 Act, s. 25(l)(a). The new sub-sections inserted into section 19 of the 1927 Act are (by virtue of being contained in section 22 of the 1995 Act) provisions of the later Act, and therefore subject to the anti-avoidance provisions.
264 1995 Act, s. 5(1).
265 1995 Act, s. 24(2).
266 1995 Act, s. 3(2).
267 1995 Act, s. 25(l)(a).
268 Although undue weight should not be given to the continuing liability of a financially secure original tenant: see in particular Ponderosa International Development Ltd. v. Pengap Securities (Bristol) Ltd [1986] 1 E.G.L.R. 66, 68.
269 See, for example, Venetian Glass Gallery Ltd v. Next Properties Ltd [1989] 2 E.G.L.R. 42, 46
270 See the "administrative disadvantages" referred to by counsel in Ponderosa International Development Ltd. v. Pengap Securities (Bristol) Ltd. [1986] 1 E.G.L.R. 66, 68.
271 It should be emphasised, however, that the 1988 Act continues to apply with full vigour to leases which are not "qualifying leases" within the amended s. 19, notably "old leases" and residential leases.
272 A good example is the Selous Street litigation: Selous Street Properties Ltd v. Oronel Fabrics Ltd. (1984) 270 E.G. 643; [1984] 1 E.G.L.R. 50.
273 See above, p. 334.
274 1995 Act, s. 5(2).
275 1995 Act, s. 24(1).
276 1995 Act, s. 16.
277 1995 Act, s. 5(2).
278 1995 Act, s. 3(2).
279 See above, p. 324.
280 The statutory release effected by section 5 applies only where the tenant assigns.
281 1995 Act, s. 6(2)( a).
282 1995 Act, s. 6(2) (6).
283 1995 Act, s. 24(1).
284 1995 Act, s. 4.
285 1995 Act, s. 3(5).
286 1995 Act, s. 11 (2)(a).
287 1995 Act, s. 11 (2) (b).
288 1995 Act, s. 16(6).
289 1995 Act, s. 5(3).
290 1995 Act, s. 3(2).
291 1995 Act, s. 9(6).
292 1995 Act, s. 10.
293 1995 Act, s. 21(1).
294 1995 Act, s. 24(2).
295 See generally above, pp. 350–1.
