Leasehold covenants, enforcement and remedies

Introduction

Leasehold covenants are those terms agreed in a lease that relate to the parties’ obligations to each other in their capacity as landlord and tenant.

  • Covenants are promises made by the landlord and tenant in a deed
  • Covenants can be express and implied as well

Common Covenants

  • Common covenants include paying a certain amount as rent (by the tenant)
  • Not to commit waste (by the tenant)
  • Pay rates and taxes (by the tenant)
  • To allow the tenant quiet and peaceful enjoyment of the land/property (by the landlord)
  • Not to derogate from his/her grant (by the landlord)
  • Repair the premises in order to be fit for human habitation (by the landlord)
  • Not to assign or sublet the premises without the consent of the landlord (by the tenant)
  • To use the premises for permitted purpose only etc. (by the tenant)

Covenants

Covenants are promises made by landowners in a deed

Covenantee

Covenantee is a person who has actually benefited from the promise/ covenant

Covenantor

Is a person who is promised something from his/her land and has the burden of the covenants

Short Residential leases and houses on low rent

Implied covenants

  • Short leases mean leases that are for less than 7 years.
  • Section 11(1) (a) Landlord & Tenant Act 1985 states that the landlord implicitly  undertakes to keep in repair the structure and exterior of the dwelling house.
  • Low rent means £80 in London and £52 elsewhere per year
  • The house must be fit for human habitation at the beginning of the tenancy and
  • The house will be kept by the landlord fit for human habitation during the tenancy

Further implied landlord covenants

  • To keep the structure and exterior of the detached house in good repair
  • To keep in good repair and proper working order installations for the supply of water, gas, electricity, sanitation and installations for space heating and heating water.

Important

Please note that implied covenant on repair has limited scope. The implied covenant covers repairs to the structure and exterior of the property, e.g. a leaking roof, but it does not cover general internal decoration, e.g. tiles falling off the bathroom wall.

Absolute Covenant

Absolute means that the tenant can never do or engage in certain activities, for example, assign the lease unless the landlord waives this covenant.

Qualified Covenant

Qualified means that the leaseholder/tenant must obtain the landlord’s consent before the tenant can engage in certain activities, for example, to assign or sublet the premises but with the consent of the landlord.

Important

The landlord cannot unreasonably withhold that consent to sublet or assign – Section 19(1) (a) Landlord and Tenant Act 1927.

  • A landlord is not entitled to refuse his consent to an assignment on grounds which have nothing to do with the relationship between the landlord and the tenant in regard to the subject matter of the lease.
  • Questioning  of whether the landlord’s conduct is reasonable or unreasonable is a question of fact and degree.
  • Where a landlord refuses permission, he/she is required to show that his conduct was reasonable, not that it was right or justifiable

Tenant’s Remedies where landlord refuses to consent

  1. A tenant/leaseholder can seek for a declaration from the court that the refusal is unlawful
  2. A tenant can also seek for damages and a positive injunction under the Landlord & Tenant Act 1988 for the landlord’s breach of statutory duty.
    • Under section 1(3) the landlord must respond to the tenant’s request within a reasonable time.
    • Under the same section the landlord must reply in writing and if refusing must give reasons.
    • If the landlord refuses consent then the burden of proof is on the landlord to prove that it is reasonable (section 1(6))
    • Under section 4 the tenant is given the right to sue that landlord for the breach of these statutory duties.
  1. A tenant can take the risk and make the disposition without the consent of a landlord
  • This will be effective even if s/he is in breach of the covenant
  • The landlord may sue the tenant for breach of covenant.
  • The tenant will have the defence if they can prove that the refusal by a landlord was unreasonable

Commercial Tenancies

Section 22 Landlord & Tenants (Covenants) Act 1995 applies to new commercial tenancies (those created on or after 1.1.1996)

  • It provides that the landlord and tenant may enter into an agreement specifying the circumstances in which the landlord may in future withhold his consent to any assignment and the conditions subject to which any consent may be given. 
  • If the landlord then refuses consent on these grounds then it shall not be held to be unreasonable.

Enforcement of Leasehold Covenants

These covenants are enforceable in law. A party with the benefit of the covenant (it could be landlord or tenant) has the ability to sue the other, for example, a promise by the leaseholder to pay rent is for the benefit of the landlord, hence where a tenant/leaseholder breaches his/her promise the landlord can sue the leaseholder.

Similarly, a leaseholder can sue a landlord where he/she breaches his/her promises, express and implied.

  • Where a tenant has assigned the lease to another person (new tenant) the original tenant is automatically released from the burden of his covenants on assignment of his lease
  • The original tenant will no longer remain liable for the breaches by his assignees once he has assigned the lease.
  • However, the original leaseholder/tenant will remain liable for any breaches committed by the new tenant or sub tenant where the original tenant has assigned the lease to the new tenant in breach of covenant to assign or in case of assignments by operation of law
  • Leases and their enforcement is a complex area of law, it is advisable to seek the help of solicitors, for further help and information please refer to our expert property lawyers.

Remedies for Breach of Covenant

Landlord’s Remedies

The remedies vary depending on whether the covenant breached is one for payment of rent or some other obligations

  • A landlord can sue the tenant personally for the rent.
  • A landlord can seek compensation for distress caused by a tenant/ leaseholder for non-payment of rent
  • Forfeiture: this is where the landlord re-enters the property and the leasehold or tenancy ends
  • A forfeiture is a right of re-entry where a landlord takes back the let premises and the lease is terminated prematurely

Forfeiture key conditions

  • The lease must contain an express right of re-entry (forfeiture) clause.
  • The landlord must serve a formal demand on the tenant
  • The landlord must re-enter the premises. Re-entry can be effected by obtaining a court order for possession
  • The landlord may have waived the particular breach (either expressly or impliedly).
  • A waiver will be implied if the landlord, with knowledge of the breach, acts in some way which treats the lease as continuing
  • The tenant can apply to the court for relief from forfeiture which effectively means that he is given a final opportunity to pay the rent arrears plus interest and thereby prevent the lease from being prematurely terminated.
  • Peaceable re-entry; it is a criminal offence to use or threaten violence for the purposes of securing entry into any premises where to the knowledge of the entrant (including a landlord) there is someone present (that could be leaseholder/tenant) who is opposed to the entry.
  • It is advisable that the landlord must seek a possession order from the court before entering into the let premises
  • A landlord can also seek Damages, Injunction and Specific Performance as well

Tenant/leaseholder’s Remedies

Where a landlord breaches a covenant either express or implied the tenant can seek the following remedies

  • Damages
  • Injunction
  • Deduction from rent
  • Specific performance
    • including for breach by the landlord of the covenant to carry out repairs in residential premises – s.17 L & T Act 1985

Termination of leases

A lease can be terminated by following methods

Expiry of Term

A fixed term tenancy will come to an end at the expiry of the term. 

Notice

Relates mainly to periodic tenancies.  In certain circumstances, however, fixed term tenancies can be terminated by notice as well as prior to the expiration of the contractual term, provided the lease expressly provides for this.

Surrender

Surrender involves the tenant giving up the lease to the landlord who accepts the surrender. 

Merger

This occurs when the tenant acquires the freehold reversion.  Clearly, the tenant cannot be his own landlord and so the lease will merge in the reversion.

Disclaimer

While every effort has been made to ensure the accuracy of the information provided in this article, it does not constitute legal advice and cannot be relied upon as such. Each legal case and issue may have unique facts and circumstances, as a result legalally does not accept any responsibility for liabilities arising as a result of reliance upon the information provided. For further help and guidance, you can always rely on and seek advice from our experienced lawyers.