Land - Landlord & Tenant (1) - updated1

1. In 1994 Peter granted a lease of a house to Thomas for a term of 20 years, Thomas covenanting to pay rent, to keep the house in a good state of repair, not to use the house for business purposes and to purchase anything he needed for the garden from Peter’s garden-shop. Performance of the covenants was guaranteed by a surety, Simon. In 1996 Thomas granted a sub-lease of the house to Richard for a term of ten years and in 1997 he assigned his lease to Stephen. In 1998 Peter assigned his reversion to Arthur. Arthur has received no rent this year, the house is in urgent need of repair and Richard is proposing to start a business in the house. Neither Thomas nor Richard have ever purchased their garden requirements from Peter’s shop.
Who can enforce the covenants and against whom? Would your answer be the same if Peter had granted Thomas the lease in January 1996?

* Since the lease was granted in 1994, pre-1995 Landlord & Tenant (Covenant) Act rules apply, (even if Thomas assigned the lease to Stephen in 1997, the pre-1995 rules still apply

Peter assigns reversion to Arthur
- LPA 1925 s141: passing of benefits of covenant to assignee that relate to the subject matter of the lease
- Arthur can enforce the covenants to have rent paid, have the house repaired and not to have the house for business purpose
- Arthur cannot enforce the covenant of ‘Thomas purchasing anything he needed for the garden from Peter’s garden-shop’ because it is personal covenant in nature
- Peter loses all the right to Arthur

Against whom can Arthur claim his rights?
Thomas?
- Under old law of original tenant liability, Thomas is liable for the whole duration of the original lease, i.e. 20 years for covenants especially money claims – Doctrine of privity of contract

Simon?
- Simon, as a surety to guarantee performance of covenants, is liable to the same degree as Thomas

Stephen?
- Thomas assigned the lease to Stephen in 1997, therefore Stephen gets the legal estate of what is left of the 20-year lease, i.e. 17 years
- Stephen got all the interests from Thomas, thus Stephen becomes the Richard’s landlord
- Under old common law of Spencer’s rule: burden of covenants will pass to assignee if
- Does ‘privity of estate’ exist between the Arthur and Stephen so as to allow enforcement of the covenants?
- Do the covenants ‘touch & concern’ the land?
- Test of ‘touch & concern the land’ (Swift Investments)
- Could the covenant benefit any owner of an estate in the land as opposed to the particular original tenant (indicates a proprietary covenant)?
- Does the covenant affect the nature, quality, mode of user or value of the land (indicates a proprietary covenant)?
- Is the covenant expressed to be personal?

Richard?
- Spencer’s rule applies
- There is no privity of estate between Arthur and Richard (sub-tenant), therefore Arthur cannot sue Richard
- Under doctrine of restrictive covenant, Arthur can sue on the restrictive covenant (here, ‘‘not to use the land for business purpose’) directly against subtenant

If Peter leases Thomas in 1996
- Applies LTCA 1995: No distinction between legal and equitable lease
- LPA 1925 s141 no longer applies
- Peter assigns reversion to Arthur: LTCA s3
- Benefits and burdens pass to assignee of reversion
- No more requirement of ‘relate to subject matter of the land’
- Thomas assigns the lease to Stephen: Original tenant liability not applicable, Thomas is no longer liable for the land (LTCA s5); However, recent lease will include a clause ‘tenant will not assign without landlord’s consent’. Landlord will require the tenant to sign the Authorized Guarantee Agreement (AGA) in which tenant guarantees the new tenant performs to covenant or the original tenant will be liable. When new tenant assigns further, the original tenant will be release from the liability, while the new tenant will be asked by the landlord/assign of reversion to sign a new AGA and be bound
- Simon, as a surety to guarantee performance of covenants, is liable to the same degree as Thomas
- If Thomas is bound by AGA, same as Simon
- If Thomas is released based on LTCA s5, same as Simon
- Thomas assigns the lease to Stephen: LTCA s3 – S receives all the benefits and burdens
- Spencer’s rule not applicable
- No touch & concern the land requirement
- No requirement of privity legal estate
- s3(6)(a) express personal covenant is exempted from being automatically passed to assignee; per BHP, it is likely that covenant will be exempted if it’s personal in nature
- Richard as a subtenant is not covered by LTCA 1995
- Follow the old law: no privity of legal estate, Arthur can’t sue Richard; However, Arthur can hold Richard liable directly with the Doctrine of restrictive covenant