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Leasehold Covenant: Remedies

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  • once established that covenant is enforceable by either tenant or landlord several remedies available

Remedies: non-payment of rent

  • rent is not essential to a lease but most granted on basis tenant will pay rent to landlord & covenant will be implied to pay (rarely express covenant)
  • landlord can sue tenant for debt if breach contractual promise to pay rent
    • action to recover must be within 6 years from which arrears due
  • landlord may levy distress: seizing tenant's goods found on demised premises & recovering owed by selling goods
  • Law Commission has recommended distress remedy abolished due to human rights concerns

    Fuller v Happy Shopper Markets [2001] All ER (D) 156

    • The ancient (and perhaps anachronistic) self-help remedy of distress involves a serious interference with the right of the tenant, under Article 8 of the European Convention on Human Rights, to respect for his privacy and home, and, under Article 1 of the First Protocol, to the peaceful enjoyment of his possessions. The human rights implications of levying distress must be in the forefront of the mind of the landlord before he takes this step, and he must fully satisfy himself that taking this action is in accordance with the law.
  • Government brought forward provisions to amend which came into force in April 2014
    • s.71: abolishes common law right to levy distress for rent arrears
    • Part 3 Chapter 2: Commercial Rent Arrears Recovery (CRAR) to replace distress for rent with modified regime for recovering rent arrears due under leases of commercial premises
  • landlord may also use forfeiture (bring lease to premature end) as a remedy for many breaches of covenants

Remedies: breaches of other covenants

  • lease may contain many covenants: repair, not to assign without landlord's consent, not alter property, not to use for certain purposes, to insure
  • damages: basic principles for suing on contractual promises apply to covenants

    Hadley v Baxendale (1854) 9 Ex 341

    • damages are limited to amount fairly & reasonably be considered either
      arising naturally (according to the usual course of things) from such a breach
      or as may reasonably have been in contemplation of both at time contract made as probable consequence of breach
  • specific performance of obligation: discretionary equitable remedy only granted if damages inadequate means of compensating claimant
  • specific performance not available for keep open covenants

    Co-operative Insurance Society v Argyll Stores [1998] AC 1


    • D closed busy supermarket in shopping centre in breach of covenant with C to keep open until 2014


    • could C seek remedy of specific performance?


    • Court of Appeal: granted order of specific performance
    • House of Lords: reversed CoA decision
    • grant of order of specific performance would require continued court supervision, which not possible
    • continual supervision: failure to perform would give rise to ongoing actions for non-compliance, expensive & time consuming so damages better solution
  • specific performance may be available in relation to repairing covenants
  • statute introduced to overcome problem of landlords buying poor repair property & renting to tenants with tenant covenant to undertake repairs
    • applies leases of 7 yrs or more with 3 yrs left to run
    • proceedings to recover damages or forfeit lease only brought with permission of court (satisfied repairs must take place before end of lease)
  • traditionally specific performance for repairing covenants not available against landlord or tenant (Hill v Barclay (1810) 16 Ves Jun 402)

    Lee Parker v Izzet [1971] 1 WLR 1688

    • if landlord in breach of repairing obligation tenant's only remedy to carry out repairs & recover by withholding rent or suing for damages
  • now statutory powers in relation to specific performance
    • s.17: tenant has powers to order specific performance of landlord's repairing covenant
    • replaced s.125 Housing Act 1974
  • specific performance against tenant in relation to repairing covenants only in limited circumstances

    Rainbow Estates v Tokenhold [1999] Ch 64

    • order against tenant only likely to be appropriate in rare cases: subject to the overriding need to avoid injustice or oppression, the remedy should be available when damages are not adequate
  • injunction: for negative or restrictive covenant discretionary remedy of injunction ordering defendant not to contravene covenant may be suitable
  • damages for tenant's breach of repairs duty are limited
    • s.18(1): damages limited to diminution in value of the reversion
      landlord cannot recover damages if premises are to be pulled down or altered structurally as to make any repair valueless
  • alternatively landlord may enter premises to carry out work (if express permission in lease)

    Jervis v Harris [1996] Ch 195

    • if landlord carries out repairs can recover damages for full cost of repairs (s.18 Landlord and Tenant Act 1927 not apply)
  • generally if landlord fails to carry out obligation not entitled tenant to withhold payment of rent (tenant at risk of landlord forfeiting lease)
  • certain circumstances may have common law right to withhold rent

    British Anzani v International Marine Management [1980] QB 137

    • Taylor v Beal Cro Eliz 222 established possibility of set-off against rent
    • to set off: tenant must inform landlord repairs need carrying out & if he fails (contrary to his covenant), tenant may carry out repairs & deduct cost from rent owed (amount seeking must be liquidated or fixed sum)
    • alternatively tenant may withhold payment of rent & if landlord sues, equity may allow unliquidated claim set off against the liability for rent: if connection between two claims sufficiently direct so it is not manifestly unjust to allow

Remedy: forfeiture

  • forfeiture allows landlord to terminate fixed term lease before due to end under contract & terminates any interests derived from lease (such as underlease)
  • landlord has right to forfeit if:
    lease contains forfeiture clause (provision for landlord to re-enter property for breach of covenant by tenant)
    lease granted subject to condition that landlord may forfeit on certain event
    tenant denies the landlord's title
  • if lease contains forfeiture clause & tenant breaches covenant:
    lease does not end automatically
    landlord decides whether to forfeit or allow lease to continue
    if landlord continues lease he has waived the breach
  • once landlord communicates decision it is binding on him

    Central Estates v Woolgar (No. 2) [1972] 1 WLR 1048

    • waived right to forfeit: if landlord or agent demands or accepts rent (intention is irrelevant)
    • if breach is continuing one (such as repairing covenant) landlord may still decide to forfeit after accepting rent
  • landlord can show intention to forfeit by peaceable re-entry or service of proceedings
  • tenant may seek relief from forfeiture by application to a court

Forfeiture: non-payment of rent

  • right to forfeit for breach of rent covenant differs from forfeiture for breach of other covenants
  • M: to forfeit lease due to non-payment of rent landlord had to show tenant had been given opportunity to pay rent (by making a formal demand)

    Duppa v Mayo (1669) 1 Wms Saund 275

    • formal demand: landlord should attend premises on last day for payment at a convenient hour before sunset & demand payment of the exact amount, such demand continuing until sunrise
    • if rent not paid landlord could forfeit lease
  • forfeiture clause now usually states landlord has right to re-enter when payment of rent is overdue without formal demand
  • forfeiture for non-payment of rent requires a forfeiture clause or for lease to be granted subject to forfeit condition
  • if lease does not contain provision dispensing with need for formal demand, formal demand has to be made unless statute assists
    • s.210: if lease gives landlord right to re-enter & rent is 6 months in arrears, proceedings may be served without any formal demand
    • s.139: rent must be months in arrears & no sufficient distress found on the premises
  • in some cases a landlord is required to issue court proceedings to commence forfeiture
    • s.2: unlawful to forfeit lease of a dwelling otherwise than by court proceedings while a person is lawfully residing at the premises
    • s.166: tenant under a long lease (21 yrs or more) of a dwelling not liable to pay rent unless landlord has given notice
      notice must require payment on a specified date (not before date tenant liable to pay rent under the lease, not less than 30 days or more than 60 days from notice
    • s.167: restricts landlord's right to forfeit long lease of dwelling for non-payment of rent, service charges or administration charges unless more than a prescribed amount or owed for more than a prescribed period
  • tenant may seek relief from forfeiture: availability will depend on method used to forfeit & whether relief sought in High Court or County Court
  • High Court: forfeiture by proceedings
    • s.212: if landlord has commenced forfeiture action in High Court: discontinued if tenant pays all arrears & costs prior to hearing
    • if tenant does not pay all arrears & costs he has 6 months from execution of the order for possession within which to apply to court for relief
  • County Court: forfeiture by proceedings
    • s.138: action will cease if tenant: no less than 5 clear days before hearing date pays arrears & all costs (& remains tenant under current lease)
      if proceeds to trial: court will order possession within specified period (if landlord establishes case) not less than 4 weeks form date of order
      once order has been made tenant can avoid forfeiture by paying arrears & costs before period expires
      if tenant not make payment within required period landlord may recover possession
      if within 6 months from landlord recovering possession tenant may still apply to the court for relief & court has discretion to grant relief subject to such conditions as it thinks fit (if tenant makes no application he is barred from all relief)
  • High Court: relief sought for forfeiture by peaceable re-entry

    Billson v Residential Apartments [1991] 3 All ER 265

    • s. 210 - 212 Common Law Procedure Act 1852 only apply where landlord forfeits lease by means of proceedings
    • under old equitable jurisdiction no time limit for seeking relief from forfeiture by peaceable re-entry
  • County Court: relief sought for forfeiture by peaceable re-entry
    • s.139: 6 month time limit for seeking relief from forfeiture by peaceable re-entry
  • considerations in relation to granting relief: if tenant delays in making application for relief, landlord may have re-let property & relief will only be granted if it is equitable to do so (so unlikely if landlord has altered his position)
  • if tenant pays arrears & costs court will grant relief even if landlord complains other covenant have been breached

    Gill v Lewis [1956] 2 QB 1

    • tenant who paid his rent arrears would not be refused equitable relief on basis that he had assaulted two boys in the property

Forfeiture: breaches of other covenants

  • landlord must:
    check whether lease contains right to forfeit (usually forfeiture clause)
    & then serve notice
    • s.146: if landlord seeking to forfeit lease by action or peaceable re-entry (except for non-payment of rent)he must serve notice
    • valid notice must:
      specify particular breach complained of
      require lessee to remedy breach if capable of being remedied
      in any case require lessee to make compensation in money for the breach
  • despite wording of s.146 LPA 1925

    Lock v Pearce [1893] 2 Ch 271

    • if landlord does not want compensation an omission to claim it will not invalidate notice
    • confirmed in Rugby School v Tannahill [1935] 1 KB 87
  • in some circumstances a notice under s.146 LPA 1925 may not be served
    • s.168: landlord of long lease of dwelling may not serve a notice under s.146 LPA 1925 unless:
      he has made an application to a leasehold valuation tribunal to determine that a breach of covenant or condition has occurred & the tribunal has finally so determined
      tenant has admitted the breach
      court or arbitral tribunal has finally determined that the breach has occurred
  • once a valid notice has been served under s.146 LPA 1925 landlord can decide to forfeit by serving proceedings or by peaceable re-entry
  • if landlord obtains court order & takes possession under it, tenant has no right to relief

    Billson v Residential Apartments [1992] 1 AC 494

    • if landlord effects peaceable re-entry tenant may be able to apply for relief

Forfeiture: breaches of repairing covenant

  • if tenant breaches repairing covenant landlord may seek damages or forfeiture of the lease
    • s.7: lease is for term of 7 yrs or more
    • s.1(1): applies if lease unexpired term exceed 3 yrs, landlord must serve notice under s.146 LPA 1925 & tenant may serve counter-notice
    • s.1(3): if tenant serves counter-notice landlord must obtain leave of court to enforce right to damages or forfeit the lease
    • s.1(4): notice must inform tenant of their right to serve a counter-notice within 28 days claiming the benefit of the 1938 Act
    • s.1(5): court will only grant leave if :
      (a) immediate remedying of the breach is requisite for preventing substantial diminution in the value of his reversion, or that the value thereof has been substantially diminished by the breach
      (b) if immediate remedying fo breach necessary to comply with byelaw or statutory obligation
      (c) if lessee not in occupation of whole premises & immediate remedying of the breach required in interests of the occupier
      (d) that the breach can be immediately remedied at an expense that is relatively small in comparison with the much greater expense that would probably be occasioned by postponement of the necessary work
      (e) special circumstances which in the opinion of the court, render it just and equitable that leave should be given

    SEDAC Investments v Tanner [1982] 1 WLR 1342

    • landlord must serve s.146 LPA 1925 notice before the breach is remedied or will be deprived of right to seek the leave of the court
  • if landlord obtains leave of the court to proceed with forfeiture tenant still has right to seek relief
  • if lease contains clause giving landlord right to serve a notice requiring tenant to carryout repairs & tenant fails to respond: landlord may enter & carry out repairs & recover full cost of the repairs from tenant

    Jervis v Harris [1996] Ch 195

    • if landlord is recovering a debt (not seeking damages) neither s.18 LTA 1927 (capping damages at diminution in value of reversion) or Leasehold Property (Repairs) Act 1938 will apply

Termination of leases

  • fixed term tenancy expires by effluxion of time (end automatically without either party needing to give notice when term expires) & tenant no longer occupies & property passes back to landlord
  • period tenancy continues indefinitely until one party decides to end by serving notice to quit

    Prudential Assurance v London Residuary Body [1991] UKHL 10

    • it is of the essence of a tenancy from year to year that both the landlord and the tenant shall be entitled to give notice determining the tenancy
  • length of notice: usually length of period of tenancy (monthly on one month's notice & should expire at end of clear period (weekly tenancy start on Monday should expire on a Sunday)

    Queen's Club Gardens Estates v Bignell [1924] 1 KB 117

    • yearly tenancy: at least six months' notice must be given & it must expire at end of a completed period of the tenancy
    • s.5: tenancy of dwelling house minimum 4 weeks written notice
  • security of tenure: when tenancy ends at common law but tenants have statutory protection & do not have to leave premises they are occupying
  • security of tenure for private residential tenancies provisions under Rent Act 1977 & Housing Act 1988 (as amended by Housing Act 1996) & for public sector protection under Housing Act 1985
  • right of enfranchisement (acquiring landlord's freehold interest) under Commonhold and Leasehold Reform Act 2002
  • occupiers for purpose of business may have some protection under Landlord and Tenant Act 1954
  • tenancy running from set date for 12 months with rent payable each month

    Adler v Blackman [1953] 1 QB 146

    • yearly tenancy despite the fact that the rent is payable monthly
  • joint tenancy: lease is a contract

    Hammersmith & Fulham LBC v Monk [1992] 1 AC 478

    • periodic tenancy granted to two or more persons jointly all must agree to it being continued at the end of each period if one joint tenant gives notice, then will end tenancy of all joint tenants (deprives others of home & security of tenure but is preferable to any joint tenants being able to bind others for joint lives )
    • House of Lords highlighted difference between contract-based approach & property-based:
      property-based approach: view tenancy as creating legal estate & emphasise unity of joint tenants (so require agreement of all joint tenants to service of a notice & revulsion against one joint tenant being able to end other's rights in the home)
  • surrender: tenant giving up lease to immediate landlord:
    express by deed (s. 52(1) LPA 1925), effect: merge leasehold interest with landlord's interest & extinguish the lease
    implied: tenant accepts new lease from landlord or tenant hands back keys & landlord re-lets
  • merger: tenant acquires landlord's interest (tenant buying freehold or third party buying freehold reversion & tenant's leasehold interest)
  • argument courts tending towards increasing contractualisation leases

    Bruton v London & Quadrant Housing Trust

    • House of Lords: tenancy can exist purely as a contract without tenant acquiring any proprietary interest whatsoever
  • question: whether doctrines of contract can be applied satisfactorily to leases?
  • frustration: event after contact is made which destroys whole basis of the contract or makes performance vastly different from parties agreed in contract
  • long lease (such as 99 years) may entail some significant periods when property cannot be used without destroying the lease
  • different approaches may suit different types of lease:
    long lease granted for capital sum: mainly executed contract & interest more in property
    shorter term for commercial rent: parties obliged to perform in future (throughout term) & the contract is largely executory

    Progressive Mailing House v Tabali (1985) 157 CLR 17

    • Australian case: unresolved issues with applying doctrine of frustration courts should question assumption fundamental doctrines of contract law have no application to leases

    National Carriers v Panalpina [1981] AC 675

    • House of Lords: in rare cases doctrine of frustration may apply to leases
    • Lord Simon: law should be founded on comprehensive principles...compartmentalism, particularly if producing anomaly, leads to the injustice of different results in fundamentally analogous circumstances
      anomaly: charter of a ship by demise (doctrine frustration not apply) & demise of land (doctrine of frustration does apply to a licence to occupy land)
    • in instant case, lease not frustrated tenant as 18 months deprivation in 10 years too small
  • repudiatory breach: breach of contract sufficiently serious to allow other party to withdraw from the contract

    Progressive Mailing House v Tabali (1985) 157 CLR 17

    • Australian case: at common law breach of covenant by tenant gave landlord no right to re-enter unless lease conferred such a right & therefore tenant's breach of covenant itself not a repudiatory breach
    • other Australian cases where tenants found to have repudiated contracts involve abandoned properties but suggested not confined to these circumstances

    Hussein v Mehlman [1992] 2 EGLR 87

    • HoL decision in National Carriers v Panalpina continuing the process... of assimilating leases to other contracts
    • application of doctrine of repudiatory breach part of the process even though it had a number of important implications
  • argument that leases different to other contracts

    National Carriers v Panalpina [1981] AC 675

    • risk argument for treating leases differently from other contracts: risk passes to buyer on sale of land & by analogy risk so pass to lessee
      Lord Wilberforce: not accept analogy as leases often expressly allocate risk
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