Land Law and Tenant

Question 1

This Problem concerns the enforceability and remedies of leasehold covenants between landlords and tenants, and their successors in title. The ground floor lease is granted before 1 January 1996 and so the covenants are governed by a mixture of statute and common law. The first and second floor leases were granted in 2001 after the coming into force of the Landlord and Tenant (Covenant) Act 1995 and are dealt with under this statutory regime.

Ground Floor

On the facts the original landlord, Larry and the Original tenant Tariq have assigned their leasehold estate. Clearly the original parties are bound to each other in contract to perform the covenants contained in the lease. Tariq liability continues throughout the whole term of the lease, and for any breach of covenant committed by his assignee Thursby v Plant (1690). Under s141 of the Law of Property Act (LPA) 1925, a landlord will not be able to sue the original tenant after he has parted with the land as that right is statutorily transferred to the new landlord, if the covenant has reference to the subject matter of the lease Re King 1963.

Of course for practical purposes, the landlord, Ron, will wish to enforce the leasehold covenant against the present tenant and, in this respect, the issue turns on whether the benefit of the covenant has passed to him and the burden of the covenant has passed to the new tenant. The rule under the Spencer case provides that two conditions must also be met (i) there must also be privity of estate between the parties and (ii) the covenants touch and concern the land.

The lease contains two covenants, one to pay rent and the other to use property as a ladies fashion business. The requirements for determining whether a covenant does touch and concern land have been re-stated by Swift Investments v Combined English Stores 1988. They are (i) covenant that benefits any estate as opposed to a particular original covenantee (ii) a covenant which affects the nature, quality, mode of use or value of land (iii) whether the covenant was expressed to be personal.

Both covenant prima facie touches and concern the land and fall within the Swift formula. Tariq has assigned his interest to Adam and Larry has assigned his interest to Ron. The relationship of Landlord and Tenant between Adam and Ron also appears to exist; a legal lease will establish privity of estate.

I would advise Ron that he is entitled to sue Adam He could seek forfeiture on the breach of the user covenant under s146 LPA 1925. He would need to serve a notice, which would have to specify the breach, and require the breach to be remedied, if it is capable of remedy he may also request, compensation. The breach is a continuous breach and the covenant is negative as such it might be capable of being remedied. Also under s146 (2) LPA 1925 the tenant could apply for relief against forfeiture. Ron could alternatively sue for an injunction and damages.

Ron may also forfeit the lease for non-payment of rent .The procedure here is entirely different from that of forfeiture for breach of any other covenant. It is not necessary to first serve a s146 notice.

Forfeiture for non-payment of rent is governed by s 210 Common Law Procedure Act 1852 unless the lease provides for otherwise. Ron must first make a formal demand for the rent unless (i) at least half a year’s rent is arrears and (ii) there are not enough goods available for distress on the premises to satisfy all the arrears.

The courts have the statutory right to stay proceedings s212 CLPA 1852 provided the tenant pays all the rent due and the landlords cost

Under s 210 CLPA 1852 and s 138 County Court Act 1984 Adam can obtain relief against forfeiture within six months of the Landlord’s re-entry pursuant to a court order if Adam (i) pays the rent due (ii) pays the landlords expenses and (iii) it is just and equitable to grant relief. The rational behind this generous provision is of course, that the Landlord has let the premises in order to generate income and should not be entitle to bring that arrangement to an end when the income is paid.

First Floor

The enforceability of the two covenants raises similar issues to those considered above, save that the lease is granted on or after 1 January 1996, the Landlord and Tenant (Covenants) Act 1995 is applicable. This makes no distinction between personal and proprietary covenants. Consequently, all leasehold covenants will run to assignees of the reversion of the lease irrespective of whether they touch and concern or have reference to the subject matter of the lease provided they are not expressed to be personal ss2 and 3 LTCA In Ron’s case, therefore, the original tenant’s covenant not to

use the first floor other than for the purpose of a recording studio and to allow Larry to use the studio on one day during the Christmas season to record a Christmas carol for his parents, may well run to assignees as neither are actually expressed to be personal, even though the latter is personal under the pre -1996 Swift test.. Also by force of statute, the benefits and burdens of the leasehold covenants pass to assignees. There is no need to prove privity of estate or plead ss141 of the LPA this rule is irrelevant for LTCA leases s3 of the LTCA.

The original tenant Sean is released from liability on assignment, subject only to possibility of being required to guarantee the assignee under an Authorised Guarantee Agreement (AGA) ss 5 and 16 of the LTCA.

With the above principles in mind Ron cannot sue Sean the original tenant, under any of the covenants. He has assigned to Keith and there is no suggestion that Larry extracted an AGA prior assignment. However, as Keith is an assignee of the tenant, and as no covenant is expressed to be personal, it is clear that Keith is subject to the burden of both covenants and Ron could sue Keith for breach of covenants. Ron may seek forfeiture as above for breach of the user or an injunction and damages. Ron may even seek specific performance to ensure Keith allows him to record his Christmas ditties.

(b)

Under s52 of the Law of Property Act 1925, all legal leases except those which are exempt under s52 (2) must be created by deed. This is the basic principle in respect of the creation of legal leases. The exception granted by statute is for those leases which take effect in possession for not more than three years without fine s54 (2) LPA. As Jerome is in possession paying a rent of 400 pounds Ron will be bound by the oral agreement between Jerome and Larry and will be unable to evict Jerome until his three years has expired.

Question 2

The problem concerns whether equitable lease is as good as a legal lease and to what extent this is true with regards to leases of registered land

A lease is an estate in land of defined duration. It is capable of being a legal estate under s1(1)(b) of the Law of Property Act 1925 provided that it is a “term of years absolute” and is created in the correct manner i.e. if exceeding three years by deed ss 52, 54 LPA.

If not created by deed, the general rule is that the lease will be equitable in nature. Where the actual lease purports to create a legal estate or interest is in writing but has not been executed as a deed, then provided it complies with s2 of the of the Law of Property (Miscellaneous Provision) Act 1989 as to signature, it will create a valid contract to create or convey the estate or interest. Under the doctrine of Walsh v Lonsdale (1882) the grantee has an equitable estate or interest that is one which equity will recognise and protect.

The advantage of a legal lease is that a purchase of the Landlord’s right will almost certainly be aware of the existence of any legal tenancy. In registered land a legal lease currently for a period of seven years or more will be registered with its own legal title number and even if the purchaser forgot to register the lease the legal lease will be an interest which overrides whether the situation involves first registration or the disposition of already registered land. Under schedule 1 and 3 of the Land Registration Act 2002 as the tenant is likely to be a person in actual occupation, even in the absence of occupation, short term legal leases, that is, those for seven years or less will, similarly be protected under paragraph 1 of both schedules in the LRA 2002. This means that a purchaser of registered land is going to be bound by the legal lease come what may. Similarly, in unregistered land, the deed (or fact of occupation under a legal periodic tenancy) will be obvious and after all, in unregistered land legal rights bind the whole world. As much cannot be said, however for equitable leases.

Equitable leases can sometimes be difficult for a purchaser of the reversion to discover although the requirement of writing in the LP (MP) Act 1989 may relieve this, but they can be destroyed on the sale of that reversion’ like all equitable interests, equitable lease are prima facie vulnerable to purchasers, that is to put the purchase of the freehold land over which the lease exists.

However the equitable tenant in registered land may protect their interest, by way of notice (usually agreed but more rarely unilateral) as a protected interest, they may rely on the alternative in schedule 1 and 3 of the LRA 2002 to gain an interest which overrides as a person in actual occupation of the premises.

This is all very well for the equitable tenant, but it does mean that the purchaser of the reversion may well become bound by an interest that was informally created. In many situations the fact of occupation (and hence the equitable lease) may well be obvious and the purchaser will be warned of the overriding interest. This situation is aided by the two schedules which remove the risk of apparently innocuous occupation of a small area protecting the entire plot and thus reserving the decision in Ferrishurst Ltd v Wallcite Ltd but this is not always going to be true especially with estoppel leases that can still be entirely oral.

Ultimately, then it is better for all parties if a legal lease is established. Not only is the very existence of the equitable lease dependent on the availability of specific performance, its informal nature still poses problems for purchasers and tenants alike.

Question 3

(a) I would advise Kirwan that the Leasehold Reform, Housing & Urban Development Act 1993, enables tenants of flats to protect what would otherwise be considered a depreciating asset by providing for the enforced sale of the freehold of a building to the tenants acting together (known as collective enfranchisement) The 1993 Act gives tenants rights which they may exercise regardless of the landlord intentions or actions.

To qualify under the 1993 Act a tenant must have a long lease of his flat, i.e. generally an original term of more than 21 years, the building must be a self-contained building or part of a building, it must contain a minimum of two flats (s3 (1) and 3(2)). No more than 25% of the internal floor area, excluding common parts, must be for non-residential purposes (s4 (1)).

Chapter2 Part 2 Commonhold and Leasehold Reform Act 2002 will require the tenants to set up a Right To Enfranchise company (RTE) to serve notice on the landlord to purchase the freehold. The landlord can serve counter notice disputing tenant’s right to enfranchisement. The parties are entitle to take the matter to court to resolve there difference.

(b)

The Tenant also has the right to acquire Appleton Mews under the Landlord and Tenant Act 1987. If Kirwan disposed of their interest in the premises they would have to first serve notice on the qualifying tenants giving them collectively a right of first refusal. If they fail to do so the tenants may serve a purchase notice requiring the new landlord to sell to them. The tenants would have to protect the interest by a notice on the register.

Question 4

This problem between George Elizabeth and Julia concerns whether Nigel granted Elizabeth and Julia a lease or a licence. A lease is traditionally a proprietary right, whereas a licence is a mere personal arrangement Ashburn Anstalt v Arnold

The distinction between a lease and licence was summerised in the case of Street v Mountford, Lord Templeman said “wherever exclusive possession of premises is granted for a term at a rent, then prima facie a lease will be created”. He warned that judges must be wary of “sham” agreements, where a lease is disguised as something else, such as a licence. Thus the answer as to whether as lease has been created is not to be found in the label attached to the agreement by the parties but in the nature of the agreement created by the parties.

Nigel entered into a deed with Elizabeth and Julia for a five year term prima facie a lease has been created. However it is essential to have exclusive possession to create a valid lease. If there are joint tenants then they may collectively have exclusive possession between them. Elizabeth and Julie have entered into a separate licence whereby neither of them has exclusive possession of the whole but each occupies in common of the other.

The only way Elizabeth and Julia can refute this is to establish that they have been granted exclusive jointly of the leasehold estate, as made clear in the case of AG Securities v Vaughan for a joint tenancy of a leasehold estate to exist the four unities must be present. There must be unity of interest, title, possession and time. Elizabeth and Julia signed different documents but they did sign their deeds at the same time.

Thus unity of time exist but, unity of title is separate this however was not a problem in Antoniadis v Villiers. They also have interests that are not the same in extent as Elizabeth is paying more rent. In the Vaughan case the different rents paid by the occupiers clearly meant that no leasehold joint tenancy of the whole property exist.

Each agreement contains the right for Nigel to bring in a new tenant if either of the tenants were to leave, the joint tenant should be able to choose its successor if she so wishes. Nigel right to choose the successor would tend to negate the notion of a joint tenancy.

The fact that Nigel has also agreed to provide a cleaning service will also reinforce that Elizabeth and Julia have entered into a licence although in the case of Markou v Da silvaesa illustrates a mere promise to provide such a service is not sufficient they must be provided.

However although Elizabeth and Julia occupy the whole of the flat all four unities do not appear to be present , the fact that Elizabeth pays more rent suggest that they are separately liable for their share of the rent and this would mean that they were indeed licensees and not joint tenants . T he fact that Nigel created the right to select another occupier and provide a cleaning service as in AG Securities v Vaughan and Markou v Da silvaesa suggest also that they are licensees and not tenants and that they do not have exclusive possession for a tenancy, unless this is in reality a sham. If, the occupiers have entered into a licence then in principle they cannot bind George and the occupiers will have to give George vacant possession when he serves them notice.