a) "To see leases as contracts is helpful with respect to the original landlord and tenant but not with respect to third parties. " Discuss. It is true that comparing leases to contracts is helpful, especially in academic situations when trying to learn their complex structures. When looking at contracts, there are set of rules in order for a contract to be deemed legal. This is the same for leases. It can also be said that leases are simply a different form of contract.
By this, it is meant that leases are simply a sort of continuously ongoing rental contract, wherein the tenant pays the rent to the landlord, and in exchange the landlord will allow him/her the use of a certain plot of land. This continues until there is a breach in the contract or the lease comes to close on the predetermined date. The similarity between leases and contracts is also illustrated in many cases, where doctrines governing contract have been applied to leases. An example of this in Hussein v.
Mehlman1, in which the doctrine of repudiatory breach was enforced. Here, a lease was entered into subject to the repairing covenant on behalf of L implied by the Landlord and Tenant Act 19852. The judgement in this case showed that it was possible to have a repudiatory in a lease as in any other contract. Another such illustrative case is Cricklewood3 in which the doctrine of frustration was brought forward. Here the tenant claimed that due to certain war-time restrictions which the government placed on building, he was not able to complete was required of him.
Although it was not this argument that decided the case, but it is an interesting concept which shows that there is no reason why a lease cannot be frustrated, especially seeing as there is no authority which excludes leases from the doctrine of frustration. Although leases can be viewed as a sort of contract, where many of the rules governing contracts could be applied, certain situations prevent this from happening. These situations arise when third parties become involved the rules which are applied to contracts and leases are different.
One of the longest standing rules of contract law is that third person(s) not party to a contract cannot bring about an action, and there can be no enforcement of the contract against or by this third party. There are two main scenarios where third parties become involved with leases, these are the creations of sub-leases and assignments. When a sub-lease is created, what is happening is that the current leaseholder is creating another lease on top of the original, as can be seen in the diagram.
Essentially a new and separate contract has been created between the tenant (T) and the new sub-tenant (S) where S rents the lease from T. In this situation the rules of contracts apply as the there can be no interference or involvement in the sub-lease by the landlord (L), and in the head-leas by the sub-tenant. This is the case because there is privity of contract, hence rent is paid and covenants are enforceable between the (T and L) and (T and S). However, the problem arises when assignments are created.
An assignment is when the lease is sold rather than rented out, represented by the diagram below. In addition to this, there also be an assignment of reversion which is where L will assign their position to a fourth party. When this happens the lease held by T is "assigned" to the new tenant called the Assignee (A). When this happens T is cut out of the equation and rent is paid directly to L by A. This causes a problem when trying to apply rules of contract to leases because these rules dictate that as there is no privity of contract between L and A, covenants are not enforceable on or by A.
Unfortunately, commercial expedience does not allow this to take place, therefore privity does not work. This brings rise to rule of "Privity in Estate". "Privity in Estate" is the basic rule that covenants in a lease are enforceable between the landlord and "actual tenant" of that lease, the actual tenant being the tenant currently in the head lease, paying rent directly to the original landlord. This rule comes from a case from the late 16th century known as Spencer's Case4, where it was ruled that covenants in the lease were enforceable.
This was later given statutory footing in sections 141 and 142 of the LPA5, which states that when there is no privity of contract, privity of estate can enforce covenants "touching and concerning the land". However, this lead to problems as it was unclear as to what was meant by " touching and concerning". With the law being problematic it was eventually changed in the Landlord and Tenant (Covenants) Act6. This made it no longer necessary for the covenant to "touch or concern" the land. Covenants related to mere peripheral matters could now be enforced as long as they were in the lease and are recognised covenants under the act.
As the law no allows for parties without privity of contract to sue for breach or seek damages or remedies, which is not possible under the current Law of Contract, which is why leases should not be seen as contracts with respect to third parties. As it has been shown many of the rules which govern contracts can be applied leases and it can be helpful to in fact see them as contracts. However, due to the continuous involvement of third parties who have the power to enforce covenants and have covenants enforced upon them while not having any privity of contract.
This shows that with relation to third parties leases should not be compared to contracts as privity of contract is not necessary with leases and it is fundamental in contracts. b) Advise to Canbury Cathedral When reviewing these sorts of situations one must look at it from the point of view of all the parties concerned. This way, more informed decisions can be made by the Cathedral as to what course of action to pursue. In this case the lease was granted by the Cathedral to Alberrys Books.
However due to the fact that the lease was assigned over to Barterstone's Bible Books rather than a sub-lease being created means that Alberrys is removed from the situation. When the lease was created, two covenants were attached to it. With the Cathedral being such a prominent aspect of local society, it is understandable that it would wish to protect itself from negative opinion. With the creation of the "religious bookshop" covenant in the lease the Cathedral was hoping that it would protect itself from any problems which may arise with proprietors of other types of businesses.
However, with the scandal in the local papers surrounding Barterstone's selling books on witchcraft is such close proximity to the Cathedral. Unfortunately it may be quite difficult to enforce this covenant as a court may not see this as a breach. Barterstone's may argue that in this day and age witchcraft is an essential part of many religions. It would be necessary to find out whether or not the term "religious" was defined in the lease as to restrict the bookshop to be Christian orientated books and to whether they sold books on other religions apart from Christianity, such as Islam, Judaism, Buddhism etcetera.
If the Cathedral wishes to begin forfeiture then they will first have to prove that there has been a breach of a covenant. Also, it will need to be clarified whether there is a "forfeiture clause" in the lease, because these clauses are not inherent and need to be drafted into a lease. If it important to let the Cathedral that if they do not act on this breach then they cannot go back and act at a later date, by not doing anything they accept the actions of the Tenant. Once a decision is made on what to do, notice must be given to the Tenant7.
With notice being given, Barterstone's will in fact have the chance to try and remedy the breach, which in this case it they decide to stop selling the aforementioned books, then the Cathedral will not be able to complete termination of the lease. If this does not meet the Cathedral's approval, there may be an argument that Barterstone's have committed a stigmatising breach which has left a moral stain on the Cathedral, as not only is the shop in close proximity to the Cathedral, but the lease was also granted by the Cathedral. If the courts accept the selling of books on witchcraft as a such a breach then the lease may yet be forfeited.
Concerning the matter of the condensation on the shop premises, the Cathedral is in quite a positive position. Barterstone's are threatening to leave, however, as the Landlord only the Cathedral has the power to forfeit a lease. Even if the Cathedral is found to be in breach of the repair covenant Barterstone's can only seek a remedy. However, it is unlikely that Barterstone's will be able to enforce this covenants, because with leases granted for over ten years the duty to repair falls on the tenant rather than the landlord as repairs are seen as conveying a benefit on the tenant.
Another basis for argument is that the property is not in a state of disrepair. It was determined that the condensation was a result of the design of the property rather than the property falling into disrepair. This being the case it is unlikely that the court will rule that the premises is in disrepair. Although these possible scenarios so far have been quite positive, it is still possible for the courts to rule in favour of the tenants. If Barterstone's decide to undertake the repairs on their own accord they will later have the right to sue the Cathedral for the costs8, or take the cost out of future rent9.
Now that all the possible scenarios have been reviewed the Cathedral can make an informed decision as to what they wish to do. From a legal point of view it would be most efficient for the Cathedral to offer Barterstone's a deal, where in if the books on witchcraft are removed then no action will be taken. However, due to the severity of the condensation and rotting it is unlikely that Barterstone's will accept this and demand that the Cathedral make repairs. This is the matter which will probably take this matter to court.
To gain an even clearer view of what actions may arise some further information is required, including a full copy of the lease so as to ascertain the exact definitions of words and a list of all the expressed covenants, and possibly an idea of what the implied covenants are. Also, a copy of the surveyors' report. From the current information it would probably be financially safer to allow Barterstone's to leave, carry out repairs on the premises and find a new-tenant at a higher price.