Covenants, Leases and Possession

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  1. Whether the covenants in the head lease are binding on Jabba.

To begin with, it is imperative to note that, once a lease has been assigned to the new tenant, they are liable for their breaches of covenant. However the solution to this query depends on whether the assignment of the lease complies with the criteria stipulated in Spencer’s Case (1583) (5) Co Rep 16a[1]. These requirements are as follows:

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  1. There must be privity of estate between the parties, that is, a relationship between the current property owner and current tenant.
  2. There must be a legal lease.
  3. The lease must have been assigned legally.
  4. The covenant must touch and concern the land.

In this matter, the lease inter alia meets all the above criteria. Consequently, the covenant in the head lease is legally binding to Jabba.

  1. Esmeralda has not received any rent from Jabba for at least ten months.

The characteristics of a lease were laid down by the House of Lords in the case; Street v Mountford [1985] AC 809.Lord Templeman stated: “To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments.” However, in yet another case law; Ashburn Anstalt v Arnold [1989], contradictory to Street v Mountford [1985], it was concluded that the payment of rent is not a requirement[2]. This is because it is not contained in the definition in section 205(xxvii), LPA 1925. From that standpoint, the best manner in which Esmeralda can resolve this matter is through the forfeiture of the lease:

  • Forfeiture of Leases

When a property owner forfeits his tenant’s lease, he effectively revokes the lease, leaving the tenant with nothing. In order for the property owner to forfeit the lease, there has to have been a breach of contract and a forfeiture clause in the lease. It is solely up to the property owner as to whether he/she will forfeit the lease. A lease may be rendered forfeit either for:

  1. Non-payment of rent.
  2. Breach of other (non-rent) agreements.

In this matter, Jabba’s failure to pay rent for ten months is enough ground for Esmeralda to render the lease forfeit.

  1. Esmeralda has yet to receive any advertising advice from Jabba.

As mentioned in the matter above, for the property owner can forfeit the lease where there is a breach of other (non-rent) covenants. However, we need to consider in what circumstances covenants become enforceable between the old property owner and a new tenant.

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