Leasehold covenants

Leasehold covenants bind successors through two distinct mechanisms depending on lease date. For old leases (pre-1996), original parties remain bound indefinitely by privity of contract while successors are bound by privity of estate if covenants 'touch and concern' the land (Spencer's Case (1583)). For new leases (post-1995), the Landlord and Tenant (Covenants) Act 1995 abolishes continuing liability: assignors are automatically released (s.5) and all 'landlord covenants' and 'tenant covenants' transmit automatically (s.3), except personal covenants. The Act permits landlords to require authorised guarantee agreements (AGAs) whereby outgoing tenants guarantee immediate assignees only. This dual regime reflects the tension between contractual freedom and the proprietary nature of leasehold estates, balancing landlord security against tenant mobility.

Spencer's Case (1583) 5 Co Rep 16a: Established that covenants bind assignees only if they 'touch and concern' the land. Foundation of privity of estate doctrine governing old leases.

P & A Swift Investments v Combined English Stores Group plc [1989] AC 632: Lord Oliver's three-part test: covenant must (1) benefit only the reversioner for the time being, (2) affect the nature, quality, mode of user or value of land, (3) not be expressed as personal. Modern authority on 'touch and concern'.

City of London Corporation v Fell [1994] 1 AC 458: Original tenant remains liable throughout lease term despite assignment and disclaimer. Exemplifies harshness of old law that prompted 1995 reforms.

Scottish & Newcastle plc v Raguz [2008] UKHL 65: Landlord must serve s.17 notice within six months of liability arising or claim is statute-barred. Strict protection for former tenants/guarantors under new regime.

Oceanic Village Ltd v United Attractions Ltd [2000] Ch 234: 'Landlord covenant' and 'tenant covenant' under s.28 LT(C)A 1995 defined by who must perform, not content. Broader than 'touch and concern' test.

Courts first determine lease date: pre-1996 applies common law; post-1995 applies LT(C)A 1995. For old leases, identify whether claimant relies on privity of contract (original parties only) or privity of estate (requires legal lease and covenant touching and concerning). Apply Swift Investments three-part test. Consider indemnities under s.77 LPA 1925.

For new leases, all non-personal covenants transmit automatically under s.3. Check if AGA exists limiting outgoing tenant's liability to immediate assignee only. Verify s.17 notice served within six months. Consider s.19 overriding lease remedy for paying former tenants.

Key factual triggers: assignment dates, express exclusion of personal covenants, reasonableness of consent conditions, timing of default and notice. Registration irrelevant—covenants run as lease incidents, not separate interests.

Wrong regime: Applying LT(C)A 1995 to pre-1996 leases or common law to post-1995 leases. Always check grant date first.

Privity confusion: Assuming original tenant released on assignment under old law. They remain liable by privity of contract (Fell) while assignee liable by privity of estate.

Missing s.17 notice: Advising enforcement against former tenants/guarantors without checking six-month notice requirement. Failure bars claim entirely (Raguz).

AGA scope: Stating AGAs can cover subsequent assignees. Section 11 limits guarantee to immediate assignee only; wider attempts void under s.25.