Assignment, Termination of Leases and Distress

• Pages: 77-103

DOI: 10.4324/9781003186946-6

ASSIGNMENT OF LEASE AND REVERSION

Since a lease is a proprietary interest, it may be assigned by the lessee to another per-

son. Similarly, the reversion is property in the hands of the lessor, and he may assign

it. Where a lessee assigns the lease or the lessor assigns the reversion, the question

arises as to whether the assignee:

(a) is entitled to the benefits of the covenants made in favour of the assignor;

and

(b) is subject to the burdens of the covenants entered into by the assignor.

In other words, where T1 assigns his lease to T2, is T2 entitled to enforce the

landlord’s covenants (for example, where the landlord has covenanted to repair),

and is T2 bound by the tenant’s covenants (for example, where T1 has covenanted

to pay rent)?

Similarly, where L1 assigns the reversion to L2, is L2 entitled to enforce the

tenant’s covenants, and is L2 bound by the landlord’s covenants?

The principles may be summarised as follows: where there is privity of contract

between the parties, both are bound. There is privity of contract between the

original lessor and the original lessee. This relationship, created by the contract of

lease itself, continues to subsist between lessor and lessee despite any assignments

of their respective interests. Thus, if L1 and T1 are parties to a lease, and T1 later

assigns the lease to T2, L1 remains liable to T1 and T1 remains liable to L1 on the

covenants in the lease because there is privity of contract between them. Similarly,

if L1 assigns the reversion to L2, L1 and T1 remain liable to one another on the

covenants, because there is privity of contract between them.

Where there is merely privity of estate between the parties, only covenants that

touch and concern the land are enforceable. Privity of estate ‘describes the rela-

tionship between two parties who respectively hold the same estates as those created

by the lease’. It arises ‘when the relationship of landlord and tenant exists between

them under the lease which contains the covenant in question’.1 Thus, there will be

privity of estate between the parties where:

(a) T1 (the original lessee) holds the lease and L1 (the original lessor) holds

the reversion– that is, where there has been no assignment of the lease

or the reversion, in which case, there is also privity of contract between

T1 and L1;

(b) T2 (an assignee) holds the lease and L1 (the original lessor) holds the

reversion;

1 Cheshire and Burn, Modern Law of Real Property, 14th edn, 1988, London: Butterworths, p 431.

CHAPTER 6

ASSIGNMENT, TERMINATION OF LEASES

AND DISTRESS

78 Assignment, termination of leases and distress

(c) T1 (the original lessee) holds the lease and L2 (an assignee) holds the rever-

sion; and

(d) T2 (an assignee) holds the lease and L2 (an assignee) holds the reversion.

Touching and concerning the land

A covenant ‘touching and concerning’ the land has been defined as one that ‘aects

the landlord in his normal capacity as landlord, or the tenant in his normal capacity

as tenant’.2 Examples of such covenants are:

(a) to pay rent;3

(b) to repair;4

(c) to insure the premises against fire;5

(d) not to assign or sublet without consent;6

(e) to renew the lease;7

(f ) not to serve notice to quit for three years, unless the premises are required

for the landlord’s own occupation;8

(g) not to allow a third party, X, to participate in the running of a business on

the premises;9 and

(h) not to build on adjoining land so as to interfere with the enjoyment of the

demised property.10

On the other hand, personal or collateral covenants do not touch and concern the

land, since they are not directly relevant to the relationship of landlord and tenant.

Examples are:

(a) a covenant by either party to pay a sum of money to the other11 (unless inex-

tricably bound up with some other covenant that touches and concerns the

land);12

(b) a covenant entitling the tenant to purchase the reversion at any time during

the lease13 (because it aects the parties qua vendor and purchaser, not qua

landlord and tenant); and

(c) a covenant by the landlord that he would not open another public house

within half a mile of the demised premises (because it did not oblige the

landlord to do or refrain from doing anything on the demised premises).14

2 Op cit, p 425.

3 Hill v Booth [1930] 1 KB 381.

4 Williams v Earle (1868) LR 3 QB 739.

5 Vernon v Smith (1821) 106 ER 1094.

6 Goldstein v Sanders [1915] 1 Ch 549.

7 Weg Motors Ltd v Hales [1960] 3 All ER 758.

8 Breams Property Investment Co Ltd v Stroulgar [1948] 1 All ER 460.

9 Lewin v American and Colonial Distributors Ltd [1945] 2 All ER 271.

10 Ricketts v Enfield Churchwardens [1909] 1 Ch 544.

11 Re Hunter’s Lease [1942] 1 All ER 27.

12 Moss Empires Ltd v Olympia Ltd [1939] 3 All ER 460.

13 Cheshire and Burn, Modern Law of Real Property, 15th edn, 1994, London: Butterworths, p 448.

14 Thomas v Hayward (1869) LR 4 Ex 311.