The defendant had taken on a lease of a parade of shops, and sub-let each shop for a full premium at a nominal rent. It sought to limit its own liability to pay the head rent by limiting the covenant in the sub-leases to pay the head rent to the time in which it held the reversion to the sub-tenancies. It then assigned the head lease to a man of straw. Upon his default, the sub-tenants became liable to pay the full rents under the head-lease. They sought to rely upon anti-avoidance provisions in the 1995 Act.
Held: The sub-tenants’ appeals failed. The question was whether the terms of the landlord’s assignment worked to ‘frustrate the operation’ of the 1995 Act. The mischief addressed by the Act was the absence of any way out of liability: ‘the mischief at which the statute was aimed was the absence in practice of any such exit route. Consistently with this the legislation was not intended to close any other exit route already open to the parties: in particular, that by agreement their liability could be curtailed from the outset or later released or waived. The possibility that by agreement the parties may limit their liability in this way was not, it seems, perceived as having unfair consequences in practice.’
Baroness Hale said: ‘The mischief at which the Commission’s recommendations were aimed was the continuation of a liability long after the parties had parted with their interests in the property to which it related.’
Lord Nicholls said that section 25 is ‘to be interpreted generously, so as to ensure that the operation of the 1995 Act is not frustrated, either directly or indirectly’.
Judges:
Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Scott of Foscote, Baroness Hale of Richmond, Lord Walker of Gestingthorpe (dissenting)
Citations:
[2005] UKHL 70, Times 05-Dec-2005, [2006] L and TR 4, [2005] NPC 138, [2005] 49 EG 88, [2006] 01 EG 100, [2006] 1 P and CR 25, [2006] 1 EGLR 15, [2006] 1 All ER 127, [2005] 1 WLR 3956
Links:
Statutes:
Landlord and Tenant (Covenants) Act 1995
Jurisdiction:
England and Wales
Citing:
Appeal from – Avonridge Property Co Ltd v Mashru and others CA 14-Oct-2004
The lease released the landlord from his liability to repair after his assignment of the reversion. It appealed a finding that the provision was void under the 1995 Act, saying the clause was a personal covenant not caught by the Act.
Held: . .
Cited – BHP Petroleum Great Britain Ltd v Chesterfield Properties Ltd and another CA 30-Nov-2001
The claimant granted a lease to the respondents, and then assigned the reversion to another company. It gave notice to the tenant of its desire to be released from its obligations as landlord. The tenant did not serve any counter-notice. Defects . .
Cited – BHP Petroleum Great Britain Ltd v Chesterfield Properties Ltd and Another ChD 27-Feb-2001
An office buidling had a toughened glass cladding. When a cladding plate slipped and fell, the local authority issed a dangerous structures notice. The landlord served a notice to use the Act to divest himself of responsibility for repairs.
Cited – Spencer’s Case 1583
An assignee of a lease will take both the benefit and burden of the covenants in the lease provided that there is privity of estate as between the person enforcing the covenant and the person against whom enforcement is sought, and the covenant . .
Cited by:
Cited – Good Harvest Partnership Llp v Centaur Services Ltd ChD 23-Feb-2010
The court considered whether the 1995 Act operated to prevent a guarantor of a lessee being required to provide a similar guarantor for an assignee. The tenant had created a sub-lease, and the lease required its guarantor to provide a similar . .
Cited – K/S Victoria Street v House of Fraser (Stores Management) Ltd and Others CA 27-Jul-2011
The agreement provided that the guarantors to the original lease should act also as guarantors on any assignment. The tenant challenged this provision saying that it contravened the requirements of section 25 of the 1995 Act. HoF contended that such . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant
Updated: 04 July 2022; Ref: scu.235510