Long Leases
| Author | Christopher Jessel |
| Pages | 93-104 |
Chapter 8
Long Leases
8.1 PRELIMINARY
Positive covenants in leases can be enforced between the landlord and the tenant for the time being and therefore between successors in title to the original parties. The continuing relationship between them is known as privity of estate. The landlord can enforce covenants by the tenant by injunction
Leasehold structures can therefore be used where one person owns a property as lessee so that another person, as landlord, can either enforce positive covenants against successive owners or have positive covenants enforced against it. This is known as a virtual freehold: it is one in substance but not in form. The lease is granted for a long term in return for a capital sum called a premium equal or close to what would be the purchase price of the freehold and at a low or nominal rent. The property is freely assignable and there are a necessary minimum of covenants, positive or restrictive, on either party.
A lease has two aspects. It is a contract which contains a series of covenants on behalf of the parties but it also creates a legal estate in land so that it is a right of property.
413, HL, per Lord Hoffmann; also National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8, [1981] AC 675, especially the judgment of Lord Simon of Glaisdale.
94 Positive Covenants and Freehold Land
of character which can give rise to conceptual difficulties. It is both an executory contract and an executed demise. Its origins lie in contract rather than in real property’.
8.2 HISTORY AND CURRENT USE
Because leases do not last for ever they are sometimes seen as less secure than freeholds. In particular some people can become confused over who is the ‘owner’ of the property. The proprietary aspect of leases took some time to emerge. Although the origins are obscure, and go back to Anglo-Saxon times and there were institutions similar to leases at the time of Domesday Book, the modern law developed out of procedural changes later in the Middle Ages. Initially a lease was seen only as a contract which merely created a right in personam, so that if the tenant was evicted he might have a claim against the landlord for damages, but no right to the land.
Over the centuries tenants acquired the right to regain possession, initially if evicted before the end of the term by the original landlord who had granted the lease, later if evicted by that person’s successor in title and eventually, by use of the procedure which came to be known as ejectment, from anyone who dispossessed them. By that time the lease had become a right in rem, good against the whole world and a piece of property which could be transferred. This change of nature raised the issue whether, once assignment of the reversion or of the term or both had broken the initial privity of contract, a subsequent tenant or landlord could take the benefit of, or be subject to, the covenants.
It was straightforward to deal with rent, as a new landlord took the benefit to the income flow and a new tenant had to make the payment as a condition of remaining in possession. For a time it was uncertain how far the parties could claim the benefit of other covenants. This became a serious problem following the dissolution of the monasteries in the 1530s. They had managed most of their estates by granting leases, often long ones. When their property was confiscated and later sold off, the Crown or the other new owners took subject to those existing leases. Doubts about whether a successor of the original landlord could enforce covenants were resolved by the Grantees of Reversions Act 1540, now re-enacted in the LPA 1925, s 141. A landlord’s liability was covered in what is now s 142.
The extent of the tenant’s liability was considered by the courts at that time
Spencer granted a lease of some land and the lessee covenanted on behalf of himself and his assigns to build a brick wall on a part of it. The original tenant assigned the lease and the assignee assigned it on to Mr Clark. The decision turned partly on the words used and partly on the nature of the obligation and on the facts the covenant was not enforceable because the wall did not exist at the time of the grant and the words used did not cover the situation, but the case established that a successor to the original tenant could in principle be liable to the landlord on the covenants.
These old rules were replaced in relation to new leases granted after 1995 by the LTCA 1995, s 3(1) which provides:
The benefit and burden of all landlord and tenant covenants of a tenancy—
(a) shall be annexed and incident to the whole, and to each and every part, of the premises demised by the tenancy and of the reversion in them, and
(b) shall in accordance with this section pass on an assignment of the whole or any part of those premises or of the reversion in them.
That applies to positive covenants as much as to restrictive ones, and to long leases at nominal rents as much as to short ones at market rents. Long leaseholds as virtual freeholds have been used over the years as a technical conveyancing device. For instance under the mortmain laws a corporation, such as a trading company, wishing to acquire a freehold needed a royal licence which was expensive and time-consuming to obtain, so the seller would grant the company a lease for 1,000 years at a peppercorn rent. The mortmain laws became subject to numerous exceptions from the nineteenth century and were finally repealed in 1960. Another example was that when a copyhold was converted into a long lease the lord of the manor granted the copyholder a term of 500 years. Until 1925 mortgages were sometimes made by a term of 3,000 years and if the mortgagee exercised the power of sale the buyer took the term...
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