ALIENATION SUMMARY
Analyse alienation covenants and apply common law/statute to advise a client
Advise a client on the PROCEDURE for assigning/underletting a lease.
What is it?
ALIENATION TRANSFER OF INTEREST IN LEASE.
> Tenant disclaims their interest in the lease.
o E.g. client’s business is not doing well so client wants to get out of the
lease. If there is no break clause in the lease, their only option is
alienation.
> Alienation can involve:
o Assignment
o Underletting/subletting
o Parting with possession (grant of
licence)
o Sharing the lease
▪ E..g. business that has
different groups and parent
company.
o Mortgaging/charging
▪ Creating a mortgage over
the property –
charging/mortgaging.
o Surrender
▪ Both agree to bring lease to an end/surrender the lease.
Assignment
> When tenant sells interest of lease part way through term.
o Tenant Assignee (becomes the new tenant)
o Is the sale/transfer of an EXISTING LEASE- cannot change the original
lease terms
Underletting/subletting
> When tenant grants a NEW LEASE out of its own lease/ leasehold interest
o Underletting works by granting an underleae.
o Headlease = between Landlord and Tenant
o Underlease = Between Tenant and Undertenant.
▪ Legal interest vests in undertenant through this document.
o Tenant or assignee grants underlease to undertenant
o Landlord grants headlease to tenant/assignee
PRIVITY OF CONTRACT = contractual link between parties who signed contract.
> Due to privity of contract LL may sue tenant for breach of lease.
PRIVITY OF ESTATE = the relationship between parties who share an immediate
interest in the same land.
> E.g. Landlord-tenant, assignee–undertenant (in diagram above)
STATUTE SUMMARY
, COVENANTS
ABSOLUTE COVENANTS
> = Complete prohibition on tenant from undertaking an action.
> E.g. The Tenant shall not carry out any structural or external alterations to the Premises.
QUALIFIED COVENANTS
> = Tenant merely restricted may undertake the action with LL’s consent.
> E.g. The Tenant shall not make any non-structural alterations to the Premises without
landlord’s consent.
FULLY QUALIFIED COVENANTS
> (1)Restricts tenant from undertaking action without LL’s consent AND
> (2) Landlord cannot reasonably withhold consent
> ‘the tenant shall not make any non-structural alterations to the Property without landlord’s
consent not to be unreasonably withheld’
S.19(1)(a) LTA 1927
What does it relate to? Qualified covenants relating to all forms
of alienation
Only applies to qualified covenants ‘containing a covenant condition or
agreement against assigning,
underletting, charging or parting with the
possession of demised premises or any
part thereof without licence or
consent’
Qualified covenants are upgraded to LL cannot unreasonably withhold
become FULLY QUALIFIED consent.
One condition LL can impose: allows LL to recover reasonable costs
incurred in giving consent
(legal/professional fees).
International Drilling v Louisville = Grounds for refusal must be based on
Reasonableness Test the LL-Tenant relationship, cannot be
for personal reasons.
E.g. Incoming tenant unlikely to comply
with obligations/ pay rent = reasonable
grounds to refuse = pertains
to LL-T relationship.
Ashworth Frazer v Gloucester Would be reasonable to refuse consent
where LL believed that proposed
assignee/undertenant intended to use
premises in a way which would breach a
covenant.
Moss Bros Group v CSC If assignment would contravene a
tenant-mix policy = reasonable
grounds for refusing it. Shopping centre
where
obliged to have mixture of retailers.
S.19(1A) LTA 1927
DOES NOT APPLY TO ALL LEASES Qualifying lease definition = S.19(1E)
only QUALIFYING LEASES. new, commercial lease granted on or
after 1 Jan 1996.
Only applies to ASSIGNMENT
Analyse alienation covenants and apply common law/statute to advise a client
Advise a client on the PROCEDURE for assigning/underletting a lease.
What is it?
ALIENATION TRANSFER OF INTEREST IN LEASE.
> Tenant disclaims their interest in the lease.
o E.g. client’s business is not doing well so client wants to get out of the
lease. If there is no break clause in the lease, their only option is
alienation.
> Alienation can involve:
o Assignment
o Underletting/subletting
o Parting with possession (grant of
licence)
o Sharing the lease
▪ E..g. business that has
different groups and parent
company.
o Mortgaging/charging
▪ Creating a mortgage over
the property –
charging/mortgaging.
o Surrender
▪ Both agree to bring lease to an end/surrender the lease.
Assignment
> When tenant sells interest of lease part way through term.
o Tenant Assignee (becomes the new tenant)
o Is the sale/transfer of an EXISTING LEASE- cannot change the original
lease terms
Underletting/subletting
> When tenant grants a NEW LEASE out of its own lease/ leasehold interest
o Underletting works by granting an underleae.
o Headlease = between Landlord and Tenant
o Underlease = Between Tenant and Undertenant.
▪ Legal interest vests in undertenant through this document.
o Tenant or assignee grants underlease to undertenant
o Landlord grants headlease to tenant/assignee
PRIVITY OF CONTRACT = contractual link between parties who signed contract.
> Due to privity of contract LL may sue tenant for breach of lease.
PRIVITY OF ESTATE = the relationship between parties who share an immediate
interest in the same land.
> E.g. Landlord-tenant, assignee–undertenant (in diagram above)
STATUTE SUMMARY
, COVENANTS
ABSOLUTE COVENANTS
> = Complete prohibition on tenant from undertaking an action.
> E.g. The Tenant shall not carry out any structural or external alterations to the Premises.
QUALIFIED COVENANTS
> = Tenant merely restricted may undertake the action with LL’s consent.
> E.g. The Tenant shall not make any non-structural alterations to the Premises without
landlord’s consent.
FULLY QUALIFIED COVENANTS
> (1)Restricts tenant from undertaking action without LL’s consent AND
> (2) Landlord cannot reasonably withhold consent
> ‘the tenant shall not make any non-structural alterations to the Property without landlord’s
consent not to be unreasonably withheld’
S.19(1)(a) LTA 1927
What does it relate to? Qualified covenants relating to all forms
of alienation
Only applies to qualified covenants ‘containing a covenant condition or
agreement against assigning,
underletting, charging or parting with the
possession of demised premises or any
part thereof without licence or
consent’
Qualified covenants are upgraded to LL cannot unreasonably withhold
become FULLY QUALIFIED consent.
One condition LL can impose: allows LL to recover reasonable costs
incurred in giving consent
(legal/professional fees).
International Drilling v Louisville = Grounds for refusal must be based on
Reasonableness Test the LL-Tenant relationship, cannot be
for personal reasons.
E.g. Incoming tenant unlikely to comply
with obligations/ pay rent = reasonable
grounds to refuse = pertains
to LL-T relationship.
Ashworth Frazer v Gloucester Would be reasonable to refuse consent
where LL believed that proposed
assignee/undertenant intended to use
premises in a way which would breach a
covenant.
Moss Bros Group v CSC If assignment would contravene a
tenant-mix policy = reasonable
grounds for refusing it. Shopping centre
where
obliged to have mixture of retailers.
S.19(1A) LTA 1927
DOES NOT APPLY TO ALL LEASES Qualifying lease definition = S.19(1E)
only QUALIFYING LEASES. new, commercial lease granted on or
after 1 Jan 1996.
Only applies to ASSIGNMENT
