Reading Between the Lines – when your lease doesn’t tell you everything


Our team: Gavin Whitney


Introduction

So you have read your lease from cover to cover and you think you know what it says?  Right? Wrong!  Although the vast majority of the text of the lease will be definitive as to the rights and obligations of the parties, there are some situations where it is necessary to look beyond the text,  and read between the lines to see where case law and statute overrides or supplements what has been written.  This article gives you a few examples of these situations.

Examples

Repair

Most leases contain an obligation on the tenant to “keep the Premises in good repair and condition”.  But what the lease will not usually say is that this also means to put and keep i.e. if the premises are not in good condition then the tenant must make them that way.  This could be an expensive endeavour if they are very dilapidated, in particular if the premises includes structural elements such as the roof and walls.

A survey will help to understand the extent of repairs needed and it is also possible to agree a more limited repairing covenant in the lease, perhaps by reference to a schedule of condition which records in photos and descriptions the current state and condition of the premises so that a tenant only has to ensure that the premises stays in as good condition as recorded in the schedule and not in “full repair”.

Alienation

Alienation, which includes assignment and subletting, is usually a key covenant in the lease.  Often there will be quite detailed restrictions on when a tenant can and cannot alienate and the circumstances surrounding it.

The Landlord and Tenant Act 1927 also implies that if the lease permits the tenant to assign with consent, the landlord’s consent cannot be unreasonably withheld; and the Landlord and Tenant Act 1988 imposes certain duties on the landlord in relation to the giving of consent relating to timescales and reasonableness.

In addition, some covenants may be overridden by the 1927 Act meaning that the tenant has greater freedom to dispose of the premises than anticipated.  This is quite a limited exception and applies just to what are known as “building leases” which are ones that are granted in consideration of the erection of buildings, or substantial improvements or alterations to buildings.  The buildings do not even need to be those demised by the lease!  For that reason, it is often difficult to discern a link between the works and the lease and there are quite a few complex tests to determine whether or not section 19(1)(b) applies or not.

Alterations

The Landlord and Tenant Act 1927 is also helpful in relation to carrying out alterations to premises.  Where the consent of  the landlord is needed for improvements, then that consent is not to be unreasonably withheld and in certain circumstances, a tenant can carry out improvements even if forbidden to do so.

It is important to make the distinction, as the Act does, between “alterations” and “improvements” but, in basic terms, whether an alteration is an “improvement” is looked at from the point of view of the tenant and so most alterations will therefore be improvements since tenants don’t usually carry out alterations which have a negative impact on their premises!  As with alienation, there are other tests that must be met which relate to the specific wording of the clauses and particular processes to be followed.

Conclusion

Clearly this is an area where your lawyers are invaluable in interpreting the provisions of your leases as they are experts at spotting these issues, both in existing leases and when negotiating new ones.  Please get in touch with us if you have any questions.

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