Landlord and tenant law - Privity of contract and privity of...

Learning Outcomes

This article explains privity of contract and privity of estate in landlord and tenant law, covenant enforcement between original parties and successors under 'old' (pre-1996) and 'new' (post-1996) leases, and the statutory framework of the Landlord and Tenant (Covenants) Act 1995, including:

• The distinction between privity of contract (targeting original parties in a lease) and privity of estate (focused on current landlord-tenant relationships), including their consequences for the enforcement of leasehold covenants and the ongoing liability of original parties.
• The functional operation and modern significance of "touch and concern": how this test filters which covenants run with the land, applying the P&A Swift test, and understanding the rule’s continuing role for old leases and abolishment in new lease contexts.
• The transmission of benefit and burden of leasehold covenants on assignment of the lease or reversion, both under the common law and the Law of Property Act 1925 (ss.141–142), including how these statutory mechanisms supplement or override prior doctrines and practice.
• The implications and structure of the Landlord and Tenant (Covenants) Act 1995 for 'new' leases, including automatic release mechanisms, automatic passing of rights and obligations (with exceptions for personal covenants and excluded assignments), and analysis of the assignment of either the lease or the reversion.
• The operation, enforceability, and statutory boundaries of Authorised Guarantee Agreements (AGAs) under s.16 LT(C)A 1995, including when an AGA can lawfully be demanded, what limitations attach, and which parties are or are not caught by its reach.
• The procedural requirements and effect of s.17 LT(C)A 1995 notices for the recovery of fixed charges from former tenants or guarantors, the strict six-month limitation window, and the consequences of failing to comply, including remedies such as the grant of an overriding lease (s.19).
• The difference between assignment and underletting/subletting, how these affect enforcement options for landlords, especially in the light of LPA 1925, s.142 and the special treatment of restrictive covenants under s.3(5) LT(C)A 1995.
• The effect of assignment of the reversion by the landlord, the statutory process for landlord release under LT(C)A 1995 (ss.6–8), and the contractual possibilities for limiting liability on assignment.
• Legal and practical considerations for obtaining or refusing consent to assignment, including the requirements to act reasonably, the procedure under the Landlord and Tenant Act 1988 and Landlord and Tenant Act 1927, and the common approval conditions such as AGAs, rent deposits, or the need for a suitable guarantor.
• The broader structure and consequences of trusts of land in leasehold and co-ownership context, especially the operation of overreaching in registered and unregistered land, and how beneficiaries’ rights are affected on sale.

SQE1 Syllabus

For SQE1, you are required to understand privity of contract and privity of estate in landlord and tenant law and related covenant enforcement frameworks, with a focus on the following syllabus points:

• The landlord–tenant relationship, focusing on how leases create statutory and contractual obligations, and create both property and contractual interests.
• The operation of privity of contract and privity of estate in both residential and commercial leases, and their impact on the ability of parties to enforce covenants included in the original grant or added by subsequent variation.
• The passing of benefit and burden of covenants upon the assignment of lease or reversion, including the relevance of ‘touch and concern’, and the statutory provisions that modify or replace this test (notably, LPA 1925 ss.141–142, and the LT(C)A 1995).
• The effect of the Landlord and Tenant (Covenants) Act 1995 on leases granted from 1 January 1996, including new default rules for automatic release, AGAs, s.17 notice procedures, and overriding leases.
• Consent to assignment or sub-letting: the duty not to act unreasonably, procedural requirements under the Landlord and Tenant Act 1988, and the impact of s.19 LTA 1927 (as amended), including s.19(1A) on non-residential premises.
• Enforcement of covenants against assignees and subtenants, including the differences between legal and equitable remedies, and the options available where subletting or sub-underletting has occurred.
• Application of the doctrine of overreaching and the Trusts of Land and Appointment of Trustees Act 1996 in co-ownership scenarios, and the effect of payment to two trustees on the removal of beneficial interests as a burden on land.
• Recognizing and advising on typical exam scenarios involving:
  • Unlawful assignment or underletting,
  • Assignments in breach of covenant (excluded assignments),
  • Recovery of arrears from former tenants and the limitations on that process,
  • The requirement and enforceability of AGAs and security arrangements upon assignment.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which doctrine ensures that the original tenant remains liable for lease covenants throughout the term of a lease granted before 1 January 1996, even after assignment?
   1. Privity of estate
   2. Privity of contract
   3. The rule in Spencer's Case
   4. The doctrine of surrender
2. Under the Landlord and Tenant (Covenants) Act 1995, which of the following statements is true regarding a tenant assigning a 'new' lease (granted on or after 1 January 1996)?
   1. The original tenant always remains liable for all covenants for the entire lease term.
   2. The assigning tenant is automatically released from the tenant covenants upon lawful assignment, unless an AGA is required.
   3. The assignee is liable only for breaches committed by themselves, not previous tenants.
   4. Personal covenants automatically pass to the assignee along with real covenants.
3. What is an Authorised Guarantee Agreement (AGA)?
   1. An agreement where the landlord guarantees the tenant's performance.
   2. An agreement where the original tenant guarantees the performance of their immediate assignee.
   3. An agreement transferring all lease liabilities to the new assignee permanently.
   4. An agreement automatically implied into all leases granted after 1 January 1996.

Introduction

When a landlord (L) grants a lease to a tenant (T), legal relationships are formed through both property law and contract law frameworks. Leasehold agreements, therefore, operate on two axes: the contract between landlord and tenant (privity of contract), and the property interest relationship between whoever is actually landlord and tenant at any time (privity of estate). Managing leasehold property involves understanding which covenants can be enforced by whom, the effect of assignment (or sub-letting), and how future parties become subject to ongoing or historic obligations. The precise rules depend on whether the lease is an ‘old’ (pre-1 January 1996) lease or a ‘new’ (post-1 January 1996) lease, due to the major reforms effected by the Landlord and Tenant (Covenants) Act 1995.

Covenants in leases are critically divided into landlord covenants (promises by the landlord) and tenant covenants (promises by the tenant). For old leases, original parties remain bound by all lease covenants during the term, unless unequivocally released, even after assignment of lease or reversion. Successors can be bound (or benefited) in certain circumstances, usually through privity of estate, and only as regards covenants that are real—that is, covenants "touching and concerning" the land. New leases under the 1995 Act are governed by a statutory framework in which nearly all landlord and tenant covenants are transmitted automatically upon assignment; continuing personal liability is abolished for outgoing tenants upon assignment (unless there is an AGA or in excluded assignments), and landlords may seek release only through a defined procedure.

Key Term: Privity of Contract
The legal doctrine stating that only the original parties to a contract are bound by it. In the lease context, this means the initial landlord and initial tenant can enforce all covenants (whether "touching and concerning" the land or not) against each other, and remain bound unless released.

Key Term: Privity of Estate
The legal relationship between parties whose proprietary titles are directly connected by a legal lease at the relevant time (i.e., the current landlord and current tenant). It operates to allow successors to enforce or be subject to covenants that "touch and concern" the land.

Key Term: Leasehold Covenant
A promise contained within a lease that binds the landlord or tenant, including both positive obligations (to do something) and negative obligations (to refrain from something) regarding the premises or their use.

Key Term: Touch and Concern
A covenant "touches and concerns" land if it affects the nature, quality, mode of use, occupation, or value of the leased property, and is not simply for the personal benefit of a party. Only covenants with this character can (in old leases) pass under privity of estate.

Key Term: Assignment
The transfer of a tenant’s estate (usually the whole remaining term) or a landlord’s reversion. The assignee steps into the shoes of the assignor as tenant or landlord, subject to limitations on enforcement depending on lease date and covenant type.

Key Term: Reversion
The estate, typically a freehold, retained by the landlord when granting a lease. Upon expiry of the lease, the property reverts to the landlord. The reversion carries with it the benefits (and, in some cases, burdens) of covenants.

Key Term: Excluded Assignment
An assignment of the lease which, because it is made in breach of covenant or occurs by operation of law (e.g. bankruptcy), does not trigger automatic release of the outgoing tenant under s.5 of the Landlord and Tenant (Covenants) Act 1995. The outgoing tenant can therefore remain liable after assignment.

Key Term: Personal Covenant
A lease covenant that is purely personal to a given party—either because it benefits or burdens only a particular individual or entity, or because it is expressly stated in the lease to be "personal". Under the 1995 Act, such covenants do not automatically pass to assignees or bind successors.

Privity of Contract

Privity of contract is central to the enforcement of leasehold covenants between the original landlord and tenant parties. Upon execution of a lease, both landlord and tenant are contractually bound by all the lease covenants; this is unaffected by whether a particular covenant is considered to be "real" (touches and concerns the land) or is purely personal. During the lease term, this continuing liability endures even if either party assigns their interest, unless the contract has either been novated or the party has been statutorily released.

For leases granted before 1 January 1996 (old leases), this means that:

• The original tenant will always remain liable to the landlord for breaches of all tenant covenants, including those committed after assignment by a successor tenant, unless discharged or released from liability expressly or by statute. The original tenant’s liability is understood as being "joint and several" with that of assignees in possession.
• Likewise, the original landlord will remain liable to the tenant for landlord covenants even after disposing of the reversion, unless expressly released or where landlord and tenant have agreed to limit ongoing liability (as in so-called "Avonridge clauses" or equivalent contractual provisions).
• Privity of contract enables enforcement of purely personal covenants, such as the landlord agreeing to repay a specific sum to the original tenant, or to provide extra services tailored only to that initial tenant.
• Section 79 of the Law of Property Act 1925 operates to imply that covenants are generally deemed to be enforceable not only by and against the original parties but also their successors, unless a contrary intention is shown. However, its effect cannot turn a personal covenant into a covenant that touches and concerns the land, nor can it confer proprietary status on covenants that are otherwise personal.

For new leases (granted on or after 1 January 1996), the LT(C)A 1995 has altered this principle. On lawful assignment of a new lease:

• The outgoing tenant is, as a rule, automatically released from future liability for tenant covenants (s.5), unless required to enter into an Authorised Guarantee Agreement (AGA), or unless the assignment falls within the category of excluded assignments, whereupon the releasing effect is lost.
• The landlord, in contrast, is not automatically released from future liability upon assigning the reversion; the landlord must follow specific statutory procedures (ss.6-8) to seek a release, which may require tenant consent, or court order if consent is refused unreasonably.

Key Term: s.17 Notice (Fixed Charges)
A statutory notice under s.17 of the LT(C)A 1995 which must be served by the landlord on a former tenant or its guarantor within six months of the date a fixed charge (such as rent, service charge, or interest) becomes due, in order to be able to recover that sum from the former tenant or guarantor. Applies in both 'old' and 'new' lease regimes.

Section 17 notices operate as a restriction on the exercise of longstanding rights to pursue former tenants or their guarantors: if the s.17 process is not followed to the letter, the landlord is precluded from recovery for that instalment.

Privity of contract also allows for "chain of indemnity covenants"—whereby liability for a breach can be passed back along successive assignees via indemnities entered into at each assignment, ultimately enabling the party liable to seek compensation from whoever was in possession when the breach occurred.

Privity of Estate

Privity of estate attaches to those who are currently in the positions of landlord and tenant, i.e. those with the current reversion and current leasehold respectively. It comes into play on assignment or succession, distinguishing between parties currently in possession and those previously involved.

For privity of estate to exist:

• There must be a subsisting legal lease, and both parties must be respectively in possession of reversion and lease. Assignments must be made by deed to ensure that the transfer itself is also legal; assignments effected without a deed are, at best, equitable assignments, which may not support the necessary privity of estate for enforceability of covenants.
• Only covenants which touch and concern the land are enforceable under privity of estate. The "touch and concern" test, now usually taken from P&A Swift Investments v Combined English Stores Group plc [1989], requires that the covenant:
  • would lose benefit to the original covenantee or cease to affect the reversion if removed from the interest;
  • directly affects the value, nature, mode of use, or quality of the land itself;
  • is not purely personal to the covenantee or covenantor. Examples of covenants that satisfy this test include:
  • Promises to pay rent, outgoings, or properly apportioned service charge;
  • Covenants to repair, maintain, decorate, or insure;
  • Restrictions on use (e.g. user or non-user provisions, trading hours, alterations policy). Conversely, a covenant strictly personal to the original party—such as an agreement to reimburse a specific deposit only to that person—will fail the test and cannot be enforced by or against successors as a real covenant.

Key Term: Chain of Indemnity Covenants
When a lease is assigned, the outgoing tenant habitually secures an indemnity from the assignee to protect itself against future breaches. Successive indemnities may ultimately enable the indemnified party (such as the original tenant) to recover any losses paid to the landlord from whoever was the assignee at the time of the breach, preserving fairness in financial responsibility.

Privity of estate does not exist between the original landlord and an assignee of the lease unless that assignee is in possession. Nor does it exist between a superior landlord and subtenant; the remedy in such cases for enforcement of restrictive covenants is either based on equity (for old leases) or s.3(5) of the LT(C)A 1995 (for post-1996 leases).

Under ss.141–142 of the Law of Property Act 1925, the benefit (s.141) and burden (s.142) of leasehold covenants that touch and concern the land pass with an assignment of the reversion. This means that when the landlord sells the reversion, the new landlord can—if the covenant is a real one—enforce it against the current tenant, and vice versa.

Interaction and Enforcement Pre-1996 ('Old Leases')

For leases granted before 1 January 1996, liability and enforceability are governed by a complex alliance of contract law, statutory provisions, and the doctrine of privity of estate.

Tenant Assigns Lease (T1 assigns to T2)

• The original landlord (L1) can sue the original tenant (T1) throughout the lease term for any breach of tenant covenants, whether or not T1 is no longer in possession. This is a result of privity of contract.
• L1 can also sue the current tenant (T2) for any breach of real covenants ("touch and concern" covenants) arising during T2’s own period of possession. This is a function of privity of estate.
• T1 may seek to be indemnified by T2 (and any further assignees) through the chain of indemnity covenants if T1 is compelled to pay L1 for a breach actually committed by T2 or T2's successors.
• T2 can enforce covenants against L1 provided those covenants touch and concern the land, and provided that the breach occurs during T2’s own period of the lease.

Where a lease is underlet (i.e. sub-let rather than assigned), there is no privity of contract or privity of estate between the original landlord and the subtenant, but landlords may nonetheless sometimes enforce restrictive covenants against subtenants in equity.

Landlord Assigns Reversion (L1 assigns to L2)

• The benefit and burden of real leasehold covenants pass to the assignee of the reversion (L2) by virtue of ss.141–142 LPA 1925. This statutory mechanism means that after assignment:
  • The new landlord (L2) may sue the original tenant and current tenant for breaches of real covenants.
  • The current tenant may sue the new landlord for breach of landlord covenants, provided those covenants also touch and concern the land.
  • The original landlord (L1) may still be liable in contract for breach occurring during their period as landlord, unless contractually released.
  • Practical difficulties sometimes arise in assigning the burden of obligations, or where privity of estate is broken by an assignment not by deed.

The “Touch and Concern” Test in Action

The touch and concern test is central to deciding whether a covenant passes to an assignee or successor. This test is commonly satisfied by covenants promising to repair, pay rent, avoid certain trades, or keep premises insured. Conversely, personal covenants—such as one for the landlord to personally provide a service to the original tenant, or to repay a security deposit only to the original tenant—are not considered to touch and concern the land, and thus do not pass on assignment.

Case law demonstrates the operation of the test:

• In P&A Swift, the court provided a modern distillation of the criteria: the covenant must benefit the estate owner for the time being; affect the nature/quality/mode of use or value of the landlord's or tenant's estate; and not be expressed to be personal.
• In Hua Chiao Commercial Bank Ltd v Chiaphua Industries, a landlord’s covenant to return a security deposit to the original tenant did not touch and concern the land or benefit successor tenants, hence could not be enforced by an assignee.

Worked Example 1.1

In 1990, Landlord Ltd granted a 25-year lease of a shop to Tenant A. The lease contained a covenant for Tenant A to keep the shop front painted annually. In 1998, Tenant A assigned the lease to Tenant B. Tenant B failed to paint the shop front in 2000. Can Landlord Ltd sue Tenant A for this breach?

Answer:
Yes. This is an 'old' lease (pre-1996). Tenant A, the original tenant, remains liable for all covenants throughout the lease term due to privity of contract, even after assignment. Landlord Ltd can sue Tenant A for Tenant B's failure to paint. Landlord Ltd could also potentially sue Tenant B under privity of estate, as the painting covenant likely 'touches and concerns' the land.

Worked Example 1.2

Using the same facts as Example 1.1, assume Tenant B assigns the lease to Tenant C in 2005. Tenant C fails to paint the shop front in 2007. Can Landlord Ltd sue Tenant B for Tenant C's breach?

Answer:
Generally no. Tenant B's liability under privity of estate only exists while the lease is vested in them. Once Tenant B assigned to Tenant C, their privity of estate with Landlord Ltd ended. Landlord Ltd could sue Tenant A (original tenant, privity of contract) or Tenant C (current tenant, privity of estate). Tenant B would only be liable if they had entered into a direct contractual covenant with Landlord Ltd upon taking the assignment, which was common practice but not automatic.

In multiple comparable scenarios, assignment of benefit or burden of leasehold covenants operates by these rules unless precluded by lease terms or statute.

In practice, the operation of s.141 LPA 1925 allows a landlord who assigns the reversion to transfer the right to sue for both future and accrued breaches (i.e., those which have occurred but not yet been remedied), so long as the assignee is expressly conveyed the benefit. For tenants, s.142 LPA 1925 similarly passes the burden of obligations.

Worked Example 1.3

A lease reserves to the original tenant a right to a rent deposit or service by the landlord. The reversion is assigned. The incoming landlord refuses to perform the service or repay the deposit. Can the new tenant enforce this right to the deposit or service?

Answer:
Only if the covenant is not personal to the original parties, and if the right or service touches and concerns the land and benefits the tenant’s interest generally—not just the original tenant. If the covenant is personal, it will not run.

The Landlord and Tenant (Covenants) Act 1995 ('New Leases')

The LT(C)A 1995 applies to all leases granted on or after 1 January 1996—a significant shift from the earlier regime. Its effect is to provide much greater clarity and closure for outgoing tenants and landlords, and to ensure the passing of relevant obligations to current parties.

Key Changes for New Leases

• On assignment of a lease granted after 1 January 1996, the benefit and burden of both landlord and tenant covenants (with limited exceptions for personal covenants) pass automatically to the assignee—there is no longer any need to apply the "touch and concern" test to decide enforceability by or against successors.
• The outgoing tenant (the assignor) is automatically released from liability, unless the assignment fits one of the limited excluded assignment categories (notably, assignments made in breach of covenants or by operation of law), or unless the outgoing tenant is required to enter into an AGA as a reasonable condition of landlord’s consent.
• Landlords are not automatically released when they assign the reversion, but may seek release using the notice and counter-notice procedure set out in ss.6–8 LT(C)A 1995, failing which they remain secondarily liable for the remainder of the term unless contractually discharged ("Avonridge clause").
• AGAs enable landlords to require an outgoing tenant—where reasonable—to guarantee the performance of tenant covenants by their immediate assignee only. An AGA must only cover this period and may not extend to subsequent assignees, nor can wider forms of guarantee be required by the landlord without risking invalidity of the condition.
• Where outgoing tenants or their guarantors are being pursued for payment of "fixed charges" (such as rent or service charge), s.17 LT(C)A 1995 requires a compliant statutory notice to be served within six months of the sum becoming due. Failure to comply bars recovery for that period, but if the charge is paid, the original tenant is entitled to request an overriding lease (s.19), inserting themselves between the landlord and the defaulting current tenant.
• "Personal" covenants, being those intended to benefit or bind only the original parties, are excluded from the automatic passing rule by s.3(6)(a) LT(C)A 1995.
• In contrast to the pre-1996 position, both positive and negative (restrictive) covenants pass routinely in the new regime, other than personal covenants. The touch and concern requirement is abolished in this context.

Key Term: Authorised Guarantee Agreement (AGA)
An agreement between the outgoing tenant (assignor) and the landlord, under which the assignor guarantees the performance by the immediate assignee of all tenant covenants until further assignment by the assignee. The landlord can only require an AGA if it is reasonable to do so, and the guarantee must be limited to the immediate successor’s period and obligations.

• s.3(5) LT(C)A 1995 also allows for the enforcement of restrictive tenant covenants directly against subtenants or occupiers of the premises, which overcomes some historic difficulties in practice.

Key Term: Overriding Lease
Where a former tenant or its guarantor pays a fixed charge pursuant to a s.17 notice, that payer can (within 12 months of payment) demand the grant of an overriding lease. The overriding lease sits between the defaulting tenant’s lease and the landlord’s reversion, permitting the former tenant to control the management and enforcement of the premises to recoup sums paid.

• The assignment of a lease in breach of covenant (an "excluded assignment"), or otherwise in circumstances specified in the lease or statute, precludes automatic release for the outgoing tenant. The outgoing tenant accordingly may retain liability despite parting with the lease.
• Note that the rules about consent to assignment are not automatic or absolute; they require reasonableness and timely action, with the landlord’s reasons for withholding or conditioning consent subject to legal challenge. The Landlord and Tenant Act 1988 (especially s.1), and Landlord and Tenant Act 1927 (especially s.19 and s.19(1A)), regulate what is a reasonable basis for consent or for imposing requirements such as AGAs or rent deposits.

Worked Example 1.4

In 2005, Laura granted a 15-year lease of an office to Tom. In 2010, Tom lawfully assigned the lease to Anna, providing Laura with an AGA. In 2015, Anna assigned the lease to Ben. Ben fails to pay rent in 2017. Can Laura sue Tom for the unpaid rent?

Answer:
No. This is a 'new' lease (post-1996). Tom was automatically released from tenant covenants when he assigned to Anna (s.5 LT(C)A 1995). Although he provided an AGA, this only guaranteed Anna's performance. When Anna assigned to Ben, Tom's liability under the AGA ended. Laura's recourse is against Ben (current tenant).

Worked Example 1.5

A 2012 retail lease contains a qualified covenant against assignment. The tenant assigns in 2019 without consent in breach of the alienation covenant. The landlord later seeks to pursue the outgoing tenant for the assignee’s unpaid rent.

Answer:
The assignment is likely an “excluded assignment” under s.11 LT(C)A 1995, so the outgoing tenant may not have the s.5 automatic release and can remain liable for tenant covenants notwithstanding the assignment. The landlord may also pursue the current tenant.

Worked Example 1.6

A landlord wishes to recover a half-year’s rent from a former tenant of a 2004 lease. The rent fell due on 25 March 2024. The landlord serves a s.17 notice on 10 October 2024 and the former tenant pays. What next?

Answer:
The s.17 notice must be served within six months of the sum falling due. Here, it was served within time (by 24 September 2024 would be safest; 10 October would be out of time and recovery barred for that instalment). If validly served and paid, the former tenant can require an overriding lease under s.19 within 12 months of payment, inserting itself as landlord to the defaulting assignee and enabling control of the premises. If the notice was out of time, recovery for that instalment is barred and no overriding lease can be claimed for that payment.

Worked Example 1.7

The lease permits assignment with landlord’s consent, such consent not to be unreasonably withheld. The tenant seeks consent to assign to a marginal covenant-strength assignee. The landlord proposes conditions including an AGA by the outgoing tenant, a rent deposit, and a third-party guarantor. Is that reasonable?

Answer:
Likely yes, provided conditions are proportionate and address genuine risks related to the proposed assignee’s ability to perform. Under LTA 1927 s.19(1) and LTA 1988, consent must be given within a reasonable time and refusal must be based on landlord and tenant relationship grounds. For commercial leases, LTA 1927 s.19(1A) allows the lease to pre-agree reasonable circumstances and conditions (e.g., AGA) for withholding or granting consent.

Worked Example 1.8

Landlord sues the original tenant (pre-1996 lease) for arrears that accrued in 1994. The original tenant pays and seeks to recover from the current tenant in occupation when the arrears accrued.

Answer:
The original tenant may recover via the chain of indemnity covenants, stepping down to the tenant in occupation when the breach occurred. This reflects the common conveyancing practice of taking an indemnity on assignment of old leases.

Worked Example 1.9

A 1991 headlease includes a user restriction. The headtenant underlets in 1995 and the sub-tenant breaches the user restriction in 2023. Can the freeholder enforce directly against the sub-tenant?

Answer:
There is no privity of estate between the freeholder and the sub-tenant, but a restrictive covenant may be enforced in equity against a person deriving title, and under LT(C)A 1995 s.3(5) the landlord of a new lease can enforce restrictive covenants directly against sub-tenants or occupiers. For this old lease, enforcement will be via equitable principles against the sub-tenant and/or by action against the headtenant, including forfeiture.

Worked Example 1.10

A 2008 lease includes a landlord’s promise to repaint the exterior “for the benefit of T1 personally.” The reversion is assigned in 2014. T1 assigns to T2 in 2016 and T2 seeks to enforce the repainting covenant against the new landlord in 2017.

Answer:
The landlord’s repainting promise is expressed to be personal to T1. Under s.3(6)(a) LT(C)A 1995, personal covenants do not pass on assignment. T2 cannot enforce the promise; nor can the new landlord be liable for a personal covenant owed only to T1.

Worked Example 1.11

A 1993 lease is assigned by landlord to a purchaser in 2020. A service charge dispute relates to the 2019 accounting year. Who sues and who is liable?

Answer:
Under LPA 1925 ss.141–142 the benefit and burden of covenants that touch and concern the land pass with the reversion. The assignee landlord (L2) may sue for breaches even if the breach occurred before assignment where the benefit passes; the position can depend on the covenant and timing. The tenant can sue L2 for landlord breaches occurring while L2 holds the reversion; L1 may remain contractually liable absent release.

Worked Example 1.12

A lease is validly assigned to an assignee without securing landlord’s written consent, where the lease contains an absolute prohibition against assignment. What is the legal effect?

Answer:
The assignment will be effective to transfer the legal term to the assignee, but this constitutes a breach of covenant by the assignor (and the assignee may also be in breach if they accepted the assignment with knowledge of the prohibition). The assignment will likely be an excluded assignment, so the assignor remains liable for all lease covenants.

Worked Example 1.13

A lease assignment occurs, and the outgoing tenant provides an AGA as a condition of landlord’s consent. The immediate assignee defaults, so the landlord sues the outgoing tenant under the AGA, and after paying, the outgoing tenant takes an overriding lease under s.19. What rights now exist between all parties?

Answer:
The former tenant, as overriding leaseholder, becomes immediate landlord to the defaulting assignee and tenant to the landlord. They can now take possession, forfeit the sub-lease, or otherwise manage the lease to recoup the sums paid out. If successful in regaining possession or performance, they may limit their loss or recover damages accordingly.

Exam Warning

Always determine whether the lease falls under the old (pre-1 January 1996) or new regime. The rules governing privity, enforceability, release, and notice are different and not changeable by assignment or novation. Always check the date of grant of the lease, whether assignments were in breach, and whether s.17 (fixed charge) notices have been properly served. Note that for claims involving payment of fixed charges, or recourse against former tenants or guarantors, compliance with strict statutory procedures is essential. Also, if an assignment took place without requisite consent, examine whether it constitutes an excluded assignment, as this will affect the ongoing liability of the assignor.

Summary Table: Old vs New Leases

Key Point Checklist

This article has covered the following key knowledge points:

• Privity of contract exists between the original landlord and original tenant, binding them to all lease terms for the duration.
• Privity of estate exists between the current landlord and current tenant, allowing enforcement of covenants related to the land.
• For 'old' leases (pre-1996), original tenants had ongoing liability after assignment due to privity of contract. Assignees were liable under privity of estate for covenants touching and concerning the land.
• The “touch and concern” requirement is central to enforcement against assignees under old leases; LPA 1925 ss.141–142 pass benefit and burden of such covenants with the reversion.
• For 'new' leases (post-1996), the LT(C)A 1995 applies: covenants pass automatically (s.3) and tenants are automatically released on lawful assignment (s.5), subject to excluded assignments and AGAs (s.16).
• AGAs allow landlords to require an outgoing tenant to guarantee only their immediate assignee’s performance; broader guarantees are generally ineffective.
• Landlords are not automatically released on assigning the reversion in new leases; they must use the statutory procedure (ss.6–8) or contractually limit liability.
• Recovery from former tenants or guarantors for fixed charges requires a s.17 notice within six months of the sum falling due; a payer may seek an overriding lease under s.19.
• Consent to assign must not be unreasonably withheld or delayed; reasons and any conditions (such as an AGA or rent deposit) must be reasonable (LTA 1988; LTA 1927 s.19; s.19(1A)).
• The 'touch and concern' test is largely abolished for the passing of covenants in new leases; personal covenants remain excluded.
• Overriding leases can be used by former tenants to recoup sums paid where a fixed charge notice has been complied with.
• In the context of assignment, always analyse whether the transaction was valid and whether requisite statutory or procedural requirements (s.17 notices, consent, timing) were followed.

Key Terms and Concepts

• Privity of Contract
• Privity of Estate
• Leasehold Covenant
• Assignment
• Reversion
• Touch and Concern
• Authorised Guarantee Agreement (AGA)
• Excluded Assignment
• s.17 Notice (Fixed Charges)
• Overriding Lease
• Chain of Indemnity Covenants
• Personal Covenant