Landlord and tenant law - Relationship between landlord and ...

Learning Outcomes

This article outlines the landlord and tenant relationship, focusing on lease creation, covenants, remedies, and termination, including:

• Distinction between leases and licences
• Formalities for valid lease creation
• Main covenants binding landlords and tenants
• Principal methods of lease termination
• Binding effect of leasehold covenants on original parties and successors under pre-1996 and post-1995 regimes
• Equitable leases arising where formalities are incomplete
• Operation of forfeiture and the safeguards around it
• Registration rules affecting leases and third-party enforceability
• Application of principles to SQE1-style scenarios
• Common pitfalls in landlord and tenant law

SQE1 Syllabus

For SQE1, you are required to understand the landlord and tenant relationship from a practical viewpoint, with a focus on the following syllabus points:

• the essential characteristics and formalities of a lease, including the distinction between leases and licences
• the main express and implied covenants in leases and their enforceability
• the rules for passing the benefit and burden of leasehold covenants, including privity of contract and privity of estate
• the principal remedies for breach of leasehold covenants
• the different ways in which a lease can be terminated, including forfeiture, surrender, effluxion of time, and frustration
• registration of leases and the impact of overriding interests under the Land Registration Act 2002
• statutory controls on assignment and subletting, including reasonableness of consent
• residential repair obligations under s 11 Landlord and Tenant Act 1985 and protection from unlawful eviction

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. What are the three essential characteristics of a lease as set out in Street v Mountford?
2. Which formalities are required to create a legal lease for more than three years?
3. What is the difference between privity of contract and privity of estate in the context of leasehold covenants?
4. Name two ways in which a lease can be terminated before its fixed term expires.

Introduction

The landlord and tenant relationship is a central feature of property law in England and Wales. It arises when a landlord grants a tenant exclusive possession of land for a defined period, usually in return for rent. Understanding the legal requirements for creating a lease, the covenants that bind the parties, and the methods by which leases may be brought to an end is essential for SQE1.

The landlord retains a reversionary interest in the premises and the tenant holds a term of years. Both interests are proprietary and, subject to the rules on registration and notice, bind third parties. Leases may be fixed term or periodic. Periodic leases run from period to period (for example, weekly or monthly) until terminated by valid notice, and often arise by implication from occupation with regular rent payments.

Key Term: lease
A proprietary right granting exclusive possession of land for a fixed or periodic term, enforceable against third parties.

Key Term: licence
A personal permission to use land, which does not confer exclusive possession or bind third parties.

Creation of Leases

A valid lease must satisfy three requirements: exclusive possession, a defined term, and (historically) rent. The presence of exclusive possession is decisive—if the occupier can exclude all others, including the landlord (except as expressly reserved), the arrangement is likely to be a lease. Although rent is frequently paid, it is not essential to the existence of a lease; a lease without rent can still be valid if exclusive possession for a term is present.

Leases for more than three years must be created by deed. Short leases (three years or less), granted in possession at the best rent without a premium, may be created orally or in writing. Where the title is registered, legal leases granted for a term exceeding seven years must be substantively registered with their own title; failure to register usually downgrades the interest to equitable status. Legal leases of seven years or less can bind as overriding interests (on first registration and subsequent dispositions), while equitable leases should be protected by notice on the charges register.

Key Term: exclusive possession
The right of the tenant to exclude all others, including the landlord, from the premises, subject to any rights reserved to the landlord.

Key Term: deed
A formal written document, signed, witnessed, and delivered as a deed, required for certain transactions in land.

If the parties intend to create a lease but fail to comply with the necessary formalities, equity may recognise an equitable lease if there is a valid contract to grant a lease and specific performance is available. This is the Walsh v Lonsdale principle: equity treats as done that which ought to be done. However, equitable relief is discretionary and may be refused if the claimant is in breach (clean hands doctrine), as in Coatsworth v Johnson.

Key Term: equitable lease
A lease recognised by equity where the parties have agreed the essential terms and there is a valid contract, but the legal formalities have not been completed.

In practice:

• leases for a fixed term can include break rights allowing early termination without affecting the ascertainability of the term
• periodic tenancies can arise expressly or by implication from occupation and payment of rent
• tenancies granted beyond seven years require registration to take effect at law, and failure to register will typically leave the tenant with an equitable lease only
• a purported lease “for life” is converted by statute into a term of 90 years determinable on death

Worked Example 1.1

A landlord grants a "licence" to a tenant to occupy a flat for one year, with the right to exclude all others. The tenant pays monthly rent and the landlord retains a key only for emergencies.

Answer:
Despite being called a "licence," this arrangement is a lease. The tenant has exclusive possession for a fixed term at a rent, satisfying the requirements in Street v Mountford.

Worked Example 1.2

Owner O permits T to move in, pay £900 per month, and occupy indefinitely. No written agreement is signed. T has lived there for two years.

Answer:
A monthly periodic tenancy has arisen by implication. The fixed period is one month (derived from the rent period), exclusive possession is present, and the arrangement meets the short lease exception, so it is legal despite being oral. Termination requires a valid notice to quit expiring at the end of a rental period.

Lease or Licence?

The distinction between a lease and a licence is essential. A lease creates a proprietary right, whereas a licence is a personal permission. The label used by the parties is not determinative; the substance of the arrangement is key. Courts focus on control and reality of occupation. Clauses reserving rights to share occupation, or preventing exclusive possession, may be disregarded if they are sham or inconsistent with the actual arrangement (for example, identical “licence” agreements for a couple occupying a one-bed flat together).

Common scenarios:

• Service occupancies: if occupation is required for better performance of duties (for example, caretakers, farm workers), the arrangement is typically a licence terminable with employment.
• Hostels and supported accommodation: conditions preserving management control and allowing room changes or shared occupation can prevent exclusive possession, indicating a licence.
• Flat-sharing: where all four unities and joint control exist, sharers may have exclusive possession jointly; otherwise, separate, staggered licences will not create a joint tenancy.

Covenants in Leases

Covenants are promises in the lease that set out the obligations of landlord and tenant. They may be express (written in the lease) or implied (arising by law). In addition to the parties’ contractual obligations, some covenants pass automatically with the estate or reversion, subject to the applicable regime.

Key Term: covenant
A binding promise in a lease, either express or implied, imposing obligations on the landlord or tenant.

Tenant Covenants

Typical tenant covenants include:

• Paying rent (and associated sums reserved as rent, such as interest, insurance premiums, or service charges where expressly reserved)
• Repairing and maintaining the premises (often “keep” covenants measured by the property’s condition and character)
• Using the property only for permitted purposes (user covenants may be restrictive)
• Not assigning or subletting without consent (absolute or qualified)
• Complying with regulations for common parts or estate management
• Yielding up at the end of the term in specified condition

A tenant also has implied obligations to act in a tenant-like manner (common law) and to avoid committing waste.

Landlord Covenants

Common landlord covenants include:

• Allowing the tenant quiet enjoyment of the property
• Not derogating from grant (not substantially depriving the tenant of the lease's benefit)
• Insurance and re-instatement obligations where premiums are recovered as rent
• Repairing obligations (especially for structure/exterior or common parts in multi-occupancy buildings, where agreed)
• Enforcing other tenants’ covenants where promised (for example, to preserve amenity and use in mixed-use or residential blocks)

Key Term: quiet enjoyment
The tenant's right to use the premises without substantial interference by the landlord.

Key Term: non-derogation from grant
The landlord must not act in a way that frustrates the purpose of the lease or deprives the tenant of its benefit.

Quiet enjoyment does not mean literal silence; it protects against substantial interference by the landlord or those claiming under the landlord (for example, obstructing access by scaffolding). Residential tenants have extra statutory protection: harassment and unlawful eviction are offences under the Protection from Eviction Act 1977.

In dwellings, s 11 Landlord and Tenant Act 1985 implies landlord obligations to keep in repair the structure and exterior and installations for water, gas, electricity, sanitation, space heating and water heating. Liability generally arises once the landlord is notified of disrepair and has a reasonable time to remedy.

Consent to assign or sublet under qualified covenants must not be unreasonably withheld or delayed. The landlord’s duty is reinforced by the Landlord and Tenant Act 1988, which puts the burden on the landlord to justify refusal and to respond within a reasonable time. In commercial leases, the parties can agree in advance reasonable conditions for consent (for example, provision of financial references or an Authorised Guarantee Agreement).

Worked Example 1.3

A landlord opens a shop in the same building as the tenant and blocks the tenant's only access to customers.

Answer:
The landlord may be in breach of the covenant for non-derogation from grant, as this substantially deprives the tenant of the benefit of the lease.

Worked Example 1.4

A qualified covenant prohibits assignment without consent. The tenant proposes to assign a retail lease to a travel agency. The landlord refuses consent without giving reasons for four months.

Answer:
The landlord must not unreasonably withhold or delay consent. Delay can itself be unreasonable. If a change of use would breach the existing user covenant, refusal may be reasonable; otherwise, the landlord should consider financial standing and references. Failure to respond in a reasonable time and to provide reasons may breach statutory duties, exposing the landlord to damages.

Passing the Benefit and Burden of Leasehold Covenants

The enforceability of leasehold covenants depends on privity of contract and privity of estate.

Key Term: privity of contract
The legal relationship between the original parties to the lease, making them liable for covenants throughout the lease term.

Key Term: privity of estate
The legal relationship between the current landlord and tenant, making them liable for covenants that "touch and concern" the land while they hold their respective interests.

For leases granted before 1 January 1996 ("old leases"), the original tenant remains liable for lease covenants even after assignment, due to privity of contract. Assignees are liable while the lease is vested in them under privity of estate for covenants that “touch and concern” the land (that is, real covenants affecting the nature, quality, mode of user or value of the land, and not personal to the original parties). The benefit and burden of landlord covenants pass on assignment of the reversion under ss 141 and 142 Law of Property Act 1925.

For leases granted on or after that date ("new leases"), the Landlord and Tenant (Covenants) Act 1995 replaces much of the old law. It releases the outgoing tenant from future liability on assignment, unless an Authorised Guarantee Agreement (AGA) is required in accordance with s 16. Under s 3, the benefit and burden of landlord and tenant covenants pass automatically on assignment unless expressed to be personal. The outgoing landlord is not automatically released and must follow s 6–8 to obtain release or limit liability by the drafting of the lease, subject to the court’s approach.

Key Term: Authorised Guarantee Agreement (AGA)
An agreement by which an outgoing tenant guarantees the performance of lease covenants by the immediate assignee, permitted under the 1995 Act.

AGA terms must be reasonable and limited to guaranteeing the immediate assignee only. If the assignee later assigns, the guarantor’s liability falls away. If an AGA guarantor pays a fixed charge (such as rent), statutory mechanisms may allow further steps to protect recovery.

Recovery between tenants under old leases is supported by indemnity covenants (usually implied on assignment for value) and common law restitution principles, allowing an outgoing tenant who has paid for a successor’s breach to recover against the tenant in possession at the time of breach.

Worked Example 1.5

A tenant fails to pay rent for three months. The lease contains a forfeiture clause. The landlord serves the required notice and seeks possession.

Answer:
The landlord may forfeit the lease for non-payment of rent, provided the notice requirements are met and the tenant does not obtain relief from forfeiture by paying the arrears.

Worked Example 1.6

In 1994, L granted a 40-year lease to T1. T1 assigned to T2 in 2005. T2 has stopped paying rent. L wishes to recover against T1.

Answer:
This is an old lease. T1 remains liable under privity of contract. Before suing for rent (a fixed charge), L must serve a default notice under s 17 of the 1995 Act within six months of the sum falling due. L may recover only the sums for which notice is properly served. If T1 pays in full, T1 may request an overriding lease, becoming tenant to L and landlord to T2, enabling enforcement against T2.

Remedies for Breach of Covenant

Remedies for breach of leasehold covenants include:

• Damages (compensation for loss)
• Specific performance (court order to perform an obligation)
• Injunction (to prevent a breach)
• Forfeiture (landlord's right to terminate the lease for serious breach)

Key Term: forfeiture
The landlord's right to terminate the lease for breach of certain covenants, usually requiring a forfeiture clause and compliance with statutory notice procedures.

Non-payment of rent can also be addressed through debt actions and, in commercial cases, through the Commercial Rent Arrears Recovery (CRAR) procedure (subject to statutory requirements and restrictions). For other breaches, forfeiture typically requires service of a s 146 Law of Property Act 1925 notice specifying the breach, requiring remedy within a reasonable time if capable of remedy, and, where sought, compensation. Relief from forfeiture is commonly available to tenants on terms (for example, clearing arrears and costs).

Repair claims engage additional controls:

• damages may be limited to the diminution in value (s 18 Landlord and Tenant Act 1927)
• the Leasehold Property (Repairs) Act 1938 restricts proceedings for certain long leases unless a statutory procedure is followed
• “Jervis v Harris” clauses may entitle landlords to enter, remedy breaches, and recover costs as a debt

Other options include pursuing guarantors, drawing from a rent deposit, or seeking injunctions to restrain continuing or threatened breaches (for example, unlawful subletting or user).

Worked Example 1.7

A commercial lease includes a Jervis v Harris clause. The tenant breaches the repairing covenant and refuses access. The landlord wishes to recover the costs of urgent repairs.

Answer:
If the clause permits entry and self-help, the landlord can enter, carry out repairs, and recover costs as a debt (not damages), avoiding some statutory constraints. If access is refused contrary to the lease, the landlord may seek an injunction to compel compliance.

Termination of Leases

Leases may be terminated by:

• Effluxion of time (expiry of the fixed term)
• Break clause (early termination by notice)
• Surrender (mutual agreement to end the lease)
• Forfeiture (landlord's right to terminate for breach)
• Frustration (rare—where an unforeseen event makes performance impossible)
• Disclaimer (by a trustee in bankruptcy or liquidator)
• Repudiatory breach (serious breach accepted by the other party)
• Merger (tenant acquires the landlord's interest)

Break rights must be exercised strictly in accordance with the lease conditions; non-compliance may render an attempted break ineffective. Surrender is typically by deed, but can be inferred by unequivocal conduct inconsistent with continuance of the lease, accepted by the landlord (for example, delivering up and landlord’s clear acceptance). Merger combines the term and reversion in the same person where merger is intended.

Frustration is recognised in principle for leases but is exceptionally rare (for example, a supervening legal prohibition making performance radically different). Repudiation may apply where there is a fundamental breach of covenant accepted by the innocent party.

Disclaimers by insolvency office-holders (trustee in bankruptcy or liquidator) release the insolvent tenant from future obligations and may end subleases depending on the chain of interests.

Key Term: surrender
The mutual agreement of landlord and tenant to end the lease before its expiry, usually by deed.

Key Term: break clause
A contractual provision allowing either party to terminate the lease early by giving notice.

Key Term: frustration
The lease is brought to an end because an unforeseen event makes performance impossible or radically different.

Key Term: disclaimer
The right of a trustee in bankruptcy or liquidator to disclaim a lease, releasing the tenant from future obligations.

Key Term: merger
The lease ends when the tenant acquires the landlord's interest, combining both estates.

Key Term: notice to quit
The notice required to terminate a periodic tenancy.

Periodic tenancies require valid notice to quit expiring at the end of a rental period, subject to statutory requirements and any contractual modifications. The length of the notice is generally one full period (for a monthly tenancy, one month; for a weekly tenancy, four weeks), unless legislation or contract specifies otherwise.

Worked Example 1.8

A tenant holds a monthly periodic tenancy. The landlord gives one month's written notice to quit, expiring at the end of a rental period.

Answer:
The periodic tenancy will end at the expiry of the notice period, provided the notice complies with statutory requirements.

Worked Example 1.9

A head-lease is surrendered by deed. A sublease exists for part of the premises. The subtenant remains in occupation and pays rent to the head landlord after surrender.

Answer:
Surrender or merger of the head-lease can end dependent interests unless preserved. If the parties intend to preserve the sublease, the transaction should be structured to avoid merger or include express provisions. After surrender, if the landlord accepts rent from the subtenant and treats the sublease as continuing, a direct tenancy may be inferred; otherwise, the sublease may fall away.

Key Point Checklist

This article has covered the following key knowledge points:

• The distinction between leases and licences is determined by exclusive possession, not by the label used.
• Leases for more than three years must be created by deed; short leases may be created orally or in writing.
• Where the term exceeds seven years, registration is required for legal status; short legal leases can override, and equitable leases should be protected by notice.
• Covenants in leases may be express or implied and bind landlords and tenants; quiet enjoyment and non-derogation from grant prevent substantial interference.
• Residential landlords have implied repair obligations under s 11 Landlord and Tenant Act 1985 and must not unlawfully evict or harass.
• Privity of contract and privity of estate determine liability for leasehold covenants, especially on assignment, and real covenants must “touch and concern” the land under old leases.
• The Landlord and Tenant (Covenants) Act 1995 releases original tenants from liability on assignment of new leases, subject to AGAs, and passes covenants automatically unless expressed to be personal.
• s 17 default notices apply to recovery of fixed charges from former tenants under both old and new leases and can lead to overriding leases under s 19.
• Remedies for breach of covenant include damages, specific performance, injunction, and forfeiture. Forfeiture requires compliance with s 146 notice procedures except for rent.
• Leases may be terminated by effluxion of time, break clause, surrender, forfeiture, frustration, disclaimer, repudiatory breach, merger, or notice to quit, with specific rules on periodic tenancies and the effect on subleases.

Key Terms and Concepts

• lease
• licence
• exclusive possession
• deed
• equitable lease
• covenant
• quiet enjoyment
• non-derogation from grant
• privity of contract
• privity of estate
• Authorised Guarantee Agreement (AGA)
• forfeiture
• surrender
• break clause
• frustration
• disclaimer
• merger
• notice to quit