COVENANTS IN LEASES Overview - key issues · Covenants are terms of a lease . Like in a normal contract, terms may b express or implied at law or by statute Covenants · Express or implied o Covenants can be set oout in the lease itself or incorporated by reference (e.g. to a standard terms document recorded in the land registry) o Covenants can be implied by the common law virtue of the lessor-lessee relationship o Covenants can be implied by statute · Contract Subject to contract law principles re essential terms and repudiation Usual covenants implied at law on lessors · These covenants are implied in all leases · Imposed on lessor o *quiet enjoyment o *non-derogation from grant o Permit lessee to remove its chattels after temrination Covenant - quiet enjoyment o Implied by nature of relationship but normally expressed in a lease Subject to any reservations (such as right to enter and effect repairs), the lessor or those claiming under the lessor (e.g. the lessor's other tenants in the building) will not substantially interfere with the lessee or the lessee's enjoyment of the premises o Quiet = peaceful and free form disturbance o Conduct may occur on or off the premises O [14.38ff], [14.39ff] o Examples of breach: · Turning off services (electricity, telephone etc) · Physically preventing access to premises · Excessive noise beyond usual incidents of type of building · Wrongful eviction · Intimidation, threats or abuse o Does not need to be direct physical interference · Southwark London Borough Council v Baxter [1993] 3 WLR 939 O Does not apply to existing interferences o If known to both parties, the nature of the business for which leased premises is granted 'forms the framework of the analysis' as to whether covenant is breached · Byrnes v Jokona [2ffff2] FCA 41 [61] o But note: 'it is an interference with a property right (possession or the grant) and not interference with the business activity that is the legal foundation of the right to complain about the breach of the covenant' Byrnes v Jokona [2ffff2] FCA 41 [68] o Also see City of Subiaco v Heytesbury Properties Pty Ltd (2ffff1) 24 WAR 146 Covenant - non-derogation from grant · Subject to any reservations, the lessor must not act (or permit others to act) so as to make the premises materially less fit for the permitted use o Implied to give business efficacy to lease - the use of the property by the lessee would be very difficult or impossible without the implication of this term: Karaggianis v Malltown Pty Ltd (1979)
o Examples . Aldin v Latimer Clark, muirhead & Co [1894] . Harmer v Jumbil (Nigeria) Tin areas Ltd [1921] · Karaggianis v Malltown Pty Ltd (1979) Lessee leased cafeteria on 6th floor " At commencement, 4 lifts in service plus 2 escalators After 1 year, lift service reduced and escalators limited to 2nd floor · Leasing nearby premises to the lessee's competitors is not a