Landlord and tenant –– Assignment –– Landlord and Tenant (Covenants) Act 1995 –– Landlord covenants –– Agreement for lease –– Assignment of reversion –– Landlord serving section 8 notice and request for release from covenant –– Whether landlord released from personal covenant imposed in collateral agreement –– Whether tenant obliged to indemnify landlord in respect of costs of complying with dangerous structure notice
In April 1997 the claimant tenant and the first defendant landlord made an agreement by which the first defendant would carry out refurbishment works to a building and would then, following practical completion of works to a specified part of the building, grant the tenant a lease of that part. Under the agreement, the first defendant undertook certain liabilities for defects in the refurbishment works during a defects liability period of six years. In July 1997 the lease was granted. In July 1999 the first defendant transferred the reversion to the second defendant, an associate company, and served a notice on the tenant, under section 8 of the Landlord and Tenant (Covenants) Act 1995, seeking release from its obligations. The tenant did not serve a counternotice. In May 2000 the local authority served a dangerous structure notice on the second defendant, pursuant to section 62 of the London Building Acts (Amendment) Act 1939, requiring works to be carried out to the external glass units, some of which had fractured. The first defendant contended that the section 8 notice had extinguished its personal obligation under the 1997 agreement to remedy defects. The parties were, in any event, in dispute about the extent of the first defendant’s duty under the agreement to remedy building works defects and as to the obligations of the tenant under the lease to reimburse the second defendant for the cost of remedial works.
Held: (1) The personal obligations of the first defendant under the agreement survived and were unaffected by the section 8 notice. The personal obligations were not covenants falling within the definition of a landlord covenant contained in section 28 of the 1995 Act. The only covenant that can constitute a landlord and tenant covenant is a covenant capable of subsisting as a transmissible covenant; a personal covenant cannot qualify. However, the section 8 notice would have been effective to achieve the release of the covenants in the collateral agreement if the covenants in question had not been personal. (2) Under the terms of the agreement, the first defendant’s obligation was to remedy the accrued physical damage as at the date of the tenant’s notification of the defect. (3) Under the terms of the lease, the tenant assumed the primary contractual obligation to procure compliance at its own cost with the dangerous structure notice, and agreed to indemnify the landlord in respect of the cost of compliance.
The following case is referred to in this report.
Monro v Lord Burghclere [1918] 1 KB 291
This was the hearing of applications for summary judgment in proceedings by the claimant, BHP Petroleum Great Britain Ltd, for relief against the defendants, Chesterfield Properties Ltd and Chesterfield (Neathouse) Ltd.
Michael Barnes QC and Joanne Wicks (instructed by Herbert Smith) appeared for the claimant; Simon Berry QC and Andrew Parker (instructed by Dechert) appeared for the defendants.
Giving judgment, LIGHTMAN J said:
Introduction
1. I have before me applications for summary judgment that raise (besides two questions of construction of two specific documents) a fundamental question under the Landlord and Tenant (Covenants) Act 1995 (the Act). Section 6 of the Act makes provision for a landlord who has assigned his reversion upon a tenancy to apply, in accordance with the procedure laid down in section 8 of the Act, to be released from the landlord covenants in the tenancy or a collateral agreement. Section 8 provides that the landlord shall serve on the tenant notice of the assignment and a request for the covenant to be released, and that if the tenant does not, within four weeks thereafter, serve a notice of objection, the covenant is released to the extent mentioned in the notice. The question raised is whether such a landlord’s notice seeking release from all his covenants under the tenancy (in the absence of a tenant’s notice of objection) is effective to secure the release of the landlord from a personal covenant imposed upon him, and whether this is so even if the personal covenant is imposed by a collateral agreement, although the notice makes no specific reference to that collateral agreement.
Facts
2. The facts relevant to the applications before me can be stated quite shortly. By an agreement for a lease dated 30 April 1997 (the agreement) made between the first defendant, Chesterfield Properties Ltd (D1) and the claimant, BHP Petroleum Great Britain Ltd (the tenant), D1 agreed to undertake refurbishment works to a substantial building at 1 Neathouse Place, London SW1 (the property).
3. The agreement provided that the tenant should be entitled to occupy and use by far the greater part of the property as soon as it was practicable for the tenant to carry out the tenant’s works (as there defined), which the tenant undertook to carry out, from which date it would pay a licence fee at a rate equal to the initial rent payable of £3,113,846 pa. It went on to provide that five working days after the date of practical completion of what were referred to as the “podium works”, D1 should grant to the tenant a lease of that part of the property for a term of 20 years, commencing on 24 June 1997. For convenience, I shall refer to the part demised (as well as the whole) as “the property”, save where it is relevant to distinguish the part demised from the part retained by D1.
4. Clause 12 of the agreement contains the personal covenant on the part of D1, upon which the applications primarily centre. The material parts of this clause provide as follows:
12.2. Building Works Defects
If on one or more occasions during the Defects Period a Building Works Defect manifests itself the following provisions shall apply.
12.2.1. the Tenant shall notify the Landlord in writing of such Building Works Defect as soon as reasonably practicable and supply to the Landlord such details of the Building Works Defect as are in the possession of or under the control of the Tenant;
12.2.3.2. the Landlord shall with the minimum practical inconvenience to the Tenant and as economically as reasonably practicable remedy or procure the remedying of each Building Works Defect as quickly as reasonably practicable…
…
12.4.2. If at any time during the Defects Period the Demised Premises or any part of the Demised Premises are rendered incapable of beneficial use and occupation by reason solely or principally of a Building Works Defect then the following provisions shall apply:––
12.4.2.1. if at the date upon which the Demised Premises or the relevant part of the Demised Premises cease to be capable of beneficial use and occupation and for so long thereafter as the reversion immediately expectant on the determination of the term of the Lease remains vested in the Landlord then the yearly rent stated in clause 4.1.1 of the Lease or a fair proportion thereof according to the extent to which the Demised Premises are incapable of beneficial use and occupation…
12.3. General
12.3.1. The Landlord shall carry out any remedial works in relation to a Building Works Defect:––
12.3.1.1. in a good and workmanlike manner;
12.3.1.2. with good quality materials;
12.3.1.3. in accordance with the Necessary Consents for such works and the requirements of any competent authority.
12.3.2. The Landlord shall obtain the approval of the Tenant (such approval not to be unreasonably withheld) to the contractors and professional advisers (and the terms of their appointment including any warranties to be given by them) instructed by the Landlord in relation to any remedial works undertaken in relation to.
…
12.4.2.2. if as at the date upon which the Demised Premises or relevant part of the Demised Premises cease to be capable of beneficial use and occupation the reversion immediately expectant on the determination of the term of the Lease is not vested in the Landlord then the Landlord shall pay to the Tenant quarterly in advance an amount equal to the rent reserved by clause 4.1.1 of the Lease or a fair proportion thereof according to the extent to which the Demised Premises are incapable of beneficial use and occupation… plus any VAT chargeable thereon on the usual quarter days and so in proportion for any part of a quarter in respect of the period during which the Demised Premises or relevant part of the Demised Premises are incapable of beneficial use and occupation.
12.4.3. The provisions of clauses… 12.4.2.1 shall cease to apply on and with effect from the date (“the Disposal Date”) upon which the reversion immediately expectant on the determination of the Lease ceases to be vested in the Landlord and the provisions contained in clauses or 12.4.2.2 (if appropriate) shall apply on and with effect from the Disposal Date.
…
12.5. General Provisions
12.5.1. For the avoidance of doubt:––
12.5.1.1. the Tenant acknowledges that the obligations on the part of the Landlord contained in this clause 12 are personal obligations of Chesterfield Properties Plc and the Tenant acknowledges and confirms that the Tenant shall have no claim of any nature whatsoever against the Landlords successors in title to the Demised Premises arising out of or otherwise in connection with the obligations on the part of the Landlord contained in this clause 12;
12.5.1.2 the benefit of the provisions contained in this clause 12 shall enure for the Tenants successors in title and the Tenant and the Tenants successors in title shall be entitled to assign the benefit of the provisions contained in this clause 12 to each subsequent assignee of the Lease but not otherwise…
5. “Building Works Defect” is defined in clause 1.1.8 as:
any physical damage to the Demised Premises manifesting itself during the Defects Period or any defect in the Demised Premises which will result in physical damage to the Demised Premises manifesting itself during the Defects Period and in either case:––
1.1.8.1. which is caused by defective design materials or workmanship in the construction of the Building Works and
…
1.1.8.3. the cost of remedying which will in each such case exceed £50,000 (excluding VAT); …
The “Defect Period” is defined in clause 1.1.15 as:
the period of six years commencing on and including the date of actual completion of the Lease or if completion of the Lease is delayed otherwise than by reason of the default of the Landlord the period commencing on and including the date upon which the Lease should have been completed pursuant to the provisions of this agreement.
6. D1 completed the refurbishment works and the tenant completed the tenant’s works, and, on 1 July 1997, the parties duly executed the lease (the lease).
7. The lease contained the following relevant covenants by the tenant:
5.19. Compliance with statutes, etc
5.19.1. To comply in all respects with the provisions of all Legal Requirements for the time being in force relating to the Demised Premises.
5.19.2. Not to… omit on or about the Demised Premises any act or thing by reason of which the Landlord may under any Legal Requirement incur or have imposed upon it or become liable to pay any levy, penalty, damages, compensation, costs, charges or expenses and so far as the law allows to indemnify the Landlord against all such liability and in particular (but without prejudice to the generality of the foregoing) against any liability under the Factories Act 1961…
…
5.25. Indemnity
To keep the Landlord indemnified from and against all expenses, demands, costs, loss and claims recoverable at law (including without limitation diminution in value of the Demised Premises and damages for the loss of amenity of the Demised Premises) arising from:––
5.25.1. any breach of any of the Tenant’s covenants contained in this lease;
5.25.2. the use of the Demised Premises;
5.25.3. any works carried out during the term to the Demised Premises;… or
5.25.5. any act, neglect or default by the Tenant, any subtenant or their respective servants or agents or any person on the Demised Premises or the Landlord’s Development with the actual or implied authority of any of them…
8. “Legal requirements” was defined in clause 1.1.11 as:
all statutes, regulations and orders and all requirements, directions, codes of practice, circulars and guidance notes of or issued by any competent authority exercising powers under statute or Royal Charter and all directly applicable EC law and case law;
9. On 9 July 1999 D1 transferred the reversion to an associate company, the second defendant, Chesterfield (Neathouse) Ltd (D2). On 30 July 1999 D1 served a notice on the tenant under section 8 of the Act (the landlord’s notice), which was in Form 5 prescribed by the Landlord and Tenant (Covenants) Act 1995 (Regulations) 1995 (the 1995 Regulations). So far as material it read as follows:
Landlord and Tenant (Covenants) Act 1995 (Notices) Regulations 1995
Form 5
LANDLORD AND TENANT (COVENANTS) ACT 1995
Sections 7 and 8
Former Landlord’s Notice Applying for Release from Landlord Covenants of a Tenancy
To BHP Petroleum Great Britain Public Ltd Company of One Neathouse Place London SW1
1. This notice is given under section 8 of the Landlord and Tenant (Covenants) Act 1995
2. It relates to One Neathouse Place London SW1 let under a lease dated 1st July 1997 and made between
(1) Chesterfield Properties plc and (2) BHP Petroleum Great Britain Public Ltd Company of which you are the tenant.
3. We were formerly landlord of the property of which you are the tenant and remained bound by the landlord’s obligations under the tenancy after transferring the landlord’s interest. The landlord’s interest was transferred on 9th July 1999 to Chesterfield (Neathouse) Limited.
[We] wish to be released from [our] obligations with effect from the date of that transfer.
4. If you consider that it is reasonable for [us] to be released, you do not need to do anything, but it would help [us] if you notify [us] using Part II of this Form.
5. If you do not consider it reasonable for [us] to be released, you must notify [us] of your objection, using Part II of this Form, within the period of four weeks beginning with the serving of this notice, or [we] will be released in any event. You may withdraw your objection at any time by notifying [us] in writing.
The tenant served no counternotice.
10. The exterior of the property is largely clad in toughened glass. In September 1999 two glass units fractured, but they did not fall out of their fixings. In April 2000 a further glass unit fractured and did fall out of its fixings. The tenant says that a further glass unit fractured in August 2000. According to the tenant (and as I must accept for the purpose of these applications), the reason for these events was a defect in the property, namely the use of the wrong and insufficiently tested glass.
11. On 5 May 2000 Westminster City Council (the council) served a dangerous structure notice (the DSN) pursuant to section 62 of the London Building Acts (Amendment) Act 1939 (the 1939 Act), requiring works to be carried out to the glass units to “secure” the property. For the purposes only of the applications before me, D2 accepts that the notice was valid, was validly served on D2 and imposes on D2 alone the public legal duty to carry out the required works.
12. The issues raised on this application are threefold:
(i) whether the personal obligation assumed by D1 under the agreement to remedy building work defects was extinguished upon the expiry of the four-week period after service of the landlord’s notice;
(ii) (assuming that the obligation was not so discharged) as a matter of construction of the agreement, the extent of the duty of D1 to remedy building work defects;
(iii) as a matter of construction of the lease, the obligation of the tenant to reimburse D2 for the cost of the remedial works required to be undertaken by the DSN.
1995 Act and personal covenants
13. The 1995 Act introduced substantial changes in the law relating to covenants in leases and collateral agreements entered into on or after 1 January 1996, and, in most particular, their transmission and their release. The 1995 Act had its origins in the Report of the Law Commission on Landlord and Tenant Law, Privity of Contract and Estate (the report) published in 1988. In Part IV of the report, the Commission set out its proposals for reform, the material part of which reads as follows:
REFORM PROPOSALS
Basis
4.1 Our proposals for reform recognise the importance of two principles:
First, a landlord or a tenant of property should not continue to enjoy rights nor be under any obligation arising from a lease once he has parted with all interest in the property.
Secondly, all the terms of the lease should be regarded as a single bargain for letting the property. When the interest of one of the parties changes hands the successor should fully take his predecessor’s place as landlord or tenant, without distinguishing between different categories of covenant.
4.2 The majority of those who responded to the Working Paper believed that the effect of transferring property which has been leased should be the “clean break” which results from applying the two principles. Nevertheless, the consultation convinced us that there are cases in which, for good reason, landlords can only agree to a proposed assignment if they are assured that their existing tenant will continue to be responsible for complying with the lease terms. We are therefore proposing a scheme based on the general abrogation of the privity of contract principle, but which stops short of abolishing it in all cases.
Outline
4.3 We propose a general rule that the liability of the original tenant, and his entitlement to benefits under the lease, should not survive an assignment of the lease. For this purpose, we propose that all the covenants in a lease should be treated in the same way, whether or not at present they touch and concern the land. Nevertheless, it would be possible for the landlord, when granting consent to the assignment, to impose a condition that the tenant will be liable to guarantee the performance of some or all of the lease covenants by his immediate successor.
4.4 The Landlord and Tenant Act 1988 implements our recommendations generally to impose a duty on landlords not unreasonably to withhold consent. The effect would be that in cases where the landlord is not entitled to withhold his consent to assign, he would only be able to impose a condition that the tenant has continuing liability where it was reasonable to do so.
4.5 For landlords, we propose a rule that when they part with their interest in the property let by a lease they will escape further responsibility for the lease obligations if, but only if, they comply with prescribed conditions. These will involve their giving notice to the tenant and his being able to withhold consent if it is reasonable for him to do so. Again, the benefits of being landlord, so far as they can enure to an owner who has parted with the property, would only continue for a former landlord who had continuing liability.
Assignment of whole property by landlords
4.16 In relation to the liability of landlords, we should have preferred our proposals to have mirrored precisely our recommendations for tenants’
4.17 For these reasons, we do not propose that an assignment of the landlord’s reversionary interest should automatically affect his continuing liability. Rather, we recommend that an assigning landlord should have an option to operate a procedure which could end his liability, and his entitlement to benefits, under the lease. A landlord who wished to escape further responsibility would have to give the tenant notice of his proposal to assign. In the notice the landlord would propose that after the assignment he should no longer have any liability under the lease. It would give the tenant four weeks in which to reply.
14. There were significant intermediate stages between the report and the enactment of the 1995 Act that are conveniently referred to in Mr Charles Harpum’s Megarry and Wade on the Law of Real Property (6th ed) at para 15-064. It is accordingly not possible to assume that the 1995 Act gave unqualified effect to the recommendations in the report. There were modifications and additions. But I can find no indication in Hansard or elsewhere of any intention to qualify the adoption of the principle that the release of a landlord or tenant from a covenant was intended to be sequential upon, and only sequential upon, a parting by the landlord or tenant with his interest in the property let and the successor taking his predecessor’s place as the party responsible for complying with that covenant.
15. Section 5 of the 1995 Act applies where a tenant assigns premises demised to him under a tenancy. Section 5(2) (so far as material) reads as follows:
If the tenant assigns the whole of the premises demised to him, he ––
(a) is released from the tenant covenants of the tenancy, and
(b) ceases to be entitled to the benefit of the landlord’s covenants of the tenancy,
as from the assignment.
16. The assignment by a tenant, unless in breach of covenant (as to which see section 11), accordingly operates automatically to release him from liability under the tenant covenants of the tenancy (although section 24 spells out that this does not release him from liability for any prior breach).
17. Section 6 applies where a landlord assigns the reversion in premises of which he is the landlord under a tenancy. Section 6(2) (so far as material) provides as follows:
If the landlord assigns the reversion in the whole of the premises of which he is the landlord ––
(a) he may apply to be released from the landlord covenants of the tenancy in accordance with section 8; and
(b) if he is so released from all those covenants, he ceases to be entitled to the benefit of the tenant covenants of the tenancy as from the assignment.
18. Section 8 lays down the procedure for seeking a release under section 6. It provides as follows:
(1) For the purposes of section 6 or 7 an application for the release of a covenant to any extent is made by serving on the tenant, either before or within the period of four weeks beginning with the date of the assignment in question, a notice informing him of ––
(a) the proposed assignment or (as the case may be) the fact that the assignment has taken place, and
(b) the request for the covenant to be released to that extent.
(2) Where an application for the release of a covenant is made in accordance with subsection (1), the covenant is released to the extent mentioned in the notice if ––
(a) the tenant does not, within the period of four weeks beginning with the day on which the notice is served, serve on the landlord or former landlord a notice in writing objecting to the release, or
(b) the tenant does so serve such a notice but the court, on the application of the landlord or former landlord, makes a declaration that it is reasonable for the covenant to be so released, or
(c) the tenant serves on the landlord or former landlord a notice in writing consenting to the release and, if he has previously served a notice objecting to it, stating that that notice is withdrawn.
(3) Any release from a covenant in accordance with this section shall be regarded as occurring at the time when the assignment in question takes place.
(4) In this section ––
(a) “the tenant” means the tenant of the premises comprised in the assignment in question (or, if different parts of those premises are held under the tenancy by different tenants, each of those tenants);
(b) any reference to the landlord or the former landlord is a reference to the landlord referred to in section 6 or the former landlord referred to in section 7, as the case may be; and
(c) “the court” means a county court.
19. Section 28 is the interpretation section and includes the following critical definitions:
(1) In this Act (unless the context otherwise requires) ––
…
“collateral agreement”, in relation to a tenancy, means any agreement collateral to the tenancy, whether made before or after its creation;
…
“covenant” includes term, condition and obligation, and references to a covenant (or any description of covenant) of a tenancy include a covenant (or a covenant of that description) contained in a collateral agreement;
“landlord” and “tenant”, in relation to a tenancy, means the person for the time being entitled to the reversion expectant on the term of the tenancy and the person so entitled to that term respectively;
“landlord covenant”, in relation to a tenancy means a covenant falling to be complied with by the landlord of premises demised by the tenancy;
…
“tenant covenant”, in relation to a tenancy, means a covenant falling to be complied with by the tenant of premises demised by the tenancy.
20. Section 27 provides that the form of notice to be served for the purposes of section 8(1) should be prescribed by regulations made by statutory instrument, and that any notice purporting to be served for the purposes of section 8(1) that is not in the prescribed form, or in a form substantially to the same effect, shall be ineffective for that purpose. The landlord’s notice is in such prescribed form.
21. The first question to be resolved is whether the personal covenant given by D1 in the agreement was capable of being released by the operation of sections 6 and 8; and the second is whether (assuming that the answer to the first question is in the affirmative) such release was triggered by the landlord’s notice.
22. I turn to the first question. The rival contentions by the parties put the issue into perspective. Mr Simon Berry, for D1, submits any form of obligation on the part of a landlord in a tenancy or collateral agreement, whatever its character or topic, constitutes a landlord covenant, and, likewise, any form of obligation on the part of a tenant constitutes a tenant covenant. On the other hand, Mr Michael Barnes for the tenant, submits that the obligation in either case must be capable of being annexed to the premises demised by the tenancy and the reversion, and, accordingly, transmissible under section 3 of the Act, and that this excludes personal covenants. It is common ground that the agreement is a “collateral agreement” in relation to the lease. It is sufficient to say that the agreement is an agreement “running side by side”, and “parallel to”, the lease: see the definition of “collateral” in the Oxford English Dictionary (2nd ed). (It is unnecessary for this purpose, although it may be sufficient, that the agreement constitutes the species of contract known as a “collateral contract”.) It is clear that the personal covenant, since it is “a covenant in a collateral agreement”, is, for the purposes of the 1995 Act (in accordance with the definition of the term “covenant”), a covenant of the lease. The critical question is whether that covenant falls within the definition, in section 28, of a landlord covenant. For this purpose, it must be a covenant “falling to be complied with by the landlord of premises demised by the tenancy”, and the landlord, for this purpose, means “the person for the time being entitled to the reversion expectant on the term of the tenancy”. Focus, as it seems to me, must be placed upon the words “for the time being”. These words, to my mind, connote not merely that the covenant falls to be complied with by the landlord at any particular point in time (as
23. Mr Berry submitted that this construction could not stand with the two specific references to personal covenants in the 1995 Act. Section 3(6) provides that nothing in section 3 (which is concerned with the transmission of the benefit and burden of covenants) shall operate to make a covenant expressed to be personal to any person enforceable by, or (as the case may be) against, any other person, and section 15(5) again provides that nothing in that section (which is concerned with enforcement of covenants) shall operate to make a covenant expressed to be personal to any person enforceable by, or (as the case may be) against, any other person. I do not find any contra-indication to the construction that I have adopted in either of those provisions. They are cautionary provisions designed to prevent any question arising whether the sections might have the unexpected and unintended result there referred to. They do not elevate, or reflect any intention to elevate, personal into landlord or tenant covenants.
24. I should add that I am relieved to reach this construction for a number of reasons. First, the policy of the legislation (as the Law Commission report makes clear) was to substitute the transferee of the reversion or tenancy as obligor under transmissible covenants for the transferor: it was not to eliminate (as a windfall) the obligation of a landlord or tenant when it was personal and not to be transferred to transferee. Second, the consequences of the contention put forward by D1 would be remarkable. For it would mean that, upon any assignment by landlord or tenant, any obligation (whatever its character) that happened to be found for any reason on the lease or collateral agreement would fall to be extinguished upon a transfer. Thus, for example, if, under an agreement for lease, the prospective tenant agreed to pay a premium of (say £10m) for the lease by 10 annual instalments of £1m over the 10-year period of the lease, upon an assignment of the lease the whole liability for the balance of the purchase price would be extinguished. In the same way, there would be extinguished any obligation imposed upon a tenant, although totally unrelated to the letting, which, for any reason, happens to be included in any collateral agreement. It will be remembered that the release of the tenant is automatic upon his effecting a (lawful) assignment. I fully appreciate that a landlord may be able to protect himself against this risk by imposing a covenant against assignment, and, in the case of a non-residential lease (taking advantage of the provision of section 19(1)(B) of the Landlord and Tenant Act 1927 as inserted by section 22 of the 1995 Act), to make provision for a refusal of consent unless the landlord is duly protected in this regard, and that a tenant can protect himself by refusing consent to the landlord’s request for a release. While measures may be taken in this way to limit the mischief that this construction would engender, I still think that parliament should be expected to have made it plain (and certainly more plain than it is) if it had intended a release to be capable of having such a striking and potentially inequitable consequence.
25. Alarmed at the disturbing consequences of the construction advanced by Mr Berry, flowing from the apparently innocuous terms of the landlord’s notice, in the course of the hearing I raised the question of whether the landlord’s notice sufficiently gave notice of the intention to obtain a release of the (personal) covenants in the agreement when it referred only to the obligations under the lease. Section 8 requires the landlord, in his notice, to identify from which of the landlord covenants he seeks his release. He may choose to seek a release only from some, but not all. He may do so for any of a number of reasons, eg because he knows that the tenant will only agree to some and will vigorously oppose others in the county court. Hence, it is important to examine carefully the terms of the notice for this purpose. I was concerned that the landlord’s notice did not identify any covenants in the agreement or put the tenant on notice that D1 was requesting to have extinguished the personal covenant in question, a request for which (if appreciated) would obviously have been refused. My concern is to a large degree allayed by the construction that I have arrived at, that the reach of the 1995 Act does not extend to personal covenants. I am troubled that the form of notice makes no reference to the “collateral agreement”, and that a notice may, for this reason, mislead a lay tenant unfamiliar with the provisions of the 1995 Act, but I am satisfied that, as a matter of law, the landlord’s notice would have been effective to achieve the release sought if the covenants in question had not been personal. For (as I have already said) the statutory form of notice prescribed by the 1995 Regulations must be interpreted as one with the 1995 Act, and, accordingly, the reference in the landlord’s notice, as in the 1995 Act, to the landlord covenants of the tenancy includes within it the covenants in any collateral agreement.
26. I therefore hold that the personal obligations of D1 under the agreement for lease survive and are unaffected by the landlord’s notice.
Extent of the duty of D1 to remedy
27. The obligation of D1 to remedy accordingly survives the landlord’s notice, and the question I have to consider is the ambit of that obligation.
28. The tenant maintains that, under clause 12.2.3.2 of the agreement, he is entitled to require D1 to remedy, not merely the physical damage that has occurred by reason of the building work defect (ie replace the windows if the total cost exceeds £50,000), but also the underlying defect, namely the use of the wrong and untested glass. This claim turns upon the definition of “building work defect” in clause 1.1.8, namely:
any physical damage to the Demised Premises manifesting itself during the Defects Period or any defect in the Demised Premises which will result in physical damage to the Demised Premises manifesting itself during the Defects Period.
The tenant cannot say that further physical damage will result from this defect, nor could he say that further physical damage would result when the tenant gave notice of the defect between the date of the resultant damage to the second and third window. All he can say now is, and all he could say then was, that the defect gives rise now, and gave rise then, to a significant risk of further damage. But Mr Barnes, for the tenant, submits that the issue of whether there is a defect that will cause damage (and, accordingly, requires remedying) must be looked at as at the date of the agreement. Looked at from that viewpoint, it can now be seen, and said, that the defect would result in physical damage. It is, however, clear (most particularly from clause 12.2 of the agreement) that the situation must be looked at as at the date of the tenant’s notification of the defect. Accordingly, the tenant cannot require D1 to remedy the alleged defect: he can only require remedy of the accrued physical damage, and then only if the cost of the remedy exceeds £50,000. Any complaint about this on the part of the tenant must be in respect of the negotiation or drafting of this term of the agreement.
Extent of the obligation of the tenant to indemnify D2
29. The DSN requires “the owner” of the property:
forthwith to take down, repair or otherwise secure parts of the external glazing where shattered, part fallen, insecure or otherwise defective and to carry out any further work found necessary by reason of the foregoing
The question raised is whether the costs occasioned to D2 in complying with the DSN are to be paid by the tenant by reason of the provisions of the lease. For the purpose of this application only, D2 concedes (as contended by the tenant) that the DSN is valid, and validly served on D2, and that the public law duty of compliance is imposed on D2 alone.
30. In my view, it is plain that the “public duty” to carry out the required works falls within the definition of “legal requirements”. The tenant, however, argues that clause 5.19.1 does not bite in respect of the public duty created by service of the DSN, because clause 5.19.1 implicitly limits the duty of compliance to legal requirements imposing
31. I therefore hold that the tenant has, under clause 5.19.1, assumed the primary contractual obligation to procure compliance with the DSN at his own cost, and, further, by clause 5.19.2 agreed to indemnify D2 in respect of the cost of compliance by D2. Mr Barnes referred me to section 107(1) of the 1939 Act, which gives the county court jurisdiction to apportion the expenses of compliance with a DSN in accordance with what is just and equitable in the circumstances, and no order or declaration by me can operate to preclude an application to the county court to exercise this jurisdiction. But on the material before me, in view of the terms of the lease, which cover the situation that has arisen, I cannot see how the county court could exercise this jurisdiction otherwise than to reflect, and give effect to, the provisions of the lease to which I have referred: see Monro v Lord Burghclere [1918] 1 KB 291.
