Landlord and Tenant (Covenants) Act 1995 – Agreement for lease – Defendant landlord agreeing to refurbish property – Defendant giving collateral undertaking to remedy damage attributable to defective refurbishment – Undertaking expressed to be personal to defendant – Defendant granting lease and assigning reversion to associate company – Defendant applying by notice, under section 8, for release from undertaking – Claimant tenant disregarding notice – Serious defects occurring – Whether undertaking capable of being released under section 8 – Whether undertaking a ‘landlord covenant’ for purpose of Act
The first defendant (D1) was the owner of a large commercial building in London SWI. By an agreement made with the claimant (BHP) in April 1997, D1 agreed to carry out certain refurbishment works to the building (the building works) and to grant to BHP a 20-year lease of the greater part of the building (the property), such grant to be made five days after completion of the works. Clause 12 of the agreement (the defects obligations) required D1 to remedy “Building works defects” that became apparent during the period of six years immediately following the grant of the lease. By the same clause, BHP acknowledged that those obligations were personal obligations of D1 and that no claim would lie in connection with them against D1’s successors in title to the property.
In July 1997, following the completion of the building works, the lease contemplated by the agreement was executed. In the same month, D1 transferred the reversion to the second defendant (D2), an associate company. D1, purporting to apply for a release from the defects obligations, then served a notice in prescribed form under section 8 of the 1995 Act, requiring BHP, if it objected to the release, to serve a counternotice within the four weeks allowed for by the section. No such counternotice was served.*
In September 1999, and again in April 2000, fractures appeared in the cladding of the property, which was formed of units of toughened glass. In May 2000 Westminster City Council served a dangerous structure notice requiring work to be carried out to the units in order to “secure” the property. In subsequent High Court proceedings, one of a number of preliminary issues was whether the defects obligations were capable of being released under sections 6 to 8 of the Act (the release provisions). D1 contended that the relevant obligations were, in the language of those provisions, “landlord covenants”, notwithstanding their personal character. This was disputed by BHP, which relied, inter alia, upon various definitions contained in section 28 of the Act.
Held: The defects obligations were incapable of release under section 8.
1. The defects obligations were plainly “covenants” for the purpose of the Act, that expression being defined in section 28 to include obligations contained in an agreement collateral to the lease. However, by the same section, a “landlord covenant” was one that fell to be complied with by the “landlord”, who was defined as “the person for the time being entitled to the reversion” (italics supplied). The defects obligations could not be so described, as, by the very terms of clause 12, the only landlord required to comply with them was D1. Nor could any contrary indication be gathered from the fact that specific provisions could be found elsewhere in the Act (see sections 3(6) and 15(5)) for covenants expressed to be personal to the covenantor).
2. The construction advanced by BHP accorded with the policy of the legislation (as made clear in the 1988 Law Commission Report, Law Comm 174). That policy was to substitute the transferee of the reversion or tenancy as obligor under transmissible covenants; it was not to eliminate (as a windfall) an obligation of a landlord or tenant that was personal and not to be transferred.
*Editor’s note: The service of such a counternotice would have effectively driven the landlord to apply for a court declaration that release was reasonable: see section 8(2)(b).
Michael Barnes QC and Joanne Wicks (instructed by Herbert Smith) appeared for the claimant; Simon Berry QC and Andrew PD Walker (instructed by Dechert) appeared for the defendants.
Alan Cooklin, barrister
