Landlord and tenant — Assignment — Whether obligation in reddedum clause to pay service charges bound original tenants after assignment
On June 24
1986 the plaintiff granted the defendants a 110-year lease of commercial
premises. On July 27 1987 the defendants assigned the lease to a third party,
who in turn assigned on. The plaintiff sought to recover from the defendants
service charges of just over £15,000 in accordance with the provisions of the
lease. The defendants contended that, having regard to the construction of the
lease, their liability was limited to their time of occupation as tenants; the
lease imposed a covenant on the tenant and assigns to pay the rent during the
term, but there was no similar obligation by covenant on the tenant to pay
service charges after an assignment. The only obligation relating to service
charges appeared in the reddendum, and before the tenant’s express
covenants, ‘YIELDING and PAYING . . . the Tenant’s proportion of the
maintenance costs’.
‘YIELDING and PAYING’ amounted to a covenant by the tenant to pay rent and
service charges during the term of the lease. The defendants were bound by
privity of contract with the plaintiff and therefore all express obligations remained
binding after assignment.
The following
cases are referred to in this report.
Allied
London Investments Ltd v Hambro Life Assurance
Ltd (No 2) (1984) 270 EG 948, [1984] 1 EGLR 62
Newton v Osborn (1653) Sty 387
Steward v Wolveridge (1832) 9 Bing 60
Walkers
Case 1587 3 Co Rep 22a
Youngmin v Heath [1974] 1 WLR 135; [1974] 1 All ER 461, CA
This was the
hearing of a preliminary issue as to whether the defendants, Paul Gerald
Lawrence and Maureen Lawrence, were liable under a lease dated June 24 1986 to
pay service charges to the plaintiff, Royton Industries Ltd.
Jonathan Gaunt
QC (instructed by Bury & Walkers, of Leeds) appeared for the plaintiff;
Vivian Chapman (instructed by Fox & Co, of Taunton) represented the
defendants.
Giving
judgment, ALDOUS J said: By a lease dated June 26 1981, Bartlett
Construction Group Ltd granted and demised to Coin Controls Ltd a 125-year
lease over units 1-5 Bartlett Mews, Priorswood Industrial Estate, Venture Way,
Taunton. Coin Controls Ltd changed its name to Royton Industries Ltd and on
June 24 1986 granted and demised a 110-year lease over the units to Paul and
Maureen Lawrence. I will refer to that lease as the ‘intervening lease’. On
September 15 1987 Paul and Maureen Lawrence gave notice to Royton that on July
27 1987 they had assigned the intervening lease to Dornar Ltd. Since then, the
intervening lease has been assigned on more than one occasion and I was told
that Royton no longer know the identity of the person in whom the lease is
vested.
The
intervening lease provides for payment by the tenant of a proportion of
maintenance costs expended by the landlord. Such costs arose and were paid to
the landlord by Royton pursuant to the landlord’s demands. Royton sought to
recover them from Paul and Maureen Lawrence. That was resisted. Therefore,
Royton, in November 1991, issued the writ in this action. In the amended
statement of claim, Royton refer to the intervening lease and allege that the
defendants, Paul and Maureen Lawrence, are liable to repay to them the
maintenance costs they had paid, amounting to just over £15,000 and interest.
In the defence the lease is admitted, but liability to pay is denied because of
the assignment by the defendants of the lease. The defendants also put in issue
the reasonableness of the maintenance costs and the amount claimed.
By agreement
between the parties it was ordered on February 10 1993 that the following issue
be tried as a preliminary point:
Whether on
the true construction of the lease dated 26th June 1986 between the Plaintiff
and the Defendants of premises known as Units 1-5 Bartlett Mews, Priorswood
Industrial Estate, Venture Way, Taunton, Somerset (‘the intervening lease’)
there is any liability imposed on the Defendants to make the relevant service
charge payment in respect of sums accruing due after they had assigned the
intervening lease.
The
intervening lease is stated to be between Royton, called the landlord, and Paul
and Maureen Lawrence, called the tenant, ‘which expression shall where the
context so admits include his successors in title’.
The lease
states that in consideration of £150,000 ‘and in consideration of the rent and
covenants hereinafter reserved and contained the landlord’ grants to the tenant
the rights of the landlord over units 1-5. The grant was:
TO HOLD the
same except and reserved as aforesaid unto the tenant from and including the
1st January 1986 for the term of 110 years . . . YIELDING AND PAYING therefor
unto the landlord on the 31st day of December in each year the yearly rent of
One Pound AND ALSO YIELDING AND PAYING therefor unto the Landlord the Tenant’s
proportion of the maintenance costs as defined in the
been demanded by the landlord of the tenant.
Thereafter the
underlease contains this clause:
2. The Tenant
for itself and its assigns and to the intent that the obligations may continue
throughout the term hereby granted hereby covenants with the landlord as
follows that is to say:
(1) To pay the reserved rent as herein provided
at the times and in the manner aforesaid without any deduction.
Clause 2
continues with 24 further subclauses dealing with such matters as payment of
rates, repair of the premises and painting it.
Clause 4
provided:
4. PROVIDED
ALWAYS AND IT IS HEREBY AGREED AND DECLARED
(i) that these presents are made upon the express
condition that if the said rent or any part thereof shall be unpaid for twenty
one days after any of the days hereinbefore appointed for payment thereof
whether the same shall have been lawfully demanded or not or if any covenant on
the tenant’s part herein contained shall not be performed or observed then and
in any of the said cases and thenceforth it shall be lawful for the Landlord or
any person or persons duly authorised by the Landlord in that behalf into or
upon the demised premises or any part thereof in the name of the whole to
re-enter and the same to repossess and enjoy as if these presents had not been
made without prejudice to any right of action or remedy of the Landlord in
respect of any antecedent breach of any of the covenants by the tenant herein
contained
(ii) In the interpretation of this Lease the
masculine where the context so admits shall include the feminine and any
corporate body and the singular shall include the plural and vice versa and all
covenants entered into by more than a single person shall be deemed to be
entered into by all persons and Corporations entering into the same jointly and
severally.
The second
schedule, which refers to the maintenance costs, stated:
The
Maintenance Costs payable by the tenant in accordance with the provisions of
Clause 1 of this Lease shall be 50.75 per cent of the cost to the Superior
Landlord of providing the following services and carrying out the following
maintenance and repairs and otherwise in fulfilling its obligations under the
Head Lease including the provision of a suitable sinking fund or reserve namely
. . .
Thereafter
there are set out obligations to maintain the access roads, the walls, fences
and the like.
It is settled
law that a lessee remains liable upon express covenants in the lease for the
whole term of the lease despite any assignment. As long ago as 1587 that was
stated to be the law in Walkers Case 1587 3 Co Rep 22a. As Walton J said
in Allied London Investments Ltd v Hambro Life Assurance Ltd (No 2)
(1984) 270 EG 948 at p950:, [1984] 1 EGLR 62
I do not
think that Mr Gaunt’s attempt to bring this case under that umbrella will really
stand up, because here we have an original covenant by the defendant to pay the
rent. That is an original covenant which binds him by virtue of privity of
contract throughout the term of lease, and indeed, as has been pointed out in a
number of cases dealing with the question of what happens when the lease is
assigned, the covenant is economically to the effect that: ‘Either I will pay
you or the assignee will pay you’. But it is not something which only comes
into effect when the assignee fails to pay. Of course the expectation,
commercially speaking, is that the assignee will pay, but the assignor does not
by assignment get rid of one jot or tittle of his original liability.
The defendants
did not disagree with that proposition of law as a general proposition of law.
They submitted that the intervening lease did not contain an express obligation
that the defendants would pay the maintenance costs during the whole term of
the lease. They submitted that, when clauses 1 and 2 were read together, the
implication was that the obligation on the defendants to pay the maintenance
costs was limited to their time of occupation as lessees.
The plaintiff
submitted that the word ‘rent’ in clause 2(1) of the underlease referred to all
the sums reserved by the reddendum. If so, the obligation to pay both
the yearly rent and the tenant’s share of the maintenance costs remained after
assignment. The defendants accepted that if the word ‘rent’ was to have such a
broad meaning then the conclusion advanced by the plaintiff followed. However,
they submitted that the word ‘rent’ in clause 2(1) clearly referred back to the
word ‘rent’ in clause 1 and did not include the maintenance costs.
Clause 1
states that the grant is in consideration of £150,000, ‘and in consideration of
the rent and covenants hereinafter reserved and contained’. Thereafter the
tenant holds the land ‘YIELDING AND PAYING therefor unto the landlord on the
31st day of December in each year the yearly rent of One Pound AND ALSO
YIELDING AND PAYING therefor’ the tenant’s portion of the maintenance costs. As
will appear later in this judgment, I believe that those words which I have
quoted place an obligation on the tenant amounting to a covenant to pay rent
and also to pay the tenant’s proportion of the maintenance costs. Thus both the
grant and the reddendum point to the obligation to pay rent being
separate from the other obligations under the lease. That is consistent with
what I believe to be the natural way to construe the word ‘rent’ in both
clauses 1 and 2, namely as referring to the sum which is to be paid annually
under the lease, but not to sums for maintenance which would vary in amount and
need not necessarily arise in any particular year.
I accept that
pursuant to clause 4(ii) the word ‘rent’ may be construed as meaning rents,
but, even so, I believe that the construction sought to be placed by the
plaintiffs upon the word ‘rent’ in clause 2 is not correct. The word ‘rent’
refers to the annual rent in clause 1 and not to the maintenance costs. I
therefore reject this part of the plaintiff’s submissions. Thus the dispute
between the parties must be decided upon the basis contained in clause 1, and
clause 2 contains a covenant in respect of only one of them, namely the
obligation to pay rent.
The plaintiff submitted
that even if the word ‘rent’ in clause 2 should be construed as I have
construed it, the obligation in clause 1 was not avoided by assignment. That
submission is based upon a number of propositions.
First, the
plaintiff submitted that the reddendum imposed express obligations upon
the defendants and that, in the case of rent, it was an obligation to pay the
rent during the term of the lease. I believe that that submission is well
founded and in any case it was not disputed by the defendants. There is ample
authority to establish that the words ‘yielding and paying’ impose an express
obligation: see, for example, Newton v Osborn (1653) Sty 387 and Steward
v Wolveridge (1832) 9 Bing 60 in particular at p67. Further, it is of
the essence of the agreement that rent will be paid during the term of the
lease: see Youngmin v Heath [1974] 1 WLR 135.
Second, the
plaintiff submitted that the words ‘and also yielding and paying therefor’
imposed an express obligation to pay the tenant’s proportion of the maintenance
costs for the full term of the lease. That submission is also correct and was
also not disputed by the defendants. If the words ‘yielding and paying
therefor’, when referring to rent, impose an express obligation to pay for the
full term of the lease, then those words must impose a similar obligation when
referring to the maintenance costs.
Third, the
plaintiff submitted that, in the absence of indications to the contrary, the
express obligation to pay the rent imposed in clause 1 bound the persons in
privity of contract with the lessor even though such persons had assigned the
lease. That submission is also correct and was not disputed by the defendants.
Fourth, in the
absence of the indications to the contrary, the express obligation to pay the
tenant’s proportion of the maintenance costs imposed in clause I bound the
persons in privity of contract with the lessor even though such persons had
assigned the lease. That submission was disputed by the defendants. They
submitted that it did not follow that, because the obligation to pay rent
remained after assignment, the obligation to pay the maintenance costs also
remained.
I believe that
the submission of the plaintiff is correct. There being privity of contract
between the plaintiff and the defendants it follows that all express
obligations will continue to be binding between them even after assignment
unless there be agreement to the contrary.
To accept the
submission of the defendants, it is necessary to read into clause 1 a
limitation on the obligation to pay the tenant’s share of the maintenance
costs, namely that the tenant, the defendants, would pay only during the time
that the lease was vested in them. I see no
The primary
submission of the defendants was that there were clear indications in the lease
that the obligation to pay the tenant’s share of the maintenance costs should
be qualified so that the defendants were liable only while the lease was vested
in them. They drew to my attention the opening words of clause 2, namely ‘The
Tenant for itself and its assigns and to the intent that the obligations may
continue throughout the term hereby granted hereby covenants . . .’, and the
fact that clause 2 contained an obligation to pay the rent, but did not contain
an obligation to pay the maintenance costs. The conclusion suggested to be
drawn was that the draftsman had made it clear that there was an obligation to
pay rent imposed upon the tenant and its assigns for the term of the lease, and
by implication there was no similar obligation in respect of the duty to pay
the tenant’s share of the maintenance costs. It followed that the obligation to
pay the maintenance costs did not remain with the tenant, the defendants, after
assignment.
I cannot
accept the submission of the defendants. The fact that the obligation on the
tenant in respect of rent is spelt out in clause 2(1) does not mean that the
obligation to pay the tenant’s share of the maintenance costs in clause 1
should be altered by implication. There is an express obligation to yield and
pay the tenant’s share of the maintenance costs. I can see no reason for
cutting down that obligation by reason of the wording of clause 2. There is
privity of contract between the plaintiff and the defendants and therefore the
express obligation to pay the tenant’s share of the maintenance costs remained
even though there was assignment by the defendants.
I conclude
that the question to be tried as a preliminary point should be answered in the
affirmative. There is a liability imposed upon the defendants to make the
relevant service charge payment in respect of sums accruing due after they had
assigned the intervening lease.
For these
reasons I answer the question posed in the affirmative.
Declaration
accordingly.
