Underlease — Assignment of lease — Whether tenant liable for payment of maintenance costs after reassignment of lease — High Court holding that under terms of lease tenant liable to pay service charge accrued after assignment
By a lease dated June 26 1981, B granted R a 125-year lease of units 1-5 Bartlett Mews, Priorswood Industrial Estate, Venture Way, Taunton. In 1986 R granted and demised a 110-year lease (the intervening lease) over the units to L. The intervening lease was thereafter assigned on more than one occasion until R no longer knew the identity of the person in whom the lease was vested. The intervening lease provided for the payment by the tenant of a proportion of maintenance costs expended by the landlord. Such costs arose and were paid to the landlord by R pursuant to the landlord’s demands. R issued a writ to recover the costs from L amounting to over £15,000 plus interest. L denied liability. A preliminary issue arose whether under the terms of the lease any liability was imposed on L to make the relevant service charge payment in respect of sums accruing due after they had assigned the intervening lease.
Held The preliminary point was answered in the affirmative.
1. A lessee remained liable upon express covenants in the lease for the whole term of the lease despite any assignment: see Allied London Investments Ltd v Hambro Life Assurance Ltd (1984) 270 EG 948 at p950.
2. The agreement stated that the grant was in consideration of £150,000 “and in consideration of the rent and covenants hereinafter reserved and contained”. Thereafter, the tenant held the land “YIELDING AND PAYING therefore unto the landlord…the yearly rent…AND ALSO YIELDING AND PAYING therefore” the tenant’s portion of the maintenance costs. Those words placed an obligation on the tenant amounting to a covenant to pay rent and also to pay the tenant’s portion of the maintenance costs.
3. The words “yielding and paying” imposed an express obligation. It was of the essence of the agreement that rent would be paid during the term of the lease: see Newton v Osborne (1653) Sty 387; Youngmin v Heath [1971] 1 WLR 135.
4. Further, 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.
5. In the absence of indications to the contrary, the express obligation to pay the rent and the tenant’s portion of the maintenance costs bound the persons in privity of contract with the lessor even though such persons had assigned the lease. It followed that all express obligations would continue to be binding between them even after assignment unless there was agreement to the contrary.
6. Accordingly, there was a liability imposed upon L to make the relevant service charge payment in respect of sums accruing due after they had assigned the intervening lease.
Jonathan Gaunt QC (instructed by Bury & Walkers, of Leeds) appeared for the landlord; Vivian Chapman (instructed by Fox & Co, of Taunton) appeared for the tenant.
