Landlord and Tenant Act 1927, section 19(1)(b) — Qualified covenant against assignment — Further obligations on tenant to obtain guarantor and direct covenant from assignee — Whether further obligations struck down by section 19(1)(b) — Lessee’s summons for declarations dismissed in part
By an underlease dated August 25 1967 the plaintiffs hold part of the premises adjoining the Swallow Hotel, Newgate Street, Newcastle upon Tyne, for a 99-year term; the remaining parts of the premises are held under three other leases. By clause 3(17)(b) the plaintiffs covenant not to assign the demised premises without the consent of the defendant lessors (such consent not to be unreasonably withheld) and “upon any assignment to obtain if the Lessor shall so require an acceptable guarantor for any private limited company and a direct covenant by the assignee …”.
The plaintiffs sought a declaration that they were entitled to assign the underlease to WHL Hotels Ltd: (1) without licence or consent of the defendants; (2) without obtaining a guarantor for WHL Hotels Ltd acceptable to the defendants or any guarantor; and (3) without obtaining a direct covenant by WHL Hotels Ltd as assignee with the defendants to observe and perform the covenants and conditions of the underlease.
Held 1. It was conceded on behalf of the defendants that the Landlord and Tenant Act 1927, section 19(1)(b), applied as the underlease was a building lease granted for more than 40 years with seven years or more of the term to run; accordingly the plaintiffs were entitled to assign without the licence or consent of the defendants.
2. However, the submissions on behalf of the defendants, that a statute must not be construed as interfering with the freedom of contract any more than its terms require, were accepted. The obligations on the plaintiffs to obtain a guarantor and a direct covenant from the assignee were tenant’s covenants not struck down by section 19(1)(b) of the 1927 Act. The plaintiffs were, therefore, not entitled to the two further declarations they sought ((2) and (3) above).
Nigel Thomas (instructed by Slaughter & May) appeared for the plaintiffs; and Jonathan Gaunt (instructed by Titmuss Sainer & Webb) appeared for the defendants.
