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Covenants Restricting Dispositions, Alterations and Change of User Report

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Covenants Restricting Dispositions, Alterations and Change of User Report The Law Commission (LAW COM. No. 141) CODIFICATION OF THE LAW OF LANDLORD AND TENANT COVENANTS RESTRICTING DISPOSITIONS, ALTERATIONS AND CHANGE OF USER Laid before Parliament by the Lord High Chancellor pursuant to Section 3(2)of the Law Commissions Act 1965 Ordered by The House of Commons to be printed 21 March 1985 LONDON HER MAJESTY’S STATIONERY OFFICE €8.40 net HC 278 The Law Commission was set up by section 1 of the Law Commissions Act 1965 for the purpose of promoting the reform of the law. The Commissioners are- The Honourable Mr. Justice Ralph Gibson, Chairman. Mr. Trevor M. Aldridge Mr. Brian J. Davenport, Q.C. Professor Julian Farrand Mrs. Brenda Hoggett The Secretary of the Law Commission is Mr. J. G. H. Gasson and its offices are at Conquest House, 37-38 John Street, Theobalds Road, London, WC1N 2BQ. 11 COVENANTS RESTRICTING DISPOSITIONS. ALTERATIONS AND CHANGE OF USER CONTENTS Paragraph Page General Preface to Report X CODIFICATION OF THE LAW OF LANDLORD AND TENANT Report PART I: INTRODUCTION .......... 1.1-1.4 1 PART 11: SOME DEFINITIONS ........ 2.1-2.7 2-4 “Tenancy” ............... 2.2 2 “Disposition”.“alteration” and “user”-covenants ... 2.3 2 “Absolute... “qualified” and “fully qualified” covenants . 2.4 2-3 “Covenant” ............... 2.5-2.7 3-4 PART 111: PRESENT LAW AND PRACTICE .... 3.1-3.86 5-25 A . THE LAW ..............3.2-3.74 5-23 Preliminary ............... 3.2-3.6 5-6 Statutory provisions governing the landlord’s right to impose. or the effect of. disposition alteration and user covenants ...............3.7-3.47 6-16 (a) Law of Property Act 1925. s. 144 ...... 3.8-3.9 6-7 (b) Law of Property Act 1925. ss .86( 1)and 89( 1) . 3.10-3.12 7 (c) Landlord and Tenant Act 1927. s. 19 .....3.13-3.27 7-12 (i) Disposition covenants ........3.14-3.17 8-9 (ii) Alteration covenants ........ 3.18-3.19 9-10 (iii) User covenants ..........3.20-3.21 10 (iv) Agricultural and mining tenancies .... 3.22 10 (v) General observations ........3.23-3.27 10-12 (d) Race Relations Act 1976. s . 24 .......3.28-3.29 12 (e) SexDiscriminationAct1975,s.31 ..... 3.30 12 (f) Rent Act 1977 ............ 3.31 13 (g) Housing Act 1980 ...........3.32-3.47 13-16 (i) Disposition covenants in tenancies acquired under the right to buy provisions ....3.33-3.37 13-14 (ii) Disposition covenants in tenancies of houses held under Part V of the Housing Act 1957 . 3.38-3.40 14 (iii) Disposition covenants in secure tenancies . 3.41-3.43 14-15 (iv) Disposition covenants in shorthold tenancies ............ 3.44 15 (v) Alteration covenants in secure. protected and statutory tenancies ........3.45-3.47 16 ... 111 Paragraph Page Statutory provisions enabling the tenant to seek judicial discharge or modification of alteration and user covenants ..............3.48-3.74 1&23 (a) Housing Act 1957. s . 165 ........3.49-3.50 16-17 (b) Law of Property Act 1925. s. 84 ......3.5 1-3.53 17-18 (c) Landlord and Tenant Act 1927. s. 3 .....3.54-3.57 18 (d) Relief to enable a tenant to comply with statutory obligations ............. 3.58 19 Caselaw onfullyqualifiedcovenants ......3.59-3.74 19-23 (a) Reasonableness ...........3.60-3.7 1 19-22 (i) The testof reasonableness ......3.6 1-3.68 19-22 (ii) Objective or subjective? ....... 3.69 22 (iii) Giving reasons. and the onus of proof ...3.70-3.71 22 (b) The tenant’s remedies ..........3.72-3.74 22-23 B . THEPRACTICE ............ 3.75-3.86 2325 Preliminary ............... 3.75 23 Residentialpremises ............ 3.76-3.80 23-24 (a) Disposition covenants .........3.77-3.78 23-24 (b) Alteration covenants . ......... 3.79 24 (c) Usercovenants ............ 3.80 24 Businesspremises ............. 3.81-3.86 24-25 (a) Disposition covenants .........3.82-3.83 24-25 (b) Alteration covenants . ......... 3.84 25 (c) Usercovenants ... .........3.85-3.86 25 PART 1V: A FUNDAMENTAL QUESTION: WHAT COVENANTS SHOULD A LANDLORD IN FUTURE BE ALLOWED TO IMPOSE? . 4.1-4.76 26-46 A . SHOULD LANDLORDS BE RESTRICTED TO FULLYQUALIFIEDCOVENANTS? ..... 4.2-4.66 26-44 I Views expressed before this report ........ 4.34.12 26-29 I (a) The Jenkins Committee ......... 4.4-4.8 26-27 (b) The White Paper of 1953 ......... 4.9 28 (c) TheLawCommissionWorkingParty ..... 4.10 28 (d) Our own provisional view in Working Paper No . 25 . 4.11 28-29 .. (e) ConsultationontheWorkingPaper ..... 4.12 29 Our final view ..............4.13-4.66 29-44 (a) Disposition covenants .........4.17-4.31 30-35 (i) Theneedforfullqualification .....4.19-4.23 31-32 (ii) Would rents increase? ........4.24-4.26 32-33 (iii) Would the number of premises available for I letting decrease? ..........4.27-4.30 33-34 (iv) Conclusion ........... 4.31 34-35 iv Paragraph Page (b) User covenants ............4.32-4.53 35-42 (i) Thecaseforachangeinthelaw .....4.35-4.36 35-36 (ii) The first problem: covenants with a wider purpose .............4.37-4.44 36-39 (iii) The second problem: the danger of increasing rents ..............4.45-4.51 39-4 1 (iv) Conclusion ...........4.52-4.53 42 (c) Alteration covenants ..........4.54-4.66 42-44 (i) General considerations ........4.55-4.57 42-43 (ii) The impact of the Housing Act 1980 ....4.58-4.59 43 (iii) Conclusion ...........4.60-4.66 4344 B. DO COVENANTS WHICH ARE QUALIFIED BUT NOT FULLY QUALIFIED DESERVE A PLACE IN THE LAW? ..............4.67-4.7 1 45-46 Objections to qualified covenants . ...... 4.69 45 Conclusion ...............4.70-4.71 46 C . SUMMING UP .............4.72-4.76 46 PART V: PATTERN OF THE REMAINDER OF THIS REPORT ............ 5.1-5.8 47 PART VI: THE ELIMINATION OF COVENANTS WHICH ARE MERELY QUALIFIED . 6.1-6.22 48-53 Our main recommendation .......... 6.2 48 Comparison with the existing law. and consequential recommendations .............6.3-6.17 48-52 (a) Disposition covenants .........6.4-6.11 4&50 (i) No exception for agricultural tenancies . 6.5-6.8 48-50 (ii) No exception for covenants within the Lease- hold Reform Act 1967. s. 30 ...... 6.9-6.11 50 (b) Alteration covenants ..........6.12-6.13 51 (c) User covenants ............6.14-6.17 5 1-52 Recommendations to apply only to future lettings ...6.18-6.22 52-53 (a) Our reasons .............6.19-6.21 52-53 (b) Themeaning of “future tenancies” ...... 6.22 53 PART VII: FURTHER RECOMMENDATIONS ABOUT DISPOSITION COVENANTS . 7.1-7.87 54-71 Disposition covenants (with exceptions) to be fully qualified ................ 7.4-7.60 54-66 (a) Exceptionforagriculturaltenancies ..... 7.7 55 (b) Exception for mining tenancies ....... 7.8 55 (c) Exception for covenants within the Leasehold Reform Act 1967, s . 30 (as amended) ..... 7.9 55 V Paragraph Page (d) Exceptionfordispositionsof part ......7.10-7.13 56 (e) Exception for short lettings ........7.1 4-7.24 5659 (i) Residential lettings .........7.1 5-7.20 5658 (ii) Business lettings ..........7.21-7.23 58-59 (iii) Conclusion ............ 7.24 59 cf) Exception for “mandatory possession” cases under the Rent Act 1977 ........... 7.25-7.27 59 (g) Exceptionfor“specia1”lettings ......7.28-7.44 60-63 (i) Lettings of public houses ....... 7.29 60 (ii) Lettings by and to public bodies .....7.30-7.37 60-61 (iii) Concessionary lettings ........7.38-7.39 62 (iv) Lettings by resident landlord ......7.40-7.41 62 (v) Court approved lettings .......7.42-7.44 62-63 Further recommendations about “special” lettings . 7.45-7.60 63-66 (a) “Labelling” required for the last three categories . 7.46-7.47 63-64 (b) Ceasing of exceptions .........7.48-7.55 64-65 (c) Relief ............... 7.56-7.60 65-66 No avoidance of our main recommendation ....7.61-7.71 66-69 (a) Avoidance through surrender provisions ...7.62-7.66 67-68 (b) Avoidance through requirements of multiple consent .............. 7.67-7.69 68 (c) Other means of avoidance ........7.70-7.71 68-69 Two further recommendations about disposition covenants ................7.72-7.82 6970 (a) Long leases: repeal of Landlord and Tenant Act 1927. s . 19(l)(b) ............ 7.73-7.78 69-70 (b) Mortgages: an anomaly .........7.79-7.82 70 Recommendations to apply only to future lettings . 7.83-7.87 70-7 1 (a) Our reasons .............7.84-7.86 71 (b) The meaning of “future tenancies” ..... 7.87 71 PART VIII: FULLY QUALIFIED COVENANTS: THEIR EFFECT; AND THE TENANT’S REMEDIES ..........8.1-8.138 72-101 A . EFFECT ............... 8.3-8.49 72-82 Reasonableness .............. 8.3-8.16 72.75 . (a) General .............. 8.4-8.5 72 (b) Should there be guidelines? ........ 8.68.9 73 (c) Giving reasons. and the onus of proof ....8.10-8.16 7375 (i) Onus of proof ....... .... 8.11. 73-74 (ii) Givingreasons .......... 8.12-8.16 73-75 Conditions ........... ....8.17-8.49 75-82 (a) Finesandotherpayments ........ 8.19-8.39 76-80 (i) Fines ............. 8.20-8.25 76-77 vi Puragraph Page (ii) Landlord’s expenses ........8.26-8.27 77 (iii) Compensation for landlord‘s loss ....8.2S8.32 77-78 (iv) Sharing the financial benefit of a change of user ..............8.33-8.49 78-82 (b) Reinstatement after alterations ......8.40-8.49 80-82 (i) In what cases? ..........8.42-8.43 80-81 (ii) Enforcement ...........8.44-8.49 81-82 B .
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