Law Report: Lords rule that original tenant not liable for rent: Corporation of City of London v Fell and others - House of Lords (Lord Templeman, Lord Goff of Chieveley, Lord Jauncey of Tullichettle, Lord Browne-Wilkinson, Lord Mustill), 2 December 1993

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On an assignment of a lease the original tenant is not liable to pay the rent owed by the occupying tenant, who is obliged to observe covenants which touch and concern the land.

The House of Lords unanimously dismissed an appeal by the City of London, the landlords, against decisions of Desmond Perrett QC, sitting as a deputy High Court judge, and of the Court of Appeal that the landlords were not entitled to recover pounds 33,460 from Wilde Sapte & Co. In 1977, the landlords granted the partners of Wilde Sapte premises on a 10-year lease which included a covenant to pay rent. In 1979, Wilde Sapte, with the consent of the landlords, assigned the lease to Grovebell Group Ltd. When the lease reached its 10-year term in March 1986, Grovebell, who were protected tenants under the Landlord and Tenant Act 1954, continued the term until the liquidator of the insolvent Grovebell surrendered the term in January 1987. Rent and outgoings amounting to pounds 33,460.64 for March 1986 to January 1987 remained owing.

Andrew Arden QC and Jonathan Manning (City Solicitor) for City of London; David Neuberger QC and Erica Foggin (Wilde Sapte) for Wilde Sapte.

LORD TEMPLEMAN said that Wilde Sapte were not contractually bound to pay the landlords rent after March 1986. If Wilde Sapte were liable, that liability must have been imposed by the 1954 Act. That Act did not expressly impose any liability on anybody except the landlords and the occupying tenant. The Act was intended and expressed to protect occupying tenants against their landlords, not to impose liability on former tenants who ceased to have any interest in the property before or after the Act. At common law, after an assignment, the benefit of a covenant by the original landlord which touched and concerned the land ran with the term granted by the lease. The burden of a covenant by the original tenant which touched and concerned the land also ran with the term. The principle that the benefit and burden of covenants in a lease which touched and concerned the land ran with the term and with the reversion was necessary for the effective operation of the law of landlord and tenant.

It did not follow that if the liability of the original tenant was released or otherwise disappeared, then the term granted by the lease would disappear or that the assignee would cease to be liable on the covenants. As between landlord and assignee, the landlord enforced against the assignee the provisions of a covenant entered into by the original tenant, being provisions which touched and concerned the land, because those provisions were annexed by the lease to the term demised by the lease. On an assignment the provisions of the covenants by the original tenant continued to attach to the term because those provisions touched and concerned the land and not because there continued to exist an original tenant.

Ying Hui Tan, Barrister