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Week 5

LEASE COVENANTS

A covenant is an agreement or promise made in a deed which is enforceable b/w the parties to that
deed.
The rights and obligations which a lessor and lessee undertake are usually expressly stated in the lease
document. If not they may be implied.
Covenants implied:
By CL if no agreement to the contrary has been stipulated
By statute

ELEMENT 1: What are the terms of the lease?

Start with the express terms in the written document

Then go to Implied covenants (the CL, Statute, Contract) Element 2

ELEMENT 2: Covenants Implied At CL

Covenants implied at CL may occur in 3 circumstances:
1. In the absence of contrary agreement, certain covenants will be implied by the nature of the
landlord/tenant relationship:
- quiet enjoyment;
- non-derogation from grant
2. Where covenants are not included, or if the terms are inadequate for the nature of the lease, covenants
will be implied to give business efficacy to the lease: BP Refinery v. Shire of Hastings
3. Where the parties agree the usual covenants will apply to their lease or where the agreement is silent as
to what covenants will apply: Hampshire v. Wickens

COVENANT IMPLIED BY LANDLORD/TENANT RELATIONSHIP

The following are obligations on the part of the lessor:

1. Covenant for quiet enjoyment

The covenant for quiet enjoyment is an undertaking by the lessor not to interrupt or interfere with
the lessee and the lessees possession of the premises.
The covenant will be breached where lawful enjoyment of the leased land is substantially interfered with
by the acts of the lessor or those claiming under the lessor: Kenny v. Preen
e.g. someone whos bought the reversion from the landlord or another tenant

Examples:
removal of windows by the lessor: Lavender v. Betts
cutting central services, e.g. supplies of gas and electricity: Perera v. Vandiyar
intimidating, threatening or abusing the lessee: Kenny v. Preen

Martins Camera Corner v. Hotel Mayfair

- The camera shop was part of a hotel. It rained a lot and there were drains on the roof (under the control
of lessor) which had blocked up.
- The water came through the ceiling and destroyed the stock in the shop and was held to be a breach of
covenant for enjoyment
Held:
- There would be a breach of the covenant where the ordinary and lawful enjoyment of the demised
premises was substantially interfered with by the acts or omissions of the landlord or those lawfully
claiming under the landlord.
- If the act causes physical interference with the demised premises, there is a breach of covenant,
notwithstanding that the act itself is done off the premises: Kohua Pty Ltd v. Tai Ping Trading

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There is authority for the proposition that direct physical interference is necessary and that mere
interference with the comfort of the persons using the demised premises by disturbances such as
noise or invasion of privacy is not enough.
Kenny v. Preen
- The element of direct physical interference was found to be present in the form of the lessors knocking
on the lessees door, shouting threats at the lessee, and deliberate and persistent attempts to force the
lessee out of possession.
Held:
- The lessor was held to be in breach of the covenant for quiet possession
- While Ct found actual physical interference with the enjoyment of the premises, it was indicated that a
breach of the covenant could occur although there had been no direct physical interference with the
lessees possession and enjoyment.

There is old authority that says a lessor is NOT liable to his lessee for acts of a 3 rd party where the
acts of those claiming through the lessor are unlawful or wrongful, UNLESS the lessor has
expressly covenanted with the lessee against such interference.
Malzy v. Eichholz
- E, the lessor, leased restaurant premises to the M and also leased adjacent premises to an art
dealer/auctioneer.
- The latter conducted his business in such a way as to constitute a nuisance.
Held:
- The Ct held that there was no breach of the express covenant for quiet enjoyment b/c the art dealer had
created the nuisance (unlawful) without the concurrence of the lessor.

However, now a lessor will be liable for acts of nuisance committed by a person claiming though her
or him, even though those acts were not authorised or encouraged by the lessor if the lessor was in a
position to correct or terminate the unlawful conduct. Aussie Traveller Pty Ltd v. Marklea Pty Ltd

Remedy
Breach of the covenant for quiet enjoyment entitles the lessee to recover damages from the lessor, and/or,
in an appropriate case, an injunction to restrain further breaches.
Damages for breach of covenant are measured on contractual principles.

2. Covenant against non-derogation from grant

The obligation not to derogate from the grant is an obligation on the part of the lessor to refrain
from doing anything which is inconsistent with the purpose for which the premises were let.
This covenant applies where a lessor retains part of his/her land and leases the other part to be used for a
particular purpose. The lessor then must not allow the part retained to be used in a manner which will
make the part leased unfit for that purpose.
A breach of this covenant occurs where either the lessors activities, or activities on land under the
lessors control, make the leased premises unfit, inappropriate, or significantly less suitable for the
express purpose for which those premises have been leased.
The premises must be so affected by the actions of the lessor that the premises are not reasonably fit for
the specified use: Vasile v. Perpetual Trustees

Examples
stopping natural light from entering premises is an e.g. of a non-derogation from grant.
Where landlord interferes with access to business: Vasile v. Perpetual Trustees
The lessees right to hold a licence: Harmer v. Jumbil
Where as a result of demolition works close to the demised premises, thieves were able to enter the
lessees premises and a great deal of stock was stolen: Lend Lease Development v. Zemlicka

Aussie Traveller
- Mark Lees predecessor in title granted a lease to AT.
- AT manufactured canvas stuff.
- The adjoining premises were then leased to another coy Top Flight
- TF made mess and lots of noise and sawdust and caused trouble for AT.
- Substantial interference.
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Held:
- Its a Ct of App Qld case MacPherson J said it is doubtful whether the distinction has much practical
significance; the question always being whether the effect of the act in question is such as to disturb or
interfere with the lessees occupation irrespective of the place where those acts originated.
- He said there were two things to show:
1. breach of the implied covenant
2. because the nuisance was not caused by the lessor, but by another tenant, you had to work out if the
lessor was responsible and therefore made liable for the nuisance.
- He looked at the old cases and said a no. of things didnt apply anymore.
- To show a breach of the implied covenant, you didnt have to show that the business was uneconomic or
impractical to carry on
- There is no requirement for practical frustration of the lease
- There is no requirement for direct physical impact on the premises.
- He found that there was a breach of the implied covenant.
- But you still have to work out if the lessor is liable. While a lessor generally loses control over premises
once they are let, he or she may nevertheless remain legally responsible for tortious acts done on the land
by a tenant at least if at the time the lessor
- Here it was reasonably foreseeable b/c TF had been a tenant in another part of the same complex. One
of the requirements for the move was that they put in a dust extractor (so the lessor knew that they were
going to cause dust).
- If that is the case, he is only legally responsible. There has to be something in the lease that allows him
to control the acts of the tenant, so MacPherson looked at the clauses of the lease the tenants must not
do anything to cause nuisance to other tenants etc. TF could have been stopped by the lessor but they
werent.
- There was uncorroborated evidence because the lessor didnt give evidence, that the manager of AT had
asked the lessor to do something about it. They said they would if they gave them more money for rent.
(TF paid more money for rent than AT and therefore, they wouldnt get rid of TF).
- MacPh said that the lessor could have stopped TF. This changes the law on this point. Previously a
lessor was only liable for the tortious acts of tenants (nuisance) if it approved or participated in the
commission of those acts Malzy v. Eichholz.
- The test changed here its not whether the lessor participated or approved of the act, but whether
the lessor could have done anything to prevent it.
- ML could have, the terms were there, but he did nothing, so he was liable.
NOTE: It is possible that one action, such as harassment or intimidation by the lessor, could be both a
breach of the covenant for quiet enjoyment and a breach of the covenant not to derogate from the grant.
Distintion
Derogation occurs where the use of the land controlled by the lessor has made the demised premises
unfit for the purposes for which they were leased, whereas the covenant for quiet enjoyment is broken
where the lessees enjoyment of the premises has been disturbed.

COVENANT TO GIVE BUSINESS EFFICACY TO THE LEASE

Covenants may be implied into leases under general contractual principles: Liverpool CC v. Irwin
In order to imply a term on this basis the following conditions must be satisfied: Codelfa
(1) it must be reasonable and equitable;
(2) it must be necessary to give business efficacy to the K so that no term will be implied if the K is
effective without it;
(3) it must be so obvious that it goes without staying;
(4) it must be capable of clear expression;
(5) it must not contradict any express term of the K

Examples
that the lessor keep the exterior of a building in repair, as without such a covenant, it would be
impossible for the lessee to comply with an express covenant to keep the interior in repair: Barrett v.
Lounova
That the lessor operate and maintain lifts and escalators to service a commercial lessee: Karaggianis
That a lessee is entitled to a supply of electricity: Jenkins v. Levinson

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Liverpool
- Stairs were not lit and the lift did not work
- The tenants argued that when there is a K for letting, a term could be implied into the K to the effect that
the lessor had to look after the common areas.
- The K for letting had imposed lots of obligations on the tenants, but none on the landlord. They said
theres an implied obligation to give business efficacy
- Two cases where it will be implied
1. where theres a complete K (slide)
- to add what the parties would unhesitatingly agree was part of the bargain
- to add a term without which the K would not work
- the implication of reasonable terms (favoured by Denning L.)
2. to find out what the K is, because the parties have not stated the terms.
- The tenants agreement fitted into this.
- They implied that the lifts had to be kept in working order and the stairs had to be lit, b/c the tenancy
agreement gave access to the tenants to the common areas.
- Terms to be implied were terms of necessity.
- They were necessary here.
- But in the end they said the covenant (for keeping common areas in working order) had not been
breached (b/c the tenants had caused a lot of damage).

USUAL COVENANTS
Chester v. Buckingham Travel Ltd
- it was said that there are five well known usual covenants:
1. to pay rent;
2. to pay taxes, except such as were expressly payable by the landlord;
3. to keep and deliver up the premises in repair;
4. to allow the lessor to enter and view the state of repair; and
5. a covenant by the lessor for quiet enjoyment.
Beyond that, it is a question of fact as to what covenants are usually found in any particular case.
This implication of usual covenants does not arise in Qld very often.

LANDLORDS DUTY OF CARE

A landlord owes a duty of care on the ordinary principles of the law of negligence to persons who may
suffer injury on leased premises:
Northern Sandblasting
- case went to HC from Qld
- a little girl was playing in the garden of rented premises and turned on tap which electrocuted her. The
landlord conceded that the landlord had a duty of care to keep the premises safe for the occupants. The
landlord actually said that it had discharged its duty of care as soon as it employed a registered
electrician to fix the stove (which caused the electrocution).
Held:
- The HC was divided on when the duty was discharged.
- 2 judges said there was a duty of care, although it was discharged when the incompetent electrician tried
to fix the stove.
- 2 judges said it was a personal and non-delegable duty and it should have been inspected b/c if it was
they would have seen the faulty wiring.

ELEMENT 3: COVENANTS IMPLIED BY STATUTE - PLA

COVENANT BY THE LESSEE TO PAY RENT
s.105(1)(a) Covenant for payment of rent
Talks about paying rent and abatement of rent if one of the events outlined occurs.
In the absence of a comprehensive clause dealing with payment of rent, s.105(1)(a) PLA will operate,
unless the parties agree otherwise, i.e. the parties may K out of s.105
It applies to all leases.

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Payment of Rent
Generally, a lease will expressly provide that payment of rent is required in advance. In the absence of
such a term, rent is payable in arrears: Collett v. Curling
Where the lessee has fallen behind in his/her rental payments the lessor may:
- Proceed on the basis of the covenant and sue for rent as it becomes due;
- Re-enter and forfeit the lease.
Abatement of Rent
If premises rendered unfit b/c of fire, flood, lightening storm or tempest, the tenant does not have to
pay rent and the landlord cannot recover for it.
Fire must not be caused by the fault of the lessee.
The premises must be destroyed or damaged to the extent that they are rendered unfit for the occupation
and use of the lessee.
In each case it will be a question of fact and degree as to whether the premises are unfit:
Georgeson v. Palmos
- The tenant had a coffee shop but he also had the ability to sell things over the counter (cigs,
confectionery etc.)
- There was a fire and there was a provision in the lease for the landlord to issue a notice to vacate after
the fire.
- The tenant said he wouldnt go b/c he said he could still use the premises.
- All he could do was sell confectionery, cigs etc. from the front counter. The kitchen and eating area was
destroyed, but he refused to go b/c he argued they werent unfit for use.
- Tenant argued that for that to apply, the premises had to be unfit for all the uses, and he it was only
partial.
Held:
- The HC said that it was whether the premises were rendered unfit as a whole. Here although the
lessee could still do a bit, it still meant that they were rendered unfit, so he had to leave.
- The cigs and confectionery were ancillary to the business

At CL, the destruction of the premises did not release the lessee from the contractual obligations to pay
rent: Paradine v. Jane

The effect of the abatement proviso is that the lessee has no obligation to pay rent for the period
that the premises are unfit for occupation. The extent to which the rent abates is proportionate to
the extent of the damage sustained
The implied covenant in s.105(1)(a) does NOT provide for the lease to terminate, in the event of damage
to or destruction of the demised premises. Generally, an express covenant dealing with abatement will
provide that either party has the right to terminate the lease, by giving notice to the other, on the
occurrence of such an event.
In the absence of an express covenant, the effect of destruction (or perhaps substantial damage) may be
that the lease is frustrated, with the consequence that it terminates, automatically, as at the date of
frustration: National Carriers v. Panalpina (Northern) Ltd
There is no obligation on either party to repair the premises, by virtue of the abatement clause, but a
repair covenant in the lease may impose such an obligation.

COVENANT BY THE TENANT TO KEEP THE PROPERTY IN REPAIR

s.105(1)(b) Keep the Property in repair
This subsection applies unless the parties agree otherwise.
Element 1: Good and tenantable repair
The lessees primary obligation is to keep the premises in good and tenantable repair
You have to maintain but not improve the premises: Proudfoot v Hart
Good and tenantable repair is a relative thing - its not absolute (different people would require different
standards)
Proudfoot v. Hart
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such repair as, having regard to the age, character and locality of the house, would make it
reasonably fit for the occupation of a reasonably minded tenant of the class who would be likely to
take it.
The standard of a house in Grovernor Square would not necessarily be the same as that in Spittlefields.
It depends on the circumstances as to the meaning of good and tenantable.

Element 2: Having regard to their condition at the commencement of the

lease
The lessees obligations are referable to the condition of the premises at the time of the letting to that
lessee.
If the premises are not in good repair when the lessee first leases them the lessee is under NO obligation
to put them into good and tenantable repair.
Element 3: The meaning of repair
Repair is restoration by renewal or replacement of subsidiary parts of a whole: Lurcott
Qualification is that it is having regard to their condition at the commencement of the tenancy
Courts have drawn a distinction b/w repair of part of the premises and renewal of the whole:
Lurcott v. Wakely
- Some people lived in an old house and the Council served a notice on them telling them to repair the front
wall b/c it was dangerous
- To repair it, they would have had to rebuild it
- The landlord did it and then brought the action against the tenants for the cost of repairs.
- The Ct said theres a difference b/w repair and rebuilding.
- Repair is restoration by renewal or replacement of subsidiary parts of a whole. Renewal, as
distinguished from repair, is reconstruction of the entirety, meaning by the entirety not necessarily
the whole but substantially the whole subject-matter under discussionthe question of repair is in
every case one of degree, and the test is whether the act done is one which in substance is the
renewal or replacement of defective parts, or the renewal or replacement of substantially the whole.
Brew Brothers v. Snax
- It is not correct to look at each component part of the work and ask whether that is properly repair;
instead the correct approach is whether the total work to be done is repair, because it is renewal or
replacement of defective parts, or whether it is renewal or replacement of substantially the whole.
Element 4: Buildings with inherent defects in the structure
An inherent defect is a problem with the design or structure of the building and can only be
remedied by replacement of the structure or a substantial part of it.

Should a tenant have to fix an inherent?

The position is uncertain.

The Australian Position In Graham v. Markets Hotels there is dicta that a tenant who is liable to repair does NOT have to remove
an inherent defect, and that all the tenant has to do is maintain the structure subject to the defect
Graham v. The Markets Hotel
- Wlliams J said that a building contains an inherent defect where it is of such a kind that by its own
inherent nature it will in the course of time fall into a particular condition.
The English position
Ravensheft Properties v. Ravestone
- the building was built with external cladding of stone and no expansion joints were included.
- As it expanded, the stone cladding fell away.
- There was an express covenant that tenant repair.
- There was no qualification as in Aust.
- The tenant said they wouldnt repair b/c it was an inherent defect and the Ct said they wouldnt recognise
that there was any defence as to the defect.
Held:
- It was held to be a question of degree he considered the proportion, the cost of work v. value of building.
- Building was 3 million pounds and work cost 55000 pounds small proportion and therefore the tenant had
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to do it.
The judge rejected that this meant giving back to the landlord a safe building, it was just a matter of repair.
In view of the qualification in our covenant and the HC, it is unlikely to be applied in Australia, but it has
been accepted in England, so it needs to be recognised.

Element 5: Reasonable wear and tear excepted

The tenant doesnt have to repair damage caused by reasonable wear and tear
Reasonable wear and tear means deterioration caused by reasonable use or natural forces
A tenant must undertake such repairs to prevent damage from the original wear and tear from producing
larger problems.
Haskell v. Marlow
- life tenant lived in property for 42 years and did no repairs and property deteriorated.
- Ordinarily a life tenant is not liable to carry out repairs. But the Ct held her estate liable to make good
the condition of the property.
- The Ct said that this exception for reasonable wear and tear does not reduce the tenants obligation very
much.
- The tenants not liable for the direct result of reasonable wear and tear but is liable for any consequential
damage.
- E.g. if a tile falls off the roof, thats reasonable wear and tear and they wont have to replace it, but if
water gets in and the carpet gets damaged, they would have to repair that.
Element 6: Damages for breach of covenant to repair
s.112 limits the Landlords remedies for breach
s.112(2) provides that a Lessor can re-enter and forfeit a lease upon breach, only where sufficient notice
(s.124 PLA) and reasonable time had been given
Additional powers are conferred by s.107(a) to enter and inspect and give notice of repairs required.
S.107(b) to enter and repair; s.107(d) to enter and forfeit the lease.
damages cant exceed the decrease in the value of the reversion. So its the decrease in the value of the
property rather than the value of the repairs.
If the landlord is going to demolish the property or renovate if there are subst structural alterations, that
would render it worthless and the landlord cant recover any damages.
You have to serve a notice under s.124 if you want to terminate the lease for breach of this obligation and
the notice has to allow the tenant sufficient time to carry out repairs.
A court can order SP of such a covenant where damages are not an adequate remedy:Rainbow Estates v.
Tokenhold Ltd

LESSEES OBLIGATION TO CARE FOR THE PREMISES IN A MANNER OF

A REASONABLE LESSEE IN A SHORT TERM LEASE.

Section 106(1)(b) of the PLA applies to leases of premises of a term of 3yrs or less BUT does not apply
to short term leases of RESIDENTIAL PREMISES (s.17 RTA)
S.106 PLA requires the lessee to care for the property in the manner of a reasonable tenant and to repair
any damage caused by the lessee or people coming onto the premises with the lessees permission.
These obligations cannot be excluded by contract.
S.106 is implied in short leases only and it has little impact where it comes under the implied obligation
to repair. If s.105 applies, 106 adds very little.
S.106 will come in if there is an express covenant for the landlord to repair, the tenant would have to take
reas care: Warren v. Keane (closing windows, changing lightbulbs etc.)

ELEMENT 4: Express Covenants

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Examples of some common covenants are in the 3rd Schedule to the PLA.
- Covenant No.7 to insure against fire
- Covenant No.14 to use the premises as a private dwelling house
- Covenant No.15 not to assign or sublet without consent

ASSIGNMENT

Covenant against assigning, subleasing or parting with possession without consent.

If a tenant takes a lease of premises to conduct business, and the tenant builds up a lucrative
business, the tenant may want to sell that business. It wont be readily sellable unless the tenant
has the right to assign to someone else.
A tenant may take a business and it may not work well and want to transfer it. In either case, the tenant
needs the right to transfer.
Its also important for the landlord who comes into the business.

Assignment
Transfer of all of the balance of the lessees interest for the whole of the remainder of the term.
E.g. if there was a lease for 3 yearsif the T transferred the whole of the interest its called an
assignment. L T1T2.
After the term is assigned to an assignee, that person becomes the immediate lessee to the lessor and the
assignor ceases to be a lessee to the lessor.
Sublease
The tenant transfers something less than the whole of the balance of the tenants interest.
If there was a 3 year lease and after 6 months, the tenant wants to transfer to someone else for a year,
they would sublease.
L TST (subtenant)
Difference b/w assignment and sublease in assignment the whole of the balance is transferred, in a
sublease it is less than the whole of the balance.
Parting With Possession
similar to assignment but use if you dont have enough evidence for assignment
Lam Kee Ying v. Lam Shes
- Alleged breach was that they parted with possession
- The tenant and partners carried on business and decided to incorporate so they transferred the
telephone etc.
- The landlord found out when coy gave a cheque for rent
- PC said that a tenant doesnt part with possession just because someone else uses the premises. The coy
used the premises.
- The critical thing was held to be that there was never a denial that they transferred possession and the
coy gave its cheque for the rent.
- A covenant against parting with possession will not be breached by the lessee giving a licence to
occupy or by sharing the premises with another, as parting with possession means parting with the
legal right to possession.

Tenants Right To Assign

Where a lease contains no covenant against assignment or sub-letting, then the leasehold interest may be
assigned or sub-let without the consent of the lessor.

Absolute Covenant prohibiting assignment or Sub-Leasing

If a covenant prohibits assignment or sub-letting, then the lessee has no right to assign or sub-let, and the
lessor cannot be forced to consent to any proposed dealing. The lessor may, however, waive the benefit
of the absolute covenant and permit an assignment: s.119 PLA
The question of a reasonableness of a refusal to consent to the assignment is irrelevant
Covenant not to assign or sub-let without consent
The most common covenant dealing with assignment is a qualified covenant which provides that a Tenant
can only assign with the consent of the landlord.
If a lease contains a covenant in that form, s.121 PLA comes into operation.
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S.121 cannot be excluded by contract and applies despite any express provision to the contrary.

The effect of s.121(1)(a)(i) is that consent cannot be UNREASONABLY withheld.

Failure to ask for consent prior to effecting any assignment or sub-letting is a breach of covenant for
which the lease may be forfeited even where there are no reasonable grounds on which consent could be
withheld:
Barrow v. Isaacs
- There was no statute
- There was a covenant for a tenant not to assign without consent and L was not to arbitrarily withhold
consent
- The tenant forgot to ask the L for consent and assigned to someone to whom the L could not object to.
But the L said they were in breach and forfeited the lease.
- Ct upheld the forfeiture.
- Its critical to ask for consent
Treloar v. Bigge
- The effect of an arbitrary refusal of consent is that the lessee is free to assign.
Where the lessor refuses to consent to an assignment or sub-lease, the lessee has two
options:
1. The tenant can go ahead and assign anyway. Proviso T is not in breach by assigning.
If the lessors refusal is found to be unreasonable then there has been no breach of the covenant: Treloar
v. Bigge
However, if the lessor has reasonable grounds for refusing consent, and the lessee proceeds with the
assignment, then there is a breach of the covenant.
2. T could challenge Ls decision by seeking a declaration that the L is in breach by unreasonably
refusing consent.

It is a question of fact as to whether consent has been withheld unreasonably and the onus will be
on the lessee to show that consent was so withheld. International Drilling Fluids v Louisville

Secured Income Real Estate v. St Martins Investments

- The Ct found that a lessor who had serious doubts as to a lessees ability to pay the rent promptly was
properly entitled to refuse to grant the lease.
- It is suggested that this same test should be applied to assignments
Pimms Ltd v. Tallow Chandlers
- A lessors property interests can be a legitimate consideration for a lessor in deciding whether or not to
consent to an assignment or sub-lease.
International Drilling Fluids v. Louisville Investments
- it is unreasonable to refuse if any disadvantage to the lessor is small and out of proportion to the harm
suffered by the lessee if consent was refused.
Daventry Holdings v. Bakalakis
- T sought consent L asked for information was given L refused consent, refused to give reasons.
- T started action then L asked for trading figures they were supplied L consented.
- Issue for costs: had L been reasonable.
- Ct concluded that the L had been unreasonable it was refused to pressure the tenant into agreeing that
L could keep the fixtures
- L had to pay costs
- P.411- 413
JA McBeath Nominees v. Jenkins Development
- L refused on the grounds that the proposed assignee may not be able financially to pay the rent and then
the next day said they were happy to have the assignee if they could increase the rent.
- Ct looked at two tests and preferred the wider view in Pimms
- Ct laid down principle the L is entitled to consider the effect of the proposed assignmentwith a
qualification (the L may not refuse in order to achieve a collateral purpose wholly inconsistent with
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the lease)
Here the L was trying to achieve a collateral advantage (an increase in the rent payable under the lease).
The Ls stated reason for a refusal was untrue and therefore had been unreasonable.
P.130-132

TO AVOID S.121:
Despite the inability to contract out of s.121, there are ways in which the effects of the section can be
avoided:
1. To frame the covenant not to assign or sub-let as an absolute covenant.
2. Include in the lease a covenant that, as a precondition to any assignment or sub-letting, the lessee
must first offer to surrender the lease to the lessor:
Creer v. P & O Lines
- The tenant can covenant not to assign without consent, but first to offer to surrender lease to L
- So L would be free to let the property to somebody else.
- T offers to surrender, if L accepts, lease ends;
- If L does not accept, T may assign with consent and s.121 operates
- P.89
- Ct held that covenant to offer to surrender the lease, was a condition precedent to the tenants valid right
to assign.
EFFECT OF ASSIGNING WITHOUT CONSENT AND BREACH
T in breach of covenant but assignment is valid (not void)
The leasehold estate will pass to the assignee, but because there is a breach of the covenant the lease will
be liable to forfeiture.
Notice of the breach is required to be served on a lessee prior to forfeiture, pursuant to s.124.

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