City of London Corporation v Fell

The court held that the Landlord and Tenant Act 1954 (Part II and ss.23, 24, 69(1)) continues the tenancy for the occupying tenant but does not by that continuation impose on a former contractual tenant personal liability for rent or outgoings beyond the contractual term. The benefit and burden of covenants which "touch and concern" the land are annexed to the term and reversion by common law and by statute (notably the Law of Property Act 1925 ss.141 and 142), but that annexation creates estate-based obligations, not fresh personal liabilities on a former tenant who ceased to have any estate. The House distinguished privity of contract from the status-based obligations attached to the estate and concluded the statutory protection of the occupying tenant was not intended to underpin liability of the original tenant for arrears accruing after the contractual term expired.

The 1977 lease granted premises to Wilde Sapte & Co. for a ten year term commencing 25 March 1976. Wilde Sapte assigned to Grovebell Group Ltd in 1979; Wilde Sapte remained contractually liable by privity of contract, and Grovebell, as assignee, was liable by privity of estate for covenants touching and concerning the land. When the contractual term expired by effluxion of time on 24 March 1986, Part II of the Landlord and Tenant Act 1954 operated to continue the tenancy for the occupying tenant until a statutory termination event. The tenancy was surrendered by Grovebell's liquidator on 23 January 1987. Rent and outgoings of £33,460.64 were due in respect of the period 25 March 1986 to 22 January 1987.

The landlords sued Wilde Sapte for that sum. The central issue was whether the statutory continuation of the tenancy under the 1954 Act carried with it a personal liability on the original contracting tenant (Wilde Sapte) for sums accruing after the contractual period for which Wilde Sapte had covenanted. The court framed the questions as (i) whether the 1954 Act imposed any fresh liability on former tenants who no longer held the estate, and (ii) how the relationship between covenants annexed to the estate and the original contracting parties should be understood.

The House of Lords, endorsing the analysis of principle and authority cited, reasoned that covenants which touch and concern the land are annexed to the term and the reversion and thus operate as estate-based obligations enforceable against the person who holds the estate. That legal regime is distinct from the contractual liability of the original covenantor. The 1954 Act protects occupying tenants by preventing termination of the tenancy save as provided in the Act; it does not, however, convert the continuation into a source of a new personal obligation on a party who no longer held the estate after the contractual term expired. Accordingly the appeal was dismissed.

Appeal dismissed. The statutory continuation of a tenancy under Part II of the Landlord and Tenant Act 1954 preserves estate-based rights and obligations but does not impose personal liability on a former contracting tenant for rent and outgoings accruing after the contractual term; covenants touching and concerning the land are annexed to the estate and the reversion and are distinct from the original tenant's contractual liability.

First instance before the Deputy High Court Judge (Desmond Perrett Q.C.) where the landlords failed. The Court of Appeal (Nourse and Evans L.JJ. and Sir Michael Kerr) delivered an Order dated 25 November 1992 upholding that position. The landlords then appealed to the House of Lords, which delivered this judgment ([1993] UKHL 11; reported [1994] AC 458) dismissing the appeal.