Avonridge Property Co Ltd. v Amit Mashru & Ors.

Under the Landlord and Tenant (Covenants) Act 1995, a covenant remains a landlord covenant where it binds successors in title. A term stating that the original lessor ceases to be liable on disposing of the reversion does not convert that covenant into a personal covenant. It is instead an agreement which frustrates the statutory release procedure. The tenant must retain the opportunity to object to release under section 8. Such a term is therefore void under section 25(1), although parties may create a genuinely personal covenant which does not bind successors. The appeal was dismissed.

The appellant granted three subleases of premises held under a headlease. The subleases required the landlord to pay the headlease rent, but stated that the appellant would not remain liable after disposing of its interest in the property.

After the appellant assigned the headlease, rent arrears led the headlessors to seek forfeiture. The sublessees claimed damages against the appellant and its successor. HHJ Copley entered judgment for damages to be assessed. The appeal concerned whether the parenthetical limitation in leases granted after 1 January 1996 was void under the anti-avoidance provisions of the Landlord and Tenant (Covenants) Act 1995.

Lord Justice Jonathan Parker delivered the judgment of the court. Lord Justice Hooper and Lord Justice Pill agreed. The appeal was dismissed.

1. Nature of the covenant. The relevant covenant remained binding on successors in title because the subleases defined the landlord by reference to the person entitled to the reversion. Under section 28(1) of the Landlord and Tenant (Covenants) Act 1995, the statutory definition of landlord covenant required no modification. The qualification referring to context meant the context of the Act, not the wording of the subleases.
2. Personal covenants. The distinction identified in BHP Petroleum Great Britain Ltd v Chesterfield Properties Ltd [2002] Ch 194 was that a landlord covenant binds successors, whereas a covenant personal to the landlord does not. Section 3(6)(a) preserves freedom to create a genuinely personal covenant. That principle did not assist the appellant because the covenant in question continued to bind successors.
3. Anti-avoidance. Section 6 provides the route by which an assigning landlord may seek release from landlord covenants, and section 8 provides the notice and objection procedure. The parenthetical term automatically ended the appellant’s liability on assignment and removed the tenant’s opportunity to object. It was therefore tantamount to an agreement to release in advance and constituted an attempt to contract out of the statutory scheme.
4. Effect of section 25. The term was an agreement relating to a tenancy which would otherwise frustrate the operation of the Act. It was consequently void under section 25(1). The conclusion accorded with the Law Commission’s intention that release should occur only upon compliance with prescribed conditions.

The appellant was ordered to pay the respondents’ agreed appeal costs of £3,500. Permission to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): On 14 October 2004, dismissed the appeal and refused permission to appeal to the House of Lords.
• Willesden County Court: On 11 December 2003, HHJ Copley entered judgment for damages to be assessed in the respondents’ Part 20 claim.