User covenant

If a long residential lease has less than about 80 years left to run, the tenant has the statutory right to extend the lease. Usually, the tenant extending their lease will take legal advice. This is important because it might be possible to change some of the terms of the original long lease to make them more favourable to the tenant.  In a recent case, a long lease was extended but the tenant did not take legal advice.

After the extension, the lease was sold and the new tenant granted a one year assured shorthold tenancy of the flat to a subtenant. The landlord argued that the tenant was not allowed to underlet the flat under the terms of the lease.

The wording of the user covenant was carried forward unamended from the original lease into the extended lease. It is interesting to consider the wording of the user covenant which was as follows:

'Not to use the premises hereby demised or permit the same to be used for any purpose whatsoever other than as a single private dwelling house in the occupation of the Lessee and his family.'

That wording is pretty unequivocal - so what is perhaps surprising is that an argument was made at all for the tenant to be allowed to sublet.

The tenant tried to negotiate with the landlord seeking permission to underlet but was unsuccessful and the landlord sought a declaration that the tenant was in breach of covenant. The tenant argued that the lease did not specifically prevent underletting. The Court of Appeal was not persuaded by this argument and held that the creating of the short lease was a breach of the user covenant in the lease.

This is an unsurprising decision given the wording of the user covenant but does act as an important reminder for anyone buying a long lease or extending it to:

  • Carefully consider the terms of the lease to establish whether any covenants could be modified or relaxed If acting for a tenant on a lease extension
  • Read and understand the terms of the lease carefully. Many buyers of long leases will want the option to grant assured shorthold tenancies of the property - so it is essential for conveyancers to advise properly

To discuss this or any other property related issue, contact us.