Landlord & Tenant (Covenants) Act – Timely proposals for reform

The Property Litigation Association (PLA) has recently issued some proposed amendments to the Landlord and Tenant (Covenants) Act 1995 (LTCA 95) to address commercial issues that have arisen as a consequence of how provisions of the LTCA 1995 have been interpreted in various recent cases. The PLA has approached the Law Commission with the support of the British Property Federation, the British Retail Consortium, and the Property Bar Association to discuss amendments to the LTCA 1995 to address these commercial issues, including:

an inability for a Tenant to lawfully assign to its own Guarantor;
an inability for Tenant to assign intra-group whilst having the same guarantor;
how to unwind any assignment and the issues arising upon any unwinding;
an assignor (in the recent EMI case –EMI Group Ltd v O & H Q1 Ltd [2016] EWHC 529 (Ch)) being bound by a tenant covenant following a purported assignment contrary to the purpose of the LTCA 95 to release a Tenant from continuing to be bound by the tenant covenants, post assignment.

The PLA has drafted some minor proposed amendments to the LTCA 95 including a proposed new s24 (2A) and s24 (2B), together with consequential amendments.

The key principles of the PLA proposals include amendments designed to:

Clarify that that an assignor’s guarantor can provide a sub-guarantee of the assignor’s authorised guarantee agreement (AGA). This is likely to be OK currently, though as the judicial comment on it is obiter, clarity in the LTCA 95 would be welcome.
Allow an assignor’s guarantor to provide a repeat guarantee to a group company assignee.
Permit an assignor’s guarantor to be the assignee of the tenancy – to get round the problems caused by the recent EMI case.
Provide certainty in partnership situations to ensure that A, B, C and D can assign to B, C, D and E.

The PLA has indicated that it stands ready to lend any assistance to the Law Commission to ensure the early reform of the LTCA 95 in the best interests of legal clarity and more importantly is in the best interests of the property industry as a whole. Such reform is to be encouraged and will be welcomed by the wider commercial property industry.

For further information regarding this topic or any other property and construction matter, please contact Consultant, Robert McNally, or any member of Edwin Coe Property or Construction team.

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