A recent case has highlighted the difficulties that can arise when a landlord agrees to grant a concession but for various reasons does not want to include this in the lease. Often such concessions will be in the form of side letters or separate deeds and these are very likely to bind future owners of the landlord’s interest. What happens when the concession is set out in the correspondence prior to the grant of the lease?
The tenant here agreed that it would surrender a lease that still had many years to run. In return, the landlord would grant a new shorter lease and would not serve a schedule of dilapidations at the end of that shorter lease. The landlord’s agreement was set out in emails and letters confirming that a schedule would not be served. The lease did not reflect the agreement.
The landlord sold his interest and the new landlord issued proceedings against the tenant for breach of the repairing covenant. The tenant argued that it had relied on the original landlord’s assurances about dilapidations and therefore the new landlord had no right to enforce the repairing covenants in the lease.
The High Court held that it was clear from the communications between the landlord and tenant before the lease was completed that the landlord’s assurances were not to be overridden by the terms of the lease. The assurances amounted to a contract collateral to the lease and continued to bind future owners.
This decision shows the difficulty that surrounds the area of concessions that are not recorded in the main documentation. Do they bind future owners, do they need to be registered at the Land Registry, and have buyers discovered all such arrangements that may affect their ownership?
Before making any side arrangements the parties should think whether they are personal, and whether there is any real reason why they should not be included in the main documentation.
Further reading: Business Environment Bow Land Limited -v- Deanwater Estates Limited 5 December 2006
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The original publication date for this article was 18/12/2006.