Practical Implications
The Landlord and Tenant Covenants Act 1995 has had significant practical implications for both landlords and tenants. For landlords, the Act has provided a level of protection in the form of Authorized Guarantee Agreements (AGAs). These agreements allow landlords to have a form of recourse in the event of a breach of covenant by the new tenant. This has given landlords a greater sense of security when dealing with lease assignments.
For tenants, the Act has provided much-needed relief from indefinite liability. By abolishing the rules of privacy, tenants are now released from future liability once a lease is legally assigned. This has provided tenants with greater freedom and flexibility, as they no longer have to worry about being held liable for breaches of covenants committed by subsequent tenants.
However, the Act has also introduced new complexities. For example, the concept of AGAs, while protecting landlords, has also created additional obligations for outgoing tenants. Tenants now need to be mindful of these obligations when assigning a lease.
To illustrate the practical implications of the Act, consider the case of a tenant who wishes to assign a lease. Under the old rules of privity, the tenant would remain liable for the covenants of the lease even after the assignment. However, under the 1995 Act, the tenant’s liability ends upon the legal assignment of the lease. If the landlord requires additional protection, an AGA can be entered into, where the outgoing tenant guarantees the performance of the covenants by the incoming tenant.
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