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• Assignments of lease by a landlord or tenant – cov…

Assignments of lease by a landlord or tenant – covenants that run with the land vs personal covenants

An important matter which needs to be considered when a lease is assigned by either a landlord (selling the land) or tenant, is which lease covenants are enforceable against a purchaser of the land or an assignee of the tenant.

Generally, lease covenants that run with the land will bind a purchaser of the land or an assignee of the tenant, and covenants which are personal in nature will only bind the original landlord and tenant unless expressly assigned.

Covenants that run with the land

A lease covenant will bind a purchaser of the land or an assignee of the tenant if the covenant ‘touches and concerns’ the land.

Although there is no exhaustive test, generally a lease covenant will touch and concern the land if the covenant:

affects the nature, quality, or value of the land, or the mode of using or enjoying the land; and

is not otherwise expressed to be personal.

Some examples of covenants which 'touch and concern' the land are:

Covenants that are personal in nature

A covenant that is personal in nature will only bind the parties who first entered into the obligation, unless expressly assigned.

Side agreements (including incentive deeds) or licences which grant rights separate to the lease, are likely to be considered as personal and only bind the original landlord and tenant.

Some examples of lease covenants which have been held not to touch and concern the land are:

landlord’s covenant to sell its interest in the land

landlord’s covenant to purchase tenant's fixtures

landlord’s obligation to return the tenant’s security deposit at the expiration of the lease

tenant’s option to purchase the land

Each case will need to be considered depending on the particular facts and the legislation applying in the relevant state.

Assignments of lease by tenants

Most leases require tenants to obtain the prior consent of the landlord and enter into a deed of consent to assignment of lease (under which the tenant assigns its lease covenants to the assignee), before assigning a lease.

In such cases, all the lease covenants are expressly assigned to, and enforceable against, an assignee.

Assignments of lease by landlords

In contrast, leases do not usually contain any restriction on landlords selling the land or any obligation regarding assigning the lease covenants to a purchaser. Unless expressly assigned, only covenants that run with the land are enforceable against a purchaser of the land.

Recommendations

In order to avoid any uncertainty as to which covenants will bind a purchaser of the land or an assignee of the tenant, leases and side agreements should be carefully drafted.

If the parties intend for personal covenants to also bind a purchaser of the land or an assignee of the tenant, an obligation must be imposed on the assignor to ensure that the purchaser/assignee and subsequent purchasers/assignees enter into a deed with the remaining party, agreeing to be bound by and perform all relevant covenants.

Authors: Natasha Zusman and Stella Sun

Contributing author: Melissa Potter

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Deeds of Covenant - Why are they needed and what happens if one is not completed?

7th October 2022

In this Legal Update we consider an all too common scenario concerning freehold properties on managed estates that often sell without the incoming owner entering into a Deed of Covenant that is generally required under the terms of the Transfer governing the use of the property and, importantly, the payment of estate or service charges.

The consequence of the above to an estate management company tasked with managing a development of freehold properties, can mean that they are unable to recover estate management charges from the new owners that would ordinarily be payable under the terms of the Transfer.

In order to consider the options available to an estate management company in these circumstances, it is important to consider the applicable position in law.

Positive -v- Negative covenants

Similar to residential long leases, the Transfer deed that governs freehold properties contain a number of covenants, both positive and negative, that the owner of the property must abide by.

As the names suggest, a positive covenant places an obligation on the owner to do something, such as paying an estate maintenance charge, whereas a negative covenant, requires the owner to refrain from undertaking an action such as not to use the property for a specified purpose.

So far so good. However, how both covenants are treated in law is significantly different.

In its simplest form, a covenant is a form of contract. Generally, the rights and liabilities created by a contract can only be enforced by the parties to it but in the case of covenants relating to land, such covenants may be enforced by and/or against those who may not be an original party.

Negative covenants

In English property law, negative restrictive covenants “ run with the land ” and as such, can be enforced by those other than the original parties i.e. successors in title. Here, it does not matter whether or not a Deed of Covenant has been entered into.

Positive covenants   

In terms of positive covenants, and in complete contrast to negative ones, they do not “ run with the land ” and crucially, do not bind any successor in title. However, please note that the position is different where the management charges are payable as an estate rentcharge (see here ).

The Deed of Covenant

In most Transfer deeds for residential freehold properties, there will often be a requirement that the outgoing owner, upon an assignment, must procure that the incoming owner enters into a Deed of Covenant that is usually in a form annexed to the original Transfer.

The “procuring” of the entering into the Deed of Covenant is dealt with by the conveyancers acting on behalf of the parties upon a sale. A competent conveyancer will seek to ensure that the requirements for the Deed of Covenant are dealt with.

The purpose of the Deed of Covenant is a method used to compel a successor in title (the purchaser in a sale) to enter into a deed of covenant directly with the party who has the benefit of the positive covenant (often the management company with the obligation to manage the estate and, importantly, collect charges from the owners to facilitate that). The deed will contain a covenant in the same form as the original positive covenant. Each subsequent sale requires an obligation for the next successor in title to enter into the deed and so on.

More often than not, in order to compel compliance with the Deed of Covenant, the title to the property will usually have a restriction applied to it. The restriction will generally prevent a new owner from registering their interest unless a certificate is supplied to the Land Registry confirming that the requirements for the Deed of Covenant have been complied with. The form of restriction varies from property to property. Some will require a certificate signed by the management company confirming compliance whereas others are left to the conveyancer or a solicitor, usually of the purchaser, to certify that the Deed of Covenant has been entered into.

However, experience suggests that even in spite of the presence of a restriction, new owners frequently manage to register their interest without a Deed of Covenant having been entered into. When this happens, the chain of positive covenants is broken and it can be difficult to enforce the obligation due under a positive covenant.

So, when faced with such a scenario, what can be done to ensure that the estate management charges are paid:

Estate Rentcharges

First and foremost, it would be wise to consider how the maintenance charges are reserved under the terms of the Transfer. If they are reserved as an estate rentcharge, a Deed of Covenant may not necessarily be required as the obligation to pay in these circumstances attaches to the property and not the individual.

Provided that the Transfer obliges the estate management company to undertake a positive covenant to provide services, payment of the estate rentcharge may be enforced under the provision of Section 121 of the Law of Property Act 1925. See our legal update her e  

The previous owner

When the chain of covenants breaks, the last party to give the positive covenant will likely remain ‘on the hook’ to comply with the positive covenant to make payments. It would be most unusual for the chain of covenants to be broken on consecutive occasions so tracing the previous owner, whilst burdensome, is far from impossible.

Pursuing the previous owner will likely be a significant frustration for them when they are being asked to contribute towards charges for a property that they no longer own. Such a scenario will then likely compel the previous owner to at least seek to remedy the position concerning the Deed of Covenant or in the absence of doing so, a money claim could be made seeking a Judgment that could then be enforced against them.

The benefit and burden principle

Under common law, the “benefit and burden” principle provides that if a deed contains a positive covenant and a benefit, then it may be possible to enforce the burden of the positive covenant against a party who enjoys the benefit of it. For example, a new owner may have to contribute towards the maintenance of the estate roads because they enjoy a right of way over them, despite not having not entered into a Deed of Covenant to pay.  

However, the scope to pursue this is limited because:

  the benefit and burden have to be conferred in or by the same transaction;

there must be a reciprocal relationship between the benefit and the burden of the covenant;

a new owner must have the choice to enjoy the benefit and take on the burden of the covenant.

The requirement to enter into a Deed of Covenant upon the sale of a freehold property is very important, albeit it is largely out of the hands of the estate management company and the managing agents that act on their behalf.

Managing agents would be well advised to be fully aware of the transfer/assignment formalities for all of the units that they manage and ensure when responding to pre-sale enquires that they highlight the requirement to enter into a Deed of Covenant, if applicable, and to advise where the same should be sent.   We can assist with clarifying what is and is not required across each development should you/your managers require assistance - see here .

Should the estate management company or their managing agent become aware of a sale having completed and a Deed of Covenant has not been received, immediate enquiries should be undertaken immediately to ascertain the position whilst the transaction is still “fresh” and the parties can be prompted to deal with the formalities.

However, in circumstances where a Deed of Covenant has been missed, all is not lost. The estate management company has the option to either:

Pursue the previous owner under their covenant; or

Seek to establish the “benefit and burden” principle.

Should you have any queries in relation to this week’s Legal Update, please feel free to contact a member of the team on 01435 897297 or [email protected] .

This legal update is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of KDL Law or by KDL Law as a whole. 

If you have received this update in error or wish to unsubscribe from future updates then please email us at [email protected] .

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Deed of Covenant on a Leasehold Property?

• Last updated: 9 November 2021

IN THIS ARTICLE

Buying a leasehold flat can often be more complex than buying a freehold property . The addition of a third party, ie; the freeholder or landlord, in the conveyancing process means that there are various extra documentary requirements involved, typically including the requirement to sign a deed of covenant.

The following guide looks at deeds of covenant within the conveyancing process for residential leasehold properties, from what these are to the consequences of breaching the terms.

What is a deed of covenant?

When buying a leasehold property, there will be a written agreement between the leaseholder (or tenant) and freeholder (or landlord). This will set out the term or length of the lease, together with various other conditions relating to the rights and responsibilities of each party.

Typically, the lease will include a condition that a deed of covenant is required upon any transfer, assignment or underletting of the property. This means that when the flat is sold, the buyer will need to sign a written agreement to carry out the obligations, or refrain from the acts, stipulated therein. In this context, a deed of covenant is essentially a form of legal agreement in which the incoming tenant promises to comply with the terms of the lease.

Why are deeds of covenant used?

Strictly speaking, under the provisions of the Landlord and Tenant (Covenants) Act 1995, there is no obligation on an assignee (the incoming tenant) to enter into a direct deed of covenant with the landlord (or freeholder) for leases granted on or after 1 January 1996. This is because, by law, both the benefit and burden of the covenants made between the previous tenant and landlord will automatically pass to the new tenant on assignment of the lease.

As every assignee automatically becomes liable on the tenant’s covenants, and able to sue on the landlord’s covenants, this mean that no deed of covenant is actually required. The net effect is that the new leaseholder will become liable for any ground rent and service charges, without the need for any additional agreement, and be bound by any restrictions as to the use of the property. They will also be able to enforce the landlord’s covenants.

Additionally, the provisions of the 1995 Act make clear, to the extent that the lease contains covenants conferring rights exercisable by or against a third party — such as a management company who has undertaken obligations for the repair and maintenance of the building — that the assignee will also be liable for, and have the right to legally enforce, those covenants.

Before the 1995 Act came into force, deeds of covenant were commonly used in respect of the assignment of tripartite leases, in order to ensure that assignees were in a direct contractual relationship with the management company. Even though the law relating to privity of estate ensured that assignees would be liable on tenant’s covenants, and able to sue landlords for breach of theirs, the position in respect of management companies was less clear. To this extent, deeds of covenant still serve some useful purpose for older leases.

Still, it remains common practice for new long residential leases to require the purchaser of a leasehold to enter into a direct deed of covenant with the landlord and, where applicable, the management company, despite the fact that this is a wholly redundant requirement.

In many cases, the seller’s solicitor is likely to include a specific condition in the contract of sale requiring the execution of a direct deed of covenant, where any failure to comply is likely to frustrate the whole process.

Further, if the lease stipulates that this is what is required then it must be acted upon — where any failure to do so would place the tenant in breach of the lease. In these scenarios, the landlord and management company may not accept any payments for service charges or ground rent until a deed is signed, as to do so would mean that their right to enforce any of the leasehold covenants at a later stage could be treated as waived. In the meantime, until a deed has been executed, arrears and penalties will accrue.

Examples of leasehold covenants

In basic terms, a covenant is a legal promise that you will either carry out certain acts or, alternatively, refrain from doing certain things. There are two types of covenants: positive and negative, where these basically dictate how parties to a lease must or must not act.

Positive covenants are acts that you must carry out, such as being responsible for paying ground rent or a service charge, or keeping the property in good repair. In contrast, negative covenants stop you from doing certain things, such as not to carry out structural alterations to your property, not to carry out illegal acts, not to run a business from your flat, not to cause a nuisance, not to sublet or not to keep pets.

These clauses are commonly referred to as restrictive covenants, because they limit or restrict what you can and cannot do whilst living in the property. Restrictive covenants are essentially designed to prohibit any conduct that could affect other tenants and/or devalue the property as a whole.

As a deed of covenant will include various positive obligations on you as the potential new occupier, together with an agreement to observe certain restrictions, it’s important that you carefully read the document, together with the lease to which it refers, before signing. In this way, you will fully understand your legal rights and responsibilities when you agree to buy a leasehold property. Most covenants remain in place for the duration of the lease, so they are permanent unless otherwise removed or varied with the agreement of the landlord.

It’s worth noting, however, that insofar as any deed of covenant purports to bind you for the entire lease term, even if you later sell the property, this should be treated as void under the provisions of the 1995 Act. This is because the Act specifically abolished the principle that the original tenant would remain liable on the lease covenants throughout the whole of the term. That said, signing a deed of covenant still serves as a stark reminder to anyone who buys a leasehold property that they will be bound by its terms, at least whilst in occupation.

What information does a deed of covenant include?

The deed of covenant will be set out in a fairly standard format and is usually annexed to the lease in question. Typically, the deed will include:

• the property details, inclusive of the address, postcode and title number
• the parties to the agreement, inclusive of the names and addresses for service
• any relevant definitions, depending on how complex the deed is, and whether there’s a need for certain terms to be explained to avoid any doubt as to how these are to be interpreted
• the agreed terms are then usually set out to stipulate exactly what the deed of covenant requires, and what is being agreed, when signing, although a basic deed may simply state that the assignee agrees to take over the tenant’s obligations under the lease
• the appropriate execution clause will be included, to ensure that the document is signed as a deed, in order to make the same legally binding.

Sample wording for an assignee’s covenant could read: “To pay the ground rent and service charge, and to observe and perform the tenant covenants and other tenant obligations as set out in the lease from completion of the assignment for the residue of the term of the lease”.

Executing a deed of covenant

If a deed of covenant is required within the conveyancing process when buying a leasehold flat, the solicitors acting for the seller will usually provide a draft form of the deed to the buyer’s solicitors. The buyer’s solicitors will then create the final deed to be executed by the buyer to confirm that they agree to comply with the terms of the lease moving forward.

The document must be signed, as a deed, to make it legally binding. This must be done in the presence of an independent witness. This must be someone who is over 18, has no interest in the matter and is not related to either party, nor living at the same address as them.

Are there fees for deeds of covenant?

There are various costs involved when buying a leasehold flat, including the conveyancing costs for your own solicitor, but also certain disbursements or fees incurred by the landlord or management company. In the case of deeds of covenant, your own solicitor will complete this for you, prior to you signing, for which you will have to pay for their time in doing so.

The landlord and/or management company will often also charge a fee for updating their records. The cost of this can be anything between £100 to £300, although whether this is paid by the buyer or seller is often the subject of negotiation.

What happens if there is a breach of covenant?

As a deed of covenant is a legally binding document in which the buyer agrees to be bound by the terms of the lease, this means that action can be taken against the new leaseholder for any failure to comply with its terms — although even absent any executed deed of covenant, by law, the assignee is bound by the terms of the lease in any event.

This means that leasehold covenants are not mere guidelines that you can choose whether or not to follow, but rather you must abide by the terms set out in the lease. Where these covenants are breached, a landlord will be able to enforce them against you in court. There are various remedies available to landlords in the context of long residential leases, including:

Injunctive relief

Where the court prohibits the tenant from breaching agreed covenants.

Specific performance

Where the court orders the tenant to comply with agreed covenants

To financially compensate the landlord, in addition to or in lieu of an order for an injunction or specific performance

This will terminate the lease, giving possession of the property to the landlord.

Equally, however, the landlord will also be under various obligations, and restricted from doing various things, where you too could take legal action against your landlord where they have failed to comply with the terms of the lease — although this can be complex and costly.

Where a dispute arises, seeking legal advice at the earliest possible opportunity is often the best way forward. In this way, your legal advisor can help you to explore your options, either to sue or defend being sued, or other possible solutions without recourse to legal proceedings.

Deed of covenant FAQs

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Legal disclaimer

The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.

Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law , Tax , Human Resources , Immigration & Employment Law .

Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing Agency for the Professional Services Sector.

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Deed of Covenant

Ruban Selvanayagam

Sell house fast and auction expert.

Ruban Selvanayagam is a professional cash homebuyer, private rented sector landlord, auction specialist, blogger and media commentator.

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What is a Deed of Covenant?

Largely affecting leasehold properties, a Deed of Covenant is a legal document which states that the leaseholder agrees to undertake an obligation or series of obligations laid out by the freeholder (or landlord).

The Deed is essentially the document that lays out the covenants (or promises) that should be adhered to when a new leasehold property owner takes control.

Having this document in place serves to protect the freeholder and management company as leaseholders are legally bound by the clauses.

Covenants are broadly divided into 2 types, positive and negative:

Positive Covenants

Leaseholders are required to carry obligations, often aimed at creating a pleasant living environment for all residing within the development.  These can include:

• Agreeing to certain funds being spent on maintenance;
• Agreeing to larger works (often subject to committee discussion);
• Paying service charges promptly;
• Keeping communal areas in good condition;
• Agreeing that the external parts of the property are maintained (essential repairs and painting for example).

Negative Covenants

Leaseholders are effectively barred from certain acts across the property such as sub-letting, holiday or service accommodation lets.

Owning pets, subletting, running a commercial business, or making excessive noise after certain hours of the day are other common negative covenants.

There may also be restrictions on accessing certain parts of the development where the leasehold property is located.  These are known as easement restrictions.

What Does Signing a Deed of Covenant Mean?

When the Deed of Covenant is signed upon sale of a leasehold property, both the positive and negative covenants are passed from the seller to the new buyer (and leaseholder).

In effect, it’s a contract issued by the freeholder that obliges the new leaseholder to abide by the covenants.

Breaching any terms contained within the Deed of Covenant could result in a claim in damages and quite possibly a court injunction.

With leasehold properties within the freehold being so different, every Deed of Covenant may have its own nuances.

This is why it’s crucial to have a qualified conveyancer/conveyancing solicitor with suitable expertise to closely examine this and other legal documentation before you sign.

For example, it’s worth checking if there are any attached certificates of compliance and what the implications would be if so.

Problems could sometimes arise if one is dependent on the other.  For example, if there is a restriction on the Register of Title, a certificate of compliance be required before formal registration can happen.  Here, it must be demonstrated that specific clauses have been adhered to.

As with the house sale contract and other key legal documents, the Deed of Covenant must also be signed in the presence of an independent witness (over the age of 18).

Direct Deed of Covenant

If a leaseholder was to sublet their property (with the freeholder’s permission), the Deed of Covenant may state that a separate Deed of Covenant may be required between the subtenant and the landlord.

This is known as a Direct Deed of Covenant as it does not impose any obligations on all the other leaseholders.

Deed of Covenant Fee

You would need to check whether the freeholder will charge a fee for issuing a Deed of Covenant (to add to the other house sale costs ).

This may form part of the administrative charge that some make when forwarding the leasehold management pack to the conveyancer.

Unfortunately, there is not a set fee for this (but it usually does not exceed £300).

There are likely to be further fees charged by conveyancers.  These costs will often directly correspond to the complexity of the document itself.  For example, if the lease documentation is older, more detailed legal work may be necessary (at a proportionate cost).

The deed of covenant is likely to be considered a disbursement , or a supplementary cost to standard conveyancing fees .  Note that there may also be Notice of Transfer and Notice of Charge fees.

Deed of Covenant Template

During the conveyancing process , the seller’s solicitor will usually forward a draft Deed to the buyer’s solicitor to review.  On the back of any enquiries and ‘ironing out’ of any issues, the buyer’s solicitor will then create the final Deed.

Within the Deed, the freeholder would typically be referred to as the Covenantor and the leaseholder as the Covenantee.

Click on the image below to view a PDF sample template.  We would never advise copying and pasting the contents of this sample without qualified legal advice.

The Deed of Covenant will typically be attached to the lease or form part of the same documentation leasehold management pack.  It will be included in the leasehold management pack alongside the LPE1 Law Society Leasehold Form .

Broadly, the Deed of Covenant will contain the following (add more from doc) :

• Freehold and leasehold details (address, postcode and HM Land Registry title numbers);
• Background information on the contents of the Deed
• Parties to the agreement (full names and addresses of the covenantor* and covenantee**);
• Definitions and references are provided, particularly to terms that may be repeated or potentially ambiguous;
• Details on the terms of the covenant which will be specifically drafted by the conveyancer which state what will be the requirements of the Deed.  Each clause will be drafted so there is nothing can legally be called into question;
• An execution clause and signature area to ensure that the terms contained are legally binding.

*covenantor = the person(s) / company that agrees and signs the terms of the Deed of Covenant.

**covenantee = the person(s) / company that issues the Deed of Covenant.

Do I Need to Sign a Deed of Covenant?

Most leases state that a signed Deed of Covenant is compulsory upon any transfer, assignment, or underletting of a leasehold property.

A wet signature will typically be required (this may also need to be independently witnessed).

Not signing the Deed effectively means a breach of contract.  In such circumstances, the freeholder will often refuse to accept any service charges or ground rents (as this could affect their ability to enforce future covenants in the lease).

The consequence will be that these payments accumulate.  Furthermore, there could be additional financial penalties and interest charges down the line.  When it comes to selling the property, the freeholder can lawfully claim for this amount before allowing for things to happen.

Regardless of this, Property Solvers recommend that the document should only be signed after consultation with a suitable conveyancer / conveyancing solicitor .

On This Page

Posts in this series.

• 1 Possessory Title
• 2 Title Absolute
• 3 Deed of Covenant
• 4 Overage Clauses – The Complete Guide
• 5 Restrictive Covenants – The Complete Guide
• What You Need to Know">6 Squatters Rights – What You Need to Know

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Assignment of Lease

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What is an assignment of lease.

The assignment of lease is a title document that transfers all rights possessed by a lessee or tenant to a property to another party. The assignee takes the assignor’s place in the landlord-tenant relationship.

You can view an example of a lease assignment here .

How Lease Assignment Works

In cases where a tenant wants to or needs to get out of their lease before it expires, lease assignment provides a legal option to assign or transfer rights of the lease to someone else. For instance, if in a commercial lease a business leases a place for 12 months but the business moves or shuts down after 10 months, the person can transfer the lease to someone else through an assignment of the lease. In this case, they will not have to pay rent for the last two months as the new assigned tenant will be responsible for that.

However, before the original tenant can be released of any responsibilities associated with the lease, other requirements need to be satisfied. The landlord needs to consent to the lease transfer through a “License to Assign” document. It is crucial to complete this document before moving on to the assignment of lease as the landlord may refuse to approve the assignment.

Difference Between Assignment of Lease and Subletting

A transfer of the remaining interest in a lease, also known as assignment, is possible when implied rights to assign exist. Some leases do not allow assignment or sharing of possessions or property under a lease. An assignment ensures the complete transfer of the rights to the property from one tenant to another.

The assignor is no longer responsible for rent or utilities and other costs that they might have had under the lease. Here, the assignee becomes the tenant and takes over all responsibilities such as rent. However, unless the assignee is released of all liabilities by the landlord, they remain responsible if the new tenant defaults.

A sublease is a new lease agreement between the tenant (or the sublessor) and a third-party (or the sublessee) for a portion of the lease. The original lease agreement between the landlord and the sublessor (or original tenant) still remains in place. The original tenant still remains responsible for all duties set under the lease.

Here are some key differences between subletting and assigning a lease:

• Under a sublease, the original lease agreement still remains in place.
• The original tenant retains all responsibilities under a sublease agreement.
• A sublease can be for less than all of the property, such as for a room, general area, portion of the leased premises, etc.
• Subleasing can be for a portion of the lease term. For instance, a tenant can sublease the property for a month and then retain it after the third-party completes their month-long sublet.
• Since the sublease agreement is between the tenant and the third-party, rent is often negotiable, based on the term of the sublease and other circumstances.
• The third-party in a sublease agreement does not have a direct relationship with the landlord.
• The subtenant will need to seek consent of both the tenant and the landlord to make any repairs or changes to the property during their sublease.

Here is more on an assignment of lease here .

Parties Involved in Lease Assignment

There are three parties involved in a lease assignment – the landlord or owner of the property, the assignor and the assignee. The original lease agreement is between the landlord and the tenant, or the assignor. The lease agreement outlines the duties and responsibilities of both parties when it comes to renting the property. Now, when the tenant decides to assign the lease to a third-party, the third-party is known as the assignee. The assignee takes on the responsibilities laid under the original lease agreement between the assignor and the landlord. The landlord must consent to the assignment of the lease prior to the assignment.

For example, Jake is renting a commercial property for his business from Paul for two years beginning January 2013 up until January 2015. In January 2014, Jake suffers a financial crisis and has to close down his business to move to a different city. Jake doesn’t want to continue paying rent on the property as he will not be using it for a year left of the lease. Jake’s friend, John would soon be turning his digital business into a brick-and-mortar store. John has been looking for a space to kick start his venture. Jake can assign his space for the rest of the lease term to John through an assignment of lease. Jake will need to seek the approval of his landlord and then begin the assignment process. Here, Jake will be the assignor who transfers all his lease related duties and responsibilities to John, who will be the assignee.

You can read more on lease agreements here .

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Assignment of Lease From Seller to Buyer

In case of a residential property, a landlord can assign his leases to the new buyer of the building. The landlord will assign the right to collect rent to the buyer. This will allow the buyer to collect any and all rent from existing tenants in that property. This assignment can also include the assignment of security deposits, if the parties agree to it. This type of assignment provides protection to the buyer so they can collect rent on the property.

The assignment of a lease from the seller to a buyer also requires that all tenants are made aware of the sale of the property. The buyer-seller should give proper notice to the tenants along with a notice of assignment of lease signed by both the buyer and the seller. Tenants should also be informed about the contact information of the new landlord and the payment methods to be used to pay rent to the new landlord.

You can read more on buyer-seller lease assignments here .

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Contract to lease land from a church.

I’m planning on leasing land from a church. Putting a gym on the property. And leasing it back to the school.

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Key terms and definitions

Obtaining landlord permission, tenants and subtenants responsibilities and liabilities, protecting the tenant from sublease pitfalls, putting the agreement in writing, alternatives to subleasing, final takeaways, templates and examples to download in word and pdf formats, tenants and subtenants obligations under a sublease agreement.

From finding a new job in another state to returning home to care for a sick family member to taking the big step of moving in with a new partner, many people find themselves in a situation where they need to cancel their existing lease so they can move somewhere else. Unfortunately, many landlords are reluctant to cancel existing leases, since that puts them in the position of potentially losing money while they look for a new tenant to fill the space. However, there is a solution that is workable for tenants while also being amenable to many landlords: a Sublease Agreement , also known as a sublet. There are many misconceptions about how subleases work and the responsibilities of people involved. This guide will walk through the most important terms to know and the main issues to be aware of when creating a sublease arrangement:

1. Differences between a sublease and an assignment

2. How to get permission from a landlord to sublet

3. Responsibilities and liabilities of the tenant and subtenant

4. Protective measures for the tenant

5. Sublease alternatives

There are many terms used in subleasing that are often used interchangeably and in confusing ways. However, the key distinction is between subleases and assignments . Both of these can be easily created, but have different legal implications and responsibilities for the involved parties that will be explored further in this guide.

What is a "sublease"?

A Sublease Agreement involves a transfer of less than all of the lease . For example, if a person living alone in a leased two bedroom apartment decides to rent out the spare bedroom to a new roommate, that would be a sublease. Or, if a person rents their whole apartment to someone for a couple of months while they travel for the Summer, but then return to the apartment in the Fall, that would also be considered a sublease. The main parties involved in a sublease are:

1. the original tenant , also known as the sublessor , who is the person who first rented the property and plans to rent the space to a new renter, and

2. the subtenant , also known as the sublessee , who is the person who rents their property from the sublessor.

What is an "assignment"?

An Assignment Agreement involves the entire remainder of the lease being transferred to a new tenant. For example, if someone was required to move to a new state for their job and a new tenant takes over the remaining six months on their lease, that would be called an assignment. The main parties involved in an assignment are:

1. the assignor , who is the person who originally rented the property, and

2. the assignee , who is the person renting the property from the assignor and taking over the remainder of their lease.

The first, and most important step, in arranging a sublease or assignment agreement is getting permission from the landlord. The landlord must consent to the arrangement and put this consent in writing using a Consent to Sublease form. If a tenant does not get the consent of the landlord, they leave both themselves and their subtenant or assignee in danger. The landlord would have the option of evicting the tenant, in the case of a sublease, or evicting the assignee, in the case of an assignment, for violation of the original lease agreement. Further, the landlord would feel less obligated to correct defects with the property, such as fixing leaky faucets or broken appliances, given that they do not have a valid agreement with the subtenant or assignee to provide these services.

Unless it says otherwise, when the lease prohibits tenants from subletting or assigning without their landlord's consent, ordinarily the landlord can arbitrarily refuse to permit a sublease or assignment according to their own discretion . However, some states and many leases now provide that the landlord must not unreasonably refuse to give consent to a sublease or assignment. In these instances, if the tenant is able to find a new person who will be at least as good a tenant -- able to pay rent on time, not play the stereo too loud, and follow the other agreements in the lease -- the landlord must accept that person as a subtenant.

If a person's lease prohibits them from assigning the lease without permission from the landlord but does not mention anything about subletting, would that person still be able to sublet the apartment to their friend? Yes, if the lease states only that an assignment is forbidden, the person would still be able to sublet their apartment. Conversely, if the lease prohibits only subletting, the tenant would be able to assign the lease without their landlord's approval. Both actions are prohibited only if the lease says that the tenant cannot sublease the property OR assign the lease without the landlord's consent. Note, however, that some cities, such as New York, have ordinances regulating subleases that take precedence over private agreements.

When subleasing an apartment, the original tenant should try their best to find a person who they think is trustworthy and will continue to pay the rent. The main reason for doing this is that the original tenant remains responsible for making sure the rent gets paid . The subtenant usually does not have to answer to the landlord, only the original tenant; the landlord can generally only sue the original tenant for the rent . If the subtenant does not pay the rent on time, the landlord can start eviction proceedings against the original tenant. If the subtenant owes several months of back rent, the original tenant is responsible for making sure it is paid. In the same way, the original tenant is responsible for making sure the rental is in good shape even if they are not currently living there.

What can a tenant do if they end up paying for the outstanding rent or damage a subtenant did to the property? The tenant can then go to the subtenant to ask that they be reimbursed for this money and take them to small claims court if they refuse to pay.

Unlike in a sublease, in an assignment, if the assignee fails to pay the rent, the landlord can go directly after the assignee for the unpaid rent . The landlord can also sue the assignee for any damage to the apartment that they are responsible for. Be aware, however, that the landlord can still sue the assignor, or original tenant, as well, even if the landlord consented to the assignment. The landlord has their choice of who to go to when they are looking to get paid.

Before subleasing a property or assigning a lease, the original tenant should make sure their subtenant or assignee is a responsible person who will pay the rent on time and will not damage the apartment. In a sublease or assignment, the original tenant essentially steps into the role of landlord to their subtenant or assignee. Therefore, it's important for them to protect themselves the same way a landlord would. When entering into sublease or assignment agreements, the original tenant often puts protective measures in place , including requiring payment of a security deposit, often equal to at least one month's rent, and putting the terms and agreements of the sublease in writing, including details like the length of the sublease or assignment, the amount of rent, when and to whom it must be paid, late charges, payment for damages, and so on.

Since the original tenant is acting as a landlord when subleasing, they are bound by some of the same laws that apply to the landlord . For example, each state has different rules and guidelines about the maximum amount that may be charged for a security deposit. In most cases, the original tenant may not reenter the property without giving appropriate notice to the subtenant. However, particular to assignments, those agreements often include a provision that the original tenant has the right to reenter the property and retake possession of it if the assignee fails to pay the rent. This gives the assignor some additional protection if the assignee defaults on the lease.

Once all parties, including the original tenant, subtenant, and landlord agree to the sublease or assignment, it should be put in writing. A written agreement works to protect all of the parties and their rights and obligations under the lease agreement . An oral agreement is enforceable in some states, but in all cases is subject to potential misunderstandings and challenges in court. A written Lease Assignment Agreement is usually relatively brief since it incorporates all of the provisions included in the original Residential Lease Agreement or Commercial Lease Agreement . A Sublease Agreement is more extensive and includes specifics related to when and to whom rent payments will be made, whether the subtenant will pay a security deposit to the original tenant and if so the method and amount of that payment, who will receive notices related to the rental. Once a Sublease Agreement or Lease Assignment Agreement has been put into writing, it should be signed by all involved parties. The Agreement must always be signed by the tenant and subtenant or assignee. However, the document may also be signed by the landlord to serve as a written record that the landlord grants their permission and is aware of the arrangement.

What if a tenant must move out of their rental property for some reason, say, six months before the lease expires, but they don't want to worry about the potential hassle and risk of finding a subtenant or assignee? The lease may give the tenant the right to cancel their lease by giving a certain amount of notice, usually two to three months. In a month-to-month lease, the tenant usually must give only thirty days notice. If the lease does not allow for this, the tenant has the option of finding a new tenant, subject to their landlord's approval, and the tenant's own trouble and expense. When the tenant finds a suitable person, they can ask their landlord to sign a document releasing them from their original lease . The landlord will then have the new tenant pay a deposit and sign a new lease. If the landlord agrees to do this, the original tenant will no longer be liable for the rent or acts of the new tenant. This solution is often acceptable to reasonable landlords.

Subleasing can be a great option for someone looking to move somewhere else, either temporarily or permanently, while they are in the middle of their current lease term. Here are the most important things to remember when setting up a sublease or assignment agreement:

• A sublease is a transfer of less than all of the lease; an assignment is a transfer of the entire remainder of the lease.
• The landlord must grant their permission for the sublease or assignment in writing if the tenant wants to protect themselves from future liability.
• In a sublease, the landlord can only go after the original tenant for rent or damages owed by the subtenant; in an assignment, the landlord can go after either the original tenant or the assignee.
• The original tenant can use measures such as collecting a security deposit to protect themselves in case the subtenant or asignee fails to pay the rent or causes damages.
• The best way to protect all involved parties is to put the agreement in writing.

About the Author: Malissa Durham is a Legal Templates Programmer and Attorney at Wonder .Legal and is based in the U.S.A.

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Deed of Covenant When Buying a Leasehold Property

What is a deed of covenant our guide has everything you need to know about entering into a deed of covenant when buying a leasehold property....

Deed of Covenant is a term that may crop up when you are buying a new home if you are purchasing leasehold.

If you are buying a leasehold property , conveyancing may take a little longer, and this is because there is a third party involved - the landlord, who is the freeholder. When a leasehold property goes up for sale, they need to provide information to the buyers solicitor that only the landlord will be able to provide.

What is a Deed of Covenant?

When a buyer purchases a leasehold property, the new buyer may need to enter into what is known as a Deed of Covenant. A Deed of Covenant is a document that the buyer will sign to say that they agree with the lease terms.

It is also a legally binding agreement between two people that states that one person will pay the other an agreed amount - to pay ground rent and service charges, and to observe certain restrictions. In simple terms, the Deed states the things that the purchaser must and must not do with the property, for example, on the ‘positive’ side, being responsible for contributions to a maintenance fund, and on the ‘negative’ side, not using it as a business base, nor keeping a pet. A restrictive covenant is a clause in the Deed that limits or restricts what the leaseholder can do with the property.

Is there a fee for a Deed of Covenant?

The landlord may charge the buyer a fee for the Deed of Covenant, as well as fees for a Notice of Transfer and a Notice of Charge fee. When you find out if a Deed of Covenant is required, then it is a good idea to enquire as soon as possible about fees and about what is required.

The landlord also has to provide the buyer’s solicitors with information about the property, and the cost of providing this information is at the landlord’s discretion - usually around £300. This fee needs to be paid for by the seller.

Who can witness a Deed of Covenant?

Typically a witness needs to be unrelated to either party, over 18 and independent.

What is the process of a Deed of Covenant?

If a Deed of Covenant is required, a draft form will usually be given to the buyers solicitors by the seller’s solicitors during the conveyancing. The purchasers solicitors will then create the final Deed so the buyer can confirm that they agree to the terms of the lease.

What is a direct Deed of Covenant?

If a tenant sublets their property, their Deed of Covenant may insist that the new subtenant enters into their own Deed of Covenant with the landlord. This is why it is called ‘direct’. It is not an obligation on all leases, and may be open to negotiation when setting out the main Deed of Covenant if you ask the landlord why he feels a direct covenant is required.

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Shared ownership leases: a quick-fire guide to assignments

In this quick-fire guide, we outline the steps social landlords should take when assigning a shared ownership lease to ensure the process runs smoothly:

• Use a license

Unless the leaseholder has staircased to 100%, the landlord’s consent will be required to assign the lease. To provide evidence of this consent, enter into a licence to assign, and state that the buyer and seller should do the same.

There was a series of model leases issued between 2012 and 2015, which required the buyer to enter into a direct deed of covenant with the landlord, but using a license to assign will enable you to do both in one document.

• Establish who is approving the mortgage offer

Every shared ownership mortgage offer requires landlord approval or it won’t benefit from the mortgagee protection clause. Establish from the outset whether the housing association, or its solicitors, will be approving mortgage offers, and what their criteria will be.

• Be clear on leasehold information

All leasehold sales, shared ownership or outright, will require a pack of standard information such as confirmation that rent and service charges aren’t in arrears, if any major works are planned, and if the landlord has taken steps to forfeit and close the lease. These packs often take a lot of time to produce, and once provided, there are usually further questions. Ensure you’re being clear with your leaseholders about how they get this information from you, and how much it will cost to produce this pack.

• Take expert advice

Most legal titles are the same but it’s important to get them checked as some information may not be immediately clear.  Specialist lawyers will be able to quickly review multiple titles and leases, and conclude precisely what documentation is required.

• Do your homework on notices and compliance certificates

The majority of leases require the buyer to serve notice on the landlord formally declaring they are the legal owner. There is also usually a restriction at HM Land Registry to ensure the landlord confirms the lease has been complied with before the new buyer is registered – the buyer will require a certificate to satisfy this restriction. Confirm who is providing the certificates, how much they are charging, and what information will be needed before it is issued.

By taking these steps and being clear with your people about who is responsible for key tasks, the assignment process should be straightforward and you will avoid any potential pitfalls.

For further information on staircasing or assigning an existing lease, please speak to Alasdair Muir or Lale Ali in our Real Estate and Projects Team . 

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What is a deed of covenant and why is it important.

When you are buying or renting property, it is fairly common for you to come across terms such as “deed of covenant.” “restrictive covenant” or “positive covenant”

Although it may sound daunting and complex, deeds of covenant are actually relevant to a great many property sales  and transfers around the country. Quite simply, a deed of covenant is a legal agreement between a party with an interest in the land, such as a Landlord, Management Company or owner of adjoining property, and the purchaser. 

Restrictive Covenants

A Restrictive Covenant is an obligation not to do something in relation to the land in question.  Restrictive Covenants are usually discoverable whilst title is being investigated as part of the normal conveyancing process.

The Covenant will usually be contained in a prior deed or transfer of the land. An example of  restrictive covenant would be ‘not to use the land and the dwelling thereon as anything other than a private residence for a single family” or “not to obstruct the right of way over the pathway shown coloured blue on the plan to this Transfer”.

Restrictive Covenant’s ‘run with the land’, which means that the benefit and burden of the covenants are binding on successors in title, and anyone who acquires the land will take subject to the subsisting covenants, provided that they are clear and correctly registered, usually without any further deeds or declarations having to be produced for the purposes of ensuring that the covenants will continue to bind the new owners.

It is possible to obtain a release from a restrictive covenant, provided the party or persons with the benefit of the covenant can be identified and that they are agreeable for the covenant to be released.

More often than not, the buyer will simply acquire the land/property subject to the covenants.  As part of the conveyancing process, our report to you on title issues will generally cover the presence of any unusual or overly burdensome restrictions.

Positive Covenants

A positive covenant is a promise to actively perform or carry out a promise made to the party with the benefit of the covenant.  An example of a positive covenant would be a promise to pay  a routine service charge, or “ to maintain in a good state of repair and condition the boundary wall marked with a ‘T’ on the plan to this transfer ”

Positive covenants do not generally run with the Land.  They are personal to the original parties to the original deed, transfer or conveyance in which the covenants are set out.

There may be occasions where the party who has the benefit of the covenant will want to ensure that it is binding on the successors in title of the party with the burden of it. Because the obligations do not ‘run with the land’, a separate deed will usually be entered into between the party with benefit of the covenant and the new owners, to ensure that the covenants can be enforced.

This document is normally created and completed simultaneously with the transfer of land to the new owners.

In the case of positive covenants, it is common for the title to be burdened by a restriction which prevents a sale, transfer or other disposal of the land unless the new owner enters into a Deed of Covenant.  This ensures that the Deed of Covenant is created and that the obligations do not lapse when the original owner sells or transfers their land.

Deed of Covenant Meaning

In conveyancing, a deed of covenant is a legally binding document that sets out the terms, conditions, and obligations between two parties, for example the freeholder and the leaseholder of leasehold property. (Just to clarify, the freeholder of a property is the one who owns the property outright, whereas the leaseholder owns an interest in the property for the period of the lease, which is usually a fixed amount of time). 

Those who make the promise are known as the “covenantor(s)” and those who enjoy the benefit of that promise are the “covenantee(s)”. 

Why Is a Deed of Covenant Required?

Deeds  of Covenant basically set out rules that you have to adhere to when living in a property. They are typically used to either create or modify the rights and obligations of parties in relation to land or buildings. For example, if you have a deed of covenant on freehold property, it could require you to maintain a shared wall, or a deed of covenant on leasehold property might obligate you to contribute to the upkeep of communal areas.

When it comes to buying or selling a property, it is important to know whether there is a requirement to enter into a Deed of Covenant and how it could affect the land, so that you know what your obligations/restrictions are. This is why it is important to check if there are any existing covenants registered on the title register at the Land Registry before making a purchase. You can get property and land information by requesting it online . 

The wording on the deed of covenant  or title documentation may be confusing to the untrained eye, but your conveyancing solicitor will identify it and inform you based on your specific transaction, as well as your other rights or obligations that come with the land.

What Is a Deed of Covenant on Freehold Property Vs a Deed of Covenant on Leasehold Property?

Most obligations relating to leasehold property will usually be contained within the lease itself.  When leasehold property is sold or transferred, the new owner will become a successor in title of the previous leaseholder, and thereby ‘the Tenant’ for the purposes of the lease.

There is as a consequence minimal  need for a Deed of Covenant in the case of leasehold title, because the obligations both positive and negative or contained in the lease itself, although it is not uncommon for a Landlord to require that the new owner of leasehold title enters into a Deed of Covenant in which they promise to perform the tenant’s obligations and observe the conditions of the lease.

How Long Does a Covenant Last?

If no time limit is mentioned, covenants could last indefinitely , unless the requirements in the covenant have been met and discharged, or the parties have agreed to modify or release the signed deed of covenant for instance. 

Some covenants may have become obsolete due to the passage of time and can therefore be disregarded.

What Happens if You Breach a  Covenant?

If you breach a  covenant by not following the terms, the covenantee can take legal action for breach of contract.

The aggrieved party can file a claim in court, seek an injunction to stop further breaches, and/or seek damages for any financial loss suffered because of the failure to comply. They could also pursue a claim specific performance of the covenant in question, if applicable.

The court’s preferred solution is usually to ask for the breach to be remedied. For example, if you built an extension on your home that breached a restrictive covenant not to construct or alter the property, this would mean being ordered to tear it down. 

The  Limitation Act 1980, contains certain restrictions on the time period in which a claim for breach of covenant can be brought. For example, Section 19 of the Limitation Act 1980 prevents any action being brought to recover arrears of rent after more than six years from the date on which the rent was due.

There are however no general time limits on enforcement of a covenant. It is also important to note that some breaches are ‘continuing’, by way of illustration, the aforementioned extension breaches the restrictive covenant on each day on which it is present, rather than the just on the day that it was constructed.

It is possible to argue in some circumstances that the covenantee has waived the right to enforce a breach by their actions, for example, if a Landlord continues to collect rent, thereby treating the lease as continuing, despite being aware of a breach of covenant by the Tenant.

Must You Have a Signed Deed of Covenant for It to Be Valid?

To be a “deed” it must be a written agreement, signed by the parties, witnessed by an independent witness, and delivered to the other party. If those requirements are met, the deed of covenant is enforceable.

By signing the deed, courts take this as evidence that the signing parties have read, understood and agreed to the exact terms of the covenant. 

How Can Laker Legal Solicitors Help?

At Laker Legal Solicitors, we have a dedicated team of residential property professionals on hand to assist with your conveyancing needs. As a member of the Law Society Conveyancing Quality Scheme, we are held to the highest conveyancing standards and take this responsibility seriously by offering our clients transparent, straightforward and quality legal advice.

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What is the liability of an outgoing tenant under an 'old' lease following assignment? Is a landlord obliged to pursue the current tenant for any arrears before pursuing a former tenant or guarantor to a former tenant?

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Related legal acts:

• Land Registration Act 2002 (2002 c 9)
• Landlord and Tenant (Covenants) Act 1995 (1995 c 30)
• Landlord and Tenant Act 1954 (1954 c 56)
• Law of Property Act 1925 (1925 c 20)

Key definition:

Tenant definition, what does tenant mean.

A person to whom a lease is granted.

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Andrew Weir

Head of conveyancing, [email protected], leasehold flats – do you need a deed of covenant.

Navigating the world of real estate and property law can be complex, especially when it comes to understanding key terms like “covenants” and “deed of covenant”. In our comprehensive guide, we will delve deep into covenants, exploring their types, their role in leasehold titles, and the necessity of a deed of covenant.

What is a covenant?

In simple terms, a covenant is a legal promise that you will carry out certain acts or refrain from doing certain things.

How many types of covenants are there?

There are two types of covenants:

Positive covenants

Positive covenants are acts that you must carry out such as paying service charges, repainting every five years, keeping the property in good repair, and so on.

Negative Covenants

Negative covenants however stop you from doing certain acts with the property such as not allowing you to carry out illegal acts or cause a nuisance,  or not allowing you to sublet the property.

So it is important that you read the covenants in the lease carefully so that you understand what restrictions apply when you agree to buy a leasehold property.

What is the deed of covenant for?

With Freehold titles, positive covenants do not pass with the land and so are not enforceable upon any new owner of the property.

However, with leasehold titles positive obligations are automatically binding upon successors in title to both landlords and tenants.

When buying a leasehold property, the deed of covenant acts to confer rights between the parties or protect what is known as ‘Privity of Contract’. This principle provides that a contract cannot confer rights or impose obligations upon any person who is not a party to the contract.

The deed of covenant is therefore used to create a direct contract between the landlord/managing agents and the new leaseholder.

This way, the landlord/managing agents are able to go directly to the new leaseholder to collect ground rent and service charge payments, as well as being able to enforce the covenants on the new leaseholder directly.

Why is the deed of covenant needed?

Aside from the main reason mentioned above, the majority of leases today state that a deed of covenant is required upon any transfer, assignment or underletting of the property.

Since this deed forms one of the obligations in the lease, failure to enter into such a deed amounts to a breach of the lease.

In many cases, it also means that the managing agents/landlord will not accept any of your payments for service charges or ground rent until the deed is submitted since if they accepted the money when there has been a breach, this could waive the landlords’ right in future to enforce the covenants in the lease.

If this happens, even though a leaseholder is sending your service charge and ground rent payments as required, since the management agents/landlord will not accept this money due to a breach of the lease, you can end up getting into arrears with your payments which could lead to more substantial penalties and interest.

But is a deed of covenant still needed?

There has been much debate in the legal world as to whether deeds of covenant still have any useful application in modern-day law.

Under the Landlord & Tenant (Covenants) Act 1995, Section 12 essentially states that on any assignment of the Lease, the benefit and burden of covenants made by the tenant with the third party pass to the tenant’s assignee – so privity of contract is still maintained between the new leaseholder and the landlord/management company and so a deed of covenant will most likely be superfluous to the entire process.

There is also Section 78(1) of the Law of Property Act 1925 which states that in respect of all covenants entered into after the Act came into effect, it is implied that the covenants are to run with the land unless the covenant itself EXPRESSLY states that the covenant is EXCLUSIVELY for the current landlord/management company and the current leaseholder.

Conclusion – Deed of Covenant

Where your lease states that a deed of covenant is required, you need to sign this in order to comply with all of the obligations set out within the Lease you are now taking over.

While legally speaking providing for such a deed may be unnecessary, it has become common practice for leases to require this and the practical implications of not supplying this deed could cause you to be in breach of your lease.

If you are currently looking at buying a leasehold property , you are more than welcome to contact us here at Anthony Gold and one of our experienced conveyancing solicitors will be able to advise you on the process and implications of the property in question.

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4 thoughts on “ Leasehold Flats – Do You Need a Deed of Covenant? ”

I am current currently in a complaint position with the leaseholder/Management company for my daughters Lea should in Weymouth

There are differences in the annual reconcile between the main lease contract and the Deed of covenant I.e the main lease (landlord) states that in the event that an underspend of the SC gains the estimate is returned to the payee the attached Management Company states it goes to the MC sinking fund. Can I request a review / advise of the documents

You are welcome to contact us.

Love this information about property law absolutely Brilliant

great article

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Some Arizona property deeds contain racist restrictions. A new law seeks to nullify them

Dianne Post didn't believe it until she saw it, right there in the deed to her central Phoenix home.

“Sure enough, on page 13 there it is: 'This property may only be sold only to Caucasians'," Post said, reading from her paperwork.

Racially based restrictions on property sales are unenforceable. But a new law that takes effect later this year will allow Arizona property owners who have such restrictions written into their deeds or covenants, conditions and restrictions, known as CC&Rs, to effectively nullify the language.

The courts and Congress decades ago found restrictions based on race unconstitutional and deemed them illegal. So why bother with a new law?

"Ask a Black person," said Post, who is white and lobbies for the NAACP.

It's important to give homeowners a way to repudiate this language, said Carol Rose, a retired property law attorney who in 2013 co-authored "Saving the Neighborhood:  Racially Restrictive Covenants, Law, and Social Norms."

The amendments allowed by Senate Bill 1432 allow property owners to signal their disdain for such restrictions, she said.

Early pioneers

Years before SB1432 came along, residents of the Encanto Manor historic neighborhood in central Phoenix pooled their money and energy to strike racial restrictions from their CC&Rs.

"It was horrible," resident Michael Weeks said of the language, written in 1945.

"It was meant to be very homogenous," he said. The language made it clear that only white people were to be allowed to live in the neighborhood, which sits just north of the Encanto Park golf course.

Specifically, the document barred the sale, lease, or transfer of the homes, as well as the occupancy of them, to "anyone not of the white or Caucasian race."

It went into more detail "(T)his exclusion shall include those having perceptible strains of the Asiatic, Mexican, Spanish, Negro, Indian, Filipino or Hindu races."

But there was an exception for "house servants or yard servants employed by lot owners."

To neighborhood resident Dennis Burke: "It was just ugly."

Ban on racist terms

The neighbors were already rallying around an effort to amend their deeds to prevent short-term rentals. Burke suggested they tack on an amendment that would get rid of the 1945 language.

While the neighbors learned they couldn't erase the restrictions from their CC&Rs due to historical reasons, Burke said the amendment allowed the neighborhood to make a statement that no one supported the restrictive language.

The drive took time and money. Each of the 84 homeowners had to be contacted.

Susan Edwards, who headed up the drive, estimated they raised $4,000 from volunteer donations to cover attorney fees, printing and other costs.

Once the neighbors crossed the 51% threshold required to amend the CC&Rs, they notarized the deeds and filed them with the Maricopa County Recorder's Office.

"We had notary parties!" Edwards said. The filing happened just days before county government, like much of the rest of the nation, shut down in March 2020 due to the COVID-19 pandemic.

Unanimous support at the Capitol

The new legislation will allow homeowners a simpler path than the Encanto Manor neighbors had. It requires county recorders to create a form that property owners can download, sign and then record as an amendment to their property deed. The recording fee in Maricopa County is $30.

The amendment , based on model language from the Uniform Law Commission, removes all "unlawful restrictions" from the deed. Those restrictions cover not only race but color, religion, national origin, sex, familial status or disability when it comes to the sale, use or occupancy of a property, according to the commission.

The law also streamlines the process for a homeowners association to amend restrictive language.

Sen. J.D. Mesnard, a Chandler Republican who sponsored the bill, credited Post with bringing the legislation to his attention. It passed with unanimous support and was signed in late March by Gov. Katie Hobbs.

Post said the legislation originated with the Tucson chapter of the NAACP. A Tucson resident objected when he learned about the "Caucasian only" stipulation attached to his deed, Post said.

It took more than a year of research and lobbying to get the issue before the Legislature.

The bill will become law 90 days after the Legislature finishes its work for the year. It's unclear when that will be.

Common into the late 1960s

Racially restrictive covenants have been around for more than 150 years, said attorney Rose.

Fueled by the "great migration" of Black people from the South to the northern U.S. states, and later by migration in the wake of the two World Wars, property owners and developers used restrictions to control who could buy their land and homes, Rose said.

"It was a kind of a genteel way of discrimination," Rose said. It signaled to white people that they were buying into a white neighborhood, she said. And it sent a signal to potential Black buyers that they weren't allowed.

The practice was widely embraced into the mid-20th Century. In the wake of the Great Depression, as the federal government tried to amp up home ownership, the Federal Housing Administration encouraged the use of racial restrictions as a condition for insuring housing loans, Rose said.

In 1986, when Phoenix attorney William Rehnquist was nominated for chief justice of the U.S. Supreme Court, news accounts documented the fact that a home he had owned in the Encanto-Palmcroft neighborhood contained a restriction on selling to anyone who was not Caucasian.

Rehnquist owned the home, which was built in the early 1930s, from 1961 to 1969, according to news accounts.

The disclosure stirred controversy at the time but also highlighted how common the restrictions were in houses built before the 1968 Fair Housing Act.

A decade later, documents surfaced that showed Rehnquist's attorney had notified him years before that a home he bought in Virginia contained a restriction against selling to anyone "of the Hebrew race."

Keeping things 'fancy'

The restrictions weren't limited to race. They also were useful to try and protect the character of an area, Rose said. That was especially true as real estate development evolved into the creation of subdivisions.

"To make sure things stay fancy, they put in a lot of restrictions," she said.

However, the U.S. Supreme Court in 1948 struck down the use of race-based restrictions as unconstitutional, noting it violated the equal protection clause of the 14th Amendment.

Twenty years later, the Fair Housing Act of 1968 made racially restrictive covenants illegal and unenforceable.

The soon-to-be Arizona law reinforces that status and gives homeowners a way to show they don't agree with the discriminatory language, said Jason Jurjevich, an urban geographer at the University of Arizona.

"This is a momentous step forward for Arizona," Jurjevich said in a statement to The Republic.

"Now, hundreds of neighborhood associations across Arizona can remove racist and illegal language from their Covenants, Conditions, and Restrictions without erasing history."

Jurjevich is leading the Mapping Racist Covenants project in Tucson, documenting areas of town where such restrictions were common.

The project, as well as others like it in other cities, can help to understand the legacy of such discriminatory practices, which can help lead to more equitable housing policies, he said.

Reach the reporter at  [email protected]  or at 602-228-7566 and follow her on Threads as well as on X, the platform formerly known as Twitter  @maryjpitzl .

Support local journalism .  Subscribe to azcentral.com today .

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