Outcomes

At the end of the lesson, students would be able to:

1. Explain the various types of covenants that should be in a standard lease and reasons for the inclusion of the covenants in a lease
2. Conduct client interview to extract necessary information required for the preparation of a lease
3. Explain the various methods a lease may be determined and the various parts of a lease
4. Draft a standard deed of lease.
5. Identify and discuss ethical issues that may arise in a lease transaction

 

Contents

1. Covenants in leases --- reflecting the positions in Abuja and Lagos State
2. Determination of a lease
3. Information required to prepare a lease

Drafting a lease

 

Drafting

THIS LEASE made this……..day of………(for lease)

This agreement made this…………day of ………… (for tenancy agreement)

 

The covenants would be included in the miscellaneous part of the document.

When you use “commencing from” 17^th January 2018 –it means that 17^th January 2018 would be excluded so the lease starts counting from the 18^th ,and when you use “commencing on”, it means you start counting from the mentioned date. So note the differences when you use ‘on’ and ‘from’.

The rent clause is begun by either ‘yielding’ or ‘paying’. When the rent clause does not stipulate whether rent would be paid in advance or arrears, it would be paid in arrears. Note when the rent is to be paid, how it is to be paid.

Rent review clause gives the landlord opportunity to review the rent periodically and reasonably. Unilever v Adesegun

 

Covenants in leases

There are three types of covenants

• Express
• Implied
• Usual

 

Usual Covenants

They are usual by virtue of that relationship. These are covenants that can be taken for granted and normally arise by virtue of that landlord-tenant relationship. For example – the grant of quiet possession, the tenant would pay rent or not do anything that would amount to questioning the title of the landlord.

 

Implied covenants

These are covenants that don’t need to be expressly put into writing, if omitted they would be implied into that relationship. It is implied that the tenant would keep the property in a state of repair.

 

Express covenants

These go beyond, they are covenants that are written down. If omitted or if not provided for expressly they would not be implied into the relationship.

 

Who drafts the lease agreement? – Lessor or lessor’s solicitor.

 

COVENANT TO PAY RATES, TAXES &OUTGOINGS

This would include water,electricity,and security

Purpose

• It is to specify and identify who is responsible to pay the rates, taxes and outgoings. So basically to impose responsibility regarding to payment of outgoings
• In providing for this, it goes ahead to provide the extent of liability

In the absence of this it would give rise to disputes as one may not know the payment they ought to make. Note that certain rates are clear, they are owners rates and belong to the owner (landlord)

Who is bound to pay? Either party could be responsible,it depends on the agreement. Usually the landlord pays for the non-recurrent rates while the tenant pays for the recurrent rates, so this would apply in the absence of any agreement. If the tenant is paying rent plus service charge that means the tenant would have paid for everything, and the landlord would just pay.

Types of rates:

• Recurrent – this is usually borne by the tenant
• Non-recurrent – this is usually borne by the landlord

 

See Smith v Smith (1939) 4 All E.R 312–the case says that the tenant is only bound to pay rates and services in existence at the commencement of the tenancy. However where a new rate has been introduced but in effect it is the same rate that’s existing but under a different name the tenant would continue to pay that rate.

 

“ To pay all taxes, rates and outgoing in respect of the demised premises” – this just favours the tenant and not the landlord because if new rates are introduced the landlord would have the burden of paying them.

Where the covenant is drafted that the lessee only pays existing rates and taxes as a general rule he is not bound to pay anything existing after except where they are occupier covenants. There are usual covenants, so the question of him paying future taxes depend on whether the rates are occupiers rates.

If the covenant says to pay ‘existing and future rates’, then the future rates referred to there would be only by the occupier rate.

 

Ideal covenant

“To pay all taxes, rates, duties, assessments, impositions and outgoings whatsoever now or hereafter payable in respect of the demised premises either by the occupier or the owner”- here the tenant has been bound to pay future rates and so called rates that are referred to as owners rates.

 

USER COVENANT

Where a user covenant is not included the property can be used for any purpose as long as it is legal. See Dawodu v Odulaja (1976) OYSHC (Pt. 1) 65

When drafted the covenant must be clear and unambiguous.

Purpose of the user covenant

- It specifies the use to which the property is to be put

 

COVENANT TO REPAIR

This covenant can be undertaken by either the landlord or the tenant.

If there is no express covenant as to repair this covenant would be implied on the tenant by virtue of the implied covenant of the tenant to use and keep the property in a tenant like manner.

How the covenant to repair can be construed?

• With reference to age of property LURCOTT V WAKELY & WHEELER (1911) 1 KB 905
• PROUD FOOT V HART (1890) 25 QBD 42 – in this case even if the property was not in a good manner, the implied covenant applied that the tenant would be the one to make the repairs
• The locality

See oyename v sule (1962) 2 NLR 123 

Structural or internal? The landlord should be responsible for areas that are jointly used by the tenants and structural repairs, while the tenant should be responsible for internal repairs.

Where there is a duty on the landlord to repair, there is also a duty on the tenant to notify or give notice to the landlord. The landlord would not be guilty where the tenant has failed to give the landlord notice.

 

COVENANT AS TO ASSIGNMENT

This is an express covenant. Where this provision is not made for it means the tenant can assign Inuwada v bryne (1973) CCHCJ 59

KEEVES V DEAN (1924).

 The purpose of this covenant is 1) to protect the demised premises and prevent it from falling into wrong hands 2) it assists to ensure that undesirable elements are not allowed into the property 3) protect his reversionary interest

 

Examples of draft

“Not to assign or sublet” – this is an absolute bar, this would only be breached where there is a legal assignment. So where there is an equitable assignment this clause would not be breached. 

 

“Not to assign or otherwise part with the demised premises” – this would be broken even where there is an equitable assignment

 

“Not to assign or otherwise part with the possession of the demised premises” – this would be breached where there is an equitable assignment.

 See Ishola Williams v T.A Hammond Project Ltd (1988) 1 NSCC 342 OR (1988) 2 SCNJ 318

 

“Not to assign, underlet or otherwise part with possession of the demised premises without the written consent of the landlord” – so where the tenant fails to obtain the written consent of the landlord,he would be in breach.

 

Ideal draft

“ The tenant covenants not to assign, underlet or otherwise part with the possession of the demised premises without the prior written consent of the landlord, such consent not to be unreasonably withheld or delayed in the case of a responsible and respectable person.” – this balances both the interest of the tenant and the landlord.

 

The landlord is not bound to give reasons for refusal to grant consent but in considering whether or not to give consent there are two factors the landlord can consider. 1) The personality of the proposed sub lessee, and 2) The purpose for which the property is to be used.

Note that once consent has been granted it cannot be withdrawn. See Ideal film renting company v Nelsen (1921) 1 CH 575

 

 

Alakija v John Holt (1973) 7 CCHCJ 27 , CURTIS MORFELT V WHEELER   (1929) CH 224 @ 226

Note that in exam – they would ask you to comment on the adequacy of the draft and offer a redraft. The draft usually begins with “the sub-lessee covenants as follows”

 

Grounds for refusal of consent

• Personality of the proposed sub lessee

See Houlder Brothers & co v Gibbs (1925)

Cobham v popular restaurant (1917)

 

COVENANT TO INSURE

This is same thing as Insurance covenant.  It must contain certain points:

Contents of an insurance covenant

1. Who to insure?
2. The risks to be covered
3. The insurance company
4. Amount of cover – the insurance premium payable
5. Application of insurance money

 

• Who is to insure? Both the landlord and the tenant have insurable interest in the property. Therefore there are factors that will determine who will insure in the particular transaction
• Existing obligations - You have to ask who has an existing obligation relating to the property to insure before the transaction
• Nature of the property – if there are other tenants e.g. if there are a block of 6 flats with 6 tenants, it might not be practicable for all the tenants to insure, so the landlord may decide to insure
• Other provision in the lease – for example if there is service charge, the landlord would insure and include that burden in the charge.
• Use of the property –use to which it is put

 

• The risk – this is what it should be insured against e.g. insured against fire, burglary etc. it is not possible to insure for every conceivable risk but it should be as much as possible comprehensible and practicable

See Upjohns v Hitchens (1918) 2 KB 48

When the tenant has taken out an insurance policy with a reputable company in the usual form he has complied with the provision, it doesn’t matter if the risk is not covered by that insurance.

 

• Amount of cover - see Bander Property Holding ltd v Darwell Ltd (1968) 2 All ER 305. The landlord is not bound to chose the cheapest even though the tenant is reimbursing

 

• Application of Insurance money.See Leeds v Cheetham (1872) 1 Sim 146

See Munford Hotels Ltd v Wheeler (1964) Ch 117

What happens when the property is destroyed and the money is re-instated? 

Note General Position – under the common law

1. Where the landlord insures the tenant is not bound or have a right to compel the landlord to use the money to re-instate. Under common law where the property is destroyed the tenant is still bound to pay rent
2. Where the tenant insure or reimburses the landlord he can compel the landlord to use the money towards re-instatement of the property

• Where tenant insures in his own name and in the absence of any provision for reinstatement the landlord cannot compel the tenant to reinstate

But this has been corrected by s 67 of the Insurance Act LFN 2004 and it is to the effect that where the property was destroyed by fire, an interested party can by means of specific performance compel the landlord to apply that the money be used towards re-instatement of the property.

 

OPTION TO RENEW (COVENANT FOR RENEWAL)

Lessors covenant. Option to renew goes to the term, rent review goes to rent review before the term expires. A periodic lease would continue to run until a positive act is done to terminate it and a quit notice has to be issued but for fixed tenancy a quit notice is not needed.

Purpose/usefulness

• If its not there all the terms and condition of the existing lease would be used for the new lease
• If its not there the issue of renewal would not arise as such the lessee would not be entitled to a new lease

 

Content of:

• When to give notice e.g. two years before the expiration of the term granted
• Mode of giving notice e.g. if it has to be in writing
• Condition precedent – this has to do with condition to be met. E.g. if the tenant breached the covenants or never paid rents the landlord may not renew the term
• Terms

IITA V KHAWAM (1975) 1 WSCA

Note: avoid creating a perpetually renewable lease. In the covenant to renew, you must exclude the option to renew itself.  See Re Hopkins.

In the option to renew covenant, two clauses must be excluded – 1) option to renew clause itself and 2) rent clause

 

Standard covenant:

“ The landlord shall on the written request of the tenant made 3 months before the expiration of the term hereby created, grant to the tenant the lease of the demised premises for another term of 3 years from the expiration of the term hereby granted at a rent to be agreed and containing all the terms and conditions of this lease except the option to renew”. – The draft without the words in bold would lead to a lease that has the option to renew itself

 

Covenant and the Tenancy law of Lagos state

Even if certain covenants are not made because of the law it is implied that certain things would be done.So if the property is covered by the law, you don’t need to make express provisions for certain covenants. See section 7(2) and 7(6) of the law – covenant to pay rates, taxes and outgoings; covenant not to assign.

• Note application of the law – it doesn’t apply to Apapa, Victoria Island, Ikoyi, GRA.

 

Determination of leases

• By expiration
• By notice
• By forfeiture – this must be expressly provided for in the lease agreement

 

Remedies

• Specific performance – when its to pay rent and outgoings
• Damages
• Forfeiture
• Re-entry

 

Provisos in leases

• Definition of
• Effect of
• Types of

Note: you must include a clause for abasement of rent when it’s a long lease, frustration does not usually apply for lease.