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The Lord Chancellor moved Amendment No. 30:


After Clause 9, insert the following new clause:

("Third party covenants
Covenants with management companies etc

.—(1) This section applies where—
(a) a person other than the landlord or tenant ("the third party") is under a covenant of a tenancy liable (as principal) to discharge any function with respect to all or any of the demised premises ("the relevant function"); and

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(b) that liability is not the liability of a guarantor or any other financial liability referable to the performance or otherwise of a covenant of the tenancy by another party to it.
(2) To the extent that any covenant of the tenancy confers any rights against the third party with respect to the relevant function, then for the purposes of the transmission of the benefit of the covenant in accordance with this Act it shall be treated as if it were—
(a) a tenant covenant of the tenancy to the extent that those rights are exercisable by the landlord; and
(b) a landlord covenant of the tenancy to the extent that those rights are exercisable by the tenant.
(3) To the extent that any covenant of the tenancy confers any rights exercisable by the third party with respect to the relevant function, then for the purposes mentioned in subsection (4), it shall be treated as if it were—
(a) a tenant covenant of the tenancy to the extent that those rights are exercisable against the tenant; and
(b) a landlord covenant of the tenancy to the extent that those rights are exercisable against the landlord.
(4) The purposes mentioned in subsection (3) are—
(a) the transmission of the burden of the covenant in accordance with this Act; and
(b) any release from, or apportionment of liability in respect of, the covenant in accordance with this Act.
(5) In relation to the release of the landlord from any covenant which is to be treated as a landlord covenant by virtue of subsection (3), section 6 shall apply as if any reference to the tenant were a reference to the third party.").

The noble and learned Lord said: I spoke to this amendment with Amendment No. 24. I beg to move.

On Question, amendment agreed to.

Clauses 10 and 11 agreed to.

9.30 p.m.

The Lord Chancellor moved Amendment No. 31:


After Clause 11, insert the following new clause:

Enforcement of covenants

.—(1) Where any tenant covenant of a tenancy, or any right of re-entry contained in a tenancy, is enforceable by the reversioner in respect of any premises demised by the tenancy, it shall also be so enforceable by—
(a) any person (other than the reversioner) who, as the holder of the immediate reversion in those premises, is for the time being entitled to the rents and profits under the tenancy in respect of those premises, or
(b) any mortgagee in possession of the reversion in those premises who is so entitled.
(2) Where any landlord covenant of a tenancy is enforceable against the reversioner in respect of any premises demised by the tenancy, it shall also be so enforceable against any person falling within subsection (1) (a) or (b).
(3) Where any landlord covenant of a tenancy is enforceable by the tenant in respect of any premises demised by the tenancy, it shall also be so enforceable by any mortgagee in possession of those premises under a mortgage granted by the tenant.
(4) Where any tenant covenant of a tenancy, or any right of re-entry contained in a tenancy, is enforceable against the tenant in respect of any premises demised by the tenancy, it shall also be so enforceable against any such mortgagee.
(5) Nothing in this section shall operate—
(a) in the case of a covenant which (in whatever terms) is expressed to be personal to any person, to make the covenant enforceable by or (as the case may be) against any other person; or

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(b) to make a covenant enforceable against any person if, apart from this section, it would not be enforceable against him by reason of its not having been registered under the Land Registration Act 1925 or the Land Charges Act 1972.
(6) In this section—
"mortgagee" and "mortgage" include "chargee" and "charge" respectively;
"the reversioner", in relation to a tenancy, means the holder for the time being of the interest of the landlord under the tenancy.").

The noble and learned Lord said: This amendment inserts a new clause which, although of a technical nature, comprises another important element of the Law Commission's scheme which I outlined earlier. The amendment complements the two clauses which were introduced by Amendments Nos. 10 and 13 pursuant to which the benefit and burden of all covenants is to be annexed to and run with the lease or reversion when assigned in whole or in part, and the benefit of a landlord's right of re-entry is similarly to be annexed to the whole and every part of the reversion, by affording concomitant rights to those with derivative interests. I beg to move.

On Question, amendment agreed to.

Clause 12 [Tenant guaranteeing performance of covenant by assignee]:

The Deputy Chairman of Committees: Amendment No. 32 has been wrongly marshalled so I propose to call Amendment No. 33 first.

The Lord Chancellor moved Amendment No. 33:


Page 6, line 25, after first ("a") insert ("tenant").

The noble and learned Lord said: With Amendment No. 33, I wish to speak to Amendments Nos. 34, 35, 36, 32 (which will be taken in that place), 37 and 38. Clause 12 covers the Law Commission's recommendation that when a tenant under a new tenancy is released on assignment in accordance with Clause 3, it should nevertheless be possible for the landlord, as a condition of licence to assign, to ask him to guarantee performance of the tenant covenants of the tenancy by his immediate assignee, but no more. The possibility of such a guarantee being asked for by the landlord will only arise if the lease gives the landlord any control over assignment either by banning assignment altogether (in which case the landlord will be free to demand such a guarantee as the price for waiving the ban) or by providing for assignment only with the landlord's consent. Subsections (1) to (3) of the clause cover the propositions just stated, and the remainder of the clause makes provision for the limitations on what the landlord can seek to include in the guarantee, which is termed an "authorised guarantee agreement".

Amendments Nos. 32 to 37 make very important changes to the clause to ensure both that the guarantee is actually effective when the landlord most needs it and that it cannot be used as a device for retaining the effect of privity of contract liability once the assignee has himself assigned. As these amendments form one element in the overall scheme, perhaps the Committee will permit me to speak to them together. In addition, Amendment No. 33 does the same thing for Clause 12 as Amendment No. 38 does for Clause 13.

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Amendment No. 33 inserts the word "tenant" in subsection (1) of Clause 12 to make it absolutely clear that it is only tenant covenants the performance of which may be guaranteed, and Amendment No. 38 does the same in subsection (1) of Clause 13.

Amendment No. 34 is consequential upon Amendments Nos. 35 and 32 which make it clear that the guarantee will not be effective unless it complies with the new clearer provision setting the time limits and regulating the terms of an authorised guarantee agreement.

Amendment No. 36 simply introduces words into subsection (3) of Clause 12 making it clear that no question of an authorised guarantee agreement arises unless the lease contains some form of covenant against assignment.

Amendment No. 37 completes the revision of Clause 12 by introducing two new subsections to cover the position of excluded assignments and the position where a tenant who entered into an authorised guarantee agreement becomes tenant again. In a case where a tenant who made an excluded assignment is released on the next assignment then, if the tenant making the next assignment enters into an authorised guarantee agreement, the landlord is to be able to require the tenant who made the excluded assignment also to enter into an authorised guarantee agreement on terms corresponding to those of the assigning tenant's agreement so that they guarantee the next tenant jointly. In the case where a tenant who entered into an authorised guarantee agreement either takes back the assigned lease on a disclaimer following his assignee's insolvency or enters into a new lease under the authorised guarantee agreement it will be possible to enter into another authorised guarantee agreement. It is considered entirely appropriate for a tenant whose previous assignee was weak to have to guarantee his new assignee since it may have been only the prospect of the authorised guarantee agreement which persuaded the landlord to consent to the assignment. I beg to move Amendment No. 33.

Lord Meston: I thank the noble and learned Lord for his explanation, but I wonder in respect of Clause 12 and new Amendment No. 32, where it is provided that the guarantee agreement may,


    "require the tenant, in the event of the tenancy assigned by him being disclaimed, to enter into a new tenancy of the premises",
whether it is intended that there should be any specific timetable for that to take place or whether it should be left to the parties themselves to decide how rigid or how flexible they wish to be in the terms of that agreement. The amendment as presently drafted seems to leave it rather unclear. I wonder whether the noble and learned Lord can perhaps give us some indication of what is intended by the Bill.


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