Wording Absolves Tenant from Liability for Breach of Covenant


When a covenant over property is created, it can take more than one form. For example, it can be an undertaking that a person will not do something. Alternatively, it can be in the form of an undertaking not to permit something to be done.
These undertakings are quite different, as a recent case shows. It involved a petrol station and car showroom, which was let and then sub-let to another business. The sub-tenant parked the cars it was selling around the site and the landlord brought an action against the tenant for breach of a covenant which prohibited it from using the premises ‘for the parking of motor vehicles for sale…’.
The tenant argued that it had not breached the covenant because the sub-tenant had parked the cars. The court accepted that argument, because the covenant in the lease only acted against the tenant. Had it been phrased such that the tenant was required to ensure it did not permit vehicles to be parked on the premises, then the tenant could have been held liable for the actions of the sub-tenant in this regard. As it was not, the tenant was not liable.
In general, the courts will rule that a covenant not to do something is not broken if a third party does the prohibited thing. On the other hand, a covenant guaranteeing to do something will normally pass with the lease, so leaving the tenant liable to do the thing required if the sub-tenant defaults.
Says <<CONTACT DETAILS>>, “Wording is crucial in all forms of legal agreement, as the courts will normally interpret agreements to mean what they say, not what one party thinks they should have said. Accordingly, careful thought needs to be given to the wording of the terms of any lease. We can advise you to help you minimise the risk of an undesirable use of a property you wish to let and avoid any commercial or other loss which results.”
Partner Note
Roadside Group Ltd. v Zara Commercial Ltd. [2010] EWHC 1950 (Ch).

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