Leases: Contracts or Interests in Land

Introduction
Irish Position
Insightful Development
Implications

Introduction

The recent English High Court decision in Nynehead Developments Limited v RH Fireboard Containers Limited [1999] 02 EG139, has sparked renewed interest in Ireland in the obligations of landlords and tenants under leases. There has been growing recognition by the English judiciary that a lease may be brought to an end by the acceptance of a repudiatory breach.

Irish Position

The current position in Ireland is that a landlord's failure to perform duties under a lease does not release the tenant from its obligations. This was affirmed in Riordan v Carroll [1996] 2 ILRM 263 where the court accepted the long-held view that a tenant is not entitled to withhold his rent because the landlord is in breach of his obligations under the lease. The reason for this view is that a lease is not just a contract, but rather it creates an interest in land and various obligations to which the ordinary principals of contract law do not necessarily apply. Under contract law, the parties obligations are bilateral, that is, mutually dependant on each other. Leasehold obligations, however, are independent, which means that a breach by one party of their obligations does not entitle the other party to regard himself as released from any of his obligations.

Insightful Development

The traditional view of the nature of a lease has been the subject of radical changes in England. The issue was initially addressed in Hussein v Mehlman [1992] 32 EG 59 whereby the court expressly acknowledged the principle that a lease or tenancy could come to an end by the tenant's acceptance of his landlord's repudiatory conduct

In the recent Nynehead Developments Case the High Court accepted the authority of Hussein. The real issue before the court was with regard to the type of breach that would constitute a repudiation of the lease. The court held that to be classified as repudiatory the landlord's breach would have to deprive the tenant of substantially all of the benefit the tenant intended obtain from the lease.

Implications

The fundamental issue is how far the English approach will be reflected in Irish law. Commentators have asserted that there are good grounds for assuming that the Irish courts may follow English precedent. A major obstacle has been removed in Ireland by the provisions in Section 3 of the Landlord and Tenant Law Amendment Act which provides that the relationship of landlord and tenant is deemed to be founded on the express or implied contract of the parties. Secondly, in the case of Nelville & Sons Limited v Guardian Brothers Limited [1995] 1 ILRM 1, the Supreme Court accepted that the doctrine 'frustration of contract' can apply to a lease. This demonstrates the willingness of the Irish judiciary to apply contractual principals to a lease.

Notwithstanding the lack of any authority directly on the point in Ireland, landlords in Ireland should carefully consider the English judgments. Despite Section 3 of the Landlord and Tenant Law Amendment Act which recognizes the contract aspects of a lease, what remains to be seen is how far the court will go in restructuring leasehold law along contractual lines.

For further information on this topic please contact Paul Eustace at Dillon Eustace by telephone (+353 1 667 0022) or by fax (+353 1 667 0042) or by e-mail ([email protected]).