Whether a tenant is liable for the breach of its covenants by another person depends on the wording of the particular covenant and of other covenants in the lease.
The High Court considered the question in a recent case, Roadside Group Ltd v Zara Commercial Ltd  EWHC 1950 (Ch), in which Zara let a petrol station and car showroom to Roadside. The lease contained a covenant “not to use the demised premises … for the parking of motor vehicles for sale on any forecourt”. Roadside sublet the car showroom to Triple Eight Motor Co Ltd, which parked cars for sale on the forecourt. Zara claimed that Roadside was in breach of the covenant and brought proceedings to forfeit the lease. Roadside argued that it was not responsible for Triple Eight’s actions.
Previous cases have established that a covenant expressed actively: “not to use the premises …” can only be breached by the person who gave the covenant, or his agent, not by others such as subtenants. However, a covenant expressed passively: “the premises shall not be used …” is breached if anyone uses the premises for the prohibited purpose.
Covenants often include not only an obligation not to do a prohibited act, but also a requirement not to permit that act to be done by others. That extra wording would make the tenant liable if someone else does the prohibited act. Dechert’s leases include a general provision that obligations not to do an act include an obligation not to permit or suffer the act to be done and to use reasonable endeavours to prevent the act being done by another person.
In this case the covenant was expressed actively—“not to use…”—and did not include a requirement not to “permit” parking. On that basis, Triple Eight’s parking would not amount to a breach by Roadside. However, as is often the case with legal documents, the meaning cannot be ascertained from the words alone; statutory provisions may alter the apparent meaning. Zara’s lawyers argued that section 79 of the Law of Property Act 1925 applied.
S.79 Law of Property Act 1925
(1) A covenant relating to any land of a covenantor … shall, unless a contrary intention is expressed, be deemed to be made by the covenantor on behalf of himself, his successors in title and the persons deriving title under him or them, and, subject as aforesaid, shall have effect as if such successors and other persons were expressed…
(2) …“successors in title” shall be deemed to include the owners and occupiers for the time being of such land.
If section 79 applied, it would have the effect of extending the covenant to prohibit parking by subtenants. However, the section applies: “unless a contrary intention is expressed”. There need not be express wording saying section 79 does not apply; it is sufficient to exclude the section if it would be “inconsistent with the purport of the instrument”. So, if it appears from the document that the covenant was not intended to apply to subtenants, then the section will not apply.
The judge noted that a number of other covenants in the lease included a requirement not to permit the prohibited act to be done, whereas the parking covenant did not. The judge considered that showed the parties intended to limit the scope of the parking covenant and to read the words of section 79 into it would substantially alter its scope and be inconsistent with the purport of the lease. Therefore section 79 did not apply and Roadside had not breached the covenant.
The case is a useful reminder that the words of a legal document cannot always be taken at face value and also that it is important to be consistent in the wording of different clauses because a different form of words might imply that a different meaning is intended.