How Law Affects Lakshmi - Essay Example

Introduction A lease is generated for a period of time and can be determined (ended) by one of the parties by giving notice1. A fixed term lease is a lease that is meant to be held for a fixed and determinate period of time. This paper will examine important pointers of law and provide recommendations on how these pointers of law will affect Lakshmi. It therefore provides advise to Lakshmi on how to deal with matters and provide solutions to the problems and issues at hand. Issues The issue relates to the kind of lease and whether it is valid or not. The fundamental question relates to whether the lease transferred by Troy to Ai-Ai was in conformity or in breach of Lakshmis covenants in the initial lease agreement or not. The second issue relates to Troys position in the contract after the property is transferred to Ai-Ai. Is Troy bounded by his guarantee to check performances of new assignees or not. What is the position of the guarantee in relation to Lakshmi and can be held responsible for the actions of Ai-Ai and Boo? The third issue relates to the possibility of Ai-Ais transfer of the property to Boo. Is the extended holiday in Thailand tantamount to abandonment and is Boos usage of the property tantamount to an assignment? This is an issue because Ai-Ai does not have the right to assign the property without Lakshmis consent. Hence, there is a clear breach. But what are the legal implications? Can Lakshmi sue for forfeiture? The final pointer that will be examined is the legal position of Boos breaking down of the wall in the property to allow in more air. Alterations on the property is a covenant in the lease. Does Lakshmi have the right of forefeiture? And a possible request for damages? Rules A leasehold covenant is a clause in a lease specifying specific obligations on the part of either party2. This include express terms about how things will occur and how the lease is to be regulated. An assignment occurs when a tenant transfers whole or part of his remaining interest in the property to someone else who is an assignee. An assignment is somewhat like a three tier arrangement between a landlord who hands over to the tenant who also hands over to an assignee. In some cases, leases forbid assignments because landlords do not want their property to be transferred to assignees they do not know3. However, in a case where the lease agreement forbids tenants from assignments, a tenant can transfer interest in the lease to another person with the consent of the landlord and this transferee becomes a sub-tenant4. When a tenant obtains consent of the landlord, the lease becomes a sublease. The breach of a tenancy agreement leads to leads to two possibilities for the landlord and this include: 1. Forfeiture: where the landlord has the right to terminate the lease, but for this to take effect, a forfeiture clause must exist and the terms must be clearly stated and identified. 2. Distress: the landlord can seize the tenants goods to the value of outstanding rent Leases have elements of the law of contract and hence, the doctrines of the law of contract can be applied to leases. The doctrine of privity of contracts also played a role in leases. This is because a lease is between the parties to the contract only. The relationship exists between the landlord and tenant under the same lease that allows each to enforce his or her obligations against the other. However, in a case where a third-party enters the agreement, say a new landlord is appointed or a new tenant is employed, there is no privity of contract but privity of estate between them due to the contract they inherit5. Under the Landlord and Tenant (Contracts) Act 1995, a privity of estate automatically releases the original tenant from the covenants of the lease when the lease is transferred to a new subtenant. Thus, the tenant cannot be held by the terms of the covenant when the lease is transferred. Forfeiture occurs where there is a fundamental breach in the covenants and identity of the parties in the lease6. Forfeiture can be granted where there are elements of the frustration of contracts which are identified in a given case7. However it is subject to the reasonableness of the terms and circumstances at hand8. Certain “once and for all” negative actions are dependent on the courts discretion910. And in most cases, the breach must be one that cannot be undone11. Again, this must be subject to the reasonableness test12 Application From the case at hand, there is a leasehold covenant primarily between Lakshimi and Troy. This is a lease that creates privity of contract between them. The three obligations in the covenant are directly binding upon Troy. Although the lease covenant forbade the assignment of the lease to third parties, the assignment to Ai-Ai was with the consent of Lakshmi, this effectively made Ai-Ai a subtenant. This is because she obtained the consent of the landlord, Laskshmi. Troy however agreed to guarantee the performance of new assignees after Ai-Ai. Meanwhile, the Landlords and Tenant (Contracts) Act 1995 states that privity of estates automatically releases a tenant from obligations when a subtenant is introduced into a given contract. This could be a positive defence that Troy can put up against Lakshmi if he is to be held accountable for Boo or Ai-Ais actions. Thus, the privity of estate and privity of contract shifts to Ai-Ai and Boo directly. The guarantee of the performance of the new assignee signed by Troy is void on the basis of the statute. Forfeiture A case for forfeiture could be presented to Ai-Ai in order to get Boo to leave the premises of Lakshmi on the grounds that: 1. Ai-Ai assigned the lease to Boo without his consent and 2. Boo has altered the premises In the case of Clarence House v National Westminter Bank13 it was held that the right to possession granted in the lease was to mean holding a property to the exclusion of all others. Therefore the handing over of the studio to Boo was in breach of the assignment rules. An extended holiday with no definite point of return is clearly against the lease and was an effective transfer of the property. The forfeiture claim will be on the basis of the frustration of the contract since a fundamental aspect of the lease has been broken. The rule of not assigning a lease without Lakshmis consent was clearly broken. However, this is not strong enough to invoke forfeiture since cases of minor breaches which could be resolved easily like preparing a new lease and Boos relationship with Ai-Ai could cause the courts to waive the forfeiture clause on the grounds of reasonableness14. However, the principle of Akici V LR Butlin15 could be invoked on the grounds that a “once and for all” negative action has been committed in the form of the breaking down of the wall in the building by boo. This is against the principle of not altering the premises. Advise to Lakshmi Lakshmi has a lease arrangement with Troy. However, Troy handed a subtenancy arrangement to Ai-Ai since Lakshmis consent was sought. Hence, he transfers the rights to the lease to Ai-Ai under the Landlords and Tenant (Contracts) Act 1995. Thus, the privity of estate and privity of contract reverts directly to Ai-Ai. Lakshmi can deal with Ai-Ai directly. Concerning Boos effective take over of the lease and the property, Laksmi can take action against him on the grounds that Ai-Ai did the assignment without his consent. And in this case, Lakshmi can take action and seek the forfeiture of the lease on the grounds of serious breaches. This is likely to succeed on three grounds. First of all, a forfeiture clause was disclosed expressly in the covenant. This means it can be invoked where the subtenant went wrong or was in breach of the covenant. Secondly, a quest for the request for a forfeiture on the grounds of Ai-Ais assignment would be subject to the courts discretion. This is because it is not strong enough to warrant a direct grant of forfeiture due to the fact that Boo is a close relative to Ai-Ai and hence, the transfer could go ahead without much of an authorisation from Lakshmi. However, if the third element is invoked, which is the alteration of the premises, Lakshmi will have a strong case to claim that Boo has done a one-off act that gives room for the forfeiture of the contract. And the court will grant it. Under the law of leases, Lakshmi can demand some compensation for the breaking down of a portion of the wall. This is because the breaking down of the wall was against the covenant and more importantly, it has caused a credible damage to the property. Hence, Lakshmi can sue for damages and make demands for distress if Boo and Ai-Ai are not able to pay for the damage done to the property. Books Clark Sandra and Greer, Sarah. Land Law. Oxford: Oxford University Press. 2010. Gray Kevin and Gray Susan. Land Law. Oxford: Oxford University Press. 2011. Thompson Mark. Modern Land Law Oxford: Oxford University Press. 2006. Cases Abidogun V Frolan Health Care Ltd [2001] Ch AII ER Akici V LR Butlin [2005] CA (CD) Clarence House v National Westminter Bank [2009] EWHC 77 Expert Clothing V Hillgate [1986] Ch 340 CA (Eng) Hussein V Mehlman [1992] 32 EGLR 87 Statute Land and Property Act 1925 Landlord and Tentant Act 1988 Landlord and Tenant (Covenants) Act 1995 Read More