Termination of Tenancies for Tenant Default - Law Commission

qualified covenant not to assign the demised premises (that is, without the
landlord's consent), no transfer order should be made unless either the landlord
consents or the court is satisfied that it would be unreasonable for the landlord
not to consent to the making of the order.
6.91 In the case of chargees, it will be necessary to consider the terms of any
covenants restricting assignment contained in the charge itself. If there is a
covenant (whether absolute or qualified) not to assign the demised premises,
then no transfer order should be made unless the person holding the charge
consents to the order being made. This will confer on chargees in such
circumstances an effective veto on the making of a transfer order.
6.92 It was suggested during consultation that the court’s power to order a statutory
assignment of the tenancy might be appropriately used in some cases where the
assignment is to be made to a third party. The example given was of a head
tenancy in a block of flats let on long tenancies. The most appropriate course in
these circumstances might be to vest the head tenancy not in the sub-tenants or
any combination of them but in a management company formed by the subtenants
for the purpose of taking the head tenancy.
6.93 The good sense of such a proposal is undeniable. We therefore recommend that
the court may order the transfer of the tenant’s interest in the demised premises
to the applicant for the order, or to a person nominated by the applicant, who may
be a body corporate not in existence when the application is made.
New tenancy orders 90
6.94 Under the current law, the court does not have power to transfer the tenancy
being forfeited to a derivative interest holder. However, it does have power to
make an order granting a new tenancy to a derivative interest holder. 91 The new
tenancy may not be of any longer duration than the interest held by the
applicant. 92 Beyond this, the court may set the terms of the new tenancy and
impose such conditions as it sees fit. These will typically require the applicant to
perform the obligations under the forfeited tenancy and make good any
outstanding breaches of covenant. Because a tenancy granted in this way is a
new tenancy, it is not subject to any other interests which previously derived from
the tenancy. 93
6.95 The CP, following the First Report, provisionally proposed that the court should
have a similar power to grant a new tenancy to a derivative interest holder under
a new statutory scheme. The CP endorsed a number of recommendations which
had been made in the First Report about the way in which this order would
90 CP, para 12.7(7)(c).
91 Law of Property Act 1925, s 146(4). This is known as a “vesting order”, although it should
be stressed that it is the premises demised under the tenancy (or part of them) that is
being vested and not the tenancy. Strictly, a vesting order under s 146(4) is not relief from
forfeiture, as the tenancy previously held by the tenant remains forfeited: see Halsbury’s
Laws of England Vol 27(1) (4th ed Reissue, 1994) para 521, n 7.
92 Where the applicant is a sub-tenant, the new tenancy may therefore not be longer than the
unexpired term of the sub-tenancy: Ewart v Fryer [1901] 1 Ch 499.
93 As these would have fallen in when the tenancy was forfeited.
124