Termination of Tenancies for Tenant Default - Law Commission

Assignment
3.51 Most tenancies contain covenants prohibiting or restricting the tenant’s right to
assign the tenancy. Such covenants may apply to assignments of the whole or
part of the demised premises. The usual form is that assignment without the
landlord’s consent is prohibited. Statute has intervened to provide that where a
covenant is so qualified, consent is not to be unreasonably withheld. 43
3.52 An assignment in breach of covenant is unlawful but is nevertheless effective to
transfer the tenancy to the assignee. A landlord may therefore be left with a new
tenant who is not of his or her choosing. Under current law, an unlawful
assignment may be a ground to forfeit the tenancy (provided there is an
appropriately worded forfeiture clause).
3.53 Under the statutory termination scheme, an assignment in breach of covenant will
constitute tenant default (unless the covenant is excepted). However, strictly
speaking, the breach was committed by the outgoing tenant who no longer holds
the tenancy and not by the incoming tenant (the unlawful assignee) who was not
subject to the covenant at the point at which it was broken. A landlord may only
terminate a tenancy on the ground of a tenant default by the tenant and in these
circumstances the current tenant has not committed a tenant default simply by
accepting an unlawful assignment. 44
3.54 Clearly this is unsatisfactory and capable of causing serious injustice to landlords.
It could enable tenants to arrange sham assignments so as to avoid the
consequences of any other tenant default that they might have committed.
The CP’s provisional proposals
3.55 The risk of assignment to avoid the scheme was recognised in the First Report
and the CP. The CP provisionally proposed that a termination order should be
made in a number of “Cases”. Case 2 was where the court was satisfied that a
tenant had assigned “in order to forestall” the making of a termination order. Case
3 was where the tenant default complained of was an unlawful assignment and
no other order the court could make would be adequate or satisfactory.
Consultation
3.56 The CP’s proposals received a great deal of comment, much of it critical.
Reform recommendations
3.57 As we explain in Part 5, we now intend to recommend a modified approach to the
orders that the court may make under the scheme. We have moved away from
reliance on proof of specific “Cases”. We have concluded that the problems
concerning unlawful assignments, which we previously sought to address by
means of Cases 2 and 3, are best dealt with by creating an exception to the
general rule that a tenant can only be liable for tenant default that took place
43 Landlord and Tenant Act 1927, s 19.
44 They may, of course, subsequently breach other covenants that bind them as the new
tenant, entitling the landlord to take action against them under the scheme for those tenant
defaults as well as the assignment.
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