This week the House of Lords confirmed that a release of a landlord’s covenants contained in the lease itself is not in breach of the Landlord and Tenant (Covenants) Act 1995. In the landmark decision of London Diocesan Fund and others –v- Avonridge Property Company [2005] UKHL 70 the court maintained that the Act was not intended to close any exit strategy that a landlord may have put in place in the lease.
The case involved the head lease of seven small shop units in Wealdstone, Middlesex. The lease was for a term of 99 years expiring in 2067. Avonridge granted subleases of six shops for almost the same term as the head lease for substantial premiums.
Each lease contained a covenant by the landlord to pay the rent reserved by the head lease. The lease, however, gave an automatic release for Avonridge by adding; "but not, in the case of Avonridge Property Company Limited only, so as to be liable after the Landlord has disposed of its interest in the Property".
