Covenants in Lease PDF

Covenants in leases
• Covenant = clause in a lease (or other deed)
• Specifically, a covenant is a promise that something

has or has not been done, that something will or will
not be done, or that some right or power exists
• Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1
• Covenants are essential terms in a lease – affects

remedies for breach
Sources of covenants
1. Express – Covenants parties negotiate and include in lease
2. Implied at common law – 2 main ways this occurs:

a) By virtue of general contract law principles e.g. implication ‘in fact’ (BP
Refinery test) such as where covenant necessary to give business
efficacy to the lease
• Dikstein v Kanevsky [1947] VLR 216
b) ‘Usual covenants’ implied by virtue of lessor/lessee relationship e.g. L
will give T quiet enjoyment and not derogate from grant, T will pay
rent and L can re-enter for non-payment, T to keep premises in good
repair and give up possession at end of term etc.
• The ‘usual covenants’ may change over time: Hampshire v Wickens
(1878) 7 Ch D 555
Sources of covenants
3. Implied by statute – Statute will imply some fundamental
covenants if these are not expressly included (usually are).
Examples include:
• Real Property Act 1886 (SA) s 124 – T will pay rates and taxes and
maintain property
• Real Property Act 1886 (SA) s 125 – L may enter premises at
reasonable times to view state of repair, L can re-enter and determine
lease where rent unpaid for 3 months or where breach of any other
covenant has persisted for 3 months
These statutory terms can be modified

or excluded by express declaration in
the lease instrument: Real Property Act
1886 (SA) s 262.
Nature of covenants
• As T has EP, covenants are a way L can control or limit
the effects of EP
• Covenants can be expressed as positive (to do

something) or negative (not to do something)
• Must be words of agreement and not merely words of

qualification
DID YOU KNOW?

If you rearrange the
letters in ‘covenant’ you
get ‘ventanco’, which
means absolutely nothing
Common covenants
Covenants by lessor Covenants by lessee
Express covenants • To re-enter with notice + repair • To maintain in good repair

• Against assignment of reversion • Against assignment of lease or
against subleasing
• Not making alterations without
L’s consent
Implied by common law • Quiet enjoyment • Use in tenant-like manner
• Non-derogation from grant • Deliver/yield up possession at
• Other terms giving ‘business end of term
efficacy’ • Pay rent
• Other terms giving ‘business
efficacy’
Implied by statute • To repair • To repair
• To maintain in state fit for • To allow L to inspect and repair
habitation • To permit re-entry and forfeit
for non-payment of rent
Quiet enjoyment
• L must give T ‘peaceful and uninterrupted possession’ of
leased premises
• This relates to the ordinary use and enjoyment of the

premises (not just volume, as the name suggests!)
• ‘Enjoyment’ refers to use of right, not feelings of pleasure

• Kenny v Preen [1963] 1 QB 499
• Arguably no practical distinction between covenant for QE

and covenant for non-derogation – often there is overlap
• Southwark London Council v Mills [1999] 3 WLR 939 (Lord Millett)
Quiet enjoyment
• If T’s ordinary and lawful enjoyment of leased premises is
substantially interfered with by L or his/her agents, covenant will
be breached
• Covenant is prospective (forward-looking) – will not be violated

where related to things done before the grant and T was aware at
time of taking possession
• Southwark London Council v Mills [1999] 3 WLR 939
• L may inadvertently violate covenant through acts of third parties

(e.g. other lessees) where acts were reasonably foreseeable by L
• Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1
Quiet enjoyment
Case examples of QE covenant being violated:
• Water flooding T’s premises due to L’s failure to clear roof drains
• Martin’s Camera Corner v Hotel Mayfair Ltd [1976] 2 NSWLR 15
• L’s disconnection of T’s sprinkler system
• Kohua Pty Ltd v Tai Ping Trading (1985) 3 BPR 9705
• L’s installation of unsuitable air-conditioning unit
• Telex (A’sia) Pty Ltd v Thomas Cook & Son (1985) 3 BPR 9705
• L’s works next door reducing security for T’s premises
• Lend Lease Development v Zemlicka (1985) 3 NSWLR 207
Non-derogation
• L must not do anything rendering the leased premises
less fit for the purpose for which it was granted
• As mentioned earlier, acts that amount to derogation

will also generally violate covenant for QE
• But non-derogation concerned more with hindrance

to use from L’s actions outside premises, whereas QE
concerned mainly with L’s direct interference with
enjoyment of premises
Non-derogation
Norden v Blueport Enterprises [1996] 3 NZLR 450
Repair
• Often included as an express covenant, CL imposes no such duty
• Warren v Keen [1953] 3 WLR 702
• Common expressions are to ‘keep premises in good and substantial

repair’ or ‘maintain premises in good order and condition’
• Obligation is upon lessee to keep leased premises in repair, not to

make improvements (unless this is only way to make repair)
• Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567
• T must ensure premises are in required state of repair at all times

during term of lease – age of premises must be considered
• Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567
Repair
• Normally excludes damage caused by acts of God or nature, as well
as general or fair ‘wear and tear’
• Bunyip Buildings Pty Ltd v Gestetner Pty Ltd [1969] SASR 87
• Reasonable ‘wear and tear’ tolerance also reflected in statute

• Real Property Act 1886 (SA), s 124(b)
• ‘Wear and tear’ refers to ‘the reasonable use of the [premises] by

the tenant and the ordinary operation of natural forces’
• Haskell v Marlow [1928] 2 KB 45
Repair
• Common law implied very limited minimum obligations
• Smith v Marrable (1843) 11 M & W 5 – premises must be fit for habitation (only
applied to furnished premises)
• Related covenant – T must use and deliver up premises in ‘tenant-

like manner’ e.g. ‘do the little jobs about the place’ to prevent its
decay and avoid waste
• Warren v Keen [1954] 1 QB 15
• Combara Nominees Pty Ltd v McIlwraith-Davey Pty Ltd (1991) 6 WAR 408
• Related covenant – T must do all that is reasonably necessary to give

business efficacy to lease (e.g. clear rubbish chutes)
• Liverpool City Council v Irwin [1977] AC 239
Repair
• Landlord has duty to take reasonable care to avoid foreseeable risk
of injury to tenants (negligence standard)
• Established for residential premises – Northern Sandblasting v Harris (1997)
188 CLR 313
• And for commercial premises – Jones v Bartlett (2002) 205 CLR 166; Taylor
Woodrow Property Co v Coles Myer Ltd (1999) 9 BPR 17,449
• More recent case law suggests duty goes both ways

• Loose Fit Pty Ltd V Marshbaum [2011] NSWCA 372
• T also under obligation not to commit ‘waste’

• Ancient tort – describing the spoil or destruction of the estate (Blackstone)
• T may be liable for deliberate or reckless damage – Bower Investments v
Tabcorp Holdings [2007] FCA 708

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Covenants in leases

• Covenant = clause in a lease (or other deed)

• Specifically, a covenant is a promise that something

• Covenants are essential terms in a lease – affects

2. Implied at common law – 2 main ways this occurs:

These statutory terms can be modified

• Covenants can be expressed as positive (to do

• Must be words of agreement and not merely words of

DID YOU KNOW?

Express covenants • To re-enter with notice + repair • To maintain in good repair

• This relates to the ordinary use and enjoyment of the

• ‘Enjoyment’ refers to use of right, not feelings of pleasure

• Arguably no practical distinction between covenant for QE

• Covenant is prospective (forward-looking) – will not be violated

• L may inadvertently violate covenant through acts of third parties

• As mentioned earlier, acts that amount to derogation

• But non-derogation concerned more with hindrance

• Common expressions are to ‘keep premises in good and substantial

• Obligation is upon lessee to keep leased premises in repair, not to

• T must ensure premises are in required state of repair at all times

• Reasonable ‘wear and tear’ tolerance also reflected in statute

• ‘Wear and tear’ refers to ‘the reasonable use of the [premises] by

• Related covenant – T must use and deliver up premises in ‘tenant-

• Related covenant – T must do all that is reasonably necessary to give

• More recent case law suggests duty goes both ways

• T also under obligation not to commit ‘waste’

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