Section 141 of the Law of Property Act 1925 and Assignments of the Reversion 25 March 2025
FOCUS ON: SECTION 141 OF THE LAW OF PROPERTY ACT 1925 AND ASSIGNMENTS OF THE REVERSION
Leases create lasting relationships in respect of land. But land is a valuable, marketable commodity. A complex web of the common law, equity and statutory interventions have over centuries led us to the modern law in the Landlord and Tenant (Covenants) Act 1995, codifying (prospectively) the circumstances in which landlord and tenant covenants can be enforced by and against successors in title to land – and just as importantly, when predecessors in title can secure their release from continuing lease obligations.
The hybrid nature of leases as both contracts and estates in land gives rise to both contractual relations (by privity of contract), and the relationship of landlord and tenant (privity of estate).
At common law, where A leased freehold land to B, and then sold the land to C, the benefit of B’s covenants as tenant did not pass to C. Only the core incidents of tenure (such as the obligation to pay rent) could be sued for (or on), by virtue of privity of estate between C and B. This proved inconvenient to Henry VIII during the seizure and distribution of the (leased) monasteries;[1] and so the Grantees of Reversions Act 1540 was passed to enable the benefit and burden of all covenants, provisions and conditions in a lease which “touched and concerned” the land to pass with the reversion.
The 1540 Act remained in forced until the end of 1925, with its provisions extended by the Conveyancing Acts of 1881-1911.
Section 141 of the Law of Property Act 1925 results from the consolidation of all those Acts, and continues to apply to leases granted prior to 1996. It confirms that a successor in title to the reversion can sue on the lessee’s covenants without the need for an express assignment. Only covenants that “touch and concern” the land (or “have reference to the subject-matter of the lease”, to use the statutory language) are caught. Purely personal covenants given by B to A will not be enforceable by C by virtue of this section.
Section 141 is understood to have made clear that[2]:
- rent, and the benefit of all the covenants and conditions to be obeyed by the lessee, are annexed to the reversion;
- rent is recoverable, and those covenants and conditions are enforceable notwithstanding severance of the reversion by the person from time to time entitled to the income of the whole or any part of the demised land; and
- the reversioner may forfeit for a pre-existing breach of covenant by the lessee provided that the right to forfeit has not been waived or released (so remedying the problem in Cohen v Tannar [1900] 2 QB 609, where an assignee of the reversion was prevented from forfeiting a lease following assignment of the reversion on grounds that the breach occurred prior to the assignment and so was only enforceable by the original reversioner).
Given the long pedigree of this provision, and the common law rules as to privity of estate, this is generally one of the less revolutionary aspects of the 1925 legislation: more codification than innovation.
The continuing relevance of s.141: no application to post-1995 tenancies
Section 141 (and the corresponding s.142, which applies to ensure that obligations undertaken by a lessor also run on an assignment of the reversionary interest) has survived intact and without amendment for the last century. The section remains in force and, in the ways described above, has continuing importance for the operation of leasehold covenants as between lessees and successors to the reversion.
However, the practical significance of these provisions has now been substantially reduced following the coming into force of the Landlord and Tenant (Covenants) Act 1995 (“the 1995 Act”).
By s.30(4)(b) of the 1995 Act, s.141 (and s.142) of the 1925 Act does not apply to new tenancies. By s.1(3) of the 1995 Act, a tenancy is a “new tenancy” if it is granted on or after 1 January 1996 (the date on which the 1995 Act came into force), unless the tenancy was made pursuant to an existing agreement or court order.
The 1995 Act contains its own code for the transmission of the benefit and burden of covenants contained in new tenancies. As under s.141 for old tenancies, the benefit of the lessee’s covenants (or “tenant covenants” in the language of the 1995 Act) runs with the reversion: s.3 of the 1995 Act.
So by s.3(3), where there is an assignment of the interest in reversion on a new tenancy, the assignee becomes bound by the landlord covenants from the date of the assignment, provided that (i) they were binding on the assignor; and (ii) they fall to be complied with in relation to demised premises comprised within the assignment.
The major innovation of the 1995 Act, departing from the position under the 1925 Act, was to release lessees from performance of tenant covenants following an assignment of the term (by virtue of s. 5). By contrast, a landlord under a new tenancy that assigns the whole of the reversion is not automatically released from performance of the landlord covenants, but may apply to be released by serving notice on the tenant under s. 8: a requirement that is easily overlooked in practice.
As regards ‘old tenancies’, that is to say any tenancy entered into prior to 1 January 1996, the transmission of covenants continues to be governed by the 1925 Act.
Plainly, the significance of s.141 (and s.142) has declined over the years since the 1995 Act was passed and will continue to do so as the number of ‘old tenancies’ declines. Nevertheless, long leases granted pre-1996 are still frequently encountered in practice, particularly in the residential context. On its 100th anniversary, s.141 of the 1925 Act continues to apply to such leases and performs a vital function.
The problem of covenant chains
The operation of s.141 (and, for that matter, the equivalent provisions of the 1995 Act) can raise difficult issues in connection with residential (or mixed use) block management. It is increasingly common for large residential estates to be owned via a series of headleases, intermediate leases, block leases and, at the end of the chain, occupational sub (or sub-sub-) leases. In some cases management companies, without any proprietary interest, are parties to some or all of the leases in the chains. Sometimes management companies may be granted a ‘management’ headlease (or intermediate lease).
If an occupational tenant fails to pay the service charge or ground rent, difficult questions can arise as to which party in the chain is entitled to enforce the obligation to do so (by forfeiture if necessary) and how the costs should be claimed up the chain. In respect of pre-1996 leases, these questions continue to be governed by the operation of s.141.
Care needs to be taken to identify where privity of estate exists in the various links in these chains. Where, as frequently occurs, there are assignments of intermediate or reversionary leases, this falls to be considered under s.141 and is not always straightforward. It is common in practice for managing agents to issue demands in the name of the wrong ‘landlord’, a problem that is particularly acute where the entities with interests in blocks and estates have confusingly similar names.
The position, as regards old leases governed by s.141, is that only the party holding the interest in reversion is entitled to the benefit of the lessee’s covenant to, for example, pay the service charge. This will not always be the same company that is actually tasked with providing the services to the estate. Furthermore, the benefit of the lessee’s covenant will only pass on an assignment by virtue of s.141 if contained in the lease which is assigned. The benefit of a covenant contained in a lease further down the chain does not pass.
On the other hand, the assignee of the reversion does acquire, under s.141, the right to sue for breaches of covenant committed before the assignment; London and County (A. & D.) Ltd v Wilfred Sportsman Ltd [1971] Ch 764. This is a useful point to bear in mind if there are long-standing arrears of service charges. Conversely, the assignee of a lease does not acquire the right to sue for pre-existing breaches by the landlord (City and Metropolitan Properties Ltd v Greycroft Ltd [1987] 1 W.L.R. 1085). This is an asymmetry which may be important if a lessee relies on, for example, alleged disrepair as a reason for non-payment.
The landlord’s ultimate remedy in this type of case is to seek to forfeit the occupational lease (noting, of course, the arduous statutory hurdles to overcome before this can be achieved in the case of a residential long lease and the current proposals put forward by the Government for reform). As explained above, at common law the landlord’s right of re-entry could not be assigned (so if an assignment of the reversion occurred post-breach, the lease could not be forfeited). By s.141(3) this position is altered, so that the assignee can forfeit for a pre-assignment breach, provided that it has not been waived. Again, this will be an important point to keep in mind when chasing historic service charge arrears and other pre-existing breaches (subject always to the even more recent statutory innovations controlling the right to forfeit long-residential leases).
The result of these principles can sometimes be that the party providing services to an estate or block is not the party that is entitled to pursue the remedy of forfeiture against the ultimate paying party. This is unsatisfactory; and, of course, the best answer is to ensure that these questions are considered and properly addressed at the time such lettings schemes are created and/or at the time of an assignment. Where this has not been done, careful attention needs to be paid to the operation of s.141 in a particular case, to ensure that demands have been properly issued and claims are pursued by the correct party. The section will likely continue to generate interest – and no doubt contention – for property lawyers for many years to come.
[1] Megarry & Wade, Law of Real Property, 10th Edition, at 19-061.
[2] Wolstenholme and Cherry: Conveyancing Statutes (13th ed.), Vol. 1 p.256
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