Guidance

Practice guide 48: implied covenants

Updated 25 June 2015

Applies to England and Wales

Please note that HM Land Registry’s practice guides are aimed primarily at solicitors and other conveyancers. They often deal with complex matters and use legal terms.

1. Introduction

When land is disposed of by way of conveyance, transfer, charge or lease, certain covenants for title on the part of the seller may be implied into the document effecting the disposition (section 1(1) of the Law of Property (Miscellaneous Provisions) Act 1994).

The disposition need not be for valuable consideration. Gifts and dispositions made under a court order are treated in the same way as sales and charges.

The covenants will only be implied if the disposition is expressed to be made with ‘full title guarantee’ or with ‘limited title guarantee’ (or the Welsh equivalents: ‘gyda gwarant teitl llawn’ or ‘gyda gwarant teitl cyfyngedig’) (sections 1(2) and 8(4) of the Law of Property (Miscellaneous Provisions) Act 1994; rule 67 of the Land Registration Rules 2003). Documents effecting registrable dispositions can incorporate these terms (rule 67(1) of the Land Registration Rules 2003).

Right to buy transfers and leases must be made with full title guarantee, that should not be modified: paragraph 4A, Part I, Schedule 6 to the Housing Act 1985.

The benefit of these implied covenants runs with the purchaser’s estate or interest, so that a successor in title is able to enforce them (section 7 of the Law of Property (Miscellaneous Provisions) Act 1994). However, the liability under these implied covenants does not attach to land retained by the seller and so does not pass to the seller’s successor in title.

The implied covenants may be limited or extended in the document effecting the disposition (section 8(1) of the Law of Property (Miscellaneous Provisions) Act 1994). Generally, no reference to any covenant implied by the Law of Property (Miscellaneous Provisions) Act 1994, or to any limitation or extension of such a covenant, will be made in the register (rule 67(5) of the Land Registration Rules 2003). However, reference may be made where a registrable disposition of leasehold land limits or extends the covenant implied under section 4(1)(b) of the Law of Property (Miscellaneous Provisions) Act 1994, that there is no subsisting breach of a condition or tenant’s obligation, and nothing which at that time would render the lease liable to forfeiture. Any document effecting a registrable disposition which limits or extends that covenant must do so by express reference to section 4(1)(b) of the Law of Property (Miscellaneous Provisions) Act 1994.

2. The covenants implied in dispositions made with full or limited title guarantee

The effect of sections 2 to 5 of the Law of Property (Miscellaneous Provisions) Act 1994 is that where a disposition is expressed to be made with full title guarantee or with limited title guarantee, without modification, the following covenants are implied.

• that the seller has the right (with the concurrence of any other person making the disposition) to dispose of the property as they purport to
• that the seller will at their own cost do all that they reasonably can to give the buyer the title that they purport to give, which includes doing what they reasonably can to ensure that the buyer is entitled to be registered with at least the class of title registered before the disposition (or, if the disposition gives rise to compulsory first registration, giving all reasonable assistance fully to establish to the satisfaction of the registrar the right of the buyer to registration as proprietor)
• where the disposition is expressed to be made with full title guarantee, that the property is free from all charges and incumbrances (whether monetary or not) and from all other rights exercisable by third parties, other than any charges or rights that the seller does not and could not reasonably be expected to know about
• where the disposition is expressed to be made with limited title guarantee, that the seller has not since the last disposition for value
  • created a charge or incumbrance that is still subsisting at the time of the disposition
  • suffered the property to be so charged or encumbered or subjected to any such rights, and that they are not aware that anyone else has done so
• where the property is leasehold, that the lease is subsisting at the time of the disposition, and that there is no subsisting breach of a condition or tenant’s obligation and nothing that at that time would render the lease liable to forfeiture
• where the disposition is the grant of an underlease, that the lease out of which the underlease is created is subsisting at the time of the disposition, and that there is no subsisting breach of a condition or tenant’s obligation and nothing that at that time would render the lease liable to forfeiture
• where the disposition is a charge of leasehold property, that the chargor will fully and promptly observe and perform all the obligations under the lease that are imposed in their capacity as tenant
• where the disposition is a charge of property subject to a rentcharge, that the chargor will fully and promptly observe and perform all the obligations under the instrument creating the rentcharge that are enforceable by the owner of the rentcharge in their capacity as such

2.1 The limitations on liability

Section 6 of the Law of Property (Miscellaneous Provisions) Act 1994 provides that a seller is not liable under the covenants set out in paragraphs (a), (c), (d) or (e) in The covenants implied in dispositions made with full or limited title guarantee:

• in respect of any particular matter to which the disposition is expressly made subject
• for anything that at the time of the disposition is within the actual knowledge, or which is a necessary consequence of facts that are within the actual knowledge, of the buyer (for this purpose, section 198 of the Law of Property Act 1925 is disregarded and so registration in the Land Charges Department will be ignored)
• where the disposition is of an interest the title to which is registered, for anything that at the time of the disposition was entered in the register

2.2 Additional points

The scope of the covenant in paragraph (a) in The covenants implied in dispositions made with full or limited title guarantee will be very limited where the land is registered with absolute freehold or leasehold title. Section 23 of the Land Registration Act 2002 provides that a registered proprietor can make any disposition permitted by the general law (other than a mortgage by demise or sub-demise); section 26 of the Land Registration Act 2002 provides that, for the protection of purchasers, a proprietor’s right to exercise these powers is to be taken to be free from any limitation other than one reflected by an entry in the register or imposed by or under the Land Registration Act 2002.

As a limited title guarantee only covers charges etc created by or with the knowledge of the seller since the last disposition for value, it may be considered suitable for use by trustees or personal representatives.

It is no longer possible for the survivor of joint tenants to obtain the benefit of the Law of Property (Joint Tenants) Act 1964 by conveying as beneficial owner (section 21(1) and Schedule 1, paragraph 3 of the Law of Property (Miscellaneous Provisions) Act 1994). Instead, a statement on the following lines should be included in a transfer of unregistered land.

“The Transferor being the survivor of joint tenants is solely and beneficially interested in [the property transferred].”

The Law of Property (Joint Tenants) Act 1964 does not apply to registered land (section 3 of the Law of Property (Joint Tenants) Act 1964).

As mentioned in Introduction, the register will generally not contain any reference to implied covenants, or their limitation or extension. Where, however, anyone requires to know what provision was made in a transfer, they may make an application to the registrar for an official copy of the document.

3. Implied covenants to pay rent, etc

In this section, a ‘new tenancy’ is a lease granted on or after 1 January 1996 otherwise than in pursuance of an agreement entered into, an option granted or a court order made before that date (section 1(3) of the Landlord and Tenant (Covenants) Act 1995). If a registered lease is dated on or after 1 January 1996 it will generally be a new tenancy unless an entry to the contrary has been made in the register. An ‘old tenancy’ will be a tenancy granted before 1 January 1996 or in pursuance of an agreement etc made before that date.

3.1 Assignments of old tenancies

A tenant under an old tenancy who transfers the tenancy remains liable to the landlord on the covenants in the tenancy for its entire duration notwithstanding the transfer. This is sometimes called ‘original tenant liability’. In consequence, covenants need to be implied in the transfers of such tenancies.

Although original tenant liability remains in the case of leases that are not new tenancies, section 19 of the Landlord and Tenant (Covenants) Act 1995 enables an original tenant who is obliged to pay arrears of rent on the present tenant’s default to obtain an overriding lease. An overriding lease will be recognisable as such as it must state that it is granted under section 19 of the Landlord and Tenant (Covenants) Act 1995, and whether or not it is a new tenancy for the purposes of section 1 of the Landlord and Tenant (Covenants) Act 1995. An overriding lease is only a new tenancy if the original lease is a new tenancy.

Unless a contrary intention is expressed, there is implied into a transfer of a registered lease that is an old tenancy a covenant by the transferee that during the residue of the term granted by the registered lease the transferee and the transferee’s successors in title will:

• pay the rent
• comply with the covenants and conditions in the lease
• keep the transferor and the transferor’s successors in title indemnified in respect of any failure to pay the rent or to comply with the covenants and conditions

If the transfer is of only part of the land comprised in the registered lease, the covenant is that the transferee and the transferee’s successors in title will:

• where the rent reserved by the lease is apportioned, pay the rent apportioned to the part transferred
• comply with the covenants and conditions in the lease so far as they affect the part transferred
• keep the transferor and the transferor’s successors in title indemnified in respect of any failure to pay the rent or to comply with the covenants and conditions

And, where the transferor continues to hold land under the lease, there is implied a covenant by the transferor that the transferor and the transferor’s successors in title will:

• where the rent reserved by the lease is apportioned, pay the rent apportioned to the part retained
• comply with the covenants and conditions in the lease so far as they affect the part retained
• keep the transferee and the transferee’s successors in title indemnified in respect of any failure to pay the rent or to comply with the covenants and conditions

These covenants are implied by section 134 and Schedule 12, paragraph 20 of the Land Registration Act 2002. Where the old tenancy is unregistered, effectively the same covenants are implied by section 77 of the Law of Property Act 1925.

Further provision is made in the Land Registration Rules 2003 where the old tenancy is a registered lease and the transfer is of only part of the land comprised in the lease.

• rule 60(2) of the Land Registration Rules 2003 provides that where the part transferred is, without the consent of the lessor, expressed to be exonerated from the entire rent, the transferor’s covenant extends to the entire rent. Similarly, rule 60(3) of the Land Registration Rules 2003 provides that where the part transferred is, without the consent of the lessor, expressed to be subject to the entire rent, the transferee’s covenant extends to the entire rent
• rule 66 of the Land Registration Rules 2003 provides that if a transfer of a registered lease that is an old tenancy modifies or negatives any covenants on the part of the transferee implied by Schedule 12, paragraph 20, Land Registration Act 2002, then an entry must be made in the register to record this

3.2 Assignments of new tenancies

Original tenant liability was abolished for new tenancies. The covenants implied into transfers of old tenancies are not, therefore, implied into transfers of new tenancies. But transfers of these tenancies will still, of course, be subject to the implied covenants for title set out in The covenants implied in dispositions made with full or limited title guarantee.

4. Implied covenants in respect of rentcharges

A transfer for valuable consideration of land subject to an existing rentcharge implies a covenant by the transferee that the transferee and the transferee’s successors in title will:

• pay the rentcharge
• comply with the covenants and conditions imposed on the owner of the land by the document creating the rentcharge
• keep the transferor and the transferor’s successors in title indemnified in respect of any failure to pay the rentcharge or to comply with the covenants and conditions

Where the transfer is of only part of the land subject to a rentcharge, and the rent is apportioned without the consent of the owner of the rentcharge, the transferee’s covenant is only in respect of the apportioned rent. The transferor similarly covenants that they and their successors in title will pay the balance of the rent, comply with the covenants and conditions and keep the transferee indemnified.

Where the part transferred is, without the consent of the rentcharge owner, expressed to be exonerated from the entire rent, the transferor’s covenant extends to the entire rent (rule 69(2) of the Land Registration Rules 2003). Where the part transferred is, without the consent of the rentcharge owner, expressed to be subject to the entire rent, the transferee’s covenant extends to the entire rent (rule 69(3) of the Land Registration Rules 2003).

These covenants are implied by section 77 and Schedule 2 of the Law of Property Act 1925.

These covenants do not apply to a rentcharge falling within section 2(3)(a) of the Rentcharges Act 1977 (family charges) in relation to which different covenants are implied (section 11 of the Rentcharges Act 1977).

5. Things to remember

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