Scottish & Newcastle Plc v Raguz

At common law a lease is a contract between landlord and tenant which, if the landlord himself has or acquires an estate in the land, vests a leasehold estate in the tenant. The lease will ordinarily contain covenants to be performed by the tenant during the term of the lease and (in the absence of express contrary provision) these covenants mean what they say. A tenant who has covenanted to pay the rent during the term is liable to pay the rent during the term, whether or not he has assigned the leasehold estate to someone else.

This rule was changed by section 5(2) of the Landlord and Tenant (Covenants) Act 1995, which provides that if a tenant assigns the demised premises, he is released from his covenants. But the change applies only to tenancies granted after the Act came into force on 1 January 1996. The common law continues to apply to earlier tenancies, but subject to restrictions contained in sections 17 to 20. For present purposes, the relevant restrictions are contained in the following provisions of section 17, which deals with the liability of a "former tenant" to pay a "fixed charge" (an expression defined by subsection (6) to mean rent, a service charge or a liquidated sum payable for a breach of covenant) after he has assigned the lease:

"(2) The former tenant shall not be liable under…the covenant to pay any amount in respect of any fixed charge payable under the covenant unless, within the period of six months beginning with the date when the charge becomes due, the landlord serves on the former tenant a notice informing him—

(a) that the charge is now due; and

(b) that in respect of the charge the landlord intends to recover from the former tenant such amount as is specified in the notice and (where payable) interest calculated on such basis as is so specified.

(4) Where the landlord has duly served a notice under subsection (2)…, the amount (exclusive of interest) which the former tenant or (as the case may be) the guarantor is liable to pay in respect of the fixed charge in question shall not exceed the amount specified in the notice unless—

(a) his liability in respect of the charge is subsequently determined to be for a greater amount,

(b) the notice informed him of the possibility that that liability would be so determined, and

(c) within the period of three months beginning with the date of the determination, the landlord serves on him a further notice informing him that the landlord intends to recover that greater amount from him (plus interest, where payable)".

As appears from the facts stated in the speech of my noble and learned friend Lord Scott of Foscote, which I have had the privilege of reading in draft, the problem in this case arises from the fact that when a lease provides that the rent shall be increased from a specified date but the amount of the increase is…

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