Assignee of lease only liable on lease covenants while in possession

An assignee of a lease is (at common law) liable to perform the lease covenants while the lease is vested in them but not after they have assigned the lease.

In Johnsey Estates Ltd v Lewis and Manley (Engineering) Ltd ((1987) 54 P & CR 296, CA (Eng)) T assigned a lease to A1 who assigned it to A2. A2 went into liquidation. The question was whether A1 was liable for rent due in respect of the period after the assignment to A2. The English Court of Appeal held that it was not liable at common law. It was, however, liable to indemnify T (who had made the payment to L) because of an indemnity implied into the assignment for valuable consideration by English law (section 77(1) of the Law of Property Act 1925). The nearest equivalent to that indemnity in Hong Kong is the indemnity implied by section 35 of the Conveyancing and Property Ordinance into an assignment of the whole of the interest in land held under a government lease.

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