Relationship between privity of contract and privity of estate

In City of London Corporation v Fell ([1993] 1 A.C. 458) the original tenant of leasehold property had assigned the lease. The assignee stayed in possession at the end of the term and the lease was continued by virtue of section 24 of the Landlord and Tenant Act 1954. The assignee went into liquidation during this continuation and the landlord sought to recover rent arrears from the original tenant relying on the contractual commitments given. Was the original tenant liable for rent arrears that had accrued during the continuation? The House of Lords held not. The original tenant had not contracted to make any payments once the contractual term had ended (there was no express covenant to pay the rent during any statutory continuation) and the statute did not extend the original tenant’s liability in this way.

Lord Templeman’s judgment is notable for its explanation and affirmation of some of the basic principles concerning privity of estate. For example:

‘The effect of common law and statute on a lease is to create rights and obligations which are independent of the parallel rights and obligations of the original human covenantor’. (at 465).

A little later:

‘Upon assignment of a lease, the provisions of the covenants by the original tenant continue to attach to the term because those provisions touch and concern the land and not because there continues to exist an original tenant who has ceased to own any interest in the demised land but remains liable in contract to fulfil the promises he made under covenant.’ (at 465 – 466).

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