Effect of disclaimer on surety covenant

In RVB Investments Ltd v Bibby ([2013] EWHC 65) RVB granted two leases to CT. B, as surety, covenanted, among other things, to take a new lease for the residue of the lease terms if the leases were disclaimed. One lease was disclaimed by the liquidator and the other, after CT’s dissolution, by the Treasury Solicitors. RVB sought specific performance of B’s covenant to take new leases. RVB was successful.

As regards the lease disclaimed by the liquidator, the effect of section 178 of the Insolvency Act 1986 was that the guarantee remained alive even after disclaimer of the lease ([22] – [23]). The same was true of the lease that was disclaimed by the Treasury Solicitor after CT’s dissolution. The company’s own liability was brought to an end but not of the guarantor ([27] – [29]).

Nor was CT a ‘former tenant’ for the purposes of the Landlord and Tenant (Covenants) Act 1995 so there was no need for RVB to serve a notice before recovering any sums owed by CT to RVB ([35] – [36]).

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No disclaimer of lease where the tenant denies the landlord’s title to only part of the demised property

Where a tenant denies title to part only of the demised premises (and that forms an indivisible part of a larger whole not capable of being let and enjoyed separately) then the single relationship of landlord and tenant has not been disclaimed.

In W.G. Clarke Properties Ltd v Dupre Properties Ltd ([1992] Ch 297) there was a lease of a flat and a courtyard. The tenant discovered that the landlord was not the registered owner of the courtyard. It brought proceedings claiming damages. In these proceedings it pleaded that the courtyard was owned by a third party but that the landlord did have title to the flat. The landlords brought possession proceedings on the basis that the tenant had disclaimed the lease by denying the landlord’s title. It was held that there was no disclaimer here since the tenant had positively asserted the landlord’s title to the flat and denied the landlord’s title to only part of the demised premises. The judge left open the question as to whether the answer might be different if the courtyard had been capable of being separately let and enjoyed.