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P&A Swift Investments v Combined English Stores Group [1989] AC 632

Property law – Landlord and tenant – Lease

Facts

The landlord designated specific business premises to a subsidiary company, which was owned by the defendant. The defendant guaranteed that the sub-tenant would pay rent that was due, by way of the agreement between himself and the subtenant and stated that he would observe the respective covenants agreed previously. The landlord subsequently transferred the property to the plaintiff as a result of his liquidation. The transfer did not specify the assignment of the covenant regarding the sub-lease. The sub-tenant defaulted on several months of mortgage payments and also went into liquidation. The defendant refused to pay the outstanding rent and as such, the plaintiff applied to the court to recover the sum owed. The court found for the plaintiff and the defendant appealed the decision on the basis that he was not bound by the covenant.

Issue

The court was required to decide whether the covenant in question could be enforced by the plaintiff against the defendant. In doing so, the court would have to specifically consider whether the covenant was connected to the land. If it could be proven that it touched or concerned the land, it would be likely that the covenant could be enforced by the plaintiff.

Held

The defendant’s appeal was dismissed by the court. The court found that a covenant could be enforced if it touched or concerned the land and if it was related to something being done in relation to, or on the land in question. The guarantee of the under-tenants rent on this occasion concerned the land and therefore the plaintiff could recover the unpaid rent.


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