Is a purchaser of land bound by covenants in a lease?

  • Author : Robert Hay QC - 06-07-2011

When premises are sold the question often arises as to whether a tenant can enforce  covenants contained in the lease against the new owner? 

At common law, unaffected by statute, an assignee of the reversion is not bound by any of the covenants and conditions of the lease. See: In re Hunter’s Lease [1942] 1 Ch 124 at 128. In Victoria, s 142 of the Property Law Act 1958 altered this position and an assignee of the reversion is bound by covenants contained in the lease that “touch and concern” the land. In Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2010] VSC 44 Croft J held that a restraint of trade clause contained in a lease did not “touch and concern” the leased land and therefore did not bind the assignee of the reversion. The case contains a detailed analysis of the type of covenants that “touch and concern” land (see [52] – [67]). In broad terms any covenant that affects the landlord as a landlord or the tenant as a tenant will probably be within the class of covenants that touch and concern the land. See: Bradbrook, Coft & Hay Commercial Tenancy Law, 3rd ed, paragraph 15.20, p. 483.

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Robert Hay QC

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