This section is from the book "Dart's Treatise On The Law And Practice Relating To Vendors And Purchasers Of Real Estate", by J. Henry Dart . Also available from Amazon: A treatise on the law and practice relating to vendors and purchasers of real estate.
Under a condition that "the possession under the lease should be deemed conclusive evidence of the due performance, or sufficient waiver of any breach, of the covenants in the lease up to the completion of the sale," the purchaser was held to be fixed with notice of possible breaches of covenant prior to the contract, which must be taken to be waived, but not of those committed after the date of the contract; and no opinion was expressed as to what would have been the effect of the condition, had it been proved that the landlord intended to enforce the forfeiture (e). It is conceived, however, that any subsisting breach, if within the vendor's knowledge, ought to be expressly mentioned; and that the condition is properly applicable only to breaches, of which he has no notice, or which he has good reason for believing to be waived (f). Nor will such a condition bind the purchaser if there is a reasonable bond fide doubt as to who is the reversioner entitled to receive the rent (g).
When subsisting breaches.
Where it was stipulated that the production of the last receipt for rent prior to completion should be conclusive evidence that all the covenants had been performed, the purchaser was precluded from objecting that the lease was liable to forfeiture by reason of dilapidations, which existed at the date of the contract (h). Where on the sale of a leasehold public-house, the lease of which contained a covenant not to permit any other trade to be carried on upon any part of the premises, parts of the premises were in fact let to persons who carried on other trades thereon, but the lessors had received rent with knowledge of such under-lettings, specific performance having been decreed and the decree not having been appealed against, it was held, upon a reference as to title, that whether or not there was a continuing breach of covenant rendering the purchaser liable to ejectment, nevertheless, there being a condition in the contract that the production of the last receipt for rent paid should be taken as conclusive evidence of the due and satisfactory performance of the lessee's covenants contained in the lease, or the waiver of any breaches up to completion, a good contract had been shown pursuant to the contract (i). It is conceived that the principles of construction in such a case are the same, whether the condition has to be considered on the question of specific performance, or on a reference as to title. A difficulty of this kind has often arisen upon the covenant to insure against fire. Where there has been merely a past omission to insure, but the existing insurance is according to the terms of the covenant, the condition as to waiver may be relied on; but where the existing insurance is improperly effected (k), there is a continuous breach de die in diem of the covenant to insure and keep insured in the specified manner, and the sufficiency of the condition may be open to question (l). But bond fide purchasers were, by the Law of Property Amendment Act, 1859, ss. 4 - 9, protected against forfeiture of the lease, by reason of a prior breach of the covenant to insure, if they had a receipt for the last payment of rent, and there was a valid insurance on foot at the time of completing the purchase. These sections were repealed by the Conv. Act, 1881, which extended the benefits they conferred to other cases than breach of the covenant to insure. The Conv. Act has been repealed, and the relief given by s. 14 has been extended by L. P. Act, 1925, s. 146, and Landlord and Tenant Act, 1927, s. 18.
(c) In Singer to Thompson, (1881) 51 L. J. Ch. 42, an affidavit by the vendor of the performance of the covenants was, in the absence of a receipt, held sufficient.
(d) See Allen and Drscoll's Contract, 1904, 2 Ch. p. 231; Re Taunton, sup.; Lockharts v. Bernard, Rosen &Co., 1922, 1 Ch. 433, 439.
(e) Howell v. Kightley, (1866) 21 Beav. 331; 25 L. J. Ch. 341.
(f) See Beyfus v. Lodge, 1925, 1 Ch. 350.
(g) Pegler v. White, (1864) 33 Beav. 403; 33 L. J. Ch. 569.
(h) Bull v. Hutchens, (1863) 32 Beav. 615.
Where breaches of the covenant to insure.
Relief against forfeiture.
(i) Lawrie v. Lees, (1881) 7 A. C. 19; 51 L. J. Ch. 209.
(k) See Penniall v. Harborne, (1848) 11 Q. B. 368; 17 L. J. Q. B. 94; Havens v. Middleton, (1853) 10 Ha. 641; 22 L. J. Ch. 746.
(l) Howell v. Kightley, (1856) 21 Beav. 331; 25 L. J. Ch. 341. As to the case of breach of a covenant not to underlet, and waiver of such breach where continuing, see Walroud v. Hawkins. (1875) L. R. 10 C P. 342; Atkin v. Rose, 1923, 1 Ch. 523, 536.
If a waiver, either express, or made sufficient by the conditions, be relied on by the vendor, and the landlord giving it is a different person from the original lessor, a condition precluding investigation of the lessor's title will not disentitle the purchaser from requiring the title to be traced from the original lessor to the person whose waiver of the breach of covenant is relied on (m).
Title of reversioner when to be shown in case of waiver.
Where leasehold property held under one lease is sold in lots, provision should be made for the apportionment among the purchasers of the rent and liabilities under the lease (n). It has been usual to assign the lease to the largest purchaser on trust to grant underleases to the purchasers of the other lots, or subject to underleases previously granted by the vendor (o). Frequently, however, the vendor grants underleases to the purchasers, and retains the lease; and this mode of sale may be adopted by a vendor trustee (p). It is proper for the conditions to provide what covenants are to be given, though it seems that the vendor is entitled to covenants by the underlessees to observe the covenants in the head-lease so far as they relate to their respective lots; and by the assignee of the lease (where the lease is assigned to a purchaser) to perform, and indemnify the vendor against the covenants therein as regards the whole property; while the underlessees are entitled to the usual qualified covenants by the grantor for quiet enjoyment, for payment of the head rent, and for performance of the covenants contained in the head-lease so far as they affect the property comprised therein, other than that demised to the covenantee. This last-mentioned covenant by an assignee of the head-lease is rather onerous (q), and may deter purchaser trustees;, hence it may be well, where a purchaser is to take the head-lease and grant underleases, to restrict the operation of such last-mentioned covenant to the parts of the property retained by him. As regards cross powers of distress often given to the several purchasers, s. 189 of the L. P. Act, 1925, provides that a power of distress given by way of indemnity against a rent or breach of covenant in relation to land is not, and is not to be deemed ever to have been, a bill of sale, and that the benefit of all covenants and powers given by way of indemnity against a rent or breach of covenant, is, and is to be deemed always to have been, annexed to the land to which the indemnity relates.