Kate owned two neighbouring freehold properties in a row of shops on the High Street, numbers 1 and 3. Ten years ago, she granted a lease of shop number 1 to Bob for twenty years. Five years ago, she granted a lease of shop number 3 to Simon for fifteen years. The leases of the two properties are very similar and each includes the same tenant covenants and re-entry clause (A copy of one of the leases is overleaf). Shortly after granting the lease of number 3, Kate sold the freehold of both properties to Lucy.
Three years ago, Martha took assignments by deed of both leases, and ran a delicatessen from number 1 and a greengrocer from number 3. However, last year a supermarket opened nearby, and since then business has not been good for Martha’s shops.
Lucy has not received any rent for number 1 for four months. In addition, number 3 has fallen into a state of disrepair and last week Lucy received a call from the police to say that number 3 had been raided by the police because it was being used for growing cannabis.
Lucy seeks your advice on the following matters:
(a) Whether the rent covenant can be enforced against Martha and/or Bob (Note to students: you do not need to discuss remedies available to Lucy in this part of the question); and
[35 marks]
(b) Whether, in view of the events Lucy can terminate the leases prematurely and recover possession of the premises. You should explain what remedy is available to Lucy to achieve this and what procedures she will need to take.
Explain what action, if any, Martha could take in response to prevent termination of the leases.
[65 marks]
Advise Lucy.
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