The Landlord and Tenant Covenants Act 1995: A Guide
The Landlord and Tenant Covenants Act 1995 is a critical piece of legislation that governs the relationship between landlords and tenants in England and Wales. This Act, enacted to rectify perceived injustices in the landlord and tenant law, has significantly influenced the obligations and rights of both parties involved in a lease agreement.
This article provides a detailed examination of the Act, its historical context, key provisions, and its practical implications. It also addresses frequently asked questions, offering clarity on how the Act impacts lease assignments and the responsibilities of landlords and tenants.
Article updated: September 2026
What Is the Landlord and Tenant Covenants Act 1995?
The Landlord and Tenant Covenants Act 1995 is the law in England and Wales that decides who stays liable for the promises in a lease, called covenants, after the lease is passed on. It is often called the "1995 Act".
The Act's importance lies in its ability to balance the rights and obligations of both landlords and tenants, thereby fostering a fair and equitable relationship between the two parties.
The Background and Purpose of the Act
The Act was passed to end the old rule that kept an original tenant liable for a lease's covenants indefinitely, even after the lease had been assigned to a new tenant. That rule came from two ideas, "privity of contract" and "privity of estate". It led to numerous cases where original tenants were held liable for breaches of covenant committed by subsequent tenants, often many years after the original lease was assigned.
The Landlord and Tenant Covenants Act 1995 had two aims. One was to release a tenant who assigns a lease from future liability under it. The other was to keep adequate remedies for landlords when a covenant is broken. That release does not reach every lease, though. Under section 1, sections 3 to 16 and 21 apply only to "new tenancies". These are leases granted on or after the day the Act came into force, 1 January 1996. A lease granted under an agreement, court order or option that predates that day is not a new tenancy. Sections 17 to 20 apply to older leases as well. The Act extends to England and Wales only, and since 1 December 2022 it has not applied to occupation contracts in Wales under the Renting Homes (Wales) Act 2016.
Key Provisions
The Act has three key provisions. A tenant under a new tenancy is released once the lease is lawfully assigned. Where the lease needs the landlord's consent to assign, the outgoing tenant can be required to guarantee the incoming one. The landlord's lease obligations pass to whoever becomes the landlord next. The 1995 Act covers a wide range of issues, but these three stand out for their impact on landlords and tenants.
Firstly, the Act abolished the concept of "privity of contract" and "privity of estate" for new tenancies. This means that an original tenant under a lease granted on or after 1 January 1996, outside the section 1 exceptions, is no longer indefinitely liable for the covenants of the lease after it has been assigned. Instead, under section 5, their liability ends upon the lawful assignment of the lease. A tenant under an older lease is not released in this way, although sections 17 to 20 give former tenants under older leases some protection too. For example, a landlord who wants rent or service charge from a former tenant has to serve notice within six months of the sum falling due.
Secondly, the Act introduced the concept of "Authorised Guarantee Agreements" (AGAs). Under an AGA, an outgoing tenant can agree to guarantee the performance of the covenants by the incoming tenant. Under section 16, an AGA is available where the lease needs the landlord's consent to an assignment and that consent is given on a lawfully imposed condition that the outgoing tenant guarantees the incoming tenant. The guarantee can cover only that incoming tenant, and it falls away once the incoming tenant is released by the Act. This provides a level of protection for landlords, ensuring they have recourse in the event of a breach of covenant by the new tenant.
Finally, the Act also made provisions for landlords' obligations. It stipulated that landlords are bound by the covenants of the lease, and these obligations pass on to anyone who becomes the landlord of the property.
The Impacts
For tenants, the Act has brought greater fairness and certainty. On new tenancies, a tenant who lawfully passes the lease on is no longer left answering for the tenants who come after. A tenant who gives an AGA can still be liable for the tenant they assigned to.
At the same time, by allowing AGAs within the limits set by section 16, it has left landlords with protection and remedies available in the event of a breach of covenant by the new tenant.
The Act has thus played a crucial role in shaping the modern landscape of landlord and tenant law in England and Wales.
Practical Implications
In practice, the protection a landlord gets depends on the wording of the lease, because section 16 makes an AGA available only when the lease needs the landlord's consent to assign. An AGA gives the landlord recourse if the new tenant breaches a covenant, as an overview from UOLLB outlines.
For tenants, the Act has provided much-needed relief from indefinite liability. By abolishing the rules of privity for new tenancies, the Act releases a tenant from future liability under section 5 once a lease is lawfully assigned. This has provided tenants with greater freedom and flexibility. Unless they have given an AGA for the tenant they assigned to, they no longer have to worry about being held liable for breaches of covenant committed by subsequent tenants. Tenants under leases granted before 1 January 1996 stay bound by the old rules, subject to sections 17 to 20.
However, the Act has also introduced new complexities. For instance, the concept of AGAs, while protecting landlords, can leave an outgoing tenant who gives one still liable for the tenant they assigned to, within the limits set by section 16. Tenants now need to be mindful of these obligations when assigning a lease.
To illustrate the practical implications of the Act, consider the case of a tenant who wishes to assign a lease granted after the Act came into force, so a new tenancy. Under the old rules of privity, the tenant would have remained liable for the covenants of the lease even after the assignment. However, under section 5 of the 1995 Act, the tenant's liability ends upon the lawful assignment of the lease. If the lease says the tenant cannot assign without the landlord's consent, the landlord can give that consent on a lawfully imposed condition that the outgoing tenant enters into an AGA. Under the AGA, the outgoing tenant guarantees the performance of the covenants by the incoming tenant, within the limits in section 16. The guarantee covers that incoming tenant only, and it ends when the incoming tenant is released. Had the lease been granted before 1 January 1996, or under an agreement, court order or option made before then, the tenant would get no release from the Act and would stay bound as before.
For an investor, the Act comes into play when a leasehold investment property changes hands, since everything above turns on when the lease was granted and what its assignment clause says. The same questions arise with a leasehold buy to let property for sale and with below market value properties where the seller is assigning an existing lease. A leasehold flat bought to let comes with lease terms like these on top of the usual landlord rules, and our is buy-to-let still worth it guide weighs up those rules and costs against the rent.
FAQ
What are the Rights and Obligations of Landlords Under the Act?
Under the Act, landlords are bound by the covenants of the lease, and these obligations pass on to anyone who becomes the landlord of the property. Where the lease requires the landlord's consent to an assignment, the landlord can give that consent on a lawfully imposed condition that the outgoing tenant enters into an AGA under section 16. The AGA gives the landlord a form of recourse if the new tenant breaches a covenant. Section 16 does not make an AGA compulsory just because the landlord asks for one.
What are the Rights and Obligations of Tenants Under the Act?
Under a new tenancy, broadly one granted on or after 1 January 1996, tenants are released from future liability by section 5 once a lease is lawfully assigned. Tenants do not have to give an AGA just because the landlord asks for one. Under section 16, an AGA comes into play where the lease needs the landlord's consent to assign and that consent is given on a lawfully imposed condition that the outgoing tenant guarantees the incoming tenant. If the tenant gives one, the guarantee covers only that incoming tenant and ends when the incoming tenant is released. Tenants under older leases are not released by the Act, though sections 17 to 20 give them some protection. That protection includes the rule that a landlord must serve notice within six months of rent or service charge falling due before claiming it from a former tenant.
How Does the Act Affect Lease Assignments?
The Act has significantly changed the dynamics of lease assignments. Before the Act, original tenants remained indefinitely liable for the covenants of a lease even after it had been assigned. The Act abolished this rule for new tenancies, meaning that a tenant's liability under a lease granted on or after 1 January 1996, outside the section 1 exceptions, ends upon the lawful assignment of the lease under section 5. Older leases keep the old rule, subject to sections 17 to 20. Where the lease needs the landlord's consent to assign, the landlord can lawfully make that consent conditional on an AGA under section 16, which can place additional obligations on the outgoing tenant for the incoming tenant's performance.
What the Landlord and Tenant Covenants Act 1995 Changed
The Landlord and Tenant Covenants Act 1995 made two big changes for new tenancies. A tenant who lawfully assigns the lease is released from future liability under it. A landlord whose consent is needed for the assignment can lawfully make that consent conditional on an AGA from the outgoing tenant. So it matters when a lease was granted and what its assignment clause says.
While the Act has introduced new complexities, it has ultimately provided greater fairness and certainty for both landlords and tenants.
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