Side letters to leases
Side letters to leases

The following Property practice note provides comprehensive and up to date legal information covering:

  • Side letters to leases
  • Statutory formalities
  • When does section 2 apply?
  • Who is bound?
  • 'Old' leases—section 142 Law of Property Act 1925 and side letters
  • 'New' leases—Landlord and Tenant (Covenants) Act 1995 and side letters
  • Over-rented property
  • Treatment upon LTA 1954 unopposed lease renewal
  • Treatment at rent review

Side letters are often used:

  1. to make arrangements and grant concessions (eg in relation to the permitted use, the standards of repair or rental concessions), or

  2. to avoid ambiguity, for example, on assignment or rent review

The terms of the letters are usually intended to be:

  1. legally binding

  2. personal to the parties to the letter or binding on successors in title

If the side letter contains termination provisions, a landlord should ensure that these do not amount to an unenforceable penalty. In Vivienne Westwood, the court decided that the obligation to pay rent at a higher rate regardless of the nature and consequences of the breach and when it occurred, was penal in nature. On the particular termination wording, the higher rent was payable retrospectively, though the court confirmed that it would have come to the same conclusion if it had only been payable prospectively. The consequences of termination of the side letter for any non-trivial breach were exorbitant and unconscionable, having regard to the disparity with the loss likely to flow from any breach. The obligation to pay the higher rent was in addition to the other remedies the landlord had for breach of any tenant obligation of the lease—to pay interest and costs—and to common law damages.

However, the result of the case depended in large part on the fact that:

  1. the primary obligation of

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