Where there is a legal lease, and the legal leaseholder does not hold the whole equitable/beneficial interest, can the landlord claim against the equitable/beneficial interest holder(s), for non-compliance with the terms of the legal lease? For instance, where the legal leaseholder retains the legal leasehold interest, but has assigned the equitable interest/part of the equitable interest, to an equitable assignee, can the landlord claim against the equitable assignee, for, say, unpaid rent? Such a situation might arise where there is an attempt to assign the leasehold interest, but due to a failure to comply with the law of formalities (particularly, section 52 of the Law of Property Act 1925 - the (sometimes applicable) requirement to use a deed), only the equitable interest in the legal lease is assigned. Would the fact that the equitable assignee had entered into possession and enjoyment of the demised property, affect the position?
A convenient place to start is to identify the parties to the situation; there is:
(a) Person A: Landlord;
(b) Person B: Legal leaseholder/equitable assignor/trustee;
(c) Person C: Equitable assignee/beneficial interest/equitable interest holder.
This issue arose in the case of Cox v Bishop (1857) De. G.M. & G. 815; 44 ER 604 (‘Cox’), though as we will see, the focus was on the importance of one additional element (equitable assignee also in possession/enjoyment of the demised property).
In the case of Cox:
1. The landlord plaintiffs/respondent on the appeal, demised a mine to Mr Richard Smethurst, the lessee;
2. The (3) defendants/appellants were equitable assignees of the lease;
3. The landlord sued the equitable assignees for rent and damages for breach of the lease covenants;
4. The equitable assignees demurred for want of equity. At 1st instance, the Court held ‘an equitable assignee of a lease, who has been put into possession and enjoyed the property as assignee, is liable in equity to the lessor for the performance of the covenants.’
5. This 1st instance decision was appealed;
Point Conceded, Rightly
The first important point to note is that during argument on appeal:
(a) Counsel for the equitable assignees said ‘The question is, whether a person who by virtue of a contract with a lessee is entitled in equity to the lessee's interest is liable in equity to the landlord to the same extent as he would be liable at law if a legal assignment had been made. We say, first, that the contract itself cannot give the landlord any right to sue in equity, for it is a contract between other parties with which he has nothing to do.’ (606/mid);
(b) in response, counsel resisting the appeal conceded ‘We do not allege that the contract alone, not followed by possession, would give the landlord any such right.’ (606/mid)
To be clear therefore, the point was conceded by the landlord’s counsel - that an additional element (without possession or enjoyment of the demised property by the equitable assignee), a landlord cannot sue the equitable assignee on the covenants to the lease.
On this concession, Knight Bruce LJ said in Cox, at 607:
‘It was properly conceded, on the part of the [landlord], that the liability would not have existed but for the possession or enjoyment of the property under the equitable assignment.’
Equitable Assignee in possession and enjoyment of the demised property
What the landlord argued in Cox was that the equitable assignees taking possession and enjoyment of the demised property, changed the position. The landlord argued that where the equitable assignee also took possession or enjoyment of the demised property, the landlord could sue.
Knight Bruce LJ in Cox phrased this question as follows, at 607:
‘The substantial question upon this appeal is whether an equitable assignee of a legal term of years granted in mines, or mines and other hereditaments, under a reserved rent and certain covenants, is liable to be sued in equity by the lessor for rent which became due and damages in respect of breaches of some of the covenants committed during the time that the assignee was in the possession and enjoyment of the demised property as the equitable assignee of it…’
Knight Bruce LJ went on to reject the landlord's proposition, saying, at 607:
‘It appears, however, to me, I acknowledge, that the possession and enjoyment make no difference. They do not, in my opinion, create a contract between the lessor and the equitable assignee which can give the former a title to the relief prayed against the latter. The possession by itself would not, nor would the equitable assignment by itself, have given the [landlords] the equitable right which they are here asserting against the [equitable assignees]; neither, I think, can the union of the two. The legal right, if any, that the [landlords] have against the [equitable assignees] ought, I conceive, if asserted in any Court, to be so in a Court of law. The absence of that legal right cannot, in such a case as the present, confer, in my opinion, an equitable right to what the bill asks against them. The demurrers seem to me sustainable…’
Turner LJ in Cox said, 607 - 608:
‘The question raised by the demurrers is whether, under these circumstances, these [equitable assignees] became liable in equity to the [landlords] for the rent reserved by the lease and upon the covenants contained in it.
Looking at this question upon principle and without reference to the decided cases, I confess myself unable to discover any ground upon which these [equitable assignees] can be subjected in equity to the liability which this bill seeks to impose upon them.’
Later, Turner LJ said in Cox, 608:
‘It remains then to consider whether there is such a weight of authority in favour of the bill as renders it incumbent upon us to support it. I am of opinion that there is not.’
Subsequent Authorities and Woodfall
Megarry VC in Tito v Waddell  Ch. 106 said of Cox, at 300:
‘Cox v. Bishop holds that an equitable assignee of a lease who takes possession of the land is not liable to the lessor on the covenants of the lease. The case was argued and decided on privity…’[2a]
In Rhone v Stephen  2 AC 310, HL, Lord Templeman said, at 316A:
‘In Cox v. Bishop (1857) 8 De G.M. & G. 815 … it was held that the covenants in the lease could not be enforced against an equitable assignee of the lease who had entered into possession.’ 
The authors of Woodfall: Landlord and Tenant, paragraph 16.081 (in Part 4 entitled ‘Transfer’; in Chapter 16 entitled ‘Assignment, Sub-Lease, and Devolution of Leases; in section 5 entitled ‘Assignment of Term’), summarised the position as follows:
‘An effective assignment must made by deed, even where the tenancy was created by writing under hand or was created orally. It must pass the legal estate of the assignor; for a transfer of a mere equitable interest will not make a man liable as an assignee. An agreement to take an assignment of a lease, followed by possession on the part of the equitable assignee, is not sufficient to give the landlord any right to sue the equitable assignee in equity on the covenant in the lease.'
For completeness, it might be help to raise one additional issue. So far, it has been established that the landlord will have no right to sue the equitable assignee in equity on the covenant in the lease. However, the landlord maybe able to (successfully) plead that the equitable assignee is estopped from denying that the equitable assignee is not also the legal assignee. In other words, the equitable assignee may be estopped from denying that he (i.e. the equitable assignee) has a legal assignment. Though there are other cases, reference here will be made to Rodenhurst Estates Ltd v W H Barnes Ltd  2 All ER 3
It seems settled law that a landlord to a legal lease, cannot sue the mere holders of the/a equitable/beneficial interest in the legal lease, for non-compliance with the terms of the legal lease. This remains the position even if the equitable/beneficial interest holder is in possession and enjoying the demised property.
SIMON HILL © 2022
33 BEDFORD ROW
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.
 Section 52 of the Law of Property Act 1925 is entitled 'Conveyances to be by deed'. It requires, unless an exception applies, that a transfer of legal title to land is made by deed:
‘(1) All conveyances of land or of any interest therein are void for the purpose of conveying or creating a legal estate unless made by deed.’
The exceptions are contained in section 53(2). Section 53(2) reads:
'This section does not apply to-
(a) assents by a personal representative;
(b) disclaimers made in accordance with sections 178 to 180 or sections 315 to 319 of the Insolvency Act 1986, or not required to be evidenced in writing;
(c) surrenders by operation of law, including surrenders which may, by law, be effected without writing;
(d) leases or tenancies or other assurances not required by law to be made in writing;
(da) flexible tenancies;
(db) assured tenancies of dwelling-houses in England that are granted by private registered providers of social housing and are not long tenancies or shared ownership leases;
(e) receipts other than those falling within section 115 below;
(f) vesting orders of the court or other competent authority;
(g) conveyances taking effect by operation of law.'
Section 53(3) provides some definitions. It reads:
'In this section-
“assured tenancy” has the same meaning as in Part 1 of the Housing Act 1988;
“dwelling-house” has the same meaning as in Part 1 of the Housing Act 1988;
“flexible tenancy” has the meaning given by section 107A of the Housing Act 1985;
“long tenancy” means a tenancy granted for a term certain of more than 21 years, whether or not it is (or may become) terminable before the end of that term by notice given by the tenant or by re-entry or forfeiture;
“shared ownership lease” means a lease of a dwelling-house-
(a) granted on payment of a premium calculated by reference to a percentage of the value of the dwellinghouse or of the cost of providing it, or
(b) under which the lessee (or the lessee's personal representatives) will or may be entitled to a sum calculated by reference, directly or indirectly, to the value of the dwelling-house.'
[2a] The full quote from Tito v Waddell  Ch. 106 (1976) , at 300, is:
‘Cox v. Bishop holds that an equitable assignee of a lease who takes possession of the land is not liable to the lessor on the covenants of the lease. The case was argued and decided on privity, and not on any principle of beneﬁt and burden. The Bagot case  1 Ch. 146 concerned a licence to use patents which had been assigned in equity. The beneﬁt and burden principle was argued in an attempt to make the assignees liable on the burdens of the licence, but Vaughan Williams L.J. rejected it, relying on Cox v. Bishop: see at pp. 156, 157. Romer L.J. brieﬂy cited Cox v. Bishop as showing that the plaintiﬀs had no special right to sue the defendants merely because the latter were equitable assignees (see at p. 161), and Cozens-Hardy L.J. simply expressed his agreement. This appears to be the strongest authority against the existence of any pure beneﬁt and burden principle at all, although of course the authorities have not stood still since 1901. In due course I must return to this case.’
 The full quote from Lord Templeman in Rhone v Stephen  2 AC 310, HL, at 316A, is:
‘At common law a person cannot be made liable upon a contract unless he was a party to it. In Cox v. Bishop (1857) 8 De G.M. & G. 815 a lease was assigned to a man of straw and it was held that the covenants in the lease could not be enforced against an equitable assignee of the lease who had entered into possession. The covenants were not enforceable because there was no privity of contract or estate between the lessee and the assignee.’
 The other cases are:
(a) prior to Rodenhurst Estates Ltd v W H Barnes Ltd  2 All ER 3 ('Rodenhurst'): (1) Williams v Heales (1874) LR 9 CP 177; (2) Mayor etc. of Stratford upon Avon v Parker  2 KB 562; (3) Official Trustee of Charity Lands v Ferriman Trust Ltd  3 All ER 85; (4) Stait v Fenner  2 Ch 504; (5) Cadle v Moody (1861) 30 LJ Ex. 385; (6) Doe D.Hemmings v Burnford (1832) 2 Cr & J 667; (7) Robinson v Rosher (1841) 1 Y & CCC 7, 11. See also The Running of Covenants in Equitable Leases and Equitable Assignments of Legal Leases (1978) CLJ 98 (R J Smith), in particular, Section B 'Equitable Assignments of Legal Leases', Part 1 'Estoppel' (page 116)
(b) after Rodenhurst: (1) Re La Bersagliera  4 WLUK 88 considered/distinguished on facts; with the following mentioning Rodenhurst: (2) PCE Investors Ltd v Cancer Research UK  EWHC 884 (Ch); (3) Singla v Hedman  B.C.C. 684; (4) Talisman Property Co (UK) Ltd v Norton Rose (A Firm) -  EWHC 2793 (Ch) (18.11.05) and  EWHC 85 (Ch) (1.2.05); (5) Brown & Root Technology Ltd v Sun Alliance and London Assurance Co Ltd  Ch. 733 (19.12.96) and  Ch. 51 (16.6.95); and (6) Covell v Sweetland  1 W.L.R. 1466.