The Landlord and Tenant Covenants Act received royal assent on Wednesday 19 July, and is expected to be brought into force on 1 January 1996.The Act abolishes privity of contract for all new leases (although in certain circumstances an outgoing tenant may be required to guarantee its immediate assignee).

In return landlords are given greater powers to control assignments.The Act also introduces for both new and existing leases a procedure under which landlords must notify former tenants and their guarantors within six months of a current tenant's breach of certain covenants.

If the notified tenant or guarantor remedies the breach, he or she will be given a right to call for an overriding lease.Consent to assignment -- the new rulesThe new Act amends s.19 of the Landlord and Tenant Act 1927 in relation to assignment.

It is important to note that the law on consent to underletting has not changed.Accordingly, in any lease which is not a residential lease, the parties are now permitted to enter into an agreement (usually contained in the lease itself) specifying any circumstances in which consent can be withheld or any conditions subject to which consent can be granted.

If they do so, then the landlord is in effect deemed to be acting reasonably if the agreed terms are adhered to.There is, however, one important exception to this.

The circumstances or conditions specified in the agreement must not contain a subjective element.

If, therefore, the circumstances or conditions are to be determined by the landlord or even someone else, then the terms of the agreement must either require the person determining the matter to act reasonably, or give the tenant the right to have the matter determined independently.

The requirements for reasonable or independent determination are not implied into the wording of the covenant.

Unless the covenant is worded appropriately in the first place, the unamended s.19 will continue to apply, and the landlord will not be able unreasonably to withhold consent, whatever the circumstances.Within these limitations, therefore, the parties can now specify the rules of their own 'reasonableness test'.

Landlords will want to give careful thought to the drafting of new assignment covenants, balancing on the one hand the need for greater control, and on the other the possible effect on rent review.

Typically a landlord may want to spell out the circumstances in which no assignments will be permitted, for example in the first or last few years of the term, or if the assignee cannot pass a stipulated profits test or achieve a particular credit rating.Examples of conditions which a landlord may typically wish to propose would include: the giving of a bank guarantee on specified terms; the giving of a rent deposit for a specified amount; the giving of personal guarantees by the directors of private companies; the giving of an authorised guarantee.The Act contains stringent anti-avoidance provisions, and any conditions must not undermine the principle of the Act.Authorised guarantee agreementsAlthough the Act provides for an outgoing tenant to be released from its covenants, the landlord may still require it to guarantee the o bligations of the assignee in the following circumstances:1.

where the lease provides the consent of the landlord or some other person is required to the assignment;2.

such consent is given subject to a condition (lawfully imposed) that the tenant is to enter into the agreement with the landlord guaranteeing performance of the tenant's covenants by the assignee;3.

the assignment is entered into by the tenant in pursuance of that condition.The Act calls such a guarantee an 'authorised guarantee agreement'.

No sample wording is provided, although the Act does provide that the guarantee will be limited to the assignee's performance and will not extend to any subsequent assignee, and that the guarantee can require the original tenant, in the event of a disclaimer, to take up a new lease on the same terms and for the same duration as the existing lease.Landlord's releaseThere is a new provision contained in the Act for a landlord to apply for a release.

This effectively has to be made within four weeks beginning from the date of the landlord's assignment of the reversion.

The application is made in the first place to the tenant, but if the tenant fails to respond or objects to the release, then the landlord can seek the release from the court.

The court will order the release if it is reasonable to do so.

No guidelines on reasonableness are given.NoticesIn the case of new and existing leases where a landlord wishes to pursue an original tenant (or other former tenant or guarantor who remains liable under the terms of the lease) for a 'fixed charge', the landlord must serve notice of the potential claim on such tenants and guarantors within six months of the charge falling due.

It may be necessary to serve a new notice every six months.Fixed charge is defined to include rent, service charges as defined under the Landlord and Tenant Act 1985, and liquidated damages prescribed under the lease.Overriding leasesAny person who has 'made full repayment of an amount which he has been duly required to pay in accordance with the Act will be given an entitlement to an overriding lease of the premises demised by the current tenancy.

Any person seeking to exercise this entitlement must serve written notice on the landlord.

The notice is not required to be in any particular form and may be sent by post.

The landlord then has a reasonable time within which to grant the overriding lease.