• In the case of Amsprop Trading Ltd v Harris Distribution Ltd [1997] 1 W.L.R. 1025, it was held that the Law of Property Act 1925 section 56 is that someone who is not a party to a deed cannot take the benefit of a covenant related to it, even if they have been named as such in the deed.

Facts of the Case

  • D was the sub-tenant of a property who had a covenant with the tenant to maintain and repair the property.
  • In addition, D had agreed to allow the landlord, C’s predecessor, to enter the property to examine repairs and recover the associated costs.
  • Having taken over as landlord of the property, C was unable to recover the costs of repair from D because they were not a party to the covenant.
  • C brought an action against D, alleging that the covenant was meant for the clear benefit of the landlord.
  • As such, under the Law of Property Act 1925 s56, ‘a person may take an immediate or other interest in land or other property, or the benefit of any condition, right of entry, covenant or agreement over or respecting land or other property, although he may not be named as a party to the conveyance or other instrument.’

Issues

  • Was C, a third party to the agreement between their predecessor and the subtenant D, entitled to derive a benefit from the covenant on the basis of the 1925 Act?

Held by the High Court (Chancery Division)

  • Finding for D, that since C was not one of the parties of the original covenant, they could only gain advantage under the 1925 Act if the covenant was made for their individual benefit. Since the original covenant was made for the benefit of the preceding landlord, C was not entitled to benefit from it.

Neuberger J

  • On the facts C cannot claim to be a party to the covenant. It was expressly made solely by the parties of the original landlord and D as the subtenant of the property.
  • In Drive Yourself Hire Co v Strutt [1954] 1 Q.B. 250, Lord Denning considered that s56 of the 1925 Act allowed the courts to go back to the common law and allow third parties to sue on contracts expressly made for their individual benefit, or at least in cases concerning property.
  • With respect, Lord Denning’s view cannot stand in the light of the decision of the House of Lords in Beswick v Beswick [1968] A.C. 58. That case held that a third party cannot sue on a contract simply because it is made for their express benefit; it must purport to be made with them as a party to it.
  • “A provision such as a [Jervis v Harris] clause (which allows a landlord entry to examine what repairs need doing and claim the cost of doing them), which gives the landlords substantial powers, and in particular the power to carry out work at the tenant’s expense, should be construed narrowly rather than widely [1040].”