Rachel Thomasen is associate in Holland & Knight's London office
In the course of an aircraft lease negotiation, the lessee will typically seek to ensure that the lessor provides an express covenant to the lessee that for so long as no default has occurred and is continuing under the lease, the lessor will not disturb the lessee's quiet use, possession and enjoyment of the aircraft. Some lessee's go further and press for lessor to covenant as to itself as well as any person claiming through the lessor (such as the lessor's financier, the owner if different from the lessor or an assignee or transferee of the lessor).
However, should the lessor ultimately be responsible for ensuring that a third party lawfully claiming through it respects the lessee's right to "quiet enjoyment?" Does the fact that such person has provided a quiet enjoyment covenant directly to the lessee absolve the lessor of the obligation to ensure that such third party respects the lessee's quiet enjoyment rights?
Positions Adopted in Aircraft Lease Agreements
In practice, the lessor and the lessee commonly agree to one of the following two positions: (1) the lessor covenants that (x) it will not interfere with the lessee's quiet enjoyment rights and (y) no party lawfully claiming through the lessor will interfere with the lessee's quiet use, possession and enjoyment of the aircraft; or (2) the lessor covenants that it will not interfere with the lessee's quiet enjoyment rights and it will ensure that any owner or financier provides its own separate, direct quiet enjoyment covenant to the lessee contained in a "quiet enjoyment letter." The significant difference between positions (1) and (2) being that in the case, for example, of a breach by lessor's lender of lessee's quiet enjoyment, the lessee in (1) would make a claim for damages against lessor while the lessee in (2) would make such claim against the lender.
During recent lease negotiations in which Holland & Knight participated, the scope of the quiet enjoyment covenant was a significant issue for lessor and lessee. The lessor offered to make the covenant as to itself and to provide a quiet enjoyment letter from its lender (ie, position (2) above); however lessee took the position that it should receive a quiet enjoyment letter from lessor's lender AND the lessor itself should covenant that its lender would not interfere with the lessee's quiet enjoyment rights. The lessee argued that its main relationship was...