A game changing decision in landlord and tenant law whilst in lockdown?
In amongst the peace and quiet of the sunny days of lockdown has come a judgment of the Supreme Court that could turn on its head how flats held under long leases are owned and managed.
This appeal was heard nearly seven months ago and is fundamental for landlords, lessees, lawyers and managing agents alike.
The case concerned is Duval v 11 – 13 Randolph Crescent Limited. The building comprises a number of flats all held on long leases. The lessees are all shareholders in the freehold company. A lessee in the building applied for permission to undertake works to her flat, which also included the removal of a load bearing wall in the basement. The lease contains an absolute covenant against such works.
“Not to commit or permit or suffer any waste spoil or destruction in or upon the demised premises nor cut maim or injure or suffer to be cut maimed or injured any roof wall or ceiling within or enclosing the demised premises or any sewers drains pipes radiators ventilators wires and cables therein and not to obstruct but leave accessible at all times all casings or coverings of conduits serving the demised premises and other parts of the building.”
Mrs Duval, one of the other lessees in the building, was not happy with the proposed work and complained to the freehold company, which initially indicated that permission would not be granted but following receipt of structural engineers’ and surveyors’ reports were proposing to permit the works.
Mrs Duval commenced a claim against the company in the County Court for amongst other things a declaration that the landlord did not have the power to permit a lessee to act in breach of lease. She said that by allowing the work the landlord would be in breach of a collateral contract as between it and another lessee, and relied on Clause 3.19 of her lease.
“[…] every lease of a residential unit in the building hereafter granted by the landlord at a premium shall contain regulations to be observed by the tenant thereof in similar terms to those contained in the fifth schedule hereto and also covenants of a similar nature to those contained in clauses 2 and 3 of this lease and at the request of the tenant and subject to payment by the tenant of ( and provision beforehand of security for) the costs of the landlord on a complete indemnity basis to enforce any covenants entered into with the landlord by a tenant of any residential unit in the building of a similar nature to those contained in clause 2 of this lease.”
Clause 3.19 contains two promises by the landlord, the first that every lease will contain covenants similar to those in clauses 2 and 3. Secondly, a promise to enforce a covenant at the request of and expense of another lessee. It is contingent both on the lessee requesting it and provision of security the landlord.
At first instance the County Court decided that on the interpretation of clause 3.19 the landlord could not permit the works without the consent of all of the lessees of the flats in the building.
The matter went back to the County Court on appeal and it was decided that the landlord could license the works that would otherwise amount to a breach and once licensed could not be the subject of enforcement action.
The matter proceeded on a further appeal to the Court of Appeal which held that the grant of a license to commit what would otherwise be a breach did amount to a breach of clause 3.19.
The Supreme Court in its judgment handed down today agreed with the decision of the Court of Appeal in this vital case which will affect not just woks of alteration but anything else absolutely prohibited under a lease; for instance, the laying of wooden floors or playing of loud music.
The judgment itself is a short seventeen page read for those interested and makes some interesting references to cases brought by ladies against gentlemen in breach of a promise to marry! Aside from these references it does contain a number of technical points and the key points to take away are as follows:
- If there is an absolute covenant but no enforcement clause (clause 3.19) then the landlord is free to waive an absolute covenant or to specifically grant permission for something which would otherwise be prohibited.
- Clause 3.19 is the game changer here, permission for something otherwise prohibited cannot be given unless all other lessees agree to waive their rights.
- Clause 3.19 does not expressly say a landlord cannot give permission but it is implied.
These covenants are contained in a large number of leases and whilst it is unlikely to affect routine alterations of the interior of a flat and any repairs it will affect those wanting to undertake major works of alteration where they have an absolute covenant preventing this, combined with a clause similar to clause 3.19.
This case will undoubtedly affect drafting of leases in the future as well as the sale of flats now – where the leases contain these types of clauses, this could be damaging in an already depressed market.
Conveyancing solicitors must be mindful of advising the potential purchaser as to these terms. Our advice for any lessee wanting to undertake work, or a landlord looking to give permission for something otherwise prohibited, would be to check the lease carefully and obtain advice from a specialist landlord and tenant solicitor before proceeding.