Landlords and tenants around the country were left holding their collective breathes for the outcome of the Supreme Court’s decision in Duval v 11-13 Randolph Crescent Ltd.  UKSC 18 (6 May 2020) ("Duval") to provide guidance on a landlord's liability when granting consent to leaseholders to carry out structural alterations.
The Supreme Court found that a landlord is not entitled to grant a licence for alterations for works which would otherwise breach an absolute covenant where there is a mutual enforceability covenant.
The case concerned a house which had been converted into nine flats and let to tenants under identical long leases. The freeholder was a management company of which all the leaseholders were shareholders.
Each lease contained:
a conditional clause “Not without the previous written consent of the Landlord to erect any structure pipe partition wire or post upon the Demised Premises nor make or suffer to be made any alteration or improvement in or addition to the Demised Premises.” (Clause 2.6)
an absolute prohibition clause “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 …” (Clause2.7)
an enforcement clause “That every lease of a residential unit in the Building hereafter granted by the Landlord at a premium shall contain … 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)
One of the tenants wished to carry out alterations, including works which would have been carried out in breach of the absolute prohibition clause. The landlord gave consent to the said tenant to carry out the prohibited works. However, prior to the tenant commencing the works another tenant, Dr Duval, requested that the landlord prevent the tenant from carrying out those prohibited works.
Dr Duval argued that the landlord had covenanted to enforce the covenant if the tenant of another flat requested them to do so. She argued further that by agreeing to the works which were of a prohibited nature the landlord had effectively rendered the clause unenforceable as against the tenant carrying out the works. The landlord was as such in breach of the enforcement clause.
The landlord argued that it was entitled to consent to what would otherwise be a breach by the tenant. The tenant was therefore not in breach of its absolute prohibition covenant and as such there was no breach to enforce and likewise no breach by the landlord for failing to enforce it.
The Court of Appeal considered the effect of a landlord waiving a lease covenant which it was obliged to enforce and agreed with Dr Duval. The landlord appealed. The Supreme Court, like the Court of Appeal before it, too agreed with Dr Duval.
The Supreme Court has unanimously held that a landlord who gave consent to a leaseholder to carry out alterations in breach of an absolute prohibition in its lease, would itself be in breach of its obligation to enforce the lease covenants at the request of another tenant in the block. The landlord was also not free to grant a licence for works in breach of, or to waive compliance with, the absolute covenant without the agreement of all the other tenants with the benefit of the covenant.
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