The Supreme Court handed down its decision in Duval v 11-13 Randolph Crescent Ltd on 6 May 2020.
The unanimous judgement approves the earlier decision of the Court of Appeal and confirms that a landlord would be in breach of an obligation to enforce lease covenants at the request of another tenant in a building, if they permit a tenant to carry out alterations which are prohibited under its lease of a flat in the building.
On a practical level, when asked to consent to tenant alterations, a landlord will need to carefully check whether the lease contains an absolute covenant on the type of works proposed (an absolute covenant is often contained in leases to prohibit structural/external alterations). If so, the landlord must also check whether the leases of the block/building also contain obligations for other leases to be granted on similar terms and for the landlord to enforce tenant covenants for the mutual benefit of all other tenants in the block/building, before proceeding further.
In this case, a tenant had requested consent to carry out works to her flat which involved removing a substantial part of a load bearing wall at basement level. Another tenant objected to these proposed works. The landlord decided to grant a licence, subject to adequate insurance being obtained by the tenant proposing to carry out the works. The other tenant issued proceedings against the landlord, seeking a declaration that the landlord did not possess the power to permit the breach of the alterations clause. The Court of Appeal found in the tenant’s favour. The landlord appealed to the Supreme Court, who dismissed the appeal for the following reasons.
Each flat lease in the block prevented the tenant from making any alteration or improvement in, or addition to, the demised premises without the landlord’s prior written consent (under clause 2.6 of the leases). This is a qualified covenant and in addition, statute implies an obligation that such consent is not to be unreasonably withheld, by section 19(2) of the Landlord and Tenant Act 1927. The judgement refers to this and states that the original parties to the leases must have therefore envisaged more minor works to be carried out.
Each lease also contained an absolute prohibition on the tenant cutting into any roofs, walls, ceilings or service media (under clause 2.7 of the leases). This is an absolute covenant/prohibition. It therefore seems that the original parties to the leases would therefore have envisaged that more major works would not be permitted.
Each lease further contained (in clause 3.19 of the leases) provision that a) every lease of a residential unit in the building granted at a premium would contain similar covenants (including those in clauses 2.6 and 2.7) and b) that the landlord would enforce, at the request and cost of any tenant, certain covenants in the leases held by the other tenants, including any covenant of a similar nature to clause 2.7. These provisions created a contract as between the landlord and the other tenants such that the waiver by the landlord of a breach of the covenant in clause 2.7 by a tenant (or the grant of a licence to commit what would otherwise be a breach of that covenant) would amount to a breach of clause 3.19 of the leases held by all of the other tenants in the building.
As clause 2.7 related to works which could be damaging or destructive to the building, the landlord could not consent to such works or vary or modify clause 2.7 for this tenant without the agreement of all the other flat tenants and the tenant who brought the case was entitled, on provision of security, to require the landlord to enforce the absolute covenant in clause 2.7.
Note that a distinction was made here because some alterations could be done with landlord’s consent under a qualified covenant (clause 2.6) and some alterations were not permitted at all and were subject to an absolute covenant/prohibition (under clause 2.7).
We are happy to assist at an early stage in reviewing the provisions of any leases so please do contact anyone in the commercial property team who specialise in commercial leases and lease management matters.
Disclaimer: this BLOG has been written to give general guidance on key issues but does not constitute legal advice and cannot be relied on. Should you require our assistance we are happy to provide advice.