Neighbouring flats can force a landlord to refuse permission for alterations – Duval v 11-13 Randolph Crescent Limited

With the recent fast changing legislation arising from the Covid-19 outbreak, important case law can easily be missed.  The Supreme Court’s recent decision in Duval v 11-13 Randolph Crescent Limited [2020] UKSC 18 could have significant ramifications for landlords of residential blocks. We examine the facts.

Background

Dr Duval owned two flats at 11-13 Randolph Crescent in London which she held on 125-year leases. Mrs Winfield also owned a flat in the building. Their landlord was 11-13 Randolph Crescent Ltd (Landlord), which is a company owned by all the leaseholder owners of the building.  All the long leases were in substantially the same form.

In 2015 Mrs Winfield wished to carry out works to her flat which would include removing part of a load bearing wall. However, her lease contained an absolute covenant which prohibited her from cutting into, maiming or injuring any roofs, walls or ceilings within her flat (clause 2.7). Her lease also contained a qualified covenant that permitted alterations and improvements including erecting partitions, and installing wires, pipes or posts, subject to the Landlord’s consent. In the usual way, she approached the Landlord for a licence to do the works. The Landlord was willing to grant the licence, but Dr Duval said that the terms of the leases for the flats in the building prevented the Landlord from doing so.

The leases all contained a covenant (clause 3.19) which confirmed that, subject to reimbursement on an indemnity basis, the Landlord was required to enforce certain covenants in the leases held by the other lessees, including any covenant of a similar nature to clause 2.7. In other words, the enforcement provision was conditional on the tenant (1) making a complaint to the Landlord, and (2) agreeing to indemnify the Landlord for its costs. Dr Duval argued that the grant of the licence to carry out the works amounted to a breach of clause 3.19 with all of the other lessees.

Judgment

After making its way through the courts, the Supreme Court held that the granting of the licence to Mrs Winfield by the Landlord would be a breach of the Landlord’s obligations to Dr Duval.

The Landlord could not authorise a breach of the absolute covenant without the consent of all of the other tenants in the building. Authorising the works would mean that the Landlord could not comply with an enforcement request if received from another tenant under clause 3.19. Although the enforcement clause was conditional, that did not mean that the Landlord could fetter its power to enforce clause 2.7 by granting a licence to Mrs Winfield for her works.

Commentary

The decision here turned on the facts but this judgment could have wide-ranging implications for many residential landlords not just for future applications for consent, but also in cases where consent has already been granted.

Mutual enforceability covenants are common in modern leases and often, as was the case here, the enforceability covenant relates to all of the tenant covenants in the lease. Where this is the case, it is now clear that a landlord retains no discretion in relation to an absolute covenant; if the lease states that the landlord cannot permit certain alterations its hands are tied.

Whilst the subject matter of this case was alterations, the same rationale will apply to any absolute covenant in a lease, however minor, for example the right to keep pets if the leases in the building state that no pets are allowed at all, or that floors have to be kept suitably carpeted.

In the context of alterations, landlords should also note that the Court confirmed that the grant of the licence to undertake works strictly prohibited under the terms of the lease amounted to a breach of the landlord’s quiet enjoyment obligation in other leases, and also a derogation from grant to Dr Duval as the works removed or substantially interfered with the support that the wall in question offered to Dr Duval’s flats. Landlords will certainly want to carefully consider the interests of all of its tenants when considering applications for consent going forwards.

This decision may have more technical than practical effects but residential landlords must take into account the outcome of this case or find themselves facing a claim from their tenants.

In turn, purchasers of flats should consider whether the lease contains this type of absolute prohibition if they want to be able to carry out alterations in the future.

If you have any queries about this topic, please contact Eleanor Stark or any member of the Property Litigation team.

 

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