Landlords and tenants around the country were left holding their collective breaths 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 to one tenant where this would be in breach of covenants given to other tenants within the same property.
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: No changes to the structure of the premises without the Landlord’s written consent.
- an absolute prohibition clause: Not to cut into the roof, wall or ceiling, or any sewers, drains, pipes, radiators, ventilators, wires or cables.
- an enforcement clause: That every lease in the property would have the same covenants, and that the other tenants could request the landlord to enforce the clauses listed above.
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 tenant to carry out the prohibited works. However, prior to the tenant commencing the works, Dr Duval, another tenant of the building, requested that the landlord prevent the tenant from carrying out those prohibited works.
Dr Duval argued that under the enforcement clause, 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. As there would be no breach, neither the tenant not the landlord would be liable.
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.
So, what does this all mean? Landlords need to think carefully when drafting enforcement clauses and covenants, especially when these could limit their powers and ability to consent to changes to the property.
Audley Chaucer can help you to draft effective leasehold agreements, which can secure your position as a landlord while also being fair and equitable towards tenants.