Landlords’ competing interests
Duval v 11-13 Randolph Crescent Limited [18.10.18]
The Court of Appeal has held that if a landlord grants a license to a tenant to permit alterations that are prohibited in the lease, the landlord could be subject to an action from another tenant in the building.
Two houses were converted into 18 flats. Each flat was held under a long lease. 11-13 Randolph Crescent Limited (the ‘Landlord’) was a company owned by all the leaseholders.
Mrs Winfield, a leaseholder of one of the flats, asked the Landlord for consent to carry out alterations to her flat which involved the removal of a partition, load-bearing wall. Part of the lease, at Clause 2.6 was that the Landlord could not unreasonably withhold consent and as such consent was to be granted, however, Dr Duval, another leaseholder, objected.
The basis for the objection, contained within Clause 2.7, was that the lease contained a covenant requiring each leaseholder not cause damage to any roof, wall or partition in their premises. Further, Clause 3.9 in the lease, allowed a leaseholder to request that the Landlord take action for a breach of the lease terms against another leaseholder on their behalf.
When the Landlord agreed to grant Mrs Winfield a licence to carry out the works, Dr Duval brought legal proceedings, arguing that in granting the licence, the Landlord had breached Clause 2.7 and also, would be unable to comply with its duties to other tenants under Clause 3.9.
The Court of Appeal found in favour of Dr Duval and allowed the appeal.
As the leases in the building contained an absolute covenant requiring the tenants not to carry out certain actions (Clause 2.7), and a separate covenant that required the Landlord to enforce the absolute covenant at the request of any of the leaseholders (Clause 3.9), the Landlord would be in breach if it granted a licence for a tenant to carry out the prohibited action.
Many leasehold properties contain a mechanism permitting lessees to enforce covenants directly against each other. This particular property did not. Instead, each lease included a provision that permitted the leaseholder to provide an indemnity to the Landlord, who would enforce covenants on their behalf.
In practical terms, covenants of this nature are designed to avoid conflicts between leaseholders and also provides action for leaseholders against landlords who take a lackadaisical approach to enforcing leasehold covenants, or landlords who ignore breaches of covenants. This judgment highlighted that the use of a combination of clauses were to ensure the Landlord was bound to observe its obligations under each of those clauses.
Absolute covenants in leases will override any implied provision that it could be waived with the Landlord’s consent. Practically this means that Landlords are unable to consent to requests that are strictly prohibited in the lease.
This judgment is in line with the trend that leaseholders are in more favourable positions when enforcing terms of leases and taking actions against landlords. It is therefore vital that landlords remember to consider all the landlord covenants contained in the lease, when considering whether to grant consent so as to ensure they are not in a position where they would be in breach of their own covenants. With new leases, landlords should consider the benefit of avoiding absolute prohibitions, to avoid difficulties with licences. When purchasing new properties, landlords should also ensure to make all the necessary enquiries to identify any licence granted by a previous landlord, which resulted in a potential breach of that landlord’s covenant under the lease.