The issue in this case was one touching on the enforceability of covenants of the type seen in many typical leases of flats where the leases contain similar covenants and the landlord covenants to enforce those covenants at the request of another lessee.
What is the background on the case?
11 – 13 Randolph Crescent Ltd was the landlord of previously two mid terrace houses, converted into nine flats, each of which was let under a long lease (for a term of 125 years). Dr Duval was the leaseholder of one flat. The lease of each flat contained an absolute covenant prohibiting the leaseholder from cutting into the walls or ceilings .
The question was whether the landlord of a block of flats is entitled, without being in breach of covenant, to grant a licence to a lessee to carry out work which, but for the licence, would be a breach of covenant of that lessee’s lease, where the leases of the other flats require the landlord to enforce such covenants at the request and cost of any one of the other lessees.
The Supreme Court decided that the landlord would itself be in breach of its enforcement covenants with the other leaseholders if it granted such a licence without the consent of the other lessees.
What clauses did the lease contain?
- That every lease of a flat in the building granted by the landlord would contain covenants of a similar nature.
- That the landlord will enforce covenants of a similar nature at the request of another lessee provided the relevant conditions are satisfied, namely the payment by the requesting lessee of the landlord’s costs.
Mrs Winfield, the leaseholder of flat 13 sought permission from the landlord to carry out structural works which included the removal of a load bearing wall and would, absent of permission, amount to a breach of the terms of her lease. The landlord was minded to grant Ms Winfield a licence to complete the works.
Dr Duval objected to the consent and contended that the landlord could not grant permission because by doing so would amount to a breach of the obligation to enforce the covenants in other leases. Dr Duval issued proceedings to seek a declaration that the landlord did not possess the power to permit Mrs Winfield to act in breach of the lease.
The Circuit Judge and Court of Appeal found for Dr Duval.
What was the issue?
The issue before the Supreme Court was whether the landlord of a block of flats is entitled, without breach of covenant, to grant a licence to a lessee to carry out work which, but for the licence, breaches a covenant in the lease of his or her flat, where the leases of the other flats require the landlords to enforce such covenants at the request and cost of any one of the other lessees.
What was the verdict?
The Court affirmed the principle that a party who undertakes a contingent or conditional obligation may, depending upon the circumstances, be under a further obligation not to prevent the contingency from occurring; or from putting it out of his power to discharge the obligation if and when the contingency arises. This was said to be regarded as an implied term rather than a general rule of law. Thus some contracts with conditional terms will not carry with it such an implication; each will turn on its own construction.
How does this affect housing associations?
The implications for landlords including housing associations are far reaching. This affects all absolute covenants in such leases including relatively “minor” ones such as the keeping of pets and minor alterations. As a result of this decision any licence granted without the consent of all lessees leaves the landlord open to a claim of breach of each lease. This obviously affects rental flats in a block or on an estate.
It also would appear to affect shared ownership leases where housing associations sometimes allow the shared owners to do something otherwise not permitted by the lease e.g sub-let (often on a case by case basis), this is now potentially something that cannot be done without the consent of the other leaseholders on the estate.
Further now that this is established law, given the statute of limitations is 12 years for breach of covenant, any previous licences granted by the landlord leaves them open to a potential claim of breach of covenant.
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