Landlords of multi-let properties beware
Real estate solicitor, Safeena Ali, reviews a recent case on the effect of an enforcement covenant in a lease.
Following the decision of the Court of Appeal in Duval v 11–13 Randolf Crescent Ltd [2018] EWCA Civ 2298, a landlord commits a breach of an enforcement covenant contained in a lease, should it grant a licence to allow a tenant to breach an absolute covenant.
The case concerned a block of nine flats which were held by tenants under long leases. Mrs Winfield was the tenant of Flat 13, and Mr Duval was the tenant of flats 11G and 11H. The leases contained similar terms, and in particular included the following covenants:
“Not to commit or permit or suffer any waste spoil or destruction in or upon the Demised Premises nor cut maim or injure or suffer to be cut maimed or injured any roof wall or ceiling within or enclosing the Demised Premises or any sewers drains pipes radiators ventilators wires and cables therein …”
This is an absolute covenant on the part of the tenant in that any of the works listed are absolutely prohibited.
“That every lease of a residential unit in the Building hereafter granted by the Landlord at a premium shall contain … covenants of a similar nature to those contained in Clauses 2 and 3 of this Lease AND at the request of the Tenant and subject to payment by the Tenant of (and provision beforehand of security for) the costs of the Landlord on a complete indemnity basis to enforce any covenants entered into with the Landlord by a tenant of any residential unit in the Building of a similar nature to those contained in clause 2 of this Lease.”
This is an enforcement covenant on the part of the landlord meaning that, at the tenant’s request and subject to the tenant providing security, the landlord is to enforce covenants as contained in the other flat leases.
In 2015 Mrs Winfield approached the landlord as she wished to remove seven metres width of load bearing walls. This would amount to a clear breach of the covenant detailed in (1) above, however the landlord was willing to consent to the works.
Mr Duval argued that, should the landlord allow Mrs Winfield to remove the walls in breach of the absolute covenant, this would in turn result in the landlord breaching the enforcement covenant detailed in (2) above. It was put forward that if the landlord had the ability to consent to works which would otherwise be in breach of the absolute covenant, or to waive compliance with it, then this would have been reserved in the lease.
In response, the landlord argued that it was free to do as it pleased with its own property, and ordinarily a landlord is free to grant consent to a tenant for something which may otherwise be a breach of a tenant’s covenant (such as the absolute covenant above) and the enforcement covenant itself did not specifically prevent this. In those circumstances it cannot have been intended that the landlord be in breach of the enforcement covenant. Further, if the landlord consents in advance to an activity, that activity will not amount to a breach of covenant so there will be nothing to enforce.
The Court of Appeal found in favour of Mr Duval and confirmed that the landlord granting consent to Mrs Winfield to carry out the works to her flat in breach of the absolute covenant would lead to a breach of the enforcement covenant by the landlord. It was found that this would be the case regardless of whether a tenant had made the request and provided the security as required under the wording of the enforcement covenant.
In particular the court confirmed that, whilst a landlord is free to grant consent to what would be a breach of an absolute covenant, where there is a contingent enforcement covenant (as was the case here given the enforcement covenant required a request and security from the tenant) the landlord is under an obligation not to prevent the contingency from occurring and not to put it out of his power to comply with the covenant if and when the contingency arises.
Following this judgment, landlords should take care to review existing lease procedures and in particular the wording of any enforcement covenants and restrictions on the landlord by virtue of such covenants. Likewise when entering into new leases, landlords should consider the tenant covenants in line with any enforcement covenants. If there is a qualified covenant instead of an absolute covenant on the tenant (meaning the landlord is able to potentially provide the consent which is not to be unreasonably withheld or delayed) the landlord would not commit a breach of the enforcement covenant by granting such consent.
Whilst this case related to a long residential lease under which enforcement covenants are common place, commercial landlords with multiple tenants (in shopping centres for example) should also be aware of the operation and implications of such covenants.
For more information, contact safeena.ali@irwinmitchell.com.
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