Landlords beware: consenting to a tenant’s alterations despite absolute prohibition could put you in breach of your covenant to enforce obligations

A recent Court of Appeal decision has highlighted the importance of a landlord of residential flats acting in accordance with its leasehold obligations when an application is made by a tenant. We consider the decision in Duval v 11-13 Randolph Crescent Ltd [2018] EWCA Civ 2298 and its implications

If the landlord had carte blanche to vary or modify its obligations, the lease would have no practical or commercial effect.

The Court of Appeal has held that if a residential landlord grants consent to a tenant to carry out works to his flat despite there being an absolute prohibition against those works in the lease, the landlord would be in breach of its obligations to the other tenants in the building to enforce the covenants in that tenant's lease if the other tenants so requested.

The facts

A building contained nine flats, each of which were allotted a share in the company that owned the freehold. The leases of each respective flat provided that the tenants were not permitted to cut into any of the walls or ceiling. The leases also contained a covenant that the company would enforce, at the request of any tenant, a covenant in another tenant's lease provided that the tenant making the request for enforcement paid the costs incurred by the company in doing so.

One of the tenants was proposing to carry out alterations to his flat that involved cutting into several walls and asked the freehold company for consent, which it was prepared to grant. However, one of the other tenants in the building objected and argued that the freehold company, as the landlord, had covenanted with all the tenants that it would enforce the covenant against the absolute prohibition of carrying out any such works if requested to do so by any other tenant.

If the company could waive this provision in the lease for one tenant then it would have put itself beyond its power to enforce that covenant, if and when required to do so.

The objecting tenant applied to the court for an order that the landlord was in breach of its enforcement covenant and the court found in favour of the landlord. The tenant appealed to the Court of Appeal, which held that the landlord would be in breach of the enforcement covenant in granting consent to a tenant to do something that would otherwise be in breach of the lease.

The Court of Appeal considered that the freehold company, as landlord, had made two promises in the leases. Firstly, that each lease would impose similar covenants on all the tenants; this was a promise that had practical effect and was not just words on a page. Secondly, that it would, at the request and cost of any one tenant, enforce those covenants against another tenant.

This second promise was a contingent obligation and the landlord would have to enforce the alterations covenant in a tenant's lease regardless of whether it wanted to or not. Both those promises together meant that the objecting tenant could be certain the landlord would enforce the covenant if he paid the landlord's costs in doing so. The Court of Appeal considered that once the tenant had requested enforcement and paid for the landlord to do, it would be a breach by the landlord to grant consent to the other tenant to carry out their works. If the landlord had carte blanche to vary or modify its obligations, the lease would have no practical or commercial effect.

The court went further in stating that the landlord did not have to notify the other tenants of what it was proposing to do. If it had granted the consent, which was then acted upon by the tenant carrying out its works, then it would be unable to enforce the covenant against such works. In that situation, the remedy available to the objecting tenant would be damages, which would likely be insubstantial. If the consent was given but not acted upon, then the court would grant an injunction preventing the works being carried out or for the consent to be undone. Before deciding that remedy, the court would consider what the tenant's objections were and if they didn't have any justified reasons or any at all, that would be a powerful factor in mitigating against granting an injunction.

Conclusion

This issue arises a lot where long residential leases contain covenants by the landlord to enforce tenant covenants at the request of another tenant and it is useful to have a Court of Appeal authority on the landlord's position. It is also reassuring for tenants that the court took a practical approach that the landlord was not free to ignore the absolute prohibition against the carrying out of certain works and grant consent. It is also interesting to see the court's comments where consent had been granted but not acted upon.

For more information please contact Ben Portner at [email protected]