On 6 May 2020, the Supreme Court handed down its highly anticipated judgment in the case of Duval v 11-13 Randolph Crescent Limited  UKSC 18.
The decision is significant for landlords, tenants and agents alike, particularly those involved with managing multi-let residential properties.
The key question was: where all the leases in a multi-let property contain a clause requiring the landlord to enforce lease covenants against other tenants at the request and cost of any of the tenants, can the landlord grant a licence to a tenant to carry out works which, without the licence, would be a breach of an absolute covenant?
The answer is: No - the Supreme Court unanimously dismissed the landlord’s appeal, finding that the landlord was not entitled to authorise works that would otherwise breach an absolute covenant.
The case has wide implications as the clauses concerned are standard for many properties in multiple occupation and shifts control to the tenants. The decision should alert landlords to consider their lease obligations before responding to requests for consent from tenants.
The principles in the case are not limited to covenants against alterations and have the potential to apply to any absolute covenant where similar enforcement clauses are in place in the leases of other tenants. The decision may also have implications for landlords who have granted consents historically. The door remains open for tenants to challenge the lawfulness of any consent granted by their landlord to one of their neighbouring tenants in the last 12 years (although the question of damage would need to be considered).
11-13 Randolph Crescent in Maida Vale consists of 2 houses which have been converted into 9 flats, each held under leases granted for a term of 125 years. The freehold owner and landlord of the property is Randolph Crescent Limited, of which the tenants are all shareholders.
One of the tenants, Mrs Winfield, wanted to carry out structural alterations to her basement flat which involved removing a significant part of the load-bearing wall.
Mrs Winfield’s lease contained an absolute covenant against “cutting or maiming” any roof, wall or ceiling within or enclosing the demised premises. The proposed works would have amounted to a breach of this clause and so Mrs Winfield approached the landlord for consent. The landlord was minded to grant Mrs Winfield a licence to undertake the works, but another tenant, Dr Duval, was unhappy with the proposals and objected.
Crucially, the landlord had covenanted with each tenant that:
- all the leases in the building would contain covenants in similar form; and
- at the request of a tenant, the landlord would enforce the covenants given by other tenants, subject to the complaining tenant paying the landlord’s costs. (The “enforcement clause”).
Dr Duval issued proceedings against the landlord, seeking a declaration that the landlord could not permit Mrs Winfield to act in breach of her lease.
The question was whether by granting a licence to Mrs Winfield, the landlord would be in breach of its obligations to Dr Duval and the other tenants under the enforcement clause.
The Supreme Court’s Decision
In a unanimous decision, dismissing the landlord’s appeal and upholding the Court of Appeal’s decision, the Supreme Court held that the landlord could not grant consent to Mrs Winfield to undertake works prohibited by an absolute covenant without breaching its obligations to the other tenants under their leases.
The Supreme Court concluded that the enforcement clause did not itself expressly prevent the landlord from granting a licence to Mrs Winfield, but that this was an implied term. It was significant here that the enforcement clause was contingent i.e. the landlord was only obliged to enforce the absolute covenant against a tenant if another tenant requested that it do so and paid the landlord’s costs. As it is well established that a party who undertakes a contingent obligation may be under a further obligation not to prevent that contingency from arising, it was implicit in the enforcement clause that the landlord would not “put it out of its power” to enforce the absolute covenant by permitting what would otherwise be a breach of the lease.
The parties cannot have intended that rights held by the objecting tenant could be defeated depending on who acts first, the landlord or that tenant – this would be “uncommercial and incoherent”.
The Supreme Court also considered the nature of the works and the purpose of the absolute covenant. It concluded that this clause was directed at works which go beyond routine alterations and improvements and are such that they may be damaging to or destructive of the building. It concluded that it was “entirely appropriate” that works of the kind Mrs Winfield wanted to carry out should require the consent of the other tenants, including Dr Duval.
Full judgment available: https://www.supremecourt.uk/cases/docs/uksc-2018-0211-judgment.pdf
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