A 2018 Court of Appeal case concerning consenting to alterations to a flat has caused concern across the residential market.  Leave to appeal the case to the Supreme Court has been granted and the decision of the highest Court in the land will have far-reaching repercussions for freeholders and long leaseholders of residential flats.  The case focuses on a property in Maida Vale that originally consisted of two houses but was converted into nine flats, with each flat being granted a lease for a term of 125 years.

The individual flat leases all contained the following covenants on the tenant’s part:

“Not without the previous written consent of the Landlord to erect any structure pipe partition wire or post upon the Demised Premises nor make or suffer to be made any alteration or improvement in or addition to the Demised Premises”

and

“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…”

Because the first covenant required the landlord’s consent, it was subject to an implied proviso that that consent is not to be unreasonably withheld.  The second covenant however, is absolute, meaning that the tenants must not do the things listed. Notwithstanding this, freeholders tend to be fairly relaxed and often do permit these alterations to be carried out (subject to licence, of course).  The issue here though was that the leases also contained the following provision:

“That every lease of a residential unit in the Building hereafter granted by the Landlord 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.”

The Court held, much to the chagrin of the freeholder and offending tenant, that, in including this provision, the landlord was, in effect, making two promises:

1. that each lease would have identical (or nearly identical) binding obligations on each tenant; and

2. that the landlord would (subject to cover for costs) enforce those covenants.

As the covenant was not qualified in any way, it was held that, by granting a licence that had the effect of waiving a tenant’s breach, the landlord would itself be committing a breach of the other leases; the landlord would be putting it out of its power to comply with the clause.

Clearly, this could have major repercussions for both freeholders and tenants (including a possible impact on value) and so the property sector awaits the Supreme Court’s judgment with baited breath.

Julia Duval (Respondent) v 11-13 Randolph Crescent Ltd (Appellant) UKSC 2018/0211